DEFINITION of Inspectorial Powers
Inspectorial powers refer to a state administrator's or other regulatory entity's power to initiate investigations to determine whether provisions of the Uniform Securities Act have been violated. The Uniform Securities Act provides a framework for states to develop and adopt their own securities laws, referred to as Blue Sky laws. When a firm or individual is in violation of these laws or is suspected of being in violation of these laws, a regulatory entity can use their inspectorial powers to investigate.
BREAKING DOWN Inspectorial Powers
Typical inspectorial powers includes the ability to issue subpoenas, require witnesses to provide materials relevant to the investigation, and to require written statements under oath. Inspectorial powers are necessary for an administrative body to properly monitor market participants' compliance with existing laws and regulations.
Example of Inspectorial Powers
Bert and Ernie work at Sesame Brokerage, located in the state of Wallingford. It is a violation of Wallingford state securities laws to sell private placements that have not been registered with the state. Bert and Ernie have been selling such investments. The Wallingford State Securities Regulator may utilize their inspectorial powers to investigate the situation. They issue a subpoena for client correspondence and security recommendation records and interview several employees of the firm, as well as Bert and Ernie's clients.