Tenn. Comp. R. & Regs. 0780-04-03-.12 - DEFINITION OF "CLIENT OF AN INVESTMENT ADVISER"

(1) Preliminary note. This Rule is a safe harbor and is not intended to specify the exclusive method for determining who may be deemed a single client for purposes of T.C.A. § 48-1-102(10)(E)(ii) and 48-1-102(10)(F) of the Act.

(2) General. For purposes of T.C.A. §§ 48-1-102(10)(E)(ii) and 48-1-102(10)(F), the following are deemed a single client:

(a) A natural person, and:

1. Any minor child of the natural person;

2. Any relative, spouse, or relative of the spouse of the natural person who has the same principal residence;

3. All accounts of which the natural person and/or the persons referred to in this subparagraph (2)(a) are the only primary beneficiaries; or

4. All trusts of which the natural person and/or the persons referred to in this subparagraph (2)(a) are the only primary beneficiaries;

(b)

1. A corporation, general partnership, limited liability company, trust (other than a trust referred to in part (2)(a)4. of this Rule), or other legal organization (any of which are referred to hereinafter as a "legal organization") that receives investment advice based on its investment objectives rather than the individual investment objectives of its shareholders, partners, limited partner, members, or beneficiaries (any of which are referred to hereinafter as an "owner"); and

2. Two or more legal organizations referred to in part (2)(b)1. of this Rule that have identical owners.

(3) Special Rules. For purposes of this Rule:

(a) An owner must be counted as a client if the investment adviser provides investment advisory services to the owner separate and apart from the investment advisory services provided to the legal organization; provided, however, that the determination that an owner is a client will not affect the applicability of this subparagraph (3)(a) with regard to any other owner;

(b) An owner need not be counted as a client of an investment adviser solely because the investment adviser, on behalf of the legal organization, offers, promotes, or sells interests in the legal organization to the owner, or reports periodically to the owners as a group solely with respect to the performance of or plans for the legal organization's assets or similar matters;

(c) A limited partnership is a client of any general partner or other person acting as investment adviser to the partnership;

(d) Any person for whom an investment adviser provides investment advisory services without compensation need not be counted as a client; and

(e) An investment adviser that has its principal office and place of business outside of the United States must count only clients that are residents in this state; an investment adviser that has its principal office and place of business in this state must count all clients.

(4) Holding Out. Any investment adviser relying on this Rule shall not be deemed to be holding itself out generally to the public as an investment adviser, within the meaning of subparagraph (1)(b) of Rule 0780-04-03-.05, solely because such investment adviser participates in a non-public offering of interests in a limited partnership under the 1933 Act.

Notes

Tenn. Comp. R. & Regs. 0780-04-03-.12

Original rule filed November 6, 1997; effective January 20, 1998. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective 6/14/2015.

Authority: T.C.A §§ 48-1-102, 48-1-115, 48-1-116, §222 of the Investment Advisers Act of 1940, as amended by §304 of the National Securities Markets Improvement Act of 1996, and 17 C.F.R. §275.203(b)(3)-1.