Section 260.235.3 - Agency Cross Transactions for Advisory Clients(a) A licensed investment adviser, or a person licensed as a broker-dealer and controlling, controlled by or under common control with a licensed investment adviser, shall be deemed in compliance with the provisions of subdivision (c) of Section 25235 of the Code in effecting an agency cross transaction for an advisory client, if: (1) The advisory client has executed a written consent prospectively authorizing the adviser, or any other person relying on this rule, to effect agency cross transactions for the advisory client, provided that the written consent is obtained after full written disclosure that with respect to agency cross transactions the adviser or other person will act as a broker-dealer for, receive commissions from, and have a potentially conflicting division of loyalties and responsibilities regarding, both parties to the transactions;(2)(A) The adviser, or any other person relying on this rule, sends to each client a written confirmation at or before the completion of each transaction, which confirmation includes (i) a statement of the nature of the transaction, (ii) the date the transaction took place, (iii) an offer to furnish upon request the time when the transaction took place, and (iv) the source and amount of any other remuneration received or to be received by the adviser and any other person relying on this rule in connection with the transaction.(B) Provided, however, that if, (i) in the case of a purchase, neither the adviser nor any other person relying on this rule was participating in a distribution, or (ii) in the case of a sale, neither the adviser nor any other person relying on this rule was participating in a tender offer, then the written confirmation may state whether any other remuneration has been or will be received and that the source and amount of any other remuneration will be furnished upon written request of the customer;(3) The adviser, or any other person relying on this rule, sends to each client, at least annually, and with or as part of any written statement or summary of the account from the adviser or other person (A) written disclosure statement identifying the total number of the transactions during the period since the date of the last statement or summary and (B) the total amount of all commissions or other remuneration received or to be received by the adviser or any other person relying on this rule in connection with the transactions during the period;(4) Each written disclosure and confirmation required by this rule includes a conspicuous statement that the written consent referred to in subsection (a)(1) of this rule may be revoked at any time by written notice to the adviser, or to any other person relying on this rule, from the advisory client; and(5) No transaction is effected in which the same adviser or an adviser and any person controlling, controlled by or under common control with the adviser, recommended the transaction to both any seller and any purchaser.(b) For purposes of this rule, the term "agency cross transaction for an advisory client" shall mean a transaction in which a person acts as an investment adviser in relation to a transaction in which the adviser, or any person controlling, controlled by or under common control with the adviser, also acts as a broker-dealer for both the advisory client and for another person on the other side of the transaction.(c) This rule shall not be construed as relieving in any way the adviser or another person relying on this rule from acting in the best interests of the advisory client, including fulfilling the duty with respect to the best price and execution for the particular transaction for the advisory client; nor shall it relieve the person or persons from any disclosure obligation which may be imposed by the Code or these rules.Cal. Code Regs. Tit. 10, § 260.235.3
1. New section filed 5-12-92; operative 6-11-92 (Register 92, No. 20).
2. Editorial correction inserting inadvertently omitted subsection (b) (Register 94, No. 2). Note: Authority cited: Section 25610, Corporations Code. Reference: Section 25235(c), Corporations Code.
1. New section filed 5-12-92; operative 6-11-92 (Register 92, No. 20).
2. Editorial correction inserting inadvertently omitted subsection (b) (Register 94, No. 2).