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-31-15a - Dishonest or unethical business practices by broker-dealers

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 broker-dealers without limiting those terms to the following practices:
(1) In a principal transaction, stating or implying to the customer that the agent would not receive a commission or other similar remuneration on a transaction when, in fact, the agent would receive such commission or remuneration;
(2) Recommending to a customer the purchase, sale or exchange of any security without reasonable grounds for believing that the recommendation is suitable for such customer based on the facts, if any, disclosed by the customer after reasonable inquiry as to the customer's other securities holdings and as to the customer's financial situation and needs;
(3) Causing any unreasonable delay under the circumstances in the requested delivery of securities purchased and fully paid for by any of the broker-dealer's customers or in the payment upon request of free credit balances of any of the broker-dealer's customers;
(4) Causing or inducing trading in a customer's account which is excessive in size or frequency in view of the customer's financial situation and needs as disclosed by the customer;
(5) Executing a transaction on behalf of a customer without authority to do so;
(6) Exercising any discretionary power in effecting a transaction for a customer's account without first obtaining written discretionary authority from the customer unless such discretionary power relates only to the price at which or the time when an order given by a customer for the purchase or sale of a definite amount of a specific security shall be executed;
(7) Extending credit to a customer in violation of the Securities Exchange Act of 1934 or the regulations of the Federal Reserve Board;
(8) Failing to provide a customer with a copy of the completed customer information document specified in section 36b-31-14 a (b) (2) of the regulations (A) within 10 days after the customer's account is first established on the books and records of the broker-dealer, or (B) within 10 days after any material amendment is made to the customer information document. A material amendment is presumed to exist in the event the broker-dealer receives from the customer and records on the customer information document, changes to the customer's annual income, net worth, or investment objectives. For purposes of this subdivision, a "customer" means any person for whom a customer information document needs to be kept and maintained under section 36b-31-14 a (b) (2) of the regulations.
(9) Executing any transaction in a margin account without obtaining from the customer a written margin agreement within 10 business days following consummation of the initial transaction in the margin account;
(10) Failing to segregate a customer's fully paid-for or excess margin securities;
(11) Hypothecating a customer's securities unless written consent of the customer is first obtained;
(12) In over-the-counter transactions, whether in listed or unlisted securities, where a broker-dealer buys for its own account from its customer, or sells for its own account to its customer, buying or selling at a price which is not fair, taking into consideration all relevant circumstances, including market conditions with respect to such security at the time of the transaction, the expense involved, and the fact that the broker-dealer is entitled to a profit; and if the broker-dealer acts as agent for its customer in any such transaction, charging its customer more than a fair commission or service charge, taking into consideration all relevant circumstances, including market conditions, with respect to such security at the time of the transaction, the expense of executing the order and the value of any service the broker-dealer may have rendered by reason of its experience in, and knowledge of, such security and the market therefore;
(13) Entering into a transaction for its own account with a customer in a security at a price not reasonably related to the current market price of the security, or charging a commission which is not reasonable;
(14) Failing to establish written supervisory procedures and a system for applying them which may reasonably be expected to prevent and/or detect violations of the Act or sections 36b-31-2 to 36b-31-33, inclusive, of the regulations;
(15) Executing a transaction to purchase or write an option contract without obtaining from the customer a written option agreement within 10 days following consummation of the transaction;
(16) Failing to comply with Rule 15c2-8, 17 C.F.R. 240.15c2-8, under the Securities Exchange Act of 1934;
(17) Representing that a security is being offered to a customer "at the market" or at a price related to the market price unless the broker-dealer knows or has reasonable grounds to believe that a market for the security exists other than that created or controlled by the broker-dealer or by any person for whom the broker-dealer is acting or with whom the broker-dealer is associated in the distribution, or any person controlling, controlled by or under common control with the broker-dealer;
(18) Effecting any transaction in, or inducing the purchase or sale of, any security by means of any manipulative, deceptive or fraudulent device, practice, plan, program, design or contrivance, including, but not limited to, the following:
(A) Effecting any transaction in a security which involves no change in the beneficial ownership of that security;
(B) entering one or more orders for the purchase or sale of any security knowing that an order or orders of substantially the same size, entered at substantially the same time and price for the sale of such security have been or will be entered by or for the same or different parties to create a false or misleading appearance of active trading in the security or a false or misleading appearance with respect to the market for the security; provided, nothing in this subdivision shall prohibit a broker-dealer from entering bona fide agency cross transactions for its customers; and
(C) effecting, alone or with one or more persons, a series of transactions in any one 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;
(19) Guaranteeing a customer against loss in any securities account of that customer carried by the broker-dealer or in any securities transaction effected by the broker-dealer with or for such customer;
(20) Using any advertising, research materials or sales presentation in such a manner as to be deceptive or misleading or which would have the effect of detracting from, superseding or defeating the purpose or effect of any prospectus or disclosure document;
(21) Where the broker-dealer is controlled by, controlling, or under common control with, the issuer of any security, failing to disclose to a customer, before entering into any contract with or for such customer for the purchase or sale of such security, the existence of such control. If such disclosure is not made in writing, it shall be supplemented by the giving or sending of a written disclosure at or before the completion of the transaction;
(22) Failing to comply with Rule 15g, 17 C.F.R. § 240.15g, Under the Securities Exchange Act of 1934; and
(23) 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.