Washington Administrative Code › Title 460 - Financial Institutions, Department of (Securities Division) › Chapter 460-24A - Investment advisers › Section 460-24A-220 - Unethical business practices-Investment advisers and federal covered advisers

Current through Register Vol. 24-14, July 15, 2024
If you are an investment adviser, investment adviser
				representative, or a federal covered adviser, you are a fiduciary and have a
				duty to act primarily for the benefit of your clients. If you are a federal
				covered adviser, the provisions of this subsection apply to the extent that the
				conduct alleged is fraudulent, deceptive, or as otherwise permitted by the
				National Securities Markets Improvement Act of 1996 (Pub. L. No.
				104-290). While the extent and nature of this
				duty varies according to the nature of the relationship with the client and the
				circumstances of each case, in accordance with
				RCW
				 21.20.020(1)(c) and
				21.20.110(1)(g)
				 you must not engage in dishonest or unethical business practices including, but
				not limited to, the following:
(1)
			 Recommending to a client to whom investment supervisory, management or
			 consulting services are provided the purchase, sale or exchange of any security
			 without reasonable grounds to believe that the recommendation is suitable for
			 the client on the basis of information furnished by the client after reasonable
			 inquiry concerning the client's investment objectives, financial situation and
			 needs, and any other information known by the investment adviser, investment
			 adviser representative, or federal covered investment adviser.
(2) Exercising any discretion in placing an
			 order for the purchase or sale of securities for a client without obtaining
			 written discretionary authority from the client within ten business days after
			 the date of the first transaction placed pursuant to oral discretionary
			 authority, unless the discretion relates solely to the price at which, or the
			 time when, an order involving a definite amount of a specified security must be
			 executed, or both.
(3) Inducing
			 trading in a client's account that is excessive in size or frequency in view of
			 the financial resources, investment objectives and character of the account in
			 light of the fact that an investment adviser, investment adviser
			 representative, or federal covered adviser in such situations can directly
			 benefit from the number of securities transactions effected in a client's
			 account. The rule appropriately forbids an excessive number of transaction
			 orders to be induced by an adviser for a "customer's account."
(4) Placing an order to purchase or sell a
			 security for the account of a client without authority to do so.
(5) Placing an order to purchase or sell a
			 security for the account of a client upon instruction of a third party without
			 first having obtained a written third-party trading authorization from the
			 client.
(6) Borrowing money or
			 securities from a client unless the client is a broker-dealer, an affiliate of
			 the investment adviser, or a financial institution engaged in the business of
			 loaning funds.
(7) Loaning money or
			 securities to a client unless you are a financial institution engaged in the
			 business of loaning funds or the client is an affiliate of the investment
			 adviser.
(8) Misrepresenting to any
			 advisory client, or prospective advisory client, the qualifications of the
			 investment adviser, investment adviser representative, federal covered adviser,
			 or any employee, or person affiliated with the investment adviser, or
			 misrepresenting the nature of the advisory services being offered or fees to be
			 charged for such service, or to omit to state a material fact necessary to make
			 the statements made regarding qualifications, services or fees, in light of the
			 circumstances under which they are made, not misleading.
(9) Providing a report or recommendation to
			 any advisory client prepared by someone other than you without disclosing that
			 fact. (This prohibition does not apply to a situation where you use published
			 research reports or statistical analyses to render advice or where you order
			 such a report in the normal course of providing service.)
(10) Charging a client an unreasonable
			 advisory fee.
(11) Failing to
			 disclose to clients in writing before any advice is rendered any material
			 conflict of interest relating to the investment adviser, investment adviser
			 representative, federal covered adviser, or any employees or affiliated persons
			 thereof which could reasonably be expected to impair the rendering of unbiased
			 and objective advice including, but not limited to:
(a) Compensation arrangements connected with
			 advisory services to clients which are in addition to compensation from such
			 clients for such services;
(b)
			 Charging a client an advisory fee for rendering advice when compensation for
			 effecting securities transactions pursuant to such advice will be received by
			 the investment adviser, investment adviser representative, federal covered
			 investment adviser, or employees or affiliated persons thereof; and
(c) Serving as an officer, director, or
			 similar capacity of any outside company or other entity.