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 30-51.169 - Fraudulent Practices of Broker-Dealers and Agents

Current through Register Vol. 49, No. 14, July 15, 2024
PURPOSE: This rule identifies practices in the
				  securities business which are generally associated with schemes to
				  manipulate.
(1) A
				broker-dealer or agent who engaged in one (1) or more of the following
				practices shall be deemed to have engaged in an "act, practice or course of
				business which operates or would operate as a fraud" as used in section
				409.5-501 of the
				Missouri Securities Act of 2003 (the Act). This rule is not intended to be all
				inclusive and acts or practices not enumerated in this rule may also be deemed
				fraudulent:
(A) Entering into a transaction
				with a customer in any security at an unreasonable price or at a price not
				reasonably related to the current market price of the security or receiving an
				unreasonable commission or profit;
(B) Contradicting or negating the importance
				of any information contained in a prospectus or other offering materials with
				intent to deceive or mislead or using any advertising or sales presentation in
				a deceptive or misleading manner;
(C) In connection with the offer, sale or
				purchase of a security, falsely leading a customer to believe that the
				broker-dealer or agent is in possession of material, nonpublic information
				which would have an impact on the value of the security;
(D) In connection with the solicitation of a
				sale or purchase of a security, engaging in a pattern or practice of making
				contradictory recommendations to different investors of similar investment
				objective for some to sell and others to purchase the same security, at or
				about the same time, when not justified by the particular circumstances of each
				investor;
(E) Failing to make a
				bona fide public offering of all the securities allotted to a broker-dealer for
				distribution by, among other things-1) transferring securities to a customer,
				another broker-dealer or a fictitious account with the understanding that those
				securities will be returned to the broker-dealer or its nominees, or 2) parking
				or withholding securities;
(F)
				Although nothing in this rule precludes application of the general anti-fraud
				provisions against anyone for practices similar in nature to the practices
				discussed as follows, the following paragraphs specifically apply only in
				connection with solicited offers or sales of designated securities in
				transactions not exempted in the following:
1. Failing to disclose at the time of
				solicitation, in either a principal or agency transaction, the price at which
				the broker-dealer is currently selling or offering to sell the designated
				security and the price at which the broker-dealer is currently buying or
				offering to buy the designated security, and failing to disclose those prices,
				which were in effect at the time of execution, on the trade confirmation of the
				transaction;
2. Failing to
				disclose, at the time of solicitation and on the trade confirmation, all
				compensation to be paid to the agent as a result of the transaction;
3. In connection with a principal transaction
				by a market maker, failing to disclose, both at the time of solicitation and on
				the confirmation, a short inventory position in the firm's account of more than
				five percent (5%) of the issued and outstanding shares of that class of
				securities of the issuer;
4.
				Conducting sales contests solely with respect to a particular
				security;
5. Failing or refusing to
				promptly execute sell orders on behalf of a customer;
6. Soliciting a secondary market transaction
				when there has not been a bona fide distribution in the primary
				market;
7. Engaging in a pattern of
				enhancing the compensation of an agent with respect to sales and purchases in
				the same security;
8. In connection
				with the solicitation of a sale of an equity security, or a security containing
				an equity component, in which the difference between the bid and ask price is
				twenty-five percent (25%) or more of the ask price, to fail to-
A. Disclose to the customer the bid and ask
				price of the designated security as well as its spread in both percentage and
				dollar amounts at the time of solicitation; and
B. Include with the confirmation, in a form
				satisfactory to the commissioner, written explanation of the bid and ask
				price;
9. For the
				purposes of subsection (1)(F), the following shall be exempt transactions:
A. Transactions in which the price of the
				designated security is five dollars ($5) or more, provided, however, that if
				the designated security is a unit composed of one (1) or more securities, the
				unit price divided by the number of components of the unit other than warrants,
				options, rights or similar securities must be five dollars ($5) or more, and
				any component of the unit that is a warrant, option, right or similar security
				or a convertible security must have an exercise price or conversion price of
				five dollars ($5) or more;
B.
				Transactions that are not recommended by the broker-dealer;
C. Transactions by a broker-dealer-
(I) Whose commissions, commission equivalents
				and mark-ups from transactions in designated securities during each of the
				immediately preceding three (3) months, and during eleven (11) or more of the
				preceding twelve (12) months, did not exceed five percent (5%) of its total
				commissions, commission-equivalents and mark-ups from transactions in
				securities during those months; and
(II) Who has not been a market maker in the
				designated security that is the subject of the transaction in the immediately
				preceding twelve (12) months; and
D. Any transaction(s) that, upon prior
				written request or upon its own motion, the commissioner conditionally or
				unconditionally exempts as not encompassed within the purposes of subsection
				(1)(F); and
10. For the
				purposes of subsection (1)(F)-
A. The term
				designated security shall mean any equity security other than a security-
(I) Registered, or approved for registration
				upon notice of issuance, on a national securities exchange recognized under
				409.2-201(6), RSMo;
(II) Exempted
				as a foreign issuer pursuant to
				15 CSR
				30-54.260;
(III) Authorized, or approved for
				authorization upon notice of issuance, for quotation in the National Market
				System of the National Association of Securities Dealers Automated Quotation
				System;
(IV) Issued by an
				investment company registered under the Investment Company Act of
				1940;
(V) That is a put option or
				call option issued by The Options Clearing Corporation; or
(VI) Whose issuer has net tangible assets in
				excess of four (4) million dollars, as demonstrated by financial statements
				dated less than fifteen (15) months previously that the broker-dealer has
				reviewed and has a reasonable basis to believe on the date of the transaction
				with the person, there have been no adverse changes to the issuer's most
				current financial statement and-
(a) In the
				event the issuer is other than a foreign private issuer, the most recent
				financial statements for the issuer have been audited and reported on by an
				independent public accountant in accordance with the provisions of 17 CFR
				210.2.02; or
(b) In the event the
				issuer is a foreign private issuer, are the most recent financial statements
				for the issuer that have been filed with the commissioner, furnished to the
				commissioner pursuant to 17 CFR 240.12g3 - 2(b) or prepared in accordance with
				generally accepted accounting principles in the country of incorporation,
				audited in compliance with the requirements of that jurisdiction and reported
				on by an accountant duly registered and in good standing in accordance with the
				regulations of that jurisdiction;
(G) Effecting any transaction in,
				or inducing the purchase or sale of any security by means of any manipulative,
				deceptive or other fraudulent device or contrivance including, but not limited
				to, the use of boiler-room tactics or use of fictitious or nominee accounts;
				and
(H) Failure to comply with any
				prospectus delivery requirement promulgated under federal law.