Hawaii Administrative Rules › Title 16 - DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS › Chapter 39 - SECURITIES › Subchapter 5 - FRAUDULENT PRACTICES OF BROKER-DEALERS, BROKER-DEALER AGENTS, AND AGENTS OF AN ISSUER › Section 16-39-501 - Fraudulent practices of broker-dealers, broker-dealer agents, and agents of an issuer

Current through June, 2024
The purpose of this section is to identify practices in the
				  securities business that are generally associated with schemes to manipulate. A
				  broker-dealer, broker-dealer agent, or agent of the issuer who engages in one
				  or more of the following practices shall be deemed to have engaged in an "act,
				  practice, or course of business that operates or would operate as a fraud or
				  deceit" as used in section
				  485A-501, HRS;
				  provided that this section is not intended to be all-inclusive, and thus, acts
				  or practices not enumerated herein may also be deemed fraudulent:
(1)
Unreasonable
				price/commission.
Entering into a transaction with a customer in
				any security at a price not reasonably related to the current market price of
				the security or receiving an unreasonable commission or profit;
(2)
Contradicting prospectus
				information.
Contradicting or negating the importance of any
				information contained in a prospectus or other offering materials with intent
				to deceive or mislead or using any advertising or sales presentation in a
				deceptive or misleading manner;
(3)
Insider information.
In connection with the offer,
				sale, or purchase of a security, falsely leading a customer to believe that the
				broker-dealer or agent is in possession of material, non-public information
				which would impact on the value of the security;
(4)
Contradictory
				recommendations.
In connection with the solicitation of a sale or
				purchase of a security, engaging in a pattern or practice of making
				contradictory recommendations to different investors of similar investment
				objective for some to sell and others to purchase the same security, at or
				about the same time, when not justified by the particular circumstances of each
				investor;
(5)
Bona fide
				distribution.
Failing to make a bona fide public offering of all
				the securities allotted to a broker-dealer for distribution by, among other
				things, transferring securities to a customer, another broker-dealer or a
				fictitious account with the understanding that those securities will be
				returned to the broker-dealer or its nominees; or parking or withholding
				securities;
(6)
Relating to OTC securities.
Although nothing in this
				section precludes application of the general anti-fraud provisions against
				anyone for practices similar in nature to the practices discussed below, the
				following subparagraphs specifically apply only in connection with the
				solicitation of a purchase or sale of OTC unlisted non-NASDAQ equity
				securities:
(A)
Bid/ask price
				disclosure.
Failing to disclose the firm's present bid and ask
				price of a particular security at the time of solicitation;
(B)
Commission
				disclosure.
Failing to advise the customer, both at the time of
				solicitation and on the confirmation, of any and all compensation related to a
				specific securities transaction to be paid to the agent including commissions,
				sales charges, or concessions;
(C)
Short inventory position.
In connection with a
				principal transaction, failing to disclose, both at the time of solicitation
				and on the confirmation, a short inventory position in the firm's account of
				more than three per cent of the issued and outstanding shares of that class of
				securities of the issuer provided that this subparagraph shall apply only if
				the firm is a market maker at the time of the solicitation;
(D)
Sales contests.
Conducting sales contests in a particular security;
(E)
Delay executing sell
				orders.
After a solicited purchase by a customer, failing or
				refusing, in connection with a principal transaction, to promptly execute sell
				orders;
(F)
Secondary
				market solicitation.
Soliciting a secondary market transaction
				when there has not been a bona fide distribution in the primary
				market;
(G)
Differing
				compensation.
Engaging in a pattern of compensating an agent in
				different amounts for effecting sales and purchases in the same
				security;
(H)
Manipulative, deceptive, or fraudulent acts.
Effecting
				any transaction in, or inducing the purchase or sale of, any security by means
				of any manipulative, deceptive, or other fraudulent device or contrivance
				including but not limited to the use of boiler room tactics or use of
				fictitious or nominee accounts;
(I)
Prospectus delivery.
Failure to comply with any
				prospectus delivery requirement promulgated under federal law; or
(J)
Penny stock
				sales.
Effecting any transaction in, or inducing or attempting to
				induce the purchase or sale of, any penny stock by any customer except in
				accordance with the requirements as set forth in section 15(g) of the
				Securities Exchange Act.