(a) The Internet communication contains a legend in which it is clearly stated that:

(1)  The broker-dealer or agent in question may only transact business in the District if licensed, excluded, or exempted from broker-dealer or agent licensing requirements; and,
 
(2)  Follow-up, individualized responses to persons in the District by the broker-dealer or agent that involve either effecting or attempting to effect transactions in securities, or rendering of personalized investment advice for compensation, will not be made without compliance with broker-dealer or agent licensing requirements, or an applicable exemption or exclusion; and, 

(b) The Internet communication contains a mechanism which includes, but is not limited to, technical “firewalls” or other implemented policies and procedures, designed reasonably to ensure that before any subsequent, direct communication with prospective customers or clients in the District, the broker-dealer and agent are first licensed in the District or qualify for an exemption or exclusion from the licensing requirement; and,
 
(c) The Internet communication is limited to the dissemination of general information on products and services and does not involve either effecting or attempting to effect transactions in securities, or rendering personalized investment advice for compensation in the District over the Internet; and,
 
(d) With respect to agent Internet communications:

(1)  The broker-dealer affiliation of the agent is prominently disclosed within the Internet communication;
 
(2)  The broker-dealer with whom the agent is associated retains responsibility for reviewing and approving the content of any Internet communication by an agent;
 
(3)  The broker-dealer with whom the agent is associated first authorizes the distribution of information on the particular products and services through the Internet communication; and
 
(4)  When disseminating information through the Internet communication, the agent acts within the scope of the authority granted by the broker-dealer.

 

 

(a) An applicant who at the time of his or her application is filed is a registered representative, registered with the NASDR, the New York Stock Exchange or the American Stock Exchange;

 

(b) An applicant who has made the required score on an appropriate written qualification examination given by the NASDR; and

 

(c) An applicant who has lawfully and actively engaged in the securities business on a full-time basis for the five(5) years immediately preceding the date on which he or she filed his or her application;
1803.3  The Department may, for good cause shown, waive the requirements of § 1803.1.

(a)  Whether the applicant has disciplinary history;
 
(b) Whether the applicant has certified to Department staff persons that the applicant has reviewed the act and this title.
 
(c)  Whether the applicant has substantial long-term and continuous experience as a principal, agent or employee, other than in a clerical capacity, of a broker-dealer or investment adviser. Staff persons also will consider whether the applicant has similar experience in a responsible position, other than in a clerical capacity, in the securities, banking, finance or other related business.
 
(d)  Whether the applicant has some continuous experience in a responsible position, other than in a clerical capacity, in the securities, banking, finance or other related business and also possesses educational credentials or professional designations such as one of the following:

(1)  An advanced degree obtained through graduation from a formal degree program of an accredited educational institution with a concentration in economics, finance, mathematics, business, business administration or similar subjects.
 
(2) A license in good standing with the relevant licensing authority as a certified public accountant.

(e)  Whether the applicant is a member of the bar in good standing of any state.
 
(f)  Whether the applicant previously has passed the examination and has remained continuously employed in the securities industry or possesses some employment experience in the securities industry and has not had a significant lapse of this employment as of the date of filing of the application for registration with the Department.

(a) a current, complete, and signed copy of SEC Form BD, or its successor, with  “DC” checked; and
 
(b)  a list of licensed agents associated or to be associated with the successor broker-dealer;

 

 

 

 

1806.2 An individual who has not been licensed in any jurisdiction for a period of two (2) years shall be required to comply with the examination requirements of § 1803.

 

 

1807 Termination and Withdrawal of Registration as an Agent of a Broker-Dealer  

(a)  Uniform Request for Broker Dealer Withdrawal (Form BDW) (Revised 8/99); or
 
(b)  Uniform Termination Notice for Securities Industry Registration (Form U-5) (Revised 8/99).
 

 

 

(a) For initial and renewal licenses of each broker-dealer, the fee shall be two hundred and fifty dollars ($ 250);

 

(b) For initial and renewal license of each agent, the fee shall be forty-five dollars ($ 45);

 

(c) For transfer of an agent's license, the fee shall be forty-five dollars ($ 45);

 

(d) For processing of fingerprints, the fee shall be twenty-five dollars ($ 25); and

 

 

 

 

(a) A detailed original document of financial condition which discloses the nature and the amount of assets and liabilities; and

 

(b)  The net worth of the issuer as of the date within thirty (30) days of the date on which the statement is filed.

(1) The above-mentioned principal has applied or will apply for a license as agent of an issuer, or is licensed as agent of an issuer under the provisions of Section 101 of the Act (D.C. Register at 47 DCR 7837);

 

(2) The above named principal is required to file a surety bond in accordance with the provisions of Section 203 (g)(1)(A) of the Act (D.C. Register at 47 DCR 7847), and § 1810.1;

 

(3) This bond is a continuous obligation and shall cover the full period or periods of licensing of the principal, including initial and renewal licensing;

 

(4) The surety shall not be obligated to this bond unless the principal fails to account for all money and securities coming into its possession for the benefit of investors, or fails to discharge all obligations imposed on it by the Act and the rules adopted thereunder;

 

(5) The liability of the surety for any one or more claims by any one or more persons shall not be cumulative and shall not exceed in the aggregate the sum of this bond;

 

(6) Any person or persons, including the Department, who have cause of action arising under the Act, or any provision of this bond, may bring suit on this bond;

 

(7) In the event that either the principal or the surety, or both, are served with notice of any suit on this bond, the person served with the notice shall immediately give written notice of the filing of the action to the Department of Insurance and Securities Regulation of the District of Columbia; and

 

(8) No suit may be maintained to enforce any liability on the bond unless brought within two years after the sale or other act upon which the liability is based.

 

 

 

 

(a) Whether the accountant reviewed the procedures followed for safeguarding the securities of customers;

 

(b) Whether, with respect to significant items in the report covered by the certificate, any auditing procedures generally recognized as normal have been omitted, including a specific designation of the procedures and of the reasons for their omission;

 

(c) Whether the audit was made in accordance with generally acceptable auditing standards applicable in the circumstances; and

 

(d)  Whether the audit omitted any procedure considered necessary by the accountant under the circumstances of the particular case.

 

 

1816-1817 Reserved
 

 

 

1818 Financial and Disciplinary Information that Broker-Dealers Must Disclose to Clients

(a) A financial condition of the broker-dealer that is reasonably likely to impair the ability of the broker-dealer to meet contractual commitments to clients. 

 

(b) A legal or disciplinary event that is material to an evaluation of the broker-dealer’s or their representative’s integrity or ability to meet contractual commitments to clients.
 
(c) A failure to comply with any arbitration award issued in connection with doing business as a broker-dealer or agent.

(a) A criminal or civil action in a court of competent jurisdiction in which the person:

(1) Was convicted or pleaded guilty or nolo contendere (“no contest”) to a felony or misdemeanor, or is the named subject of a pending criminal proceeding (any of the foregoing referred to hereafter as “action”), and such action involved: an investment related business; fraud, false statements, or omissions; wrongful taking of property; or bribery, forgery, counterfeiting, or extortion;
 
(2) Was found to have been involved in a violation of an investment-related statute or rule; or
 
(3) Was the subject of any order, judgment, or decree permanently or temporarily enjoining the person or otherwise limiting the person from engaging in any investment related activity.

(b) An administrative proceeding before the SEC, the Department, or any federal or state agency (any of the foregoing being referred to hereafter as “agency”) in which the person:

(1) Was found to have caused an investment related business to lose its authorization to do business; or
 
(2) Was found to have been involved in a violation of an investment-related statute or rule, or was the subject of an order by the agency denying, suspending, or revoking the authorization to act in, or barring or suspending the person’s association with, an investment-related business; or otherwise significantly limiting the person’s investment-related activities.

(c) A Self Regulatory Organization (“SRO”) proceeding in which the person:

(1) Was found to have caused an investment-related business to lose its authorization to do business; or
 
(2) Was found to have been in violation of the SRO’s rules and was the subject of an order by the SRO barring or suspending the person from membership or from association with other members, or expelling the person from membership; fining the person more than $2,500; or otherwise significantly limiting the person’s investment-related activities.

1818.4 For purposes of calculating the 10-year period during which events are presumed to be material under these regulations, the date of the reportable event shall be the date on which the final order, judgment, or decree was entered, or the date on which any rights of appeal from preliminary orders, judgments, or decrees expired.

 

 

1819 Practices Deemed Unethical or Dishonest For Broker-Dealers and Agents

(a)  Engaging in an unreasonable and unjustifiable delay in the delivery of securities purchased by any of its customers or in the payment, upon request, of free credit balances reflecting completed transactions of any of its customers, or failing to notify customers of their right to receive possession of any certificate of ownership to which they are entitled;
 
(b)  Inducing trading in a customer’s account that is excessive in size or frequency in view of the customer’s investment objective, level of sophistication in investments, and financial situation and needs;
 
(c)  Recommending a transaction without reasonable grounds to believe that such transaction is suitable for the customer in light of the customer’s investment objective, level of sophistication in investments, financial situation and needs, and any other information material to the investment;
 
(d)  Executing a transaction on behalf of a customer without prior authorization to do so;
 
(e)  Exercising any discretionary power in effecting a transaction for a customer’s account without first obtaining written discretionary authority from the customer, unless the discretionary power relates solely to the time and/or price for the execution of orders;
 
(f)  Executing any transaction in a margin account without securing from the customer a properly executed written margin agreement promptly after the initial transaction in the account;
 
(g)  Failing to segregate and identify customer’s free securities or securities held in safekeeping;
 
(h)  Hypothecating a customer’s securities without having a lien thereon unless the broker-dealer secures from the customer a properly executed written consent promptly after the initial transaction, except as permitted by SEC regulations;
 
(i)  Entering into a transaction with or for a customer at a price not reasonably related to the current market price of the security or receiving an unreasonable commission or profit (commissions or profits equal to 10% or more of the price of a security are presumed to be unreasonable);
 
(j)  Failing to furnish to a customer purchasing securities in an offering, no later than the date of confirmation of the transaction, either a final prospectus or a preliminary prospectus and an additional document, which, together with the preliminary prospectus, includes all information set forth in the final prospectus;
 
(k)  Charging unreasonable and inequitable fees for services performed, including miscellaneous services such as collection of monies due for principal, dividends or interest, exchange or transfer of securities, appraisals, safekeeping, or custody of securities and other services related to its securities business;
 
(l)  Charging any fee for which no notice is given to the customer, and consent obtained, prior to the event incurring the fee;
 
(m)  Offering to buy from or sell to any person any security at a stated price, unless such broker-dealer is prepared to purchase or sell, as the case may be, at such price and under such conditions as are stated at the time of such offer to buy or sell;
 
(n)  Representing that a security is being offered to a customer “at the market” or a price relevant to the market price, unless such broker-dealer knows or has reasonable grounds to believe that a market for such security exists other than that made, created or controlled by such broker-dealer, or by any person for whom he is acting or with whom he is associated in such distribution, or any person controlled by, controlling or under common control with such broker-dealer;
 
(o)  Effecting any transaction in, or inducing the purchase or sale of, any security by means of any manipulative or deceptive device, practice, plan, program, design or contrivance, that may include but not be limited to:

(1)  Effecting any transaction in a security that involves no change in the beneficial ownership thereof;
 
(2)  Entering an order or orders for the purchase or sale of any security with the knowledge that an order or orders of substantially the same size, at substantially the same time and substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties for the purpose of creating a false or misleading appearance of active trading in the security or false or misleading appearance with respect to the market for the security; provided, however, nothing in this subparagraph shall prohibit a broker-dealer from entering bona fide agency cross transactions for its customers; or
 
(3)  Effecting, alone or with one or more other persons, a series of transactions in any security creating actual or apparent active trading in such security or raising or depressing the price of such security for the purpose of inducing the purchase or sale of such security by others; 

(p)  Guaranteeing a customer against loss in any securities account of such customer carried by the broker-dealer or in any securities transaction effected by the broker-dealer with or for such customer;
 
(q)  Publishing or circulating or causing to be published or circulated, any notice, circular, advertisement, newspaper article, investment service, or communication of any kind that purports to report any transaction as a purchase or sale of any security, unless such broker-dealer believes that such transaction was a bona fide purchase or sale of such security; or that purports to quote the bid price or asked price for any security, unless such broker-dealer believes that such quotation represents a bona-fide bid for, or offer of, such security;
 
(r)  Using any advertising or sales presentation in such a fashion as to be deceptive or misleading. An example of such practice would be a distribution of any nonfactual data, material, or presentation based on conjecture, unfounded or unrealistic claims or assertions in a brochure, flyer, or display by words, pictures, graphs or otherwise designed to supplement, detract from, supersede or defeat the purpose or effect of any prospectus or disclosure;
 
(s)  Failing to disclose that the broker-dealer is controlled by, controlling, affiliated with or under common control with the issuer of any security before entering into any contract with or for a customer for the purchase or sale of such security, and, if such disclosure is not made in writing, it shall be supplemented by the giving or sending of written disclosure at or before the completion of the transaction;
 
(t)  Failing to make a bona fide public offering of all the securities allotted to a broker-dealer for distribution, whether acquired as an underwriter or a selling group member, or from a member participating in the distribution as an underwriter or selling group member;
 
(u)  Failing or refusing to furnish a customer, upon reasonable request, information to which he is entitled, including: 

(1)  with respect to a security recommended by the broker-dealer, material information that is reasonably available; and
 
(2)  a written response to any written request or complaint;

(v)  Making a recommendation that one customer buy a particular security and that another customer sell that security, where the broker-dealer acts as a principal and such recommendations are made within a reasonably contemporaneous time period, unless individual suitability considerations or preferences justify the different recommendations;
 
(w)  Where the broker-dealer holds itself out as a market maker in a particular security, or publicly quotes bid prices in a particular security, failing to buy that security from a customer promptly upon the customer’s request to sell;
 
(x)  Recommending a security to its customers without conducting a reasonable inquiry into the risks of that investment or communicating those risks to its agents and its customers in a reasonably detailed manner and with such emphasis as is necessary to make the disclosure meaningful;
 
(y)  Representing itself as a financial or investment planner, consultant, or adviser, when the representation does not fairly describe the nature of the services offered, the qualifications of the person offering the services, and the method of compensation for the services;
 
(z)  Falsifying any record or document or failing to create or maintain any required record or documents;
 
(aa) A broker-dealer shall not enter into any contract with a customer if the contract contains any condition, stipulation or provision binding the customer to waive any rights under the Act, or any rule or order thereunder. Any such condition, stipulation or provision is void;

 

(bb)  Violating any standard in the conduct rules promulgated by the NASD; or
 
(cc)  Aiding or abetting any of the conduct listed above.

(a)  Engaging in the practice of lending or borrowing money or securities from a customer, or acting as a custodian for money, securities or an executed stock power of a customer;
 
(b)  Effecting securities transactions not recorded on the regular books or records of the broker-dealer that the agent represents, unless the transactions are authorized in writing by the broker-dealer prior to execution of the transaction;
 
(c)  Establishing or maintaining an account containing fictitious information in order to execute transactions that would otherwise be prohibited;
 
(d)  Sharing directly or indirectly in profits or losses in the account of any customer without the written authorization of the customer and the broker-dealer that the agent represents;
 
(e)  Dividing or otherwise splitting the agent’s commissions, profits or other compensation from the purchase or sale of securities with any person not also registered as an agent for the same broker-dealer or for a broker-dealer under direct or indirect common control;
 
(f)  Where a recommendation is made that an unsophisticated customer purchase an over-the-counter security that:

(1)  trades sporadically or in small volume; and
 
(2)  is not traded on any United States securities exchange (excluding the Spokane Exchange) or on the NASDAQ National Market System, failing to inform the customer that he may not be able to find a buyer if the customer would subsequently want to sell the security; 

(g)  Where a recommendation is made to purchase an over-the-counter security in which the asked price is greater than the bid by 25 percent or more, failing to inform the customer of the bid and the asked prices and of the significance of the spread between them should the customer wish to resell the security;
 
(h)  Using excessively aggressive or high pressure sales tactics, such as repeatedly telephoning and offering securities to individuals who have expressed disinterest and have requested that the calls cease, or using profane or abusive language, or calling prospective customers at home at an unreasonable hour at night or in the morning;
 
(i)  Conducting or facilitating securities transactions outside the scope of the agent’s relationship with his broker-dealer employer unless he has provided prompt written notice to his employer;
 
(j)  Acting or registering as an agent of more than one broker-dealer without giving written notification to and receiving written permission from all such broker-dealers; or
 
(k)  Holding himself out as an objective investment adviser or financial consultant without fully disclosing his financial interest in a recommended securities transaction at the time the recommendation is made;
 
(l)  Engaging in any of the conduct specified in § 1819.2; or
 
(m)  Aiding or abetting any of the conduct listed in this subsection or § 1819.2.

(a)  In connection with the offer or sale of investment company shares, failing to adequately disclose to a customer all sales charges, including asset based and contingent deferred sales charges, which may be imposed with respect to the purchase, retention or redemption of such shares;
 
(b)  In connection with the offer or sale of investment company shares, stating or implying to a customer, either orally or in writing, that the shares are sold without a commission, are “no load” or have “no sales charge” if there is associated with the purchase of the shares a front-end loan, a contingent deferred sales load, a SEC Rule 12b-1 fee or a service fee which exceeds .25 percent of average net fund assets per year, or in the case of closed-end investment company shares, underwriting fees, commissions or other offering expenses;
 
(c)  In connection with the offer or sale of investment company shares, failing to disclose to a customer any available sales charge discount on the purchase of shares in dollar amounts at or above a breakpoint or the availability of a letter of intent feature which will reduce the sales charges to the customer;
 
(d)  In connection with the offer or sale of investment company shares, recommending to a customer the purchase of a specific class of investment company shares in connection with a multi-class sales charge or fee arrangement without reasonable grounds to believe that the sales charge or fee arrangement associated with such class of shares is suitable and appropriate based on the customer’s investment objectives, financial situation and other securities holdings, and the associated transaction or other fees;
 
(e)  In connection with the offer or sale of investment company shares, recommending to a customer the purchase of investment company shares which results in the customer simultaneously holding shares in different investment company portfolios having similar investment objectives and policies without reasonable grounds to believe that such recommendation is suitable and appropriate based on the customer’s investment objectives, financial situation and other securities holdings, and any associated transaction charges or other fees;
 
(f)  In connection with the offer or sale of investment company shares, recommending to a customer the liquidation or redemption of investment company shares for the purpose of purchasing shares in a different investment company portfolio having similar investment objectives and policies without reasonable grounds to believe that such recommendation is suitable and appropriate based on the customer’s investment objectives, financial situation and other securities holdings and any associated transaction charges or other fees;
 
(g)  In connection with the offer or sale of investment company shares, stating or implying to a customer, either orally or in writing, the fund’s current yield or income without disclosing the fund’s most recent average annual total return, calculated in a manner prescribed in SEC Form N-1A, for one, five and ten year periods and fully explaining the difference between current yield and total return; provided, however, that if the fund’s registration statement under the Securities Act of 1933 has been in effect for less than one, five, or ten years, the time during which the registration statement was in effect shall be substituted for the periods otherwise prescribed;
 
(h)  In connection with the offer or sale of investment company shares, stating or implying to a customer, either orally or in writing, that the investment performance of an investment company portfolio is comparable to that of a savings account, certificate of deposit or other bank deposit account without disclosing to the customer that the shares are not insured or otherwise guaranteed by the Federal Deposit Insurance Corporation or any other government agency and the relevant differences regarding risk, guarantees, fluctuation of principal and/or return, and any other factors which are necessary to ensure that such comparisons are fair, complete and not misleading;
 
(i)  In connection with the offer or sale of investment company shares, stating or implying to a customer, either orally or in writing, the existence of insurance, credit quality, guarantees or similar features regarding securities held, or proposed to be held, in the investment company’s portfolio without disclosing to the customer other kinds of relevant investment risks, including but not limited to, interest rate, market, political, liquidity, or currency exchange risks, which may adversely affect investment performance and result in loss and/or fluctuation of principal notwithstanding the creditworthiness of such portfolio securities;
 
(j)  In connection with the offer or sale of investment company shares, stating or implying to a customer, either orally or in writing, (i) that the purchase of such shares shortly before an ex-dividend date is advantageous to such customer unless there are specific, clearly described tax or other advantages to the customer, or (ii) that a distribution of long-term capital gains by an investment company is part of the income yield from an investment in such shares;
 
(k)  In connection with the offer or sale of investment company shares, making representations to a customer, either orally or in writing, that the broker-dealer or agent knows or has reason to know are based
in whole or in part on information contained in dealer-use-only material which has not been approved for public distribution; or
 
(l)  Aiding or abetting any of the conduct listed above.

(a) The purchases and sales of securities;

 

(b) The receipts and deliveries of securities (including certificate numbers);

 

(c)  The disbursements of cash and all other debits and credits;

 

(d)  The account for which each transaction was effected;

 

(e)  The name and amount of securities;

 

(f)  The unit and aggregate purchase of the sale price, if any; and

 

(g)  The trade date, and the name or other designation of the person from whom purchased or received or to whom sold or delivered;

(a) All purchases, sales, and receipts;

 

(b) All deliveries of securities and commodities for the account; and

 

(c) All other debits and credits to the account.

(a)  Securities in transfer;

 

(b)  Dividends and interest received;

 

(c)  Securities borrowed and securities loaned;

 

(d) Monies borrowed and monies loaned (together with a record of the collateral and any substitutions in the collateral); and

 

(e)  Securities failed to receive and failed to deliver.

(a)  The terms and conditions of the order or instructions;

 

(b)  Any modification or cancellation;

 

(c)  The account for which entered;

 

(d)  The time of entry;

 

(e)  The price at which executed; and

 

(f)  To the extent feasible, the time of execution or cancellation.

 

 

(a) His or her name, address, social security number, and the starting date of his or her employment or other association with the broker-dealer;

 

(b) His or her date of birth;

 

(c) The educational institutions attended by him or her and whether or not he or she graduated therefrom;

 

(d) A complete, consecutive statement of all his or her business connections for at least the preceding ten (10) years, including his or her reason for leaving each prior employment, and whether the employment was part-time or full-time;

 

(e) A record of any denial of membership or registration, and of any disciplinary action taken, or sanction imposed, upon him or her by any federal or state agency, or by any national securities exchange or national securities association, including any finding that he or she was a cause of any disciplinary action or had violated any law;

 

(f) A record of any denial, suspension, expulsion or revocation of membership or registration of any broker-dealer with which he or she was associated in any capacity when the action was taken;

 

(g) A record of any permanent or temporary injunction entered against him or her or any broker-dealer with which he or her was associated in any capacity at the time the injunction was entered;

 

(h) A record of any arrests, indictments or convictions for any felony or any misdemeanor, except minor traffic offenses, of which he or she has been the subject;

 

(i)  A record of any other name or names by which he or she has been known or which he or she has used.  Provided, that if the associated person has been registered as a registered representative of the broker-dealer with, or his or her employment has been approved by, the NASD, or the American Stock Exchange, the New York Stock Exchange, the Pacific Coast Stock Exchange, or the Philadelphia Stock Exchange, then retention of a full, correct, and complete copy of any and all application for the registration or approval shall be considered to satisfy the requirements of this subsection.

 

 

(a) All records required to be made or maintained pursuant to §§ 1820.5, 1820.7 through 1820.15, 1822.3, and 1822.4;

 

(b)  All check books, bank statements, cancelled checks and cash reconciliations; 

 

(c)  All bills receivable or payable (or copies) paid or unpaid, relating to the business of the broker-dealer;

 

(d) All trial balances, computations of minimum net capital and ratio or aggregate indebtedness to net capital, financial statements, branch office reconciliations and internal audit working papers, relating to the business of the broker-dealer as referred to in §§ 1820.16 and 1820.17;

 

(e) Originals of all communications received and copies of all communications sent by the broker-dealer (including inter-office memoranda and communications) to his or her business;

 

(f) All guarantees of accounts and all powers of attorney and other evidence of the granting of any discretionary authority given in respect of any account, and copies of resolutions empowering an agent to act on behalf of a corporation; and

 

(g)  All written agreements (or copies) entered into by the broker-dealer relating to his or her business, including agreements with respect to any account.

 

 

 

 

 

 

 

 

(a) A copy of its complete, most recent, Form ADV, including all parts and schedules, on file with the U.S. Securities and Exchange Commission;
 
(b) A non-refundable notice filing or renewal fee in the amount of $250 for the federal covered adviser and a non-refundable registration or renewal fee in the amount of $45 for each investment adviser representative required to be registered in the District.  Payment of fees shall be maid by a method specified in § 1861.3; and
 
(c) A consent to service of process (the Form U-2 and, if applicable, the Form U-2A), pursuant to § 706 of the Act (D.C. Register at 47 DCR 7883).

 

 

(a) The Internet communication contains a legend in which it is clearly stated that:

(1)  the investment adviser or investment adviser representative in question may only transact business in this state if first licensed, excluded, or exempted from the District investment adviser or investment adviser representative licensing requirements; and
 
(2)  follow-up, individualized responses to persons in this state by the investment adviser or investment adviser representative that involve either effecting or attempting to effect transactions in securities, or rendering of personalized investment advice for compensation, will not be made without compliance with the District investment adviser or investment adviser representative licensing requirements, or an applicable exemption or exclusion;

(b)  The Internet communication contains a mechanism, which includes but is not limited to, technical “firewalls” or other implemented policies and procedures, designed reasonably to ensure that before any subsequent, direct communication with prospective customers or clients in the District, the investment adviser and investment adviser representative are first licensed in the District or qualify for an exemption or exclusion from the licensing requirement. Nothing in this paragraph shall be construed to relieve a District licensed investment adviser or investment adviser representative from any applicable securities licensing requirement in the District;
 
(c) The Internet communication is limited to the dissemination of general information on products and services and does not involve either effecting or attempting to effect transactions in securities, or rendering personalized investment advice for compensation in the District over the Internet; and
 
(d) In the case of an investment adviser representative:

(1)  The affiliation of the investment adviser representative with the investment adviser is prominently disclosed within the Internet communication;
 
(2)  The investment adviser with whom the investment adviser representative is associated retains responsibility for reviewing and approving the content of any Internet communication by an investment adviser representative;
 
(3)  The investment adviser with whom the investment adviser representative is associated first authorizes the distribution of information on the particular products and services through the Internet communication; and
 
(4)  In disseminating information through the Internet communication, the investment adviser representative acts within the scope of the authority granted by the investment adviser.

(a) Proof of compliance by the investment adviser with the examination requirements of § 1860;

 

(b) A statement of financial condition of the applicant, prepared in accordance with generally accepted accounting principles in such detail as to disclose the nature and amount of assets, liabilities, and capital. This requirement may be satisfied by either of the following:

(1) An audited statement of financial condition as of the end of the applicant's most recent fiscal year which complies with the requirement of § 1877; provided that such statement is no more than 45 days prior to the date of filing; or

 

(2) An unaudited balance sheet. Such balance sheet shall be accompanied by an oath or affirmation that the statement is true and correct to the best of his or her knowledge and belief and shall be made before a person duly authorized to administer the oath or affirmation. Such balance sheet shall be as of a date within thirty (30) days of the date on which the application is filed; and

 

(3) As a part of the statement of financial condition, the Director may require the filing of the following separate schedules:

 

(4) Listing the securities owned by the applicant valued at the market; and

 

(5) Stating material contractual commitments of the applicant not otherwise reflected in the statements;

(c) The fee required by §1861;

 

(d) Except for an investment adviser that is a sole proprietorship, or the substantial equivalent, each investment adviser licensed with the Department shall register with the Department at least one investment adviser representative;

 

(e) A copy of the Surety Bond required by § 1879; and

 

(f) Any other information required by statute or requested from the applicant by the Director.

 

 

 

 

 

 

 

 

 

 

(a) File Form ADV-H [17 CFR 279.3] in paper format with NASDR no later than one business day after the filing that is the subject of the ADV-H was due; and

 

(b) Submit the filing that is the subject of the Form ADV-H in electronic format to NASDR no later than seven business days after the filing was due.

 

(c ) The temporary hardship exemption will be granted when the investment adviser files a completed Form ADV-H with NASDR.

 

 

(a) The name and broker-dealer Central Registration Depository ("CRD") number, if any, of the investment adviser representative;

 

(b) Proof of compliance by the investment adviser representative with the examination requirements of § 1859;

 

(c) The fee required by §1861; and

 

(d)  Any other information required by statute or requested from the applicant by the Commissioner.

 

 

(a) The Uniform Investment Adviser Law Examination (Series 65 examination); or

 

(b) The General Securities Representative Examination (Series 7 examination) and the Uniform Combined State Law Examination (Series 66 examination).

(a) Certified Financial Planner (CFP) awarded by the Certified Financial Planner Board of Standards, Inc.;

 

(b) Chartered Financial Consultant (ChFC) awarded by the American College, Bryn Mawr, Pennsylvania;

 

(c) Personal Financial Specialist (PFS) awarded by the American Institute of Certified Public Accountants;

 

(d) Chartered Financial Analyst (CFA) awarded by the Institute of Chartered Financial Analyst;

 

(e) Chartered Investment Counselor (CIC) awarded by the Investment Counsel Association of America, Inc., or

 

(f) Such other professional designation as the Commissioner may in his or her discretion recognize.

(a)  Whether the applicant has disciplinary history;
 
(b) Whether the applicant has certified to Department staff persons that the applicant has reviewed the act and this title.
 
(c)  Whether the applicant has substantial long-term and continuous experience as a principal, agent or employee, other than in a clerical capacity, of a broker-dealer or investment adviser. Staff persons also will consider whether the applicant has similar experience in a responsible position, other than in a clerical capacity, in the securities, banking, finance or other related business.
 
(d)  Whether the applicant has some continuous experience in a responsible position, other than in a clerical capacity, in the securities, banking, finance or other related business and also possesses educational credentials or professional designations such as one of the following:

(1)  An advanced degree obtained through graduation from a formal degree program of an accredited educational institution with a concentration in economics, finance, mathematics, business, business administration or similar subjects.
 
(2) A license in good standing with the relevant licensing authority as a certified public accountant.

(e)  Whether the applicant is a member of the bar in good standing of any state.
 
(f)  Whether the applicant previously has passed the examination and has remained continuously employed in the securities industry or possesses some employment experience in the securities industry and has not had a significant lapse of this employment as of the date of filing of the application for registration with the Department.

(a) For initial and renewal application as an investment adviser, the fee shall be two hundred and fifty dollars ($ 250);

 

(b) For initial and renewal applications as an investment adviser representative, the fee shall be forty-five dollars ($ 45);

 

(c) For transfer of the license of an investment adviser representative, the fee shall be forty-five dollars ($ 45);

 

(d) For processing of fingerprints, the fee shall be twenty-five dollars ($ 25);

 

 

 

 

(a) a current, complete, and signed copy of SEC Form ADV, or its successor, with  “DC” checked; and
 
(b)  a list of investment adviser representatives associated or to be associated with the successor investment adviser;

 

 

 

 

 

 

 

 

(a) Solely by means of publicly distributed written materials or publicly made oral statements;

 

(b) Solely by means of written material or oral statements not purporting to meet the objectives or needs of specific individuals or accounts;

 

(c) Solely through the issuance of statistical information containing no expressions of opinion as to the investment merits of a particular security; or

 

(d) Any combination of the foregoing services.

 

 

(a) There have been established procedures, and a system for applying such procedures, which would reasonably be expected to prevent and detect, insofar as practicable, any such violation by such other persons; and

 

(b) Such person has reasonably discharged the duties and obligations incumbent upon such person by reason of such procedures and system without reasonable cause to believe that such procedures were not being complied with.

 

 

(a) Not less than forty-eight (48) hours prior to entering into any written or oral investment advisory contract with such client, or

 

(b) At the time of entering into any such contract, if the advisory client has a right to terminate the contract within five (5) business days after entering into the contract.

 

 

(a) A natural person or a company who, immediately after entering into the contract has at least $750,000 under the management of the investment adviser; or

 

(b) A person who the investment adviser and its investment adviser representatives reasonably believe, immediately before entering into the contract, is a natural person or a company whose net worth, at the time the contract is entered into, exceeds $ 1,500,000. The net worth of a natural person may include assets held jointly with that person's spouse.

 

(c) For purposes of this section, each equity owner of any such company will be considered a person.

(a) A financial condition of the investment adviser that is reasonably likely to impair the ability of the investment adviser to meet contractual commitments to clients. 

 

(b) A legal or disciplinary event that is material to an evaluation of the investment adviser’s, a management person’s, as defined in § 1874.6, or an investment adviser representative’s conduct or integrity, or ability to meet contractual commitments to clients.
 
(c) A failure to comply with any arbitration award issued in connection with doing business as an investment adviser, or investment adviser representative.

(a) A criminal or civil action in a court of competent jurisdiction in which the person:

(1) Was convicted or pleaded guilty or nolo contendere (“no contest”) to a felony or misdemeanor, or is the named subject of a pending criminal proceeding (any of the foregoing referred to hereafter as “action”), and such action involved: an investment related business; fraud, false statements, or omissions; wrongful taking of property; or bribery, forgery, counterfeiting, or extortion;
 
(2) Was found to have been involved in a violation of an investment-related statute or rule; or
 
(3) Was the subject of any order, judgment, or decree permanently or temporarily enjoining the person or otherwise limiting the person from engaging in any investment related activity.

(b) An administrative proceeding before the SEC, the Department, or any federal or state agency (any of the foregoing being referred to hereafter as “agency”) in which the person:

(1) Was found to have caused an investment related business to lose its authorization to do business; or
 
(2) Was found to have been involved in a violation of an investment-related statute or rule, and was the subject of an order by the agency denying, suspending, or revoking the authorization of the person to act in, or barring or suspending the person’s association with, an investment-related business; or otherwise significantly limiting the person’s investment-related activities.

(c) An SRO proceedings in which the person:

(1) Was found to have caused an investment-related business to lose its authorization to do business; or
 
(2) Was found to have been in violation of the SRO’s rules and was the subject of an order by the SRO barring or suspending the person from membership or from association with other members, or expelling the person from membership; fining the person more than $2,500; or otherwise significantly limiting the person’s investment-related activities.

(a)  A criminal or civil action in a court of competent jurisdiction in which the person:

(1) Was convicted, pleaded guilty or nolo contendere ("no contest") to a felony or misdemeanor, or is the named subject of a pending criminal proceeding (any of the foregoing referred to hereafter as "action"), and such action involved: an investment-related business, fraud, false statements, or omissions; wrongful taking of property; or bribery, forgery, counterfeiting, extortion;

 

(2) Was found to have been involved in a violation of an investment-related statute or regulation; or

 

(3) Was the subject of any order, judgment, or decree permanently or temporarily enjoining the person from, or otherwise limiting the person from, engaging in any investment-related activity.

(b)  Administrative proceedings before the Department, United States Securities and Exchange Commission, any other federal regulatory agency or any other state agency (any of the foregoing being referred to hereafter as "agency") in which the person:

(1) Was found to have caused an investment-related business to lose its authorization to do business; or

 

(2) Was found to have been involved in a violation of an investment-related statute or regulation and was the subject of an order by the agency denying, suspending, or revoking the authorization of the person to act in, or barring or suspending the person's association with any investment-related business or otherwise significantly limiting the person's investment-related activities; or

 

(3) Was found to have engaged in an act or a course of conduct which resulted in the issuance by the agency of an order to cease and desist the violation of the provisions of any investment-related statute or rule.

(c)  SRO proceedings in which the person:

(1) Was found to have caused an investment-related business to lose its authorization to do business; or

(2) Was found to have been involved in a violation of the SRO's rules and was the subject of an order by the SRO barring or suspending the person from membership or from association with other members, or expelling the person from membership; fining the person more than two thousand five hundred dollars ($ 2,500.00); or otherwise significantly limiting the person's investment-related activities.

(a) "Management person" means a person with power to exercise, directly or indirectly, a controlling influence over the management or policies of an investment adviser which is not a natural person or to determine the general investment advice given to clients;

 

(b) "Found" means determined or ascertained by adjudication or consent in a final SRO proceeding, administrative proceeding, or court action;

 

(c) "Investment-related" means pertaining to securities, commodities, banking, insurance, or real estate, including, but not limited to, citing as or being associated with a broker-dealer, investment company, investment adviser, government securities broker or dealer, municipal securities dealer, bank, savings and loan association, entity or person required to be registered under the Commodity Exchange Act (7 U.S.C. 1 et seq.), or fiduciary;

 

(d) "Involved" means acting or aiding, abetting, causing, counseling, commanding, inducing, conspiring, with or failure reasonably to supervise another in doing an act; and,

 

(e) "Self-Regulatory Organization" or "SRO" means any national securities or commodities exchange, registered association, or registered clearing agency.

 

 

(a) The investment adviser notifies the Department in on Form ADV that the investment adviser has or may have custody. This notification may be given;

 

(b) The securities of each client are segregated, marked to identify the particular client who has the beneficial interest therein, and held in safekeeping in someplace reasonably free from risk of destruction or other loss;

 

(c) All such funds of such clients are deposited in one or more bank accounts which contain only clients' funds; such account or accounts are maintained in the name of the investment adviser as agent or trustee for such clients; and the investment adviser maintains a separate record for each such account which shows the name and address of the bank where such account is maintained, the dates and amounts of deposits in and withdrawals from such account, and the exact amount of each client's beneficial interest in this account;

 

(d) Immediately after accepting custody or possession of such funds or securities from any client, the investment adviser notifies the client in writing of the place and manner in which such funds and securities will be maintained, and, subsequently, if and when there is any change in the place or manner in which such funds or securities are being maintained, the investment adviser gives written notice thereof to the client;

 

(e) At least once every three (3) months, the investment adviser sends each such client an itemized statement showing the funds and securities in the investment adviser's custody or possession at the end of such period, and all debits, credits, and transactions, in such client's account during this period; and

 

(f) At least once every calendar year, an independent certified public accountant or an independent public accountant verifies all client funds and securities of clients by actual examination at a time chosen by the accountant without prior notice to the investment adviser.

 

 

(a) Recommending to a client to whom investment supervisory, management or consulting services are provided the purchase, sale or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client’s investment objectives, financial situation and needs, and any other information known by the investment adviser;
 
(b) Exercising any discretionary power in placing an order for the purchase or sale of securities for a client without obtaining written discretionary authority from the client within ten (10) business days after the date of the first transaction placed pursuant to oral discretionary authority, unless the discretionary power relates solely to the price at which, or the time when, an order involving a definite amount of a specific security shall be executed, or both;

 

(c)  Inducing trading in a client’s account that is excessive in size or frequency in view of the financial resources, investment objectives and character of the account;
 
(d)  Placing an order to purchase or sell a security for the account of a client without authority to do so;
 
(e)  Placing an order to purchase or sell a security for the account of a client upon instruction of a third party without first having obtained a written third-party trading authorization from the client;
 
(f)  Borrowing money or securities from a client unless the client is a broker-dealer, an affiliate of the investment adviser, or a depository institution engaged in the business of lending funds;
 
(g)  Lending money to a client unless the investment adviser is a depository institution engaged in the business of loaning funds or the client is an affiliate of the investment adviser;
 
(h)  Misrepresenting to any advisory client, or prospective advisory client, the qualifications of the investment adviser or any employee of the investment adviser, or to misrepresent the nature of the advisory services being offered or fees to be charged for such service, or to omit to state a material fact necessary to make the statements made regarding qualifications, services or fees, in light of the circumstances under which they are made, not misleading;
 
(i)   Providing a report or recommendation to any advisory client prepared by someone other than the investment adviser without disclosing that fact. This prohibition does not apply to a situation where the adviser uses published research reports or statistical analyses to render advice or where an adviser orders such a report in the normal course of providing service;
 
(j) Charging a client an unreasonable advisory fee;
 
(k)  Failing to disclose to clients in writing before any advice is rendered any material conflict of interest relating to the investment adviser or any of its employees which could reasonably be expected to impair the rendering of unbiased and objective advice including:

 (1) Compensation arrangements connected with advisory services to clients which are in addition to compensation from such clients for such services; and,

(2) Charging a client an advisory fee for rendering advice when a commission for executing securities transactions pursuant to such advice will be received by the investment adviser or its employees;

(l)  Guaranteeing a client that a specific result will be achieved (e.g. gain or no loss), with advice which will be rendered;
 
(m)  Publishing, circulating or distributing any advertisement which does not comply with Rule 206(4)-1 under the Investment Advisers Act of 1940;
 
(n)   Disclosing the identity, affairs, or investments of any client unless required by law to do so, or unless consented to by the client;
 
(o)   Taking any action, directly or indirectly, with respect to those securities or funds in which any client has any beneficial interest, where the investment adviser has custody or possession of such securities or funds and the adviser’s action does not comply with the requirements of Rule 206(4)-2 under the Investment Advisers Act of 1940; and,
 
(p)  Entering into, extending or renewing any investment advisory contract unless such contract is in writing and discloses, in substance, the services to be provided, the term of the contract, the advisory fee, the formula for computing the fee, the amount of prepaid fee to be returned in the event of contract termination or non-performance, whether the contract grants discretionary power to the adviser and that no assignment of such contract shall be made by the investment adviser without the consent of the other party to the contract.
 
(q)   Failing to establish, maintain and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information contrary to the provisions of Section 204A of the Investment Advisers Act of 1940.
 
(r)  Entering into, extending or renewing any advisory contract contrary to the provisions of Section 205 of the Investment Advisers Act of 1940. This provision shall apply to all investment advisers licensed or required to be licensed under the Act.
 
(s)  Indicating, including in an advisory contract, any condition, stipulation or provisions binding any person to waive compliance with any provision of the Act or of the Investment Advisers Act of 1940, or any other practice contrary to the provisions of Section 215 of the Investment Advisers Act of 1940.
 
(t)  Engaging in any act, practice or course of business which is fraudulent, deceptive or manipulative, contrary to the provisions of Section 206(4) of the Investment Advisers Act of 1940, notwithstanding the fact that such investment adviser is not registered or required to be registered under Section 203 of the Investment Advisers Act of 1940.
 
(u)  Engaging in conduct or any act, indirectly or through or by any other person, which would be unlawful for such person to do directly under the provisions of the Act or any rule or regulation thereunder.
  
(v) Entering into any contract with a customer if the contract contains any condition, stipulation or provision binding the customer to waive any rights under the Act, or any rule or order thereunder.

 

 

(a) The advisory client executes a written consent prospectively authorizing the investment adviser to effect agency cross transactions for such client;

 

(b) Before obtaining such written consent from the client, the investment adviser makes full written disclosure to the client that, with respect to agency cross transactions, the investment adviser will act as broker-dealer for, receive commissions from and have a potentially conflicting division of loyalties and responsibilities regarding both parties to the transactions;

 

(c) At or before the completion of each agency cross transaction, the investment adviser or any other person relying on this section sends the client a written confirmation. The written confirmation shall include:

(1) A statement of the nature of the transaction;

 

(2) The date the transaction took place;

 

(3) An offer to furnish, upon request, the time when the transaction took place; and

 

(4) The source and amount of any other remuneration the investment adviser received or will receive in connection with the transaction.

(d) In the case of a purchase, if the investment adviser was not participating in a distribution, or, in the case of a sale, if the investment adviser was not participating in a tender offer, the written confirmation may state whether the investment adviser has been receiving or will receive any other remuneration and that the investment adviser will furnish the source and amount of such remuneration to the client upon the client's written request;

 

(e) At least annually, and with or as part of any written statement or summary of the account from the investment adviser, the investment adviser or any other person relying on this section sends the client a written disclosure statement identifying:

(1) The total number of agency cross transactions during the period for the client since the date of the last such statement or summary; and

 

(2) The total amount of all commissions or other remuneration the investment adviser received or will receive in connection with agency cross transactions for the client during the period.

(f) Each written disclosure and confirmation required by this section shall include a conspicuous statement that the client may revoke the written consent required under § 1877.2(a) at any time by providing written notice to the investment adviser; and
 
(g) No agency cross transaction may be effected in which the same investment adviser recommended the transaction to both any seller and any purchaser.

 

 

(a) Examined in accordance with generally accepted auditing standards and prepared in conformity with generally accepted accounting principles;

 

(b) Audited by an independent public accountant or an independent certified public accountant; and

 

(c) Accompanied by an opinion of the accountant as to the report of financial position and by a note stating the principles used to prepare it, the basis of included securities, and any other explanations required for clarity.

 

 

(a) Maintain a minimum net capital of $ 25,000.00; and

 

(b) An investment adviser licensed or required to be licensed whose minimum net capital does not exceed $ 35,000.00 pursuant to monthly calculations shall post a Surety Bond in the amount of $ 10,000.00 within thirty (30) days after the computation which reflects the deficiency and the Surety Bond shall remain in effect for not less than twelve months thereafter. If the investment adviser's minimum net capital remains below the $ 35,000.00 at the end of twelve months in which the bond is required, the investment adviser shall maintain the Surety Bond on a continuing basis.

(a) A trial balance of all ledger accounts;

(b) A computation of net capital as defined in subsection 1879.1;

(c) A statement of all client funds, securities, or assets that are not segregated;

(d) A computation of the aggregate amount of client debit balances; and

(e) A statement as to the number of client accounts and details of client accounts for any District residents.

 

 

 

 

(a) A journal or journals, including cash receipts and disbursements records and any other records of original entry forming the basic of entries in any ledger;

 

(b) General and auxiliary ledgers (or other comparable records) reflecting assets, liability, reserve, capital, income and expense accounts;

 

(c) A memorandum of each order given by the investment adviser for the purchase or sale of any security or assets, of any instruction received by the investment adviser from the client concerning the purchase, sale, receipt, or delivery of a particular security or asset, and of any modification or cancellation of any order or instruction. These memoranda shall show the terms and conditions of the order, instruction, modification or cancellation, shall identify the person connected with the investment adviser who recommended the transaction to the client and the person who placed the order, and shall show the account for which entered, the date of entry, whether the order was entered pursuant to the exercise of discretionary power and, when appropriate, the bank, broker-dealer or other entity or person by or through which the transaction was effected;

 

(d) All checkbooks, bank statements, cancelled checks, and cash reconciliations of the investment adviser;

 

(e) All bills or statements, or copies thereof, paid or unpaid, relating to the business of the investment adviser as such;

 

(f) All trial balances, financial statements, and internal audit working papers relating to the business of the investment adviser;

 

(g) Originals of all written communications received, and copies of all written communications sent, by the investment adviser relating to any recommendation made or proposed to be made and any advice given or proposed to be given, any receipt, disbursement or delivery of funds, securities or assets, or the placing or execution of any order to purchase or sell any security or asset, provided that:

(1) The investment adviser shall not be required to keep any unsolicited market letters and other similar communications of general public distribution not prepared by or for the investment adviser; and

 

(2) If the investment adviser sends any notice, circular or other advertisement offering any report, analysis, publication or other investment advisory service to more than 10 persons, the investment adviser shall not be required to keep a record of the names and addresses of the persons to whom it was sent, except that if the notice, circular or advertisement is distributed to persons named on any list, the investment adviser shall retain with a copy of the notice, circular, or advertisement a memorandum describing the list and the source thereof;

(h) A list or other record of all accounts in which the investment adviser is vested with any discretionary power with respect to the funds, securities, assets, or transactions of any client;

 

(i) All powers of attorney and other evidences of the granting of any discretionary authority by any client to the investment adviser, or copies thereof;

 

(j) All written agreements, or copies thereof, entered into by the investment adviser with any client or otherwise relating to the business of the investment adviser as such;

 

(k) A copy of each notice, circular, advertisement, newspaper article, investment letter, bulletin or other communication that the investment adviser circulates or distributes, directly or indirectly, to 10 or more persons, (other than persons connected with the investment adviser), and, if the notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication recommends the purchase or sale of a specific security or asset, and does not state the reasons for this recommendation, a memorandum of the investment adviser indicating the reasons therefor.

(a) A record of every transaction involving a security or asset in which the investment adviser or any investment adviser representative of the investment adviser has, or by reason of the transaction acquires, any direct or indirect beneficial ownership, except transactions effected over which neither the investment adviser nor any advisory representative of the investment adviser has any direct or indirect influence or control, and transactions in securities that are direct obligations of the United States.

 

(b) The record shall state the title and amount of the security or asset involved, the date and nature of the transaction (that is, purchase, sale, or other acquisition or disposition), the price at which it was effected, and the name of the broker-dealer, bank or other entity or person with or through which the transaction was effected.

 

(c) A transaction shall be recorded not later than ten (10) days after the end of the calendar quarter in which the transaction was effected.

 

(d) The record may also contain a statement declaring that the reporting or recording of the transaction will not be construed as an admission that the investment adviser or investment adviser representative has any direct or indirect beneficial ownership in the security or asset.

 

(e) An investment adviser will not be deemed to have violated the provisions of this subsection by the investment adviser's failure to record securities or asset transactions of any investment adviser representative if the investment adviser establishes that it instituted adequate procedures and used reasonable diligence to obtain prompt reports of all transactions required to be recorded.

 

(f) For purposes of this section, the term "advisory representative" shall mean any partner, officer or director of the investment adviser; any employee who makes any recommendation, who participates in the determination of which recommendation shall be made, or whose functions or duties relate to the determination of which recommendation shall be made; any employee who, in connection with his duties (other than clerical, ministerial or administrative duties), obtains any information concerning which securities are being recommended prior to the effective dissemination of such recommendations or of the information concerning such recommendations; and any of the following persons who obtain information concerning securities recommendations being made by such investment adviser prior to the effective dissemination of such recommendations or of the information concerning such recommendations:

(1) Any person in a control relationship to the investment advisor, "control" shall have the same meaning as that set forth in Section 2(a)(9) of the Investment Company Act of 1940, as amended;

 

(2) Any affiliated person of such controlling person; and

 

(3) Any affiliated person of such affiliated person.

(a) Notwithstanding the provisions of § 1881.2 when the investment adviser is primarily engaged in a business other than advising registered investment companies or other advisory clients, a record shall be maintained of every transaction involving a security or asset in which the investment adviser or any investment adviser representative of the investment adviser has, or by reason of the transaction acquires, any direct or indirect beneficial ownership, except transactions effected in any account over which neither the investment adviser nor any investment adviser representative of the investment adviser has any direct or indirect influence or control, and transactions in securities that are direct obligations of the United States.

 

(b) The record shall state the title and amount of security or asset involved, the date and nature of the transaction (i.e. purchase, sale, or other acquisition or disposition), the price at which it was effected, and the name of the broker-dealer, bank or other entity or person with or through which the transaction was effected.

 

(c) A transaction shall be recorded not later than ten (10) days after the end of the calendar quarter in which the transaction was effected.

 

(d) The record may also contain a statement declaring that the reporting or recording of the transaction will not be construed as an admission that the investment adviser or investment adviser representative has any direct or indirect beneficial ownership in the security or asset.

 

(e) An investment adviser is "primarily engaged in a business or businesses other than advising registered investment companies or other advisory clients" if, for each of its three (3) most recent fiscal years or for the period of time since organization, whichever is less, the investment adviser derived from such other business or businesses, on an unconsolidated basis, more than 50 percent of both its total sales and revenues and its income (or loss) before income taxes and extraordinary items.

 

(f) An investment adviser shall not be deemed to have violated the provisions of this subsection by its failure to record securities or asset transactions of any investment adviser representative if the investment adviser establishes that it instituted adequate procedures and used reasonable diligence to obtain prompt reports of all transactions required to be recorded. 

 

(g) For purposes of this subsection, the term "advisory representative" shall mean any partner, officer or director of the investment adviser; any employee who makes any recommendation, who participates in the determination of which recommendation shall be made, or whose functions or duties relate to the determination of which recommendation shall be made; any employee who, in connection with his duties (other than clerical, ministerial or administrative duties), obtains any information concerning which securities are being recommended prior to the effective dissemination of such recommendations or of the information concerning such recommendations; and any of the following persons who obtain information concerning securities recommendations being made by such investment adviser prior to the effective dissemination of such recommendations or of the information concerning such recommendations:

(1) Any person in a control relationship to the investment advisor, "control" shall have the same meaning as that set forth in Section 2(a)(9) of the Investment Company Act of 1940, as amended;

 

(2) Any affiliated person of such controlling person; and

 

(3) Any affiliated person of such affiliated person.

(a) A journal or other record showing all purchases, sales, receipts and deliveries of securities (including certificate numbers) and other assets (including identifying or descriptive materials as appropriate) for these accounts, as well as all other debits and credits to the accounts;

 

(b) A separate ledger account for each client showing all purchases, sales, receipts, and deliveries of securities or assets, the date and price of each purchase and sale, and all debits and credits;

 

(c) Copies of confirmations of all transactions affected by or for the account of each client; and

 

(d) A record of each security or asset in which each client has a position or ownership interest, which record shall show the name of the client having the position or interest, the amount of the position or interest, and the location of each security or asset.

(a) True, accurate, and current records showing separately for each client the securities or assets purchased and sold, and the date, amount, and price of each purchase and sale; and

(b) For each security or asset in which any client has a current position, true, accurate, and current information from which the investment adviser can promptly furnish the name of each client, and the current amount or interest of each client.

 

 

 

 

(a) Arrange the records and index the films or computer storage medium so as to permit the immediate location of any particular record;

 

(b) Be ready at all times to provide, and promptly provide, any facsimile enlargement of film or computer printout or copy of the computer storage medium that the Department may request;

 

(c) Store separately from the original, a copy of the film or computer storage medium for the time required;

 

(d) With respect to records stored on computer storage medium, maintain procedures for maintenance and preservation of, and access to, records so as to reasonably safeguard records from loss, alteration, or destruction; and

 

(e) With respect to records stored on photographic film, at all times have available for examination of its records pursuant to the Act facilities for immediate, easily readable projection of the film and for producing easily readable facsimile enlargements.

 

 

 

 

 

 

(1) The investment adviser relying on this Chapter;

 

(2)  An affiliated person of the investment adviser, including an investment adviser representative;
 

(3)  An interested person of the investment adviser;
 

(4)  A person who receives, directly or indirectly, any compensation in connection with the contract from the investment adviser, an affiliated person of the investment adviser, an affiliated person of an affiliated person of the investment adviser or an interested person of the investment adviser; or

 

(5)  A person with any material relationship between himself (or an affiliated person of that person) and the investment adviser (or an affiliated person of the investment adviser) that exists or has existed at any time during the past two years.

(1) A company required to be registered under the federal Investment Company Act of 1940 but which is not so registered;

 

(2)  A private investment company (for purposes of this subparagraph (2), a private investment company is a company which would be defined as an investment company under Section 3(a) of the federal Investment Company Act of 1940 but for the exception from that definition provided by Section 3(c)(1) of that Act);

 

(3)  An investment company registered under the federal Investment Company Act of 1940; or

 

(4)  A business development company as defined in Section 202(a)(22) of the federal Investment Advisers Act of 1940, unless each of the equity owners of any such company, other than the investment adviser entering into the contract, is a natural person or company within the meaning of paragraph AA09.1(c) of this section.

(1) By means of written material or oral statements which do not purport to meet the objectives or needs of specific individuals or accounts; or

 

(2) Through the issuance of statistical information containing no expression of opinion as to the investment merits of a particular security; or

 

(3) Any combination of the foregoing services.

(a) Any person of the immediate family of any affiliated person of the investment adviser;

 

(b)  Any person who knowingly has any direct or indirect beneficial interest in or who is designated as trustee, executor, or guardian of any legal interest in any security issued by the investment adviser or by a controlling person of the investment adviser if that beneficial or legal interest exceeds:

(1)  One tenth of one percent of any class of outstanding securities of the investment adviser or a controlling person of the investment adviser; or

(2)  Five percent (5%) of the total assets of the person seeking to act as the client's independent agent; or

(c) Any person or partner or employee of any person who, at any time since the beginning of the last two years, has acted as legal counsel for the investment adviser.

Time of Entry shall mean the time when the broker-dealer transmits the order or instruction for execution or, if it is not transmitted, the time when it is received.