Ala. Admin. Code r. 830-X-3-.20

Current through Register Vol. 43, No. 1, October 31, 2024

Section 830-X-3-.20 - Agency Cross Transactions

(1) For purposes of this rule, agency cross transaction means a transaction in which an investment adviser, or any person controlled by, or under common control with such investment adviser, including an investment adviser representative, acts as a dealer for both the advisory client and the person on the other side of the transaction.

(2) An investment adviser effecting an agency cross transaction for an advisory client shall comply with the following conditions:

(a) Obtain from the advisory client a written consent prospectively authorizing the investment adviser to effect agency cross transactions for such client.

(b) Before obtaining such written consent from the client, disclose to the client in writing that, with respect to agency cross transactions, the investment adviser will act as dealer for, receive commission from and have a potentially conflicting division of loyalties and responsibilities regarding both parties to the transactions.

(c) At or before the completion of each agency cross transaction, send the client a written confirmation. The written confirmation shall include a statement of the nature of the transaction, the date the transaction took place, an offer to furnish, upon request, the time when the transaction took place and the source and amount of any other remuneration the investment adviser received or will receive in connection with the transaction. In the case of a purchase, if the investment adviser was not participating in a distribution, or, in the case of a sale, if the investment adviser was not participating in a tender offer, the written confirmation may state whether the investment adviser has been receiving or will receive any other remuneration and that the investment adviser will furnish to the client the source and amount of such remuneration upon the client's written request.

(d) At least annually, and with or as part of any written statement or summary of the account from the investment adviser, send each client a written disclosure statement identifying:

1. The total number of agency cross transactions during the period since the date of the last such statement or summary, and

2. The total amount of all commission or other remuneration the investment adviser received or will receive in connection with agency cross transactions during the period.

(e) Each written disclosure and confirmation required by this rule must include a conspicuous statement that the client may revoke the written consent required under subsection (2)(a) of this rule at any time by providing written notice of revocation to the investment adviser.

(f) No agency cross transaction may be effected in which the same investment adviser recommended the transaction to both any seller and any purchaser.

(3) Nothing in this rule shall be construed to relieve an investment adviser or investment adviser representative from acting in the best interests of the client, including fulfilling his duty with respect to the best price and execution for the particular transaction for the client nor shall it relieve any investment adviser or investment adviser representative of any other disclosure obligations imposed by the Act.

Author:

Ala. Admin. Code r. 830-X-3-.20

Filed September 28, 1990.

Statutory Authority:Code of Ala. 1975, § 8-6-23.