North Dakota Administrative Code › Title 73 - Securities Commissioner › Article 73-02 - Securities Act of 1951 › Chapter 73-02-09 - Fraudulent and Unethical Sales Practices and Manipulative Conduct › Section 73-02-09-02 - Unethical practices of dealers

Current through Supplement No. 393, July, 2024
The purpose of this section is to identify practices in the
				  securities business which are dishonest or unethical. The following must be
				  deemed "dishonest or unethical practices" by any person other than a sales
				  agent, as used in North Dakota Century Code section   10-04-11. This section is
				  not intended to be all inclusive, and thus, acts or practices not enumerated
				  herein may also be deemed dishonest or unethical.
1. Engaging in any unreasonable and unjustifiable delay in
				  the delivery of securities purchased by any of its customers or in the payment
				  upon request of free credit balances reflecting completed transactions of any
				  of its customers.
2. Inducing trading in a customer's account which is
				  excessive in size or frequency in view of the financial resources and character
				  of the account.
3. Recommending to a customer the purchase, sale, or exchange
				  of any securities 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 dealer.
4. Executing a transaction on behalf of a customer without
				  authorization to do so.
5. 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 the execution of orders.
6. 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.
7. Failing to segregate customers' free securities or
				  securities held in safekeeping.
8. Hypothecating a customer's securities without having a
				  lien thereon unless the dealer secures from the customer a properly executed
				  written consent promptly after the initial transaction, except as permitted by
				  rules of the securities and exchange commission.
9. 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.
10. Failing to furnish to a customer purchasing securities in
				  an offering registered pursuant to North Dakota Century Code section   10-04-07
				  or   10-04-08, 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; if
				  the offering is not registered pursuant to section   10-04-07 or   10-04-08, the
				  dealer shall furnish disclosure documents customarily available.
11. Charging unreasonable and inequitable fees for services
				  performed, including miscellaneous services such as collection of moneys 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.
12. Offering to buy from or sell to any person any security
				  at a stated price unless such dealer is prepared to purchase or sell, as the
				  case may be, at such price and under such conditions as are stated at the time
				  of such offer to buy or sell.
13. Representing that a security is being offered to a
				  customer at the market or a price relevant to the market price unless such
				  dealer knows or has reasonable grounds to believe that a market for such
				  security exists other than that made, created, or controlled by such dealer, or
				  by any person for whom it is acting or with whom it is associated in such
				  distribution, or any person controlled by, controlling, or under common control
				  with such dealer.
14. 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
				  not be limited to:
a. Effecting any transaction in a security which involves no
				  change in the beneficial ownership thereof;
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 size, at substantially the same time and 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 the purpose of creating a false or misleading
				  appearance of active trading in the security or a false or misleading
				  appearance with respect to the market for the security; provided, however,
				  nothing in this subsection shall prohibit a dealer from entering bona fide
				  agency cross transactions for its customers; or
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.