Code of Maine Rules › 02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION › 032 - OFFICE OF SECURITIES › Chapter 515 - INVESTMENT ADVISER LICENSING › Section 032-515-14 - Dishonest and unethical practices

Current through 2024-29, July 17, 2024
Investment advisers and investment adviser representatives
				  are fiduciaries and have a duty to act for the benefit of their clients. While
				  the extent and nature of this duty varies according to the nature of the
				  relationship between investment advisers or investment adviser representatives
				  and their clients and the circumstances of each case, an investment adviser or
				  investment adviser representative shall not engage in dishonest or unethical
				  business practices. The practices listed below are examples of practices that
				  may constitute grounds for discipline as "dishonest or unethical practices"
				  under Section 16412 of the Act.
This section is not intended to be all inclusive, and thus
				  practices not enumerated herein may also be deemed dishonest or unethical. This
				  section is also not intended to limit or preclude application of the general
				  anti-fraud provisions contained in Subchapter 5 of the Act against any person
				  for practices similar in kind to those listed below.
To the extent that the conduct alleged constitutes fraud or
				  deceit, the provisions of this section also apply to all other persons, in
				  addition to investment advisers and investment adviser representatives, who
				  advise others for compensation, either directly or indirectly or through
				  publications or writings, as to the value of securities or the advisability of
				  investing in, purchasing or selling securities or who, for compensation and as
				  part of a regular business, issue or promulgate analyses or reports relating to
				  securities.
A person may be deemed to have engaged in "dishonest or
				  unethical practices" under Section 16412(4)(M) of the Act if the person has
				  engaged in practices including but not limited to one or more of the
				  following:
1. Recommending to a
				client, to whom 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 or investment adviser
				representative.
2. 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 specified security shall be executed, or both.
3. 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.
4. Placing an order to purchase or sell a
				security for the account of a client without authority to do so.
5. 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.
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
				loaning funds.
7. 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.
8. Misrepresenting to any
				investment advisory client, or prospective investment 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 a material fact necessary
				to make any such representations not misleading in light of the circumstances
				under which they are made.
9.
				Providing a report or recommendation to any investment advisory client prepared
				by someone other than the investment adviser without disclosing that fact. This
				prohibition does not apply to a situation where the investment adviser uses
				published research reports or statistical analyses to render advice or where an
				investment adviser orders such a report in the normal course of providing
				service.
10. Charging a client an
				unreasonable advisory fee.
11.
				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:
A.
				Compensation arrangements connected with advisory services to clients which are
				in addition to compensation from such clients for such services; and
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 investment adviser or its
				employees.