P.R. Laws tit. 10, § 852
(a) It is unlawful for any person who receives any consideration from another person primarily for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise:
(1) To employ any device, scheme, or artifice to defraud the other person, or
(2) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the other person.
(b) It is unlawful for any investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing:
(1) That the investment adviser shall not be compensated on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client;
(2) that no assignment of the contract may be made by the investment adviser without the consent of the other party to the contract, and
(3) that the investment adviser, if a partnership, shall notify the other party to the contract of any change in the membership of the partnership within a reasonable time after the change.
Clause (1) of this subsection does not prohibit an investment advisory contract which provides for compensation based upon the total value of a fund averaged over a definite period, or as of definite dates or taken as of a definite date. “Assignment”, as used in clause (2) of this subsection, includes any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of a controlling block of the assignor’s outstanding voting securities by a security holder of the assignor; but, if the investment adviser is a partnership, no assignment of an investment advisory contract is considered to result from the death or withdrawal of a minority of the members of the investment adviser having only a minority interest in the business of the investment adviser, or from the admission to the investment adviser of one or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business.
(c) It shall be unlawful for any investment adviser to take or have custody of any securities or funds of any client if:
(1) The Commissioner prohibits custody through regulations, or
(2) in the absence of regulations, the investment adviser fails to notify the Commissioner that he/she has or may have custody.
History —June 18, 1963, No. 60, p. 128, § 102; Aug. 11, 1996, No. 114, § 3.