South Carolina Code of Regulations › Chapter 13 - ATTORNEY GENERAL › Article 2 - SECURITIES › Subarticle 5 - FRAUD AND LIABILITIES › Section 13-501 - Dishonest or Unethical Practices by Broker-Dealers and Agents

Current through Register Vol. 48, No. 6, June 28, 2024
A. Broker-Dealers.
				Each broker-dealer shall observe high standards of commercial honor and just
				and equitable principles of trade in the conduct of their business. Acts and
				practices, including but not limited to the following, are considered contrary
				to such standards and may constitute grounds for denial, suspension or
				revocation of registration, imposition of administrative fines, or such other
				action authorized by statute:
(1) Engaging in
				a pattern of unreasonable delays in the delivery of securities purchased by any
				of its customers and/or in the payment upon request of free credit balances
				reflecting completed transactions 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 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.
(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 and/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 promptly after 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 broker-dealer secures from the
				customer a properly executed written consent promptly after the initial
				transaction, except as permitted by the United States Securities and Exchange
				Commission ("SEC") rule.
(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, 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.
(11) 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.
(12) Offering
				to buy from or sell to any person any security at a stated price unless such
				broker-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 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 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 is acting or
				with whom he is associated in such distribution, or any person controlled by,
				controlling or under common control with such broker-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 broker-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;
(15) Guaranteeing a customer against loss in
				any securities account of such customer carried by the broker-dealer or in any
				securities transaction effected by the broker-dealer with or for such
				customer.
(16) 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;.
(17) Using any
				advertising or sales presentation in such a fashion as to be deceptive or
				misleading. An example of such practice would be a distribution of 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.
(18) Failing to disclose that the
				broker-dealer is controlled by, controlling, affiliated with or under common
				control with the issuer of any security before entering into any contract with
				or for a customer for the purchase or sale of such security, the existence of
				such control to such customer, and if such disclosure is not made in writing,
				it shall be supplemented by the giving or sending of written disclosure at or
				before the completion of the transaction.
(19) Failing to make a bona fide public
				offering of all of the securities allotted to a broker-dealer for distribution,
				whether acquired as an underwriter, a selling group, or from a member
				participating in the distribution as an underwriter or selling group
				member.
(20) Failing or refusing to
				furnish a customer, upon reasonable request, information to which he is
				entitled, or to respond to a formal written request or complaint.
(21) Violating any rule of the Securities and
				Exchange Commission, or of a national securities exchange or national
				securities association or self regulatory association of which it is a
				member.
(22) Knowingly paying or
				splitting fees or commissions with unlicensed persons except as otherwise
				allowed by law.
(23) Failing to pay
				within thirty (30) days any fine, cost or assessment by the Securities
				Commissioner or any arbitration award which is not the subject of a motion to
				vacate or modify the award or when such a motion has been denied.
(24) Engaging in any dishonest or unethical
				sales practice while engaged in a telephone solicitation to include any of the
				following:
(a) Telephoning any person using
				threats, intimidation, or the use of profane or obscene language in connection
				with securities solicitations, recommendations, transactions or other brokerage
				account activity;
(b) Telephoning
				any person in this state after that individual has requested that they not be
				telephoned;
(c) Telephoning any
				person repeatedly in an annoying, abusive, or harassing manner, either
				individually or in concert with others;
(d) Telephoning any person in this state
				between the hours of 9:00 PM and 8:00 AM local time at the called person's
				location without that individual's prior consent; or
(e) Telephoning any person in this state
				without providing at the beginning of any telephone solicitation both the
				caller's identity and the identity of the broker-dealer or issuer. A telephone
				solicitation is defined as any telephone contact or electronic communication
				used to offer or sell securities, to gather information used in qualifying
				persons for the purpose of establishing a securities account or to make
				securities recommendations.