Connecticut Administrative Code › Title 36b - Connecticut Securities Law and Business Opportunity Investment Act › 31 - Connecticut Uniform Securities Act › Transferred from section 36-500, July 3, 1995 › Section 36b-31-15c - Dishonest or unethical business practices by investment advisers

Current through July 10, 2024
(a) In implementing section 36b-15(a) (2) (H) of the general statutes, the following shall be deemed "dishonest or unethical practices in the securities . . . business" by investment advisers without limiting those terms to the following practices:
(1) 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, needs and any other information known or acquired by the investment adviser;
(2) Placing an order to purchase or sell a security for the account of a client without written authority to do so;
(3) 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;
(4) 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 10 business days after the date of the first transaction placed pursuant to oral discretionary authority;
(5) 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;
(6) 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 lending funds or securities;
(7) Lending money to a client unless the investment adviser is a financial institution engaged in the business of lending funds or the client is an affiliate of the investment adviser;
(8) Misrepresenting to any client or prospective client the qualifications of the investment adviser or any investment adviser agent, representative or employee of the investment adviser, misrepresenting the nature of the advisory services being offered or the fees to be charged for such services, 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;
(9) Providing a report or recommendation to any client prepared by a person other than the investment adviser without disclosing that fact, except that the investment adviser may use published research reports or statistical analyses to render advice or order such a report in the normal course of providing its services;
(10) Failing to disclose to a client in writing before any advice is rendered any material conflict of interest relating to the investment adviser or any of its investment adviser agents, representatives or employees which could reasonably be expected to impair the rendering of unbiased and objective advice;
(11) Guaranteeing that a specific result will be achieved (gain or no loss) as a result of the advice that shall be rendered;
(12) Publishing, circulating or distributing any advertisement prohibited by section 36b-31-5 a of the regulations;
(13) Disclosing the identity, affairs or investments of any client to any third party, unless required by law or governmental authority to do so, or unless the client consents;
(14) Engaging in any conduct prohibited by section 36b-31-5 b of the regulations;
(15) 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 and the manner of calculating the amount of the prepaid fee to be returned in the event of contract termination or nonperformance, whether the contract grants discretionary power to the investment adviser and that the investment adviser shall not make an assignment of the contract without the consent of the other party to the contract;
(16) Failing to provide a client with a copy of the completed client information document specified in section 36b-31-14 b (b) (2) of the regulations (A) within 10 days after the client's account is first established on the books and records of the investment adviser or (B) within 10 days after any material amendment is made to the client information document. A material amendment is presumed to exist, without limitation, in the event the investment adviser receives from the client and records on the client information document, changes to the client's annual income, net worth, or investment objectives. For purposes of this subdivision, a "client" means any person for whom a client information document needs to be kept and maintained under section 36b-31-14 b (b) (2) of the regulations;
(17) Failing to disclose to any client or prospective client all material facts with respect to 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, if the investment adviser has express or implied discretionary authority or custody over the client's funds or securities, or if the investment adviser requires the prepayment of advisory fees of more than $500 from such client six months or more in advance;
(18) Failing to disclose to any client or prospective client all material facts with respect to a legal or disciplinary event that is material to an evaluation of the investment adviser's integrity or ability to meet contractual commitments to clients. For purposes of this subsection, there shall be a rebuttable presumption that the following legal or disciplinary events involving the investment adviser or a management person of the investment adviser that were not resolved in such person's favor or subsequently reversed, suspended or vacated are material for 10 years from the time of the event:
(A) A criminal or civil action in a court of competent jurisdiction in which the person was (i) convicted, pled guilty or nolo contendere ("no contest") to a felony or misdemeanor involving an investment-related business, fraud, false statements or omissions, wrongful taking of property or bribery, forgery, counterfeiting or extortion, or was the named subject of a pending criminal proceeding of such nature; (ii) found to have been involved in a violation of an investment-related statute or regulation; or (iii) the subject of any order, fine, judgment or decree permanently or temporarily enjoining or otherwise limiting such person from engaging in any investment-related activity and
(B) administrative proceedings before the commissioner, the United States Securities and Exchange Commission or any other state or federal regulatory agency in which such person was (i) found to have caused an investment-related business to lose its authorization to do business; or (ii) found to have been involved in a violation of an investment-related statute or regulation and was the subject of an order by the state or federal agency denying, suspending or revoking the authorization of, or such person's association with, an investment-related business or otherwise limiting such person's investment-related activities; and
(19) Failing to comply with any securities-related arbitration award, where a timely motion to vacate or modify such award has not been made pursuant to applicable law or where such a motion has been denied.