Rhode Island Code of Regulations › Title 230 - Department of Business Regulation › Chapter 50 - Securities, Franchises and Charities › Subchapter 05 - Securities › Part 2 - Post-Licensing Requirements (230-RICR-50-05-2) › Section 230-RICR-50-05-2.10 - Unethical and Dishonest Practices

Current through June 14, 2024
A. Under authority
				  of R.I. Gen. Laws §
										7-11-705(a)(3),
				  the Director hereby defines the term "unethical or dishonest practices", as
				  that term appears in R.I. Gen. Laws §
										7-11-212(b)(8) and
				  without limiting the meaning to that set forth below, to mean one or more
				  instances where a person has engaged in the conduct described below:
1. The following are deemed to be unethical
				  or dishonest practices by a broker-dealer:
a.
				  Causing any unreasonable 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;
b. 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;
c.
				  Recommending to a customer the purchase, sale or exchange of any securities
				  without reasonable grounds to believe that the recommendation is suitable for
				  the customer after reasonable inquiry concerning the customer's investment
				  objectives, financial situation and needs, and any other information known by
				  the broker-dealer;
d. Executing a
				  transaction on behalf of a customer without authority to do so;
e. Executing a transaction for the account of
				  a customer upon instruction from a third party 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, or
				  both;
f. Exercising any
				  discretionary power in effecting a transaction of 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, or both;
g. Extending,
				  arranging for, or participating in arranging for credit to a customer in
				  violation of the Securities Exchange Act of 1934 or the regulations of the
				  Federal Reserve Board;
h. Executing
				  any transaction in a margin account without obtaining from its customer a
				  written margin agreement not later than fifteen (15) calendar days after the
				  initial transaction in the account;
i. Failing to segregate customers' free
				  securities or securities in safekeeping;
j. Hypothecating a customer's securities
				  without having a lien thereon unless written consent of the customer is first
				  obtained, except as permitted by rules of the SEC;
k. Charging its customer an unreasonable
				  commission or service charge in any transaction executed as agent for the
				  customer;
l. Entering into a
				  transaction for its own account with a customer with an unreasonable mark-up or
				  mark-down;
m. Entering into a
				  transaction for its own account with a customer in which a commission is
				  charged;
n. Entering into a
				  transaction with or for a customer at a price not reasonable related to the
				  current market price;
o. Executing
				  orders for the purchase by a customer of securities not registered or exempted
				  unless the transaction is exempted under RIUSA;
p. Representing itself as a financial or
				  investment planner, consultant, or adviser, when the representation contains
				  any untrue statement of material fact or omits to state a material fact
				  necessary in order to make the statements made, in light of the circumstances
				  under which they were made, not misleading; including but not limited to the
				  nature of the services offered, the qualifications of the person offering the
				  services, or the method of compensation for the services;
q. Violating any material rule of SEC, FINRA,
				  any national or regional securities exchange or national securities association
				  of which it is a member with respect to any customer, transaction or business
				  in this state;
r. Failing to
				  furnish to a customer purchasing securities in an offering, not 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 for the in the final prospectus;
s. Introducing customer transactions on
				  "fully disclosed" basis to another broker-dealer that is not licensed under
				  RIUSA; and
t. Recommending to a
				  customer that the customer engage the services of an investment adviser that is
				  not licensed or exempt from licensing under RIUSA.