Iowa Administrative Code › Agency 191 - Insurance Division › Securities › Chapter 50 - Regulation of Securities Offerings and Those Who Engage in the Securities Business › Rule 191-50.16 - Dishonest or Unethical Practices in the Securities Business

Current through Register Vol. 47, No. 3, July 24, 2024
(1) Dishonest or
				unethical business practices by any person in the securities business, other
				than an agent, investment adviser, investment adviser representative, or
				federal covered investment adviser, as prohibited pursuant to Iowa Code section
				502412(4).
"m "
include, but are not limited to, the following:
a. Engaging in any unreasonable and
				unjustifiable delay in delivering securities purchased by any customers or
				paying, upon request, free credit balances reflecting completed transactions of
				any customers;
b. Inducing in a
				customer's account trading which is excessive in size or frequency relative to
				the financial resources and character of the account;
c. Suitability:
(1) Failing to use reasonable diligence, in
				regard to the opening and maintenance of every account, to know and retain the
				essential facts concerning every customer and concerning the authority of each
				person acting on behalf of such customer;
(2) Recommending a transaction or investment
				strategy involving a security or securities without a reasonable basis to
				believe that the transaction or investment strategy is suitable for the
				customer, based on the information obtained through the reasonable diligence of
				the member or associated person to ascertain the customer's investment profile.
				A customer's investment profile includes, but is not limited to, the customer's
				age, other investments, financial situation and needs, tax status, investment
				objectives, investment experience, investment time horizon, liquidity needs,
				risk tolerance, and any other information the customer may disclose to the
				broker-dealer or agent in connection with such recommendation;
d. Executing a transaction on
				behalf of a customer without authorization;
e. 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 for executing the orders;
f. Executing any transaction in a margin
				account without securing from the customer a properly executed written margin
				agreement prior to the initial transaction in the account;
g. Failing to segregate customers' free
				securities or securities held in safekeeping;
h. Hypothecating a customer's securities
				without having a lien on them unless the broker-dealer secures from the
				customer a properly executed written consent promptly after the initial
				transaction, except as otherwise permitted by SEC rules;
i. 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;
j. Failing to furnish on or before the
				transaction confirmation date a final prospectus, or, if a final prospectus is
				not available, a preliminary prospectus together with additional documents
				which include all information that would be set forth in the final prospectus,
				to a customer purchasing securities in an offering registered pursuant to Iowa
				Code section
				502303.
				or
				502304.
				or that is subject to a notice filing made pursuant to Iowa Code section
				502302.. If the
				offering is not registered, the broker-dealer shall furnish those disclosure
				documents that are customarily available;
k. Charging unreasonable and inequitable fees
				for services performed, including miscellaneous services such as collecting
				moneys due for principal, dividends or interest, exchange or transfer of
				securities, appraisals, safekeeping, custody of securities or other services
				regarding the securities business;
l. Offering to buy from or sell to any person
				any security at a stated price unless the broker-dealer is prepared to purchase
				or sell the security at the stated price and under the conditions as stated at
				the time of the offer to buy or sell the security;
m. Representing that a security is being
				offered to a customer "at the market" or a price relevant 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 made, 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
				controlled by, controlling or under common control with such
				broker-dealer;
n. Effecting any
				transaction in, or inducing the purchase or sale of, any security by any
				manipulative, deceptive or fraudulent device, practice, plan, program, design
				or contrivance, including but not limited to:
(1) Effecting any transaction in a security
				involving no change in the beneficial ownership thereof;
(2) Entertaining an order for the purchase or
				sale of any security knowing that an order or orders of substantially the same
				size have been or will be entered by or for the same or different parties at
				substantially the same time and price for the purpose of creating a false or
				misleading appearance of active trading in the security or a false or
				misleading appearance regarding the market for the security. Nothing in this
				subparagraph shall prohibit a broker-dealer from entering bona fide agency
				cross transactions for the broker-dealer's customers;
(3) Effecting, alone or with one or more
				persons, a series of transactions in any security which creates actual or
				apparent active trading in a security or raising or depressing the price of the
				security for the purpose of inducing the purchase or sale of the security by
				others;
o. Guaranteeing
				a customer against loss in any securities account of the customer carried by
				the broker-dealer or in any securities transaction effected by the
				broker-dealer with or for the customer;
p. Publishing or circulating, or causing to
				be published or circulated, any notice, circular, advertisement, newspaper
				article, investment service, or communication of any kind purporting to report
				any transaction as a purchase or sale of any security unless the broker-dealer
				believes that the transaction was a bona fide purchase or sale of such
				security, or purporting to quote the bid price or asked price for any security
				unless the broker-dealer believes that the quotation represents a bona fide bid
				for or offer of such security;
q.
				Using any advertising or sales presentation in a deceptive or misleading
				fashion including but not limited to a distribution of any nonfactual data,
				material or presentation based on conjecture, unfounded or unrealistic claims
				or assertions in any brochure or flyer, or display by words, pictures, graphs
				or other medium designed to supplement, detract from, supersede or defeat the
				purpose or effect of any prospectus or disclosure;
r. Failing to disclose that the broker-dealer
				is controlled by, controlling, affiliated with or under common control of the
				issuer of any security before entering into any contract with or for a customer
				for the purchase or sale of the security. The existence of any control or
				affiliation shall be disclosed to the customer in writing prior to completion
				of the transaction;
s. Failing to
				make a bona fide public offering of all of the securities allotted to a
				broker-dealer for distribution, whether the securities were acquired by the
				broker-dealer as an underwriter, as a selling group member, or from a member
				participating in the distribution as an underwriter or selling group
				member;
t. Failing or refusing to
				furnish a customer, upon reasonable request, information to which the customer
				is entitled or to respond to a formal written request or complaint from the
				customer;
u. Failing or refusing to
				provide information requested in writing by the administrator within 14 days or
				a later time as prescribed by the administrator;
v. Extending credit to a customer in
				violation of the Securities Exchange Act of 1934 or the regulations of the
				Federal Reserve Board;
w. Engaging
				in acts or practices enumerated in rule 191-50.100 (502);
x. Failing in the solicitation of a sale or
				purchase of an OTC non-NASDAQ security to promptly provide, upon the customer's
				request, the most current prospectus, the most recent periodic report filed
				pursuant to Section 13 of the Securities Exchange Act of 1934, or any other
				available research reports;
y.
				Marking any order tickets or confirmations as unsolicited when the transaction
				is solicited;
z. Failing to provide
				each customer, on no greater than a quarterly basis, a statement of account
				that, for all OTC non-NASDAQ equity securities in the account for which the
				firm has been a market maker during the reportable period, contains a value for
				each security based on the closing market bid on a date certain for any month
				in which activity has occurred in a customer's account;
aa. Failing to comply with any applicable
				provision of the FINRA Conduct Rules or any applicable fair practice or ethical
				standard promulgated by the SEC or by a self-regulatory organization approved
				by the SEC; and
bb. 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 the purchaser's investment needs and
				objectives.