North Carolina Administrative Code › Title 18 - SECRETARY OF STATE › Chapter 06 - SECURITIES DIVISION › Subchapter A - RECODIFIED RULES › Section .1800 - MISCELLANEOUS PROVISIONS INVESTMENT ADVISERS › Section 06A .1803 - AGENCY CROSS TRANSACTIONS

Current through Register Vol. 39, No. 2, July 15, 2024
(a) For
				  purposes of this Rule, "agency cross transaction for an advisory client" means
				  a transaction in which a person acts as an investment adviser in relation to a
				  transaction in which the investment adviser, or any person controlling,
				  controlled by, or under common control with such investment adviser, including
				  an investment adviser representative, acts as a broker for both the advisory
				  client and another person on the other side of the transaction. When acting in
				  such capacity such person is required to be registered as a dealer in this
				  state unless excluded from the definition of "dealer" in N.C. Gen. Stat.
				  Section 78A-2(2).
(b) An investment adviser effecting an agency
				  cross transaction for an advisory client shall be in compliance with Section
				  78C-8(a)(3) of
				  the Act if the following conditions are met:
(1) The advisory client executes a written
				  consent prospectively authorizing the investment adviser to effect agency cross
				  transactions for such client;
(2)
				  Before obtaining such written consent from the client, the investment adviser
				  makes full written disclosure to the client that, with respect to agency cross
				  transactions, the investment adviser will act as broker for, receive
				  commissions from and have a potentially conflicting division of loyalties and
				  responsibilities regarding both parties to the transactions;
(3) At or before the completion of each
				  agency cross transaction, the investment adviser or any other person relying on
				  this Rule sends the client a written confirmation. The written confirmation
				  shall include:
(A) a statement of the nature
				  of the transaction,
(B) the date
				  the transaction took place,
(C) an
				  offer to furnish, upon request, the time when the transaction took place,
				  and
(D) the source and amount of
				  any other remuneration the investment adviser received or will receive in
				  connection with the transaction.
In the case of a purchase, if the investment adviser was
					 not participating in a distribution, or, in the case of a sale, if the
					 investment adviser was not participating in a tender offer, the written
					 confirmation may state whether the investment adviser has been receiving or
					 will receive any other remuneration and that the investment adviser will
					 furnish the source and amount of such remuneration to the client upon the
					 client's written request;
(4) At least annually, and with or as part of
				  any written statement or summary of the account from the investment adviser,
				  the investment adviser or any other person relying on this Rule sends the
				  client a written disclosure statement identifying:
(A) the total number of agency cross
				  transactions during the period for the client since the date of the last such
				  statement or summary; and
(B) the
				  total amount of all commissions or other remuneration the investment adviser
				  received or will receive in connection with agency cross transactions for the
				  client during the period;
(5) Each written disclosure and confirmation
				  required by this Rule must include a conspicuous statement that the client may
				  revoke the written consent required under Subparagraph (b)(1) of this Rule at
				  any time by providing written notice to the investment adviser; and
(6) No agency cross transaction may be
				  effected in which the same investment adviser recommended the transaction to
				  both any seller and any purchaser.