441-205-0145 Unethical Business Practices of State Investment Advisers and Their Investment Adviser Representatives (1) A person who is a State Investment Adviser or an Investment Adviser Representative for a State Investment Adviser is a fiduciary and has a duty to act primarily for the benefit of the Adviser’s clients. The provisions of this rule apply to state investment advisers and their investment adviser representatives. While the extent and nature of this duty varies according to the nature of the relationship between an investment adviser and its clients and the circumstances of each case, a state investment adviser or its investment adviser representatives shall not engage in unethical business practices, including the following: (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 first obtaining written discretionary authority from the client unless the discretionary power relates solely to the price at which, or the time when, an order involving a definite amount of a specified 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 if that adviser in such situations can directly benefit from the number of securities transactions effected in a client’s 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 financial institution engaged in the business of loaning funds. (g) Loaning money to a client unless the investment adviser is a financial 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 misrepresenting the nature of the advisory services being offered or fees to be charged for such service, or omitting 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 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 adviser or any of its employees which could reasonably be expected to impair the rendering of unbiased and objective advice including: (A) Compensation arrangements connected with advisory services to clients which are in addition to compensation from such clients for such services; or (B) 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 adviser or its employees. (l) Guaranteeing a client that a specific result will be achieved (gain or no loss) with advice which will be rendered. (m) Disclosing the identity, affairs, or investments of any client unless required by law to do so, or unless consented to by the client. (n) 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, and whether the contract grants discretionary power to the adviser. (o) 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 this rule or the Oregon Securities Law. (p) Indicating, in an advisory contract, any condition, stipulation, or provisions binding any person to waive compliance with any provision of the Oregon Securities Law, this rule, or the Investment Advisers Act of 1940. (2) The conduct set forth above is not inclusive. Engaging in other conduct such as non-disclosure, incomplete disclosure, or deceptive practices shall be deemed a dishonest, fraudulent or unethical business practice. Statutory/Other Authority: ORS 59.285 Statutes/Other Implemented: ORS 59.205 History: FCS 7-2000, f. & cert. ef. 6-2-00