Code of Massachusetts Regulations › 950 CMR - OFFICE OF THE SECRETARY OF THE COMMONWEALTH › Title 950 CMR 12.200 - Registration of Broker-Dealer, Agents, Investment Adviser, Investment Adviser Representatives and Notice of Filing Procedures for Federal Covered Advisers › Section 12.204 - Denial, Revocation, Suspension, Cancellation and Withdrawal of Registration

Current through Register 1525, July 5, 2024
(1)
Dishonest and Unethical Practices in the Securities
			 Business.
(a)
Broker-dealers
. Each broker-dealer shall observe high
			 standards of commercial honor and just and equitable principles of trade in the
			 conduct of its business. Acts and practices, including, but not limited to the
			 following, are considered contrary to such standards and constitute dishonest
			 or unethical practices which are grounds for imposition of an administrative
			 fine, censure, denial, suspension or revocation of a registration, or such
			 other appropriate action:
1. Being found by a
			 court of competent jurisdiction to have violated M.G.L. c. 93A in connection
			 with the sale of securities.
2.
			 Engaging in a pattern of unreasonable and unjustifiable delays in the delivery
			 of securities purchased by any of its customers and/or in the payment upon
			 request of free credit balances reflecting complete transactions of any of its
			 customers.
3. Inducing trading in a
			 customer's account which is excessive in size and frequency in view of the
			 financial resources and character of the account.
4. Except as provided in 950 CMR 12.207,
			 recommending to a customer an investment strategy, the opening of or
			 transferring of assets to any type of account, or the purchase, sale or
			 exchange of any security without reasonable grounds to believe that such
			 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
			 broker-dealer.
5. Executing a
			 transaction on behalf of a customer without authorization to do so.
6. Exercising any discretionary power in
			 effecting a transaction for a customer's account without first obtaining
			 written authority from the customer, unless the discretionary power relates
			 solely to the time and/or price for the execution of the order.
7. Executing any transaction in a margin
			 account without securing from the customer a properly executed written margin
			 agreement promptly after the initial transaction in the account.
8. Failing to segregate customer's free
			 securities or securities held in safekeeping.
9. Hypothecating a customer's securities
			 without having a lien thereon, unless the broker-dealer secures from the
			 customer a properly executed written consent promptly after the initial
			 transaction, except as permitted by the rules of the SEC.
10. Entering into a transaction with or for a
			 customer at a price not reasonably related to the current market price of the
			 securities or receiving an unreasonable commission or profit.
11. Failing to furnish to a customer
			 purchasing securities in a registered offering, no later than the date of
			 confirmation of the transaction, a final or preliminary prospectus, and, if the
			 latter, failing to furnish a final prospectus within a reasonable period after
			 the effective date of the offering.
12. 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.
13. Offering to buy or sell to any person any
			 security at a stated price, unless such broker-dealer is prepared to purchase
			 or sell at such price and under such conditions as are stated at the time of
			 such offer to buy or sell.
14.
			 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 such security exists other than
			 that made, created or controlled by such broker-dealer, or by any person for
			 whom he or she is acting or with whom he or she is associated in such
			 distribution, or any person controlled by, controlling or under common control
			 with such broker-dealer.
15.
			 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, which may include, but is not necessarily
			 limited to, the following:
a. Effecting any
			 transaction in a security which involves no change in the beneficial
			 ownership.
b. Entering an order or
			 orders for the purchase or sale of any security with the knowledge that an
			 order or orders of substantially the same price, for the sale of any such
			 security, has been or will be entered by or for the same or different parties
			 for purpose of creating a false or misleading appearance of active trading in
			 the security or false or misleading appearance with respect to the market for
			 the security, provided, however, nothing in 950 CMR 12.204(l)(a)15. shall
			 prohibit a broker-dealer from entering
bona fide
agency cross
			 transactions for its customers so long as the cross transaction is noted on the
			 confirmation and monthly account statements.
c. Effecting, alone or with one or more other
			 persons, a series of transactions in any security creating actual or apparent
			 active trading in such security or raising or depressing the price of such
			 security, for the purpose of inducing the purchase or sale of such security by
			 others.
16. Guaranteeing a
			 customer against loss in any securities account of such customer carried by the
			 broker-dealer of in any securities transaction effected by the broker-dealer
			 with or for such customer.
17.
			 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 such broker-dealer believes that such
			 transaction was a
bona fide
purchase or sale of such security;
			 or which purports to quote the bid price or asked price for any security,
			 unless such broker-dealer believes that such quotation represents a
bona fide
bid for, or offer of, such security.
18. Making any advertising or sales
			 presentation, either in written or oral form, in such a fashion as to be
			 deceptive or misleading including, but not limited to, the following:
a. Distributing any nonfactual data, 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.
b. Using supplementary materials in
			 connection with the offer of a particular security where the information in
			 such materials is not consistent with, or adequately supported by, the
			 prospectus or is not filed as part of the registration statement.
c. Using supplementary material not
			 authorized by the issuer in connection with the offer of a particular security
			 when any prospectus or other offering document required to be delivered in
			 connection with such offer specifically states that no such material is
			 authorized.
19. Failing
			 to disclose that the broker-dealer is affiliated with the issuer of a security
			 before entering into a contract with or for a customer for the purchase or sale
			 of such security. If such disclosure is made orally, written disclosure must be
			 given before the completion of the transaction.
20. Failing to make a
bona
			 fide
offering of all of 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.
21. 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.
22. Being found by a
			 court or administrative tribunal of competent jurisdiction to have violated the
			 anti-fraud and/or registration provisions of state or federal securities
			 laws.
23. Marking any order ticket
			 or confirmation as unsolicited when in fact the transaction was
			 solicited.
24. In connection with
			 the solicitation of a sale or purchase of an over-the-counter non-NASDAQ
			 security, failing to provide promptly the most current prospectus or the most
			 recently filed periodic report filed under the Securities Exchange Act §
			 13, when requested to do so by the customer.
25. For any month in which activity has
			 occurred in a customer's account, but in no event less than every three months,
			 failing to provide the customer with a statement of account with respect to all
			 over-the-counter non-NASDAQ equity securities in the account, containing a
			 value for each such security based on the closing market bid on a date certain.
			 950 CMR 12.204(5)(a)25. shall apply only if the firm has been a market maker in
			 such security at any time during the month in which the monthly or quarterly
			 statement is issued.
26. Failing to
			 refrain from soliciting prospective customers who have informed the
			 broker-dealer that such person does not want to be solicited, and conducting
			 business by telephone at unreasonable times.
27. Failing to disclose to a person
			 purchasing shares of an investment company on the premises of an insured
			 depository institution that such investment is not covered by the Federal
			 Deposit Insurance Corporation, or failing to cause a written statement to be
			 presented to, and signed by such person, acknowledging that he has received
			 such information.
28. Failing to
			 comply with any applicable provision of FINRA member conduct rules or any
			 applicable fair practice or ethical standard promulgated by the SEC or by a
			 self-regulatory organization approved by the SEC.
29. Failing to act in accordance with the
			 duties and standards described in 950 CMR 12.207.