Wisconsin Administrative Code › Department of Financial Institutions › DFI-Sec 1-36 - Department of Financial Institutions-Securities › Chapter DFI-Sec 4 - Registration of broker-dealers and agents › Section DFI-Sec 4.06 - Prohibited conduct

Current through June 24, 2024
(1) The following are deemed "dishonest or
				unethical business practices" or "taking unfair advantage of a customer" by a
				broker-dealer under s.
				551.412(4)
				(m), Stats., without limiting those terms to
				the practices specified herein:
(a) Causing
				any unreasonable delay in the transmitting of customer orders for execution,
				the delivery of securities purchased by any of its customers, the payment upon
				request of free credit balances reflecting completed transactions of any of its
				customers or the transfer of a customer's account securities positions and
				balances to another broker-dealer;
(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)
1. Recommending to a customer the purchase,
				sale or exchange of any security without reasonable grounds to believe that the
				recommendation is suitable for the customer on the basis of information
				furnished by the customer after reasonable inquiry concerning the customer's
				investment objectives, financial situation and needs, and any other information
				known by the broker-dealer;
2. For
				purposes of making purchase recommendations to a customer with respect to
				direct participation program securities, the following investor financial
				income and net worth suitability standards do not preclude the use of any other
				information, including without limitation the criteria in subd. 1., to
				establish suitability or lack of suitability in specific instances:
a. The customer has an annual gross income of
				at least $70,000 and a net worth of at least $70,000 exclusive of the
				customer's principal residence and its furnishing and personal use automobiles;
				or
b. The customer has a net worth
				of at least $250,000, exclusive of the customer's principal residence and its
				furnishings and personal use automobiles.
(d) Executing a transaction on behalf of a
				customer without authority to do so, except that use by a broker-dealer of a
				negative response letter in conformity with rule 2510(d)(2) of the financial
				industry regulatory authority is not a violation of this rule;
(e) Executing a transaction for the account
				of a customer upon instructions from a 3rd party without first having obtained
				written 3rd party authorization from the customer;
(f) 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 pursuant
				to rule 2510(d)(1) of the financial industry regulatory authority;
(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 15 calendar days after the initial transaction
				in the account;
(i) Failing to
				segregate customers' free securities or securities in safe-keeping;
(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 U.S. securities and exchange
				commission;
(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 reasonably related to the current market
				price;
(o) Executing orders for the
				purchase by a customer of securities not registered under s.
				551.303
				or
				551.304,
				Stats., unless the securities are exempted under s.
				551.201,
				Stats., or the transaction is exempted under s.
				551.202,
				Stats.;
(p) Representing itself as
				a financial or investment planner, consultant, or adviser, when the
				representation does not accurately describe the nature of the services offered,
				the qualifications of the person offering the services, and the method of
				compensation for the services;
(q)
				Violating any rule of any 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 forth in the final prospectus;
(s) Introducing customer transactions on a
				"fully disclosed" basis to another broker-dealer that is not registered under
				ch. 551, Stats., unless the customer is a person described in s.
				551.401(2),
				Stats., or s. DFI-Sec 4.10;
(t)
				Recommending to a customer that the customer engage the services of an
				investment adviser, broker-dealer or agent not registered under ch. 551,
				Stats., unless the customer is a person described in s.
				551.401(2)
				(h) or
				551.402(2)
				(i), Stats., or s. DFI-Sec 4.10;
(u) Failing to accurately describe or
				disclose in advertising or other materials used in connection with the
				promotion or transaction of securities business in this state, the identity of
				the broker-dealer or the issuer. For purposes of this paragraph, "other
				materials" includes, but is not limited to, business cards, business stationery
				and display signs.
(v) Disclosing
				the identity, investments, or other financial information of any customer or
				former client unless required by law to do so, or unless consented to by the
				client.
(w) Using any term or
				abbreviation thereof in a manner that misleadingly states or implies that a
				person has special expertise, certification, or training in financial planning,
				including the misleading use of a senior-specific certification or designation
				as set forth in ch. DFI-Sec 10.