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 30-51.170 - Dishonest or Unethical Business Practices by Broker-Dealers and Agents

Current through Register Vol. 49, No. 14, July 15, 2024
PURPOSE: This amendment adds provisions regarding
				  disclosure when a broker-dealer or its agent incorporates a social objective or
				  non-financial objective into certain aspects of their customer
				  business.
(1) Grounds for the
				discipline or disqualification of broker-dealers or agents 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) Unreasonable and unjustifiable delaying
				or failing to execute orders, liquidating customers' accounts or in making
				delivery of securities purchased or in paying upon request of free credit
				balances reflecting completed transactions of any of its customers;
(B) Entering into a transaction with or for a
				customer at a price not reasonably related to the current market price of the
				security or receiving an unreasonable commission or profit;
(C) Effecting transactions in the account of
				a customer without authority to do so; or exercising any discretionary power in
				effecting a transaction for a customer's account without first obtaining
				written discretionary authority from the customer, unless the discretionary
				power relates solely to the time or price, or both, for the execution of
				orders;
(D) Inducing trading in a
				customer's account that is excessive in size or frequency in view of the
				financial resources and character of the account for the purpose of
				accumulation or compounding commissions;
(E) Recommending to a customer the purchase,
				sale or exchange of any security commodity or other investment without
				reasonable grounds to believe that this transaction or recommendation is
				suitable for the customer based upon reasonable inquiry concerning the
				customer's investment objectives, financial situation and needs, and any other
				relevant information known by the applicant or registrant;
(F) Engaging in or aiding in boiler-room
				operations or high pressure tactics in connection with the promotion of
				speculative offerings or hot issues by means of an intensive telephone campaign
				or unsolicited calls to persons not known by, nor having an account with, the
				agent or broker-dealer represented by the agent, where the prospective
				purchaser is encouraged to make a hasty decision to buy, irrespective of
				his/her investment needs and objectives;
(G) Failing to furnish to a customer
				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;
(H) Making false, misleading, deceptive,
				exaggerated or flamboyant representations or predictions in the solicitation or
				sale of a security, as, for example:
1. That
				the security will be resold or repurchased;
2. That it will be listed or traded on an
				exchange or established market;
3.
				That it will result in an assured, immediate or extensive increase in value,
				future market price or return on investment;
4. With respect to the issuer's financial
				condition, anticipated earnings, potential growth or success;
5. That there is a guarantee against risk or
				loss; or
6. A representation that a
				security is being offered to a customer at the market or a price related to the
				market price unless the applicant or registrant knows or has reasonable grounds
				to believe that-
A. A market for the security
				exists other than that made, created or controlled by the applicant or
				registrant, or by any person for whom s/he is acting or with whom s/he is
				associated in the distribution, or any person controlled by, controlling or
				under common control with the applicant or registrant; or
B. The security is traded in an established
				securities market, and the fact that the applicant or registrant is in a
				control position with respect to the market for that security is fully
				disclosed to the investor;
(I) Failing to disclose a dual agency
				capacity or effecting transactions upon terms and conditions other than those
				stated per confirmations; or failing to disclose that the applicant or
				registrant is controlled by, controlling, receiving compensation from,
				affiliated with or under common control with the issuer of any security before
				entering into any contract with or for a customer for the purchase or sale of
				the security, or if this disclosure is not made in writing, failing to give or
				send a written disclosure at or before the completion of the
				transaction;
(J) Failing to make a
				bona fide public offering of all the securities allotted to a broker-dealer for
				distribution, whether acquired as an underwriter, a selling group member, or
				from a member participating in the distribution as an underwriter or selling
				group member; or entering into an underwriting or selling group agreement which
				establishes unfair or unreasonable terms and conditions or
				compensation;
(K) Establishing
				fictitious accounts in order to execute transactions which would otherwise be
				prohibited;
(L) Entering into
				agreements for selling concessions, discounts, commissions or allowances as
				consideration for services in connection with the distribution or sale of a
				security in Missouri to any unregistered broker-dealer or agent, or dividing or
				otherwise splitting the agent's commissions, profits or other compensation from
				the purchase or sale of securities with any person not also registered as an
				agent for the same broker-dealer, or for a broker-dealer under direct or common
				control unless that person is not required to be registered in order to engage
				in the securities business in Missouri;
(M) Failing or refusing to furnish a
				customer, upon reasonable request, information to which s/he is entitled, or to
				respond to a formal written demand or complaint;
(N) Extending, arranging for, or
				participating in arranging for credit to a customer in violation of the
				regulations of the Securities and Exchange Commission or the regulations of the
				Federal Reserve Board;
(O) Failing
				to secure from the customer a properly executed written margin agreement that
				authorizes the existence of the margin account promptly after the initial
				transaction in the account;
(P)
				Failing to segregate customers' free securities or securities held in
				safekeeping;
(Q) Hypothecating a
				customer's securities without having a lien on the security unless the
				broker-dealer secures from the customer a properly executed written consent
				except as permitted by rules of the Securities and Exchange
				Commission;
(R) Charging
				unreasonable and inequitable fees for services performed, including
				miscellaneous services such as collection of monies due for principal,
				dividends or interest, exchange or transfer of securities, appraisals,
				safekeeping or custody of securities and other services related to its
				securities business;
(S) Offering
				to buy from or sell to any person any security at a stated price unless the
				applicant or registrant is prepared to purchase or sell, as the case may be, at
				a price and under the conditions as are stated at the time of the offer to buy
				or sell;
(T) 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:
1. Effecting any transaction in a security
				which involves no change in the beneficial ownership of the security;
				and
2. Effecting, alone or with one
				(1) or more other persons, a transaction or series of transactions in any
				security creating actual or apparent active trading in the security or raising
				or depressing the price of the security, for the purpose of inducing the
				purchase or sale of the security by others;
(U) Publishing or circulating or causing to
				be published or circulated, any notice, circular, advertisement, newspaper
				article, investment service or communication of any kind which purports to
				report any transaction as a purchase or sale of any security unless the
				applicant or registrant believes that the transaction was a bona fide purchase
				or sale of this security; or which purports to quote the bid or asked price for
				any security, unless the applicant or registrant believes that the quotation
				represents a bona fide bid for, or offer of, the security; or using any
				advertising or sales material in such a fashion as to be deceptive or
				misleading, such as the distribution of any nonfactual datum, material or
				presentation based on conjecture, unfounded or unrealistic claims or assertions
				in any brochure, flyer, or display by words, pictures, graphs or otherwise,
				designed to supplement, detract from, supersede or defeat the purpose or effect
				of any prospectus or disclosure;
(V) Borrowing of money or securities from a
				customer by an agent, or for an agent to act as a custodian for money,
				securities or an executed stock power of a customer;
(W) Sharing, by an agent, directly or
				indirectly, in profits or losses in the account of any customer without the
				written authorization of the customer and the broker-dealer the agent
				represents;
(X) Effecting
				securities transactions not recorded on the regular books or records of the
				broker-dealer the agent represents, unless the transactions are authorized in
				writing by the broker-dealer prior to the execution of the
				transaction;
(Y) Stating, implying
				or otherwise indicating, in connection with the solicitation of the securities
				transaction, that the market price of a security is readily or generally
				available unless the market price of that security is reported at least daily
				in a bona fide newspaper that does not receive any special compensation for
				reporting the market price of securities or any particular issuer(s);
(Z) In connection with the solicitation of a
				sale or purchase of an Over the Counter (OTC) non-National Association of
				Securities Dealers Automated Quotation (NASDAQ) security, failing to promptly
				provide the most current prospectus or the most recently filed periodic report
				filed under Section 13 of the Securities Exchange Act when requested to do so
				by a customer;
(AA) Marking any
				order tickets or confirmations as unsolicited when in fact the transaction was
				solicited;
(BB) Failing to comply
				with any applicable provision of the Conduct Rules of Financial Industry
				Regulatory Authority (FINRA), any applicable fair practice or ethical standard
				promulgated by the Securities and Exchange Commission, or by a self-regulatory
				organization approved by the Securities and Exchange Commission;
(CC) Engaging in any acts or practices
				enumerated in
				15 CSR
				30-51.169; and
(DD) Aiding or abetting any of the acts or
				practices enumerated in this rule.