Ga. Comp. R. & Regs. 590-4-5-.16

Current through Rules and Regulations filed through October 17, 2024

Rule 590-4-5-.16 - Dishonest or Unethical Business Practices

(1) Every entity, organization, or individual regulated by the Act shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of business. The Commissioner may, at his or her discretion, take such action authorized by the Act regarding any entity, organization, or individual regulated by the Act.

(2) The following are prohibited acts:

(a) Broker-Dealers

1. Making false, misleading, deceptive, or exaggerated, representations or predictions in the offer, purchase or sale of securities;

2. Representing, agreeing, or guaranteeing, directly or indirectly, in writing or orally that:

(i) There is a guarantee against loss or risk;

(ii) The customer's capital will increase or that the purchase involves a preservation of original capital and protection against loss in value;

(iii) The securities will be repurchased or resold; or

(iv) A market will be established in the shares that will regularly be bought and sold;

3. Executing a transaction on behalf of a customer without authorization to do so;

4. Recommending to a customer the purchase, sale or exchange of securities without reasonable grounds to believe that the transaction or recommendation is suitable for the customer based on the customer's financial condition, investment objectives, and risk tolerance;

5. Exercising any discretionary power in effecting a transaction for a customer's account without first obtaining written authority from the customer, unless the discretionary power relates solely to the time and/or price for the execution of the order;

6. Effecting transactions pursuant to discretionary authority that are excessive in size or frequency in relation to the financial resources of the customer or the character of his or her account;

7. Knowingly effecting transactions in a customer account for the purpose of accumulating or compounding commissions;

8. Charging an excessive or unreasonable markup or commission;

9. Offering to buy or sell to any person any security at a stated price unless such broker-dealer is prepared to purchase or sell at such price and under such conditions as are stated at the time of such offer to buy or sell;

10. Using any advertising or sales presentation in such a fashion as to be deceptive or misleading;

11. Marking any order ticket or confirmation as unsolicited when in fact the transaction was solicited;

12. Executing any transaction in a margin account without securing from the customer a properly executed written margin agreement promptly after the initial transaction in the account;

13. Creating an impression of false supply or demand or manipulating a market to create false supply or demand;

14. Engaging or aiding in "boiler-room" operations or high pressure tactics in connection with the promotion of speculative securities by means of an intensive telephone campaign or unsolicited calls to persons not known by or having an account with the salesperson or broker-dealer, whereby the prospective purchaser is encouraged to make a hasty decision to buy, irrespective of his or her investment needs and objectives;

15. Representing that a security is being offered to a customer "at the market" or a price relevant to the market price unless the broker-dealer knows or has reasonable grounds to believe that a market for such security exists other than that made, created or controlled by such broker-dealer, or by any person for whom he or she is acting or with whom he or she is associated in such distribution, or any person controlled by, controlling or under common control with such broker-dealer;

16. Failing to refrain from soliciting prospective customers who have informed the broker-dealer that such persons do not want to be solicited, and conducting business by telephone at unreasonable times;

17. Failing to furnish to a customer purchasing securities in a registered offering, no later than the date of confirmation of the transaction, a final or preliminary prospectus, and, if the latter, failing to furnish a final prospectus within a reasonable period after the effective date of the offering;

18. Failing to make a bona fide offering of all of the securities allotted to a broker-dealer for distribution, whether acquired as an underwriter, a selling group member, or from a member participating in the distribution as an underwriter or selling group member;

19. Failing to segregate a customer's free securities or securities held in safekeeping; and

20. Hypothecating a customer's securities without having a lien thereon unless the broker-dealer secures from the customer a properly executed written consent promptly after the initial transaction, except as permitted by the rules of the SEC.

(b) Agents

1. Engaging in the practice of lending or borrowing money or securities from a customer, or acting as a custodian for money, securities or an executed stock power of a customer;

2. Effecting securities transactions not recorded on the regular books or records of the broker-dealer which the agent represents, unless the transactions are authorized in writing by the broker-dealer prior to execution of the transaction;

3. Engaging in an outside business activity away from the broker-dealer without giving prior written notice;

4. Establishing or maintaining an account containing fictitious information in order to execute transactions which would otherwise be prohibited;

5. Sharing directly or indirectly in profits or losses in the account of any customer without the written authorization of the customer and the broker-dealer which the agent represents;

6. Dividing or otherwise splitting the agent's commissions, profits or other compensation from the purchase or sale of securities with any person not also registered as an agent for the same broker-dealer, or for a broker-dealer under direct or indirect common control; and

7. Engaging in conduct specified in subsection (1)(a).

(3) Senior-specific Certifications and Designations. The improper use of a senior-specific certification or designation by any person in connection with the offer, sale, or purchase of securities, or the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly, through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicate or imply that the user has special certification or training in advising or servicing senior citizens or retirees in such a way as to mislead any person shall be a dishonest and unethical business practice.

Ga. Comp. R. & Regs. R. 590-4-5-.16

O.C.G.A. Secs. 10-5-41(a), 10-5-70.

Original Rule entitled "Dishonest or Unethical Business Practices" adopted. F. Nov. 18, 2011; eff. Dec. 8, 2011.