Fla. Admin. Code Ann. R. 69W-600.0131 - [Effective until 10/1/2024] Prohibited Business Practices for Investment Advisers and Their Associated Persons
(1) The following
are prohibited business practices for investment advisers and associated
persons pursuant to Section
517.1215(2),
F.S., and are deemed violations by an investment adviser or an associated
person of an investment adviser under Section
517.161(1)(a),
F.S., without limiting that term to the practices specified herein:
(a) With respect to any client, transaction
or business in, to or from this state, engaging in any conduct prohibited by,
or failing to comply with the requirements of, the following, notwithstanding
the fact that the investment adviser or associated person is not registered or
required to be registered under the Investment Advisers Act of 1940:
Sections 204, 204A, 205, 206, 207, 208 of the Investment Advisers Act of 1940, ( 15 U.S.C.A. §§80b -4, 80b-4a, 80b-5, 80b-6, 80b-7, 8 0b-8), or SEC Rules 204-1, 204-3, 205-1, 205-2, 205-3, 206(3)-1, 206(3)-2, 206(4)-1, (17 C.F.R. §§275.204-1, 275.204-3, 275.205-1, 275.205-2, 275.205-3, 275.206(3)-1, 275.206(3)-2, 275.206(4)-1), which are incorporated by reference in Rule 69W-200.002, F.A.C.
(b) Borrowing money
or securities from a client unless the client is a dealer, an affiliate of the
investment adviser, or a financial institution engaged in the business of
loaning funds.
(c) Loaning money or
securities to a client unless the investment adviser is a financial institution
engaged in the business of making loans or the client is an affiliate of the
investment adviser.
(d)
Recommending to a client 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.
(e) Exercising any discretionary power in
placing an order for the purchase or sale of securities for a client's account
without first obtaining written discretionary authority from the client, unless
the discretionary power relates solely to the time or price for the execution
of orders.
(f) Inducing trading in
a client's account which is excessive in size or frequency in view of the
financial resources, investment objectives, and character of the
account.
(g) Placing an order to
purchase or sell a security on behalf of a client without authority to do
so.
(h) Placing an order to
purchase or sell a security for a client's account upon instruction of a third
party without first having obtained a written third-party trading authorization
from the client.
(i)
Misrepresenting the qualifications of the investment adviser or any employee of
the investment adviser to a client or prospective client when the
representation does not fairly describe the nature of the services offered, the
qualifications of the person offering the services, and the method of
compensation for the services or omitting to state a material fact.
(j) Charging a client an unreasonable
advisory fee.
(k) Failing to
disclose to clients in writing before any advice is rendered any material
conflict of interest relating to the adviser or any of its employees which
could reasonably be expected to impair the rendering of unbiased and objective
advice including:
1. Compensation arrangements
connected with advisory services to clients which are in addition to
compensation from such clients for such services; and,
2. Charging a client an advisory fee for
rendering advice when a commission for executing securities transactions
pursuant to such advice will be received by the adviser or its
employees.
(l)
Guaranteeing a client that a specific result will be achieved with the advice
to be rendered.
(m) Recommending to
a client that the client engage the services of a dealer that is not registered
or exempt from registration under Chapter 517, F.S., unless the client is a
person described in Section
517.061(7),
F.S.
(n) Recommending to a client
that the client engage the services of a dealer in connection with which the
investment adviser receives a fee or remuneration from the dealer, except as
permitted in subsection
69W-600.0024(4),
F.A.C.
(o) Disclosing the identity,
affairs, or investments of any client unless required to do so by law or
consented to in writing by the client.
(p) Giving false or otherwise misleading
client information to any financial institution or regulatory agency.
(q) Entering into, extending or renewing any
investment advisory contract unless such contract is in writing and discloses,
in substance, the services to be provided, the term of the contract, the
advisory fee, the formula for computing the fee, the amount of prepaid fee to
be returned in the event of contract termination or non-performance, whether
the contract grants discretionary power to the adviser and that no assignment
of such contract shall be made by the investment adviser without the consent of
the other party to the contract.
(r) Entering into, extending or renewing any
investment advisory contract contrary to the provisions of Section 205 of the
Investment Advisers Act of 1940,
15 U.S.C. §
80b-5. This provision shall apply to all
advisers and associated persons of investment advisers registered or required
to be registered under this Act, notwithstanding whether such adviser or
associated person would be exempt from federal registration pursuant to Section
203(b) of the Investment Advisers Act of 1940, ( 15 U.S.C. §80b
-3(b)), which is
incorporated by reference in Rule 69W-200.002, F.A.C.
(s) Including, in an advisory contract, any
condition, stipulation, or provisions binding any person to waive compliance
with any provision of Chapter 517, F.S., or with any provision of, or with any
rule, regulation, or order issued under, the Investment Advisers Act of 1940
(1 5 U.S.C. §80b-1 through
80b -21), which is incorporated by
reference in Rule 69W-200.002, F.A.C.
(t) Taking any action, directly or
indirectly, with respect to those securities or funds in which any client has
any beneficial interest, where the investment adviser has custody or possession
of such securities or funds when the adviser's action is subject to and does
not comply with the requirements of Rule
69W-600.0132, F.A.C.
(u) Any unethical practice pursuant to Rule
69W-600.0133, F.A.C.
(v) Failing to send a client an itemized
invoice each time a fee is directly deducted from the client's account in
accordance with the provisions of paragraph
69W-600.0132(2)(i),
F.A.C.
(w) Failing to establish,
maintain, and enforce written policies and procedures reasonably designed to
achieve compliance, by the investment adviser or its associated persons, with
Chapter 517, F.S., and Division 69W, F.A.C.
(x) Charging a client an advisory fee greater
than the amount authorized in the written investment advisory contract between
the client and the investment adviser.
(2) The federal statutory and regulatory
provisions referenced herein shall apply to investment advisers, associated
persons of investment advisers and federal covered advisers, to the extent
permitted by the National Securities Markets Improvement Act of 1996
(Pub. L.
104-290 ), which is incorporated by reference in
Rule 69W-200.002,
F.A.C.
Notes
Rulemaking Authority 517.03(1), 517.1215 FS. Law Implemented 517.12(3), 517.1215, 517.161(1) FS.
New 1-25-00, Amended 10-30-03, Formerly 3E-600.0131, Amended 10-23-06, 1-18-09, 11-22-10, 9-22-14, 5-6-15, 11-15-16, 11-26-19, 1-18-21, 2-14-23, 3-21-24.
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
(1) The following are prohibited business practices for investment advisers and associated persons pursuant to Section 517.1215(2), F.S., and are deemed violations by an investment adviser or an associated person of an investment adviser under Section 517.161(1)(a), F.S., without limiting that term to the practices specified herein:
(a) With respect to any client, transaction or business in, to or from this state, engaging in any conduct prohibited by, or failing to comply with the requirements of, the following, notwithstanding the fact that the investment adviser or associated person is not registered or required to be registered under the Investment Advisers Act of 1940:
Sections 204, 204A, 205, 206, 207, 208 of the Investment Advisers Act of 1940, ( 15 U.S.C.A. §§80b -4, 80b-4a, 80b-5, 80b-6, 80b-7, 8 0b-8), or SEC Rules 204-1, 204-3, 205-1, 205-2, 205-3, 206(3)-1, 206(3)-2, 206(4)-1, (17 C.F.R. §§275.204-1, 275.204-3, 275.205-1, 275.205-2, 275.205-3, 275.206(3)-1, 275.206(3)-2, 275.206(4)-1), which are incorporated by reference in Rule 69W-200.002, F.A.C.
(b) Borrowing money or securities from a client unless the client is a dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds.
(c) Loaning money or securities to a client unless the investment adviser is a financial institution engaged in the business of making loans or the client is an affiliate of the investment adviser.
(d) Recommending to a client 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.
(e) Exercising any discretionary power in placing an order for the purchase or sale of securities for a client's account without first obtaining written discretionary authority from the client, unless the discretionary power relates solely to the time or price for the execution of orders.
(f) Inducing trading in a client's account which is excessive in size or frequency in view of the financial resources, investment objectives, and character of the account.
(g) Placing an order to purchase or sell a security on behalf of a client without authority to do so.
(h) Placing an order to purchase or sell a security for a client's account upon instruction of a third party without first having obtained a written third-party trading authorization from the client.
(i) Misrepresenting the qualifications of the investment adviser or any employee of the investment adviser to a client or prospective client when the representation does not fairly describe the nature of the services offered, the qualifications of the person offering the services, and the method of compensation for the services or omitting to state a material fact.
(j) Charging a client an unreasonable advisory fee.
(k) Failing to disclose to clients in writing before any advice is rendered any material conflict of interest relating to the adviser or any of its employees which could reasonably be expected to impair the rendering of unbiased and objective advice including:
1. Compensation arrangements connected with advisory services to clients which are in addition to compensation from such clients for such services; and,
2. Charging a client an advisory fee for rendering advice when a commission for executing securities transactions pursuant to such advice will be received by the adviser or its employees.
(l) Guaranteeing a client that a specific result will be achieved with the advice to be rendered.
(m) Recommending to a client that the client engage the services of a dealer that is not registered or exempt from registration under Chapter 517, F.S., unless the client is a person described in Section 517.061(7), F.S.
(n) Recommending to a client that the client engage the services of a dealer in connection with which the investment adviser receives a fee or remuneration from the dealer, except as permitted in subsection 69W-600.0024(4), F.A.C.
(o) Disclosing the identity, affairs, or investments of any client unless required to do so by law or consented to in writing by the client.
(p) Giving false or otherwise misleading client information to any financial institution or regulatory agency.
(q) Entering into, extending or renewing any investment advisory contract unless such contract is in writing and discloses, in substance, the services to be provided, the term of the contract, the advisory fee, the formula for computing the fee, the amount of prepaid fee to be returned in the event of contract termination or non-performance, whether the contract grants discretionary power to the adviser and that no assignment of such contract shall be made by the investment adviser without the consent of the other party to the contract.
(r) Entering into, extending or renewing any investment advisory contract contrary to the provisions of Section 205 of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-5. This provision shall apply to all advisers and associated persons of investment advisers registered or required to be registered under this Act, notwithstanding whether such adviser or associated person would be exempt from federal registration pursuant to Section 203(b) of the Investment Advisers Act of 1940, ( 15 U.S.C. §80b -3(b)), which is incorporated by reference in Rule 69W-200.002, F.A.C.
(s) Including, in an advisory contract, any condition, stipulation, or provisions binding any person to waive compliance with any provision of Chapter 517, F.S., or with any provision of, or with any rule, regulation, or order issued under, the Investment Advisers Act of 1940 (1 5 U.S.C. §80b-1 through 80b -21), which is incorporated by reference in Rule 69W-200.002, F.A.C.
(t) Taking any action, directly or indirectly, with respect to those securities or funds in which any client has any beneficial interest, where the investment adviser has custody or possession of such securities or funds when the adviser's action is subject to and does not comply with the requirements of Rule 69W-600.0132, F.A.C.
(u) Any unethical practice pursuant to Rule 69W-600.0133, F.A.C.
(v) Failing to send a client an itemized invoice each time a fee is directly deducted from the client's account in accordance with the provisions of paragraph 69W-600.0132(2)(i), F.A.C.
(w) Failing to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance, by the investment adviser or its associated persons, with Chapter 517, F.S., and Division 69W, F.A.C.
(x) Charging a client an advisory fee greater than the amount authorized in the written investment advisory contract between the client and the investment adviser.
(2) The federal statutory and regulatory provisions referenced herein shall apply to investment advisers, associated persons of investment advisers and federal covered advisers, to the extent permitted by the National Securities Markets Improvement Act of 1996 (Pub. L. 104-290 ), which is incorporated by reference in Rule 69W-200.002, F.A.C.
Notes
Rulemaking Authority 517.03(1), 517.1215 FS. Law Implemented 517.12(3), 517.1215, 517.161(1) FS.
New 1-25-00, Amended 10-30-03, Formerly 3E-600.0131, Amended 10-23-06, 1-18-09, 11-22-10, 9-22-14, 5-6-15, 11-15-16, 11-26-19, 1-18-21, 2-14-23, 3-21-24.