Missouri Code of State Regulations › Title 15 - ELECTED OFFICIALS › Division 30 - Secretary of State › Chapter 51 - Broker-Dealers, Agents, Investment Advisers, and Investment Adviser Representatives › Section 15 CSR 30-51.172 - Dishonest or Unethical Business Practices by Investment Advisers and Investment Adviser Representatives

Current through Register Vol. 49, No. 14, July 15, 2024
PURPOSE: This amendment adds provisions regarding
				  disclosure when an investment adviser or its representative incorporates a
				  social objective or non-financial objective into certain aspects of their
				  advisory business.
(1) Grounds
				for the discipline or disqualification of investment advisers or investment
				adviser representatives (adviser) shall include, in addition to other grounds
				specified in section
				409.4-412(d)
				of the Missouri Securities Act of 2003 (the Act), the following "dishonest or
				unethical practices in the securities business":
(A) Recommending to a client to whom
				investment, supervisory, management, or consulting service are provided that
				he/she purchase, sell, or exchange any security, commodity, or other investment
				when the adviser does not have 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 overall
				portfolio, investment objectives, financial situation and needs, investment
				experience, and any other information known by the adviser;
(B) Inducing trading in a client's account
				when:
1. The size or frequency of such trading
				is excessive given the financial resources, investment objectives, and
				character of the account; and
2.
				The adviser directly benefits from the number of securities transactions
				effected in a client's account;
(C) Ordering the purchase or sale of a
				security for a client's account without authority to do so;
(D) Ordering the purchase or sale of a
				security for a client's account upon a third-party's instruction without first
				receiving the client's third-party trading authorization in writing;
(E) Establishing fictitious accounts in order
				to execute transactions, which would otherwise be prohibited;
(F) Exercising any discretionary power in
				ordering the purchase or sale of securities for a client without first
				obtaining the client's written discretionary authority 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;
(G) 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;
(H) 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
				adviser;
(I) Failing to furnish to
				a client purchasing securities in an offering, no later than the date of
				confirmation of the transaction, either a final prospectus or a preliminary
				prospectus and an additional document, which together include all information
				set forth in the final prospectus, or making oral or written statements
				contrary to or inconsistent with the disclosures contained in the
				prospectus;
(J) Misrepresenting to
				any client or prospective client the qualifications of the adviser or its
				employees, or to misrepresent the nature of the advisory services being offered
				or fees to be charged for such services, or to omit 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;
(K) Providing to a
				client a report or recommendation prepared by someone other than the adviser
				without also disclosing to the client that someone else prepared that report or
				recommendation. This prohibition does not apply to an adviser's use of
				published research reports or statistical analysis when rendering advice, nor
				when an adviser orders such a report in the normal course of providing
				service;
(L) Rendering advice to a
				client before making written disclosure to that client about any material
				conflict of interest relating to the adviser, its representative, or any of its
				employees, when that conflict could reasonably be expected to impair the
				rendering of unbiased and objective advice including:
1. Compensation arrangements connected with
				advisory services to clients which are in addition to compensation from those
				clients for such services; and
2.
				Charging a client an advisory fee for rendering advice when the adviser or its
				employees will also receive a commission for executing securities transactions
				pursuant to that advice;
(M) Failing to disclose to any client or
				prospective client all material facts with respect to:
1. Any financial condition of the adviser
				that is reasonably likely to impair the ability of the adviser to meet
				contractual commitments to clients, if the adviser has discretionary authority
				(express or implied) or custody over such client's funds, assets, or
				securities, or requires payment of advisory fees six (6) or more months in
				advance and in excess of five hundred dollars ($500) per client; or
2. Any legal or disciplinary event that is
				material to an evaluation of the adviser's integrity or ability to meet
				contractual commitments to clients;
(N) Charging a client an unreasonable and
				inequitable advisory fee in light of the fees charged by other advisers
				providing essentially the same services;
(O) Paying solicitor fees if such fees are
				not paid in accordance with
				15 CSR
				30-51.145(1), charging performance
				based fees that are not in accordance with
				15 CSR
				30-51.145(2), or having custody or
				possession of a client's funds and/or securities if such custody or possession
				is not maintained in accordance with
				15 CSR
				30-51.100. Custody shall include holding checks drawn
				by the client and made out to a third party for more than one (1) business
				day;
(P) Guaranteeing a client that
				a specific result will be achieved (gain or no loss) as a result of advice that
				will be rendered;
(Q) Disclosing
				the identity, affairs, or investments of any client to any third party unless
				required by law to do so, or unless consented to by the client;
(R) Entering into, extending, or renewing any
				investment advisory contract, other than a contract for impersonal advisory
				services, unless such contract is in writing and discloses, in substance-
1. The services to be provided;
2. The term of the contract;
3. The advisory fee or the formula for
				computing the fee;
4. The amount or
				the manner of calculation of the amount of the prepaid fee to be returned in
				the event of contract termination or nonperformance;
5. Whether the contract grants discretionary
				power to the adviser or its representatives;
6. That no assignment of such contract shall
				be made by the adviser without the client's written consent; and
7. That the investment adviser or investment
				adviser representative is authorized to record and retain information about the
				client's designated trusted contact, and to inform the trusted contact person
				of the designation and disclose information about the client's account in
				accordance with 15 CSR
				30-51.075;
(S) Publishing, circulating, or distributing
				any advertisement that does not comply with
				17 CFR section
				275.206(4)-1;
(T) Failing or refusing to furnish a
				customer, upon reasonable request, information to which s/he is entitled, or to
				respond to a formal written reprimand or complaint;
(U) Engaging in any conduct or act, either
				directly or indirectly through any other person, which would violate any
				applicable professional, fair practice or ethical standard established by state
				or federal law or regulation; and
(V) Aiding or abetting any of the acts or
				practices enumerated in this rule.