The purpose of this section is to identify practices in the
securities business which are generally associated with schemes to manipulate.
A broker-dealer, broker-dealer agent or agent of the issuer who engages in one
or more of the following practices shall be deemed to have engaged in an "act,
practice, or course of business that operates or would operate as a fraud or
deceit" as used in SDCL
47-31B-501. This
rule is not intended to be all-inclusive, and thus, acts or practices not
enumerated herein may also be deemed fraudulent.
(1) Entering into a transaction with a
customer in any security at an unreasonable price or at a price not reasonably
related to the current market price of the security or receiving an
unreasonable commission or profit.
(2) Contradicting or negating the importance
of any information contained in a prospectus or other offering materials with
intent to deceive or mislead or using any advertising or sales presentation in
a deceptive or misleading manner.
(3) In connection with the offer, sale, or
purchase of a security, falsely leading a customer to believe that the
broker-dealer or agent is in possessions of material, non-public information
which would impact on the value of the security.
(4) In connection with the solicitation of a
sale or purchase of a security, engaging in a pattern or practice of making
contradictory recommendations to different investors of similar investment
objective for some to sell and others to purchase the same security, at or
about the same time, when not justified by the particular circumstance of each
investor.
(5) Failing to make a
bona fide public offering of all the securities allotted to a broker-dealer for
distribution by, among other things, (1) transferring securities to a customer,
another broker-dealer or a fictitious account with the understanding that those
securities will be returned to the broker-dealer or its nominees or (2) parking
or withholding securities.
(6)
Although nothing in this section precludes application of the general
anti-fraud provisions against anyone for practices similar in nature to the
practices discussed below, the following subsections specifically apply only in
connection with the solicitation of a purchase or sale of OTC unlisted
non-NASDAQ equity securities:
(a) Failing to
advise the customer, both at the time of solicitation and on the confirmation,
of any and all compensation related to a specific securities transaction to be
paid to the agent including commissions, sales charges, or
concessions.
(b) In connection with
a principal transaction, failing to disclose, both at the time of solicitation
and on the confirmation, a short inventory position in the firm's account of
more than 3 percent of the issued and outstanding shares of that class of
securities of the issuer provided that this subsection shall apply only if the
firm is a market maker at the time of the solicitation.
(c) Conducting sales contests in a particular
security.
(d) After a solicited
purchase by a customer, failing or refusing, in connection with a principal
transaction, to promptly execute sell orders.
(e) Soliciting a secondary market transaction
when there has not been a bona fide distribution in the primary
market.
(f) Engaging in a pattern
of compensating an agent in different amounts for effecting sales and purchases
in the same security.
(g) Effecting
any transaction in, or inducing the purchase or sale of, any security by means
of any manipulative, deceptive or other fraudulent device or contrivance
including but not limited to the use of boiler room tactics or use of
fictitious or nominee accounts.
(h)
Failure to comply with any prospectus delivery requirement promulgated under
federal law.
(i) Effect any
transaction in, or to induce or attempt to induce the purchase or sale of, any
penny stock by any customer except in accordance with the requirements as set
forth in the 1934 Securities Exchange Act Sec. 15(g) and the rules and
regulations prescribed thereunder.
