Pennsylvania Code › Title 10 - BANKING AND SECURITIES › Part VII - Securities › Subpart D - Fraudulent and Prohibited Practices › Chapter 403 - PROHIBITED TRANSACTIONS; BROKER-DEALERS AND AGENTS › Section 403.010 - Prohibited transactions and practices

Current through Register Vol. 54, No. 28, July 13, 2024
(a) Each broker-dealer or agent shall not
				  enter into any 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, if such market exists.
(b) Each broker-dealer or agent who
				  recommends to a customer the purchase, sale or exchange of any security shall
				  have reasonable grounds to believe that the recommendation is not unsuitable
				  for such customer on the basis of information furnished by such customer after
				  reasonable inquiry concerning the customer's investment objectives, financial
				  situation and needs, and any other information known by or made available to
				  such broker-dealer or agent.
(c)
				  Each broker-dealer or agent shall not exercise any discretionary power or
				  authority for any customer who is not an institutional investor as defined in
				  these regulations unless such customer has given prior written authorization to
				  exercise such power or authority to a stated individual or entity who is a
				  broker-dealer or agent. This subsection shall not be applicable to customer
				  limit orders for the purchase or sale of securities.
(d) With respect to the activities of each
				  broker-dealer or agent, the phrase "manipulative, deceptive or other fradulent
				  scheme, device or contrivance," as used in section 403 of the act
				  (70
				  P. S. §
											1-403) is hereby defined to
				  include, without limitation, the following:
(1) Any act of a broker-dealer or agent
				  designed to effect with or for the account of any customer who is not an
				  institutional investor as defined in these regulations with respect to which
				  such broker-dealer or agent is vested with any discretionary power or authority
				  or with respect to which such broker-dealer or agent is able by reason of the
				  trust and confidence of the customer and confidence to influence the volume and
				  frequency of the trades, any transactions of purchase or sale which are
				  excessive in size or frequency in view of the financial resources and character
				  of such account. This subsection shall not be applicable to customer limit
				  orders for the purchase or sale of securities.
(2) Any representation made to a customer by
				  a broker-dealer or agent that any security is being offered to such customer
				  "at the market" or at a price reasonably related to the market price shall not
				  be made unless such broker-dealer or agent knows or has reasonable grounds to
				  believe that a market for such 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, or by any person
				  controlled by, controlling, or under common control with the
				  broker-dealer.
(3) Any acceptance
				  by a broker-dealer or agent participating in any primary or secondary
				  distribution of securities, other than a firm commitment underwriting of any
				  part of the sale price of any security being distributed unless:
(i) The money or other consideration received
				  is promptly transmitted to the persons entitled thereto; or
(ii) The money or other consideration
				  received is promptly transmitted to a bank or other financial institution which
				  has agreed in writing to hold such funds in escrow for the persons who have the
				  beneficial interest therein and to transmit or return such funds directly to
				  the persons entitled thereto upon the occurrence of a specified event or
				  contingency.
(4) Any act
				  of a broker-dealer or agent designed to effect with or for the account of any
				  customer any transaction in, or to induce the purchase or sale by such customer
				  of any security in the primary or secondary distribution of which such
				  broker-dealer or agent is participating or is otherwise financially interested
				  unless such broker-dealer or agent, at or before the settlement date, notifies
				  such customer of the existence of such participation or interest.
(5) Any act of a broker-dealer or its agent
				  controlled by, controlling or under common control with, the issuer of any
				  security, designed to effect with or for the account of a customer any
				  transaction in, or to induce the purchase or sale by such customer of such
				  security unless such broker-dealer or its agent, before entering into any
				  contract with or for such customer for the purchase or sale of such security,
				  discloses to such customer the existence of such control, and unless such
				  disclosure, if not made in writing, is supplemented by the giving or sending of
				  written disclosure at or before the settlement date.