Arkansas Administrative Code
Agency 214 - Arkansas Securities Department
Rule 214.00.09-001 - Rules of the Securities Commissioner

Universal Citation: AR Admin Rules 214.00.09-001

Current through Register Vol. 49, No. 9, September, 2024

CHAPTER 1 GENERAL PROVISIONS

RULE 101 TITLE.

[RESERVED]

RULE 102

102.01 DEFINITIONS.

When the terms listed below are used in the Act, these Rules, the forms, and the instructions and orders of the Commissioner, the following definitions shall apply (unless the context indicates otherwise), together with the definitions which may hereinafter appear, to the extent that they are not inconsistent with the definitions provided in Section 23-42-102 of the Act.

(1) ACCESS TO OR FURNISHING OF INFORMATION. Access to or furnishing of information can only exist by reason of the purchaser's position with respect to the issuer or seller. Position means an employment or family relationship or economic bargaining power that enables the purchaser to obtain information from the issuer or seller in order to evaluate the merits and risks of a prospective investment. In any event, each purchaser or his legal, financial or other representative(s), or both, shall have access to or have been furnished during the course of the transaction and prior to the sale, by the issuer or any person acting on its behalf, or the seller or any person acting on its behalf, the same kind of information that is required by a registration under the Act, to the extent that the issuer or seller possesses such information or can acquire it without reasonable effort or expense. This condition shall be deemed to be satisfied if the purchaser or his legal, financial or other representative(s) is furnished with information, either in the form of documents actually filed with the Commissioner or otherwise. The issuer or seller shall make available, during the course of the transaction and prior to sale, to each purchaser or his legal, financial or other representative(s) or both, the opportunity to ask questions of, and receive answers from, the issuer or seller, or any person acting on the issuer's or seller's behalf, concerning the terms and conditions of the offering and to obtain any additional information, to the extent that the issuer or seller possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information obtained. Audited, unaudited or other financial statements must be sworn to with a statement from a responsible representative of the issuer as follows: "To the best of my knowledge and belief these financial statements and supporting schedules or documents of the issuer are true, correct and fairly represent the financial position of the issuer."

(2) ACCREDITED INVESTOR. See definition of "Accredited Investor" found in SEC Rule 501 of Regulation D, promulgated under the Securities Act of 1933.

(3) ACT. The Arkansas Securities Act, as amended, codified at Ark. Code Ann. Sections 23-42-101 through 509.

(4) ADVISORY AFFILIATE. A person that directly or indirectly controls or is controlled by a person who either is registered as an investment adviser or has filed an application to become registered as an investment adviser, including any current employee except one performing only clerical, administrative, support or similar functions.

(5) AFFILIATE. The term "affiliate" of or "affiliated" with a person means a person that directly or indirectly through one or more intermediaries' controls, or is controlled by, or is under common control with such person.

(6) APA. The Arkansas Administrative Procedures Act ("APA"), as amended, codified at Ark. Code Ann. §§ 25-15-201 through 25-15-217.

(7) APPLICANT. A person who submits an application for registration of securities, for an exemption procedure or for registration as a broker-dealer, broker-dealer agent, agent of the issuer, investment adviser, or investment adviser representative who files an application for an order of the Commissioner.

(8) APPLICATION. The form prescribed by the Commissioner for filing in connection with the registration of securities, for an exemption procedure and as a broker-dealer, broker-dealer agent, agent of the issuer, investment adviser, or investment adviser representative, including all amendments, papers, documents and exhibits incidental thereto.

(9) CLIENT. For purposes of Sections 23-42-102(8)(E)(ii) of the Act and Rule 102.01(35), the following shall be deemed a single client:

(A) A natural person, and:

(i) Any minor child of the natural person;

(ii) Any relative, spouse, or relative of the spouse of the natural person who has the same principal residence;

(iii) All accounts of which the natural person and/or the persons referred to in this subsection (A) are the only primary beneficiaries; and

(iv) All trusts of which the natural person and/or the persons referred to in this subsection (A) are the only primary beneficiaries.

(B) A corporation, general partnership, limited partnership, limited liability company, trust (other than a trust referred to in Rule 102.01(9)(A)(iv) above), or other legal organization that receives investment advice based on its investment objectives rather than the individual investment objectives of its shareholders, partners, limited partners, members, or beneficiaries, or any two or more legal organizations that have identical owners, provided however, 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, and a limited partnership shall be deemed a client of any general partner or other person acting as investment adviser to the partnership.

(10) COMMISSIONER. The Arkansas Securities Commissioner.

(11) CONTROL. The power to direct or cause the direction of the management or policies of a person, whether through ownership of securities, by contract, or otherwise. Any individual or firm that is a director, partner or officer exercising executive responsibility (or having similar status or functions) or that directly or indirectly has the right to vote 25 percent or more of the voting securities of a person or is entitled to 25 percent or more of the profits of a person is presumed to control that person.

(12) CONTROL AFFILIATE. Any person that directly or indirectly controls, is controlled by or under common control with an applicant or registrant, including any current employee except one performing only clerical, administrative, support or similar functions, or who, regardless of title, performs no executive duties or has no senior policy making authority.

(13) CRD. The Central Registration Depository operated by FINRA.

(14) CUSTOMER. The person being charged a commission or fee, being rendered a service, being sold a security, being solicited to sell a security, or receiving investment advice. However, the term "customer" shall not include the broker-dealer or investment adviser charging the commission or fee, offering the services, or rendering the investment advice.

(15) DEPARTMENT. The Arkansas Securities Department.

(16) DISCRETION OR DISCRETIONARY AUTHORITY. Solely for purposes of determining an investment adviser's surety bond obligation under Rule 305.01(b), the term "discretionary authority" means the authority that an investment adviser possesses by virtue of a limited power of attorney or other grant of authority enabling such investment adviser to determine what securities or other property shall be purchased or sold by or for an account, or make decisions as to what securities or other property shall be purchased or sold by or for an account even though some other person may have responsibility for such investment decisions.

The term "discretionary authority" shall not include the authority of an investment adviser to direct purchases or sales of securities in an account provided the following conditions are met:

(A) The limited power of attorney or other grant of authority precludes the possibility of disbursements of cash or securities from the account to the investment adviser other than for the payment of advisory fees due to the investment adviser;

(B) The investment adviser receives no compensation or pecuniary benefit, either directly or indirectly, on account of or as a result of any purchase or sale in the account, other than the compensation which he may receive for investment advice or for purely administrative services under the Employee Retirement Income Security Act of 1974;

(C) The investment adviser has no direct or indirect ownership interest in the broker-dealer or affiliation with the agent effecting the purchase or sale; or

(D) The purchase or sale does not involve a security in which the investment adviser has an interest unless such security is:

(i) A "covered security" in Section 18(b)(1) of the Securities Act of 1933;

(ii) A security which has been determined by rule or order of the Commissioner to be exempt because it is sold on an exchange (or tier or segment thereof) which has listing standards substantially similar to the listing standards of the exchanges set forth in subparagraph (D)(i) of this subsection.

The Commissioner may upon written request and for good cause shown, waive any of the conditions set forth above.

(17) ENGAGED IN THE BUSINESS OF EFFECTING TRANSACTIONS IN SECURITIES. As used in Section 23-42-102(2) of the Act, the term "engaged in the business of effecting transactions in securities," includes any person who holds himself out as being able to effect transactions in securities for the accounts of others or for his or her own account regardless of whether any transactions have actually been effected. The term shall not include a business broker who, as part of the facilitation of the sale of business, including securities of the business, takes a fee provided all of the following conditions are met:

(A) The business broker has a limited role in negotiations between the purchaser and the seller;

(B) The businesses represented by the business broker are going concerns and are not 'shell" organizations;

(D) Transactions effected by means of securities convey all of the business' equity to a single purchaser or group of purchasers formed without the assistance of the business broker;

(E) The business broker does not advise the parties whether to issue securities or assess the value of any securities sold;

(F) The business broker's compensation does not vary according to the form of conveyance the parties agree to; and

(G) The business broker does not assist purchasers in obtaining financing other than to provide to a party a list of potential lenders.

(18) EXEMPTED OR EXEMPTION. Securities or transactions meeting the requirements of Section 23-42-503 or Section 23-42-504 of the Act, and the applicable Rules, are exempt from the registration requirements contained in Section 23-42-501 and Section 23-42-502 of the Act. Such securities or transactions are not exempted from any other provisions of the Act or applicable Rules.

(19) FINRA. The Financial Industry Regulatory Authority.

(20) IARD. The Investment Adviser Registration Depository operated by FINRA.

(21) INDICATIONS OF INTEREST. Communications and/or actions on the part of a customer, or the solicitation thereof, that give rise to the inference that such customer may purchase the yet-to-be issued securities.

(22) INVESTMENT INTENT. Securities purchased under the Act and these Rules with "investment intent" cannot be purchased with a view to, or for resale in connection with any sale or hypothecation. Securities purchased with investment intent cannot be disposed of unless the securities are registered under the Act or, in the opinion of counsel for the issuer, an exemption from the registration requirements of the Act is available. As a result, the purchaser of these securities must be prepared to bear the economic risk of the investment for an indefinite period of time and have no need of liquidity of the investment. Where securities are purchased under the Act for investment, investment intent shall be presumed if the purchaser retains such securities for one year from the date of consummation of the sale. However, any disposition of the securities within one year of the date of purchase, in the absence of an unforeseeable change of circumstances, shall create a presumption that the person did not purchase the securities with investment intent. Securities purchased with investment intent are deemed "restricted" securities and must bear an appropriate legend restricting retransfer.

(23) LIFE SETTLEMENT CONTRACT. An agreement for the purchase, sale, assignment, transfer, devise, or bequest of any portion of the death benefit or ownership of a life insurance policy or certificate for consideration that is less than the expected death benefit of the life insurance policy or certificate. Life settlement contract does not include:

(A) The assignment, transfer, sale, devise or bequest of a death benefit, life insurance policy or certificate of insurance by the insured to the life settlement provider pursuant to the Life Settlement Act, Ark. Code Ann. Sections 23-81-801 through 23-81-818;

(B) The assignment, transfer, sale, devise or bequest of a life insurance policy, for any value less than the expected death benefit, by the insured to a friend or family member who enters into no more than one such agreement in a calendar year;

(C) An assignment of a life insurance policy to a bank, savings bank, savings and loan association, credit union or other licensed lending institution as collateral for a loan; or

(D) The exercise of accelerated benefits pursuant to the terms of the Arkansas Insurance Code and of the life insurance policy.

(24) MSRB. Municipal Securities Rulemaking Board.

(25) NASAA. North American Securities Administrators Association, Inc.

(26) NOTICE FILING. A filing made pursuant to Section 23-42-301(c)(1) of the Act in the case of investment advisers, and Section 23-42-509 of the Act in the case of persons issuing or offering securities.

(27) OFFER OR OFFER TO SELL. For the purposes of Sections 23-42-501 and 23-42-502 of the Act, the term "offer" or "offer to sell" as defined in Section 23-42-102(13)(A)(ii) of the Act shall not include negotiations, agreements or similar communications with respect to a proposed reorganization provided such negotiations, agreements or similar communications are incidental to the formulation of a proposal of a reorganization and, except for the merger of a subsidiary entity into its parent, a vote of approval and consent of security holders is required to effectuate the proposed transactions.

(28) PARENT. An affiliate controlling another person.

(29) PLACE OF BUSINESS. The term "place of business" means:

(A) Any office or other location at or from which an investment adviser, investment adviser representative, broker-dealer, or agent regularly provides investment advisory or broker-dealer services, solicits, meets with, or otherwise communicates with clients; and

(B) Any other location that is held out to the general public as a location at which the investment adviser, investment adviser representative, broker-dealer, or agent provides investment advisory or broker-dealer services, solicits, meets with, or otherwise communicates with clients.

(30) PRINCIPAL PLACE OF BUSINESS. The executive office of a registrant from which the officers, partners, or managers of the registrant direct, control, and coordinate the activities of the registrant.

(31) PROMOTER. A person who, acting alone or in conjunction with others, takes the initiative in founding, organizing or incorporating the business or enterprise. A promoter does not include a lawyer or accountant acting as an independent contractor.

(32) PROOF OF EXEMPTION. "Proof of Exemption" as used in Sections 23-42-503(d) and 23-42-504(b) of the Act shall mean the filing made by an applicant, together with any supporting documents and written statements of the applicant as set forth in the appropriate rule, whereby the applicant describes his expected conduct during the exemption process and demonstrates his disclosure and antifraud responsibilities required in order to qualify for the exemption. A proof of exemption is not in and of itself an exemption. It is merely the filing by which an applicant requests the Commissioner not to withdraw the availability of use of the exemption based on the applicant's demonstration of his recognition of the technical requirements necessary to qualify.

(33) PUBLIC ADVERTISING. Public advertising shall mean any form of general solicitation, offer, invitation to invest, or other writing that could be easily understood to be designed to attract investors, general advertising or any other communication directed to persons whose background is unknown to the communicant, including but not limited to, the following:

(A) Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar medium or broadcast over television, radio or other electronic media;

(B) Any seminar or meeting or invitation to or promotion of such meeting or seminar;

(D) Any solicitation by telephone or other electronic media; or

(E) A solicitation that is maintained on or disseminated by way of any webpage, site on the Internet, or other electronic posting.

(34) PURCHASER. For purposes of computing the number of purchasers, offerees, investors, or subscribers, a husband and wife who purchase or contemplate purchasing in the joint names of both spouses shall be deemed to be one offer or sale.

(35) REGISTRANT. An applicant for whom a registration has been declared effective.

(36) REPRESENTATIVE OF AN INVESTMENT ADVISER REGISTERED WITH THE SEC. The term "representative of an investment adviser registered with the SEC" shall mean a supervised person of the investment adviser more than ten percent of whose clients are natural persons, but does not include a supervised person who:

(A) Does not on a regular basis solicit, meet with, or otherwise communicate with clients of the investment adviser; or

(B) Provides only investment advisory services by means of written material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts.

For purposes of this subsection, natural persons who have at least five hundred thousand dollars ($500,000.00) under management with the investment adviser immediately after entering into the investment advisory contract, and natural persons who immediately prior to entering into the investment advisory contract the investment adviser reasonably believes to have a net worth (together with assets held jointly with a spouse) of more than one million dollars ($1,000,000.00) at the time the investment advisory contract is entered into shall not be included as clients of the investment adviser.

(37) RESTRICTED SECURITY. Restricted securities shall mean those securities that require purchase with investment intent and those securities that have additional transfer restrictions, such as shareholder agreements. Each restricted security should bear the appropriate restrictive legend, including the NASAA Uniform Disclosure Guidelines for Cover Legends. The following reflects retransfer restriction as to securities law:

"RESTRICTION ON RETRANSFER"

"The security represented by this certificate has been executed pursuant to an exemption from registration under the Securities Act of 1933 and the Arkansas Securities Act in reliance upon the representation of the holder hereof that the same is acquired for investment purposes. This stock may accordingly not be resold or otherwise transferred or conveyed in the absence of registration of the same pursuant to the applicable securities laws or unless an opinion of counsel satisfactory to the issuer is first obtained that such is not then necessary. Any transfer contrary hereto is void."

(38) REORGANIZATION. The term "reorganization" shall mean any merger, consolidation, reclassification of securities, sale of assets in consideration of the issuance of securities of another person, exchange of outstanding securities for the issuance of securities or assets of another person, or other similar reorganization, pursuant to applicable statutory provisions of the jurisdiction under which such corporation or other person is organized, or pursuant to the provisions of its Articles of Incorporation or similar controlling instrument, which the approval or consent of the security holders is required to effectuate, or any merger of a subsidiary entity into its parent where such vote, approval or consent is not required by the applicable statute.

(39) RULES. The Rules of the Arkansas Securities Commissioner.

(40) SEC. The Securities and Exchange Commission.

(41) SPONSOR. A person or a member of the immediate family of a person who acts as a general partner, manager or management company of a program including an affiliate of, or a person associated with, a sponsor, except as otherwise provided.

(42) SUBSIDIARY. An affiliate controlled by another person.

(43) SUPERVISED PERSON. With regard to investment advisers registered with the SEC, the term 'supervised person" means any partner, officer, director, or employee of an investment adviser, or other person who provides investment advice on behalf of the investment adviser and is subject to the supervision and control of the investment adviser.

(44) STAFF. The Staff of the Arkansas Securities Department.

(45) TRANSACT BUSINESS. As used in Sections 23-42-301(a) and 23-42-301(c) of the Act, the term "transact business" includes representing a person or entity as being able to effect transactions in securities for the account of others or for his or her own account regardless of whether any transactions have actually been effected, or being able to serve as an investment adviser regardless of whether any investment advice or service has actually been rendered. The term shall not include communications, postings, or distributions of information set forth on the Internet if each of the following conditions are met:

(A) The Internet communication contains a legend in which it is clearly stated that:

(i) The broker-dealer, investment adviser, broker-dealer agent, agent of the issuer, or investment adviser representative in question may only transact business in this state if first registered, or exempted from registration as a broker-dealer, investment adviser, broker-dealer agent, agent of the issuer, or investment adviser representative, whichever is applicable; and

(ii) Follow-up, individualized responses to persons in this state by such broker-dealer, investment adviser, broker-dealer agent, agent of the issuer, or investment adviser representative that involve either the effecting of or the attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation or attempt to render such advice, as may be, will not be made absent compliance with state broker-dealer, investment adviser, broker-dealer agent, agent of the issuer, or investment adviser representative requirements, or an applicable exemption;

(B) The Internet communication contains a mechanism, including and without limitation, technical "firewalls" or other implemented policies and procedures, designed reasonably to ensure that prior to any subsequent, direct communication with prospective customers or clients in this state, the broker-dealer, investment adviser, agent of the issuer, broker-dealer agent, or investment adviser representative is first registered in this state or is exempt from registration under the Act. Nothing in this Rule 102.01(45) shall be construed to relieve a broker-dealer, investment adviser, broker-dealer agent, agent of the issuer, or investment adviser representative from any applicable securities registration requirements in this state;

(C) The Internet communication does not involve either effecting or attempting to effect transactions in securities, or rendering of or attempting to render personalized investment advice for compensation, as may be, in this state over the Internet, but is limited to the dissemination of general information on products and services; and

(D) In the case of an agent or representative:

(i) The affiliation with the broker-dealer or investment adviser of the agent, or representative is prominently disclosed within the communication;

(ii) The broker-dealer or investment adviser with which the agent or representative is associated retains responsibility for reviewing and approving the content of any Internet communication by the agent or representative;

(iii) The broker-dealer or investment adviser with which the agent or representative is associated first authorizes the distribution of information on the particular products and services through the Internet communication; and

(iv) In disseminating information through the Internet communication, the agent or representative acts within the scope of the authority granted by the broker-dealer or investment adviser with which the agent or representative is associated.

(46) UNDERWRITER. The term "underwriter" means any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or broker-dealer not in excess of the usual and customary distributors' or sellers' commission.

RULE 103 APPLICABILITY.

[RESERVED]

RULE 104 CRIMINAL PENALTIES.

[RESERVED]

RULE 105 PROSECUTION OF CRIMINAL OFFENSES.

[RESERVED]

RULE 106 CIVIL LIABILITY.

[RESERVED]

RULE 107 CONSENT TO SERVICE OF PROCESS.

[RESERVED]

RULE 108 RIGHTS AND REMEDIES CUMULATIVE.

[RESERVED]

RULE 109 WAIVER OF COMPLIANCE VOID.

[RESERVED]

RULE 110 FALSE OR MISLEADING STATEMENTS UNLAWFUL.

[RESERVED]

CHAPTER 2 ADMINISTRATION

RULE 201 ADMINISTRATION BY SECURITIES COMMISSIONER - CONFLICTS OF INTEREST.

[RESERVED]

RULE 202 DELEGATION OF AUTHORITY BY SECURITIES COMMISSIONER.

[RESERVED]

RULE 203 CONFIDENTIALITY OF INFORMATION OR PROCEEDINGS - GENERALLY.

[RESERVED]

RULE 204 RULES, FORMS, AND ORDERS OF SECURITIES COMMISSIONER.

204.01 GENERAL.

The following provisions apply to all applications, petitions, notice filings, amendments, reports, complaints, or other documents required under the Act, these Rules, or any order of the Commissioner:

(A) FILING. A document is deemed filed when it is received in the office of the Commissioner.

(1) All communications and inquiries shall be addressed or delivered to: Arkansas Securities Commissioner, 201 East Markham, Suite 300, Little Rock, Arkansas 72201, Telephone (501) 324-9260.

(2) The Office of the Commissioner shall be open for business between the hours of 8:00 a.m. and 4:30 p.m. on weekdays, except for legally declared holidays.

(3) The original of each form or exhibit is required. Additional copies of certain documents may be requested or required by other provisions of the Act or Rules.

(4) When a document is required to be signed, such signature shall be an original signature of the person signing or if submitted electronically, the signature shall be verified through a certification authority that shall verify for the Department that the electronic signature is authentic.

(B) FEES. Unless a filing is made electronically or as otherwise set forth specifically in these Rules, all fees must accompany the application, notice filing or supplemental amendment to which they pertain and are payable by check or money order to the Arkansas Securities Department. A filing shall be deemed incomplete until applicable fees are received. Copies of documents filed and recorded in the office of the Commissioner will be provided at a charge of ten cents per page. Certified copies will be provided at an additional charge of one dollar per document.

(1) BROKER-DEALER REGISTRATION.

(a) Uniform Application to Register for Broker-Dealer Registration (Form BD).

(b) Uniform Application for Securities Industry Registration or Transfer (Form U4).

(d) Uniform Surety Bond (Form USB).

(e) Designated Principal Form.

(f) Designated Arkansas Principal Form (if applicable).

(g) Notice of Withdrawal from Registration as Broker-Dealer (Form BDW).

(h) Independent Contractor Acknowledgement Form.

(2) INVESTMENT ADVISER REGISTRATION.

(a) Uniform Application for Investment Adviser Registration (Form ADV).

(b) Uniform Surety Bond (Form USB)

(d) Independent Contractor Acknowledgement Form.

(3) SECURITIES AGENT, AGENT OF AN ISSUER AND INVESTMENT ADVISER REPRESENTATIVE.

(a) Uniform Application for Securities Industry Registration (Form U4).

(b) Uniform Surety Bond (Form USB).

(d) Dual Registration Acknowledgement Form.

(e) Agent of the Issuer Renewal Registration Form.

(4) SECURITIES REGISTRATION AND EXEMPTION.

(a) Uniform Application to Register Securities (Form U-1).

(b) Uniform Consent to Service of Process (Form U-2).

(d) Small Corporate Offering Registration (Form U-7)

(e) Notice of Sales of Securities Pursuant to Regulation D, Section 4(6), and/or Uniform Limited Offering Exemption (Form D).

(5) NOTICE FILINGS.

(a) Uniform Investment Company Notice Filing (Form NF).

(b) Uniform Application for Investment Adviser Registration (Form ADV).

RULE 205 INVESTIGATIONS.

[RESERVED]

RULE 206 RECORDS OF SECURITIES COMMISSIONER - GENERALLY - INTERPRETIVE OPINIONS.

206.01 GUIDELINES FOR INTERPRETIVE OPINIONS AND NO-ACTION LETTERS.

(A) GENERAL. In most circumstances persons requesting informal advice from the Staff should submit a request for an interpretive opinion or no-action letter. In an interpretive opinion, the Staff provides its views on the interpretation of a specific statute or rule in the context of an actual and narrow fact situation. A no-action letter is one in which the Staff indicates that it will not recommend enforcement action to the Commissioner if a proposed course of action described in the request occurs just as described in the request. In some instances, the Staff may indicate that it is unable to assure the requesting party that it will not recommend enforcement action and may allow the requesting party to withdraw the request. A no-action letter expresses the Staff's position on enforcement action only and does not represent any legal conclusion on the question presented. Requests for no-action letters or interpretive opinions should comply with the following:

(1) Each request for no-action letter or an interpretive opinion shall be in writing. The requesting party must submit an original and one copy of each request.

(2) The specific subsection of the particular statute to which the request pertains must be indicated in the request. Thus, for example, a letter requesting an interpretation of the Section 23-42-504(a)(9) exemption would be captioned "Section 23-42-504(a)(9) Exemption" and a letter requesting an interpretation of Rule 504.01(a)(9) under the Arkansas Securities Act would be captioned "Rule 504.01(a)(9)."

(3) The request must contain the names of each person and entity involved in the underlying facts. Requests relating to unnamed persons or entities, or to hypothetical situations, will not be answered.

(4) The request must be limited to the particular situation involving the problem at hand and should not attempt to include every possible type of situation which may arise in the future. The facts and representations must be specific, not general.

(5) While it is essential that the request contain all of the facts necessary to reach a conclusion in the matter, the request should be concise and to the point.

(6) The requesting party must indicate why he thinks a problem exists, his own opinion in the matter and the basis for such opinion. If the requesting party seeks confidential treatment, a separate letter requesting confidential treatment and stating the basis for confidential treatment must be submitted with the interpretive request. Confidential treatment will generally not be available unless necessary to protect bona fide trade secrets or unless clearly authorized by some other provision of law.

(7) In responding to a properly submitted request for interpretive opinion or no-action letter, the Staff will use an endorsement to the incoming request. The Staff will state its position on a separate page attached to the incoming request. Both the incoming letter and the Staff's endorsement response will be sent to the requesting party, will be made publicly available, and will be posted to the Department's website.

(B) LIMITATIONS. All forms of informal advice, including no-action letters and interpretive opinions, are subject to substantial limitations. These limitations include the following:

(1) All informal advice is subject to reconsideration and is not precedent binding on the Commissioner. Informal advice sets forth the Staff's position only with respect to the particular facts posed by the particular requesting party and does not constitute an official expression of the Commissioner's views.

(2) In responding to any request for informal advice, the advice given will be limited to and conditional upon the specific representations made to the Staff by the requesting party. The Staff's position will be based solely upon the facts and representations provided by the requesting party. These facts and representations must be specific rather than general. Any different facts, representations, or circumstances might require the Staff to reach a different conclusion.

(3) All informal advice applies only to the requesting party. Persons in similar circumstances should not rely on previous no-action letters or interpretive opinions, but submit their own request for such informal advice.

(4) All informal advice shall be limited to the specific law administered by the Department as stated in the Staff's response, and will not address the applicability of any other federal, state, or local law, rule, or regulation.

(5) The Staff may decline to express any view on the application of law to a particular set of facts. There are several reasons why the Staff may feel it inappropriate in a particular instance to express an opinion. For example, (i) the Staff may be in no position to verify the facts and circumstances which are the basis of the request, (ii) the Staff may be concerned that its position may be misconstrued in somewhat different factual circumstances, and (iii) in some areas policy concerns dictate that the Staff may not express a view.

RULE 207 PUBLIC INSPECTION OF RECORDS-EXCEPTIONS.

[RESERVED]

RULE 208 COOPERATION WITH OTHER REGULATORY AGENCIES.

[RESERVED]

RULE 209 INJUNCTION, MANDAMUS, OR OTHER ANCILLARY RELIEF.

[RESERVED]

RULE 210 JUDICIAL REVIEW.

[RESERVED]

RULE 211 DISPOSITION OF FEES.

[RESERVED]

RULE 212 REGISTRATION OR AVAILABILITY OF EXEMPTION NOT CONSTRUED AS APPROVAL BY COMMISSIONER - INCONSISTENT REPRESENTATION.

[RESERVED]

RULE 213 DISPOSITION OF FINES-INVESTOR EDUCATION FUND.

213.01 INVESTOR EDUCATION PROGRAM.

(A) GENERAL. Utilizing the Investor Education Fund described in Section 23-42-213 of the Act, the Commissioner may administer an investor education program for the citizens of the State of Arkansas. The purpose of such program will be to inform and educate the public regarding investments in securities in order to help investors and potential investors:

(1) Evaluate their investment decisions;

(2) Protect themselves from unfair, inequitable and fraudulent offerings;

(3) Choose their broker-dealers, agents, and investment advisers more carefully;

(4) Be alert for false or misleading advertising or other harmful practices; and

(5) Know their rights as investors.

(B) GRANT PROGRAM. Utilizing the Investor Education Fund described in Section 23-42-213 of the Act, the Commissioner may administer a grant program to solicit grant proposals from public schools and non-profit organizations (Internal Revenue Code Section 501(c)(3), tax-exempt organizations) for the purpose of providing securities/investment education to teachers and students about the securities industry, securities markets, and investment decision.

(1) Eligible applicants are public schools and non-profit groups that provide investment education to Arkansas students in grades five through twelve.

(2) The Commissioner may establish the number of grant awards available as well as the amount of monies available for award through the grant program.

(3) Grant funds awarded may be used to procure any appropriate educational, resource, software materials and equipment consistent with the purpose of the grant program, this Rule and Section 23-42-213 of the Act.

(4) The Commissioner may establish a grant proposal process by which eligible applicants may submit an application for a grant award.

(5) A grant award by the Commissioner will be based upon the merit of the grant proposal considering:

(a) Educational need for the project;

(b) Learning objectives to be accomplished by the project;

(d) Number of students educated;

(e) Description of measurable project outcomes; and

(f) Other school resources dedicated to the project.

CHAPTER 3 BROKER-DEALERS AND INVESTMENT ADVISERS

RULE 301 REGISTRATION REQUIRED.

[RESERVED]

RULE 302 REGISTRATION PROCEDURE.

302.01 BROKER-DEALER OR AGENT.

(A) GENERAL PROVISIONS. The following are general eligibility requirements.

(1) Each non-resident broker-dealer must be registered as a broker-dealer or an agent, or exempt or excepted from registration, or qualified to engage in business as a broker-dealer or agent in the state of his primary residence or, in the case of broker-dealers that are not natural persons, in the state in which such broker-dealer has its principal place of business.

(2) Each partner or officer of a registered broker-dealer or issuer may act as an agent only if he is registered as an agent as required by the Act.

(3) Except upon approval of the Commissioner, an agent may not be registered with more than one broker-dealer, investment adviser, issuer, or any combination thereof, unless the business entities are affiliated. An agreement of joint supervision from all affiliated firms shall be submitted to the Commissioner for approval.

(4) Applications which have been on file for a period of one hundred eighty days following notification of a deficiency that remain deficient may be deemed incomplete and automatically withdrawn.

(5) At least one employee of an issuer or broker-dealer who is qualified, who shall have direct supervision over the purchase and sale of securities in Arkansas, shall be:

(a) Registered as an agent of the issuer;

(b) Registered as an agent and designated as a principal of the broker-dealer; or

(c) An Arkansas resident and is qualified as a principal with the proper examinations, when the broker-dealer has a branch office located in Arkansas.

(6) Pursuant to Sections 23-42-208 and 23-42-302 of the Act, the Commissioner designates the CRD to receive and store filings and collect related fees from broker-dealers and broker-dealer agents on behalf of the Commissioner.

(B) APPLICATION. Each filing for initial and renewal registration shall be complete only if it contains the information set forth in Sections 23-42-302 through 23-42-305 of the Act in the manner prescribed by the Commissioner. The requirements listed below are subject to change pursuant to Section 23-42-208 of the Act.

(1) BROKER-DEALER APPLICATIONS.

An applicant for initial broker-dealer registration shall:

(a) Submit to the CRD a completed Uniform Application for Broker-Dealer Registration (Form BD), and branch office registration (Form BR) or such other forms established for the CRD, designating Arkansas as a state in which the applicant requests to be licensed, along with the fee set forth in Section 23-42-304 of the Act and any other fee required by FINRA; and

(b) Submit to the Commissioner:

(i) Most recent audited financial statement.

(ii) Proof of bonding coverage as prescribed by FINRA;

(iii) An applicant acknowledges responsibility for registered agent employees and Independent Contractors via the Independent Contractor Acknowledgement Form;

(iv) Principal Designation Letter and Arkansas Resident Principal Designation Letter, if applicable; and

(v) Any other information deemed necessary by the Commissioner to determine whether the applicant should be licensed.

(2) AGENT APPLICATIONS.

(a) Initial agent applications for a broker-dealer registered or to be registered with FINRA must be submitted directly to the CRD system on a Uniform Application for Securities Industry Registration or Transfer (Form U4) along with the initial agent registration fee as set forth in Section 23-42-304 of the Act and any other fee required by FINRA.

(b) Initial agent applications for an agent of an issuer must be submitted directly to the Commissioner on a Uniform Application for Securities Industry Registration or Transfer (Form U4) along with the initial agent registration fee as set forth in Section 23-42-304 of the Act, a photocopy of processed Federal Bureau of Investigation fingerprint card, surety bond in the amount of twenty-five thousand dollars ($25,000.00), and attachments as required by the instructions on the Uniform Application for Securities Industry Registration or Transfer (Form U4).

(c) An application for registration as an agent of a broker-dealer shall not be complete until the applicant has furnished, in addition to the requirements set forth in Rule 302.01(B)(2), any other information not specifically required by the Act or these Rules that the Commissioner may reasonably require, including, but not limited to, copies of any litigation, regulatory proceedings, and customer complaints.

(3) BROKER-DEALER RENEWAL APPLICATIONS.

An applicant for the renewal of a registration as a broker-dealer shall, prior to expiration of its current registration, submit to the CRD all appropriate amendments and fees. The applicant shall also submit to the Commissioner proof of continued bonding coverage.

(4) AGENT RENEWAL APPLICATIONS.

(a) Renewal registration of agents, including the principal, of a broker-dealer shall be submitted to the CRD along with the fee set forth in Section 23-42-304 of the Act and any other fee required by FINRA prior to expiration of registration.

(b) No documents or fees need to be filed directly with the Commissioner; however, the Commissioner may request other information not specifically required by the Act or these Rules, including, but not limited to, copies of any litigation, regulatory proceedings, and customer complaints.

(c) Renewal registration of agents of an issuer shall be submitted to the Commissioner prior to the expiration of registration and shall include the following:

(i) A completed agent renewal application (supplied by the Department);

(ii) The agent renewal registration fee as set forth in Section 23-42-304 of the Act;

(iii) Proof of continued bond coverage for agents of the issuer who submitted individual surety bonds as a part of their application for registration;

(iv) Any amendments to the documents on file; and

(v) Any other information not specifically required by the Act or these Rules that the Commissioner may reasonably require, including, but not limited to, copies of any litigation, regulatory proceedings, and customer complaints.

(5) Each applicant for registration as an agent of a broker-dealer or issuer shall, as a part of his application, be properly fingerprinted.

(a) Any applicant subject to the fingerprinting requirements of the Securities Exchange Act of 1934 shall submit to the CRD system a fingerprint card along with a fingerprint record transmittal form (both supplied by the CRD) which will be processed by the Federal Bureau of Investigation by the CRD system. The applicant may be registered after submission of the fingerprint card and completion of all other registration requirements. Notification of the results of the processed card will be made available to the Department via the CRD system.

(b) Any agent of the issuer shall follow the same procedures outlined above except that the applicant shall send the appropriate fee charged by the CRD system and a letter rather than the transmittal form to the CRD system requesting that the fingerprint card be processed for the purposes of registration in Arkansas. Upon submission of the fingerprint card and completion of all other registration requirements, the applicant may be registered.

(6) Additional exhibits or information not specifically required by such application but essential to a full presentation of all material facts relating to the applicant's qualifications shall be furnished and properly identified.

(C) EXAMINATION. Unless specifically exempt or waived as hereinafter provided, examination(s) in the form and content prescribed or approved by the Commissioner must be taken and passed by each applicant in order to test their knowledge of the broker-dealer or issuer business, the Act and the Rules relating thereto before such applicant will be considered eligible for registration.

(1) An individual applying to be registered as an agent of a broker-dealer, principal of a broker-dealer, or agent of the issuer under the Act shall provide the Commissioner with proof of knowledge of the broker-dealer business and the Act by obtaining a passing score on the required examination(s) within the two year period immediately preceding the filing date of the application. Applicants shall meet the following minimum standards to qualify:

(a) Agent. Agents must pass an appropriate general knowledge examination and the appropriate state law examination.

(b) Principal. Agents designated as a principal of a broker-dealer must pass the appropriate general knowledge examination required in subsection (a) above as a prerequisite and must pass the CRD principal examination (S24) or other limited principal examination if the firm is limited in its scope of business and provides verification of same to the Commissioner.

(c) Agent of the Issuer. Agents of the Issuer must pass an appropriate general knowledge examination and the appropriate state law examination.

(2) Applicants successfully completing a limited knowledge examination will only be eligible for registration to effect transactions in those securities that were covered by the limited examination.

(3) Any individual who has been registered as a general securities agent, or general securities principal in any state, commonwealth, territory, district, or province in the United States or Canada within the two years immediately preceding the filing of a completed application and who has at any time in the past met the requirements of subsection (C)(1) of this Rule shall not be required to repeat the examinations in order to become registered as an agent of a broker-dealer, principal of a broker-dealer, or agent of the issuer.

(4) Solely in those cases where circumstances warrant because of the limited time, amount, or nature of the issue or transaction involved, the Commissioner may, upon substantiation by the applicant, waive any or all of the examination requirements set forth above.

(D) REGISTRATION REQUIREMENTS. Upon completion of the application, compliance with the examination(s) requirement, payment of the fees and acceptance by the Commissioner, initial registration will become effective.

(1) For agents and broker-dealers filing a completed application as set forth in Rule 302.01(B), the Commissioner will either accept such application or notify the applicant of the matters still to be resolved.

(2) Notification by the CRD will be given to each broker-dealer evidencing the broker-dealer and each agent's registration status.

(3) All amendments shall be filed with CRD in such manner as CRD requires. Changes necessitating a filing shall include, but may not be limited to, the following:

(a) Change in firm name, ownership, management or control of a broker-dealer, or a change in any of its partners, officers or persons in similar positions, or its businesses address, or the creation or termination of a branch office in Arkansas.

(b) Change in type of entity, general plan or character of a broker-dealer's business, method of operation of type of securities in which the registrant is dealing or trading.

(c) Insolvency, dissolution or liquidation, or a material adverse change or impairment of working capital, or noncompliance with the minimum capital or bond requirements hereinabove provided.

(d) The filing of a criminal charge or civil action against a registrant, or a partner or officer, in which an alleged violation of a securities law, threats of violence against any person, dishonesty, wrongful taking of any property or any manner of fraud is involved, and the result of any hearing, proceeding, or action in such matter, as well as any subsequent action taken on appeal by any reviewing agency or court.

(e) The filing of a complaint or the commencement of a proceeding by an administrative agency, regulatory agency, self-regulatory agency, or court, or a written notice of intention to do so, to consider whether to deny, suspend or revoke a registration, impose a fine or other penalty upon the registration, or to enjoin the registrant from engaging in or continuing any conduct or practice in the securities business, the results of such hearing or proceeding any subsequent actions taken by any reviewing agency or court.

(f) The registrant shall be deemed to have complied with immediate notification pursuant to this subsection if such information has been filed with CRD as soon as possible but in no event more than thirty calendar days after the registrant has knowledge of the circumstances requiring such notification.

(4) Any broker-dealer registered under the Act shall give timely notice to each agent registered with such broker-dealer of the results of any hearing or proceeding referred to in Rule 302.01(D)(3) to the extent the agent is required to disclose such matters on his application(s).

(E) EXPIRATION AND RENEWAL OF REGISTRATION. All broker-dealer and agent registrations hereunder shall automatically expire on December 31 of each year without notification by the Commissioner, unless such registration has been properly renewed, or is withdrawn, terminated or cancelled.

(1) See Rules 302.01(B)(3) and 302.01(B)(4) for renewal procedures.

(2) Where registrations are permitted to expire without the filing of a renewal therefore, a subsequent application shall be considered in all respects as an original application unless an extension has been requested and granted in writing by the Commissioner prior to expiration.

(3) Uniform Termination Notice (Form U5) must be used to report termination of an agent. If notification of termination on Uniform Termination Notice (Form U5) has not been received and processed after termination of a connection with a broker-dealer and Uniform Application for Securities Industry Registration or Transfer (Form U4) for registration with another broker-dealer has been received and processed the Commissioner shall consider such application in accordance with Section 23-42-301(b) of the Act. This does not relieve the broker-dealer from the requirement to file a Uniform Termination Notice (Form U5) within ten days after an agent's termination.

(4) Termination of a broker-dealer's registration for any reason shall automatically constitute a termination of all agents' registrations thereunder.

(5) The registration of a broker-dealer who ceases to have a registered principal and fails to appoint a qualified individual as a registered principal within sixty days from the date it ceased to have a registered principal may have its registration suspended or terminated. No offers or sales of securities may be made to residents of Arkansas during this period of suspension or termination.

(F) FINANCIAL REQUIREMENTS. Audited financial statements as required hereunder and computation of net capital and aggregate indebtedness (as hereinafter defined), unless otherwise permitted, shall be prepared by an independent certified public accountant in accordance with generally accepted accounting principles and practices applied on a consistent basis accompanied by an opinion acceptable to the Department.

(1) An applicant for initial broker-dealer's registration must submit audited financial statements for the most recently ended fiscal year, originally signed or authenticated, if the applicant has been in existence for twelve months or more, or most recent unaudited financial statement certified by the president, chief financial officer, or similar executive officer, as correct to the best of his or her knowledge if the applicant has been in existence less than twelve months and no audited financial statement has been prepared within thirty days of filing.

(2) Annual Reports. Every broker-dealer currently registered must file with the Commissioner annual audited financial statements accompanied by an opinion acceptable to the Commissioner. The annual audited financial statements will be due not later than ninety days after the close of the fiscal year unless permission to file at some other date is granted by the Commissioner in advance of the date for filing the report.

(3) All financial statements filed with the Commissioner as part of a registration or annual filing requirement when filed shall be public, except that if the balance sheet is in a format which is separate from the remainder of the audited financial statements and is identified as confidential, then it will be so treated.

302.02 INVESTMENT ADVISER.

(A) GENERAL PROVISIONS.

(1) Each non-resident investment adviser and representative must be registered, exempt, excepted from registration, or qualified to engage in business as an investment adviser or representative in the state of his primary residence, or in the case of investment advisers that are not natural persons, in the state in which such investment adviser has its principal place of business. Each person not required to register with the Commissioner but required to make a notice filing pursuant to Section 23-42-301(c)(1) of the Act must be registered as an investment adviser with the SEC.

(2) Pursuant to Sections 23-42-208 and 23-42-302 of the Act, the Commissioner designates the IARD to receive and store filings and collect related fees from investment advisers and their representatives on behalf of the Commissioner.

(3) Except upon approval of the Commissioner, a representative may not be registered with more than one investment adviser, broker-dealer, issuer, or any combination thereof, unless the business entities are affiliated. An agreement of joint supervision from all affiliated firms shall be submitted to the Commissioner for approval.

(4) Each filing for initial or renewal registration shall be complete only if it contains the information set forth in Sections 23-42-302 through 23-42-305 of the Act and corresponding Rules in the manner prescribed by the Commissioner. All information submitted in or accompanying an application must be complete and current as of the date of filing. If any of the information becomes inaccurate or incomplete for any reason prior to registration, amended information shall be filed as soon as practicable, but in any event, within thirty days from the date on which the applicant knew or should have known of the inaccuracy or change. Any application that becomes inaccurate or incomplete prior to registration will be deemed to be incomplete until such time as the inaccuracy or change is corrected.

(5) Failure to correct an application deficiency for one hundred eighty or more days subsequent to notification of the deficiency may result in an automatic withdrawal of the application by the Commissioner.

(B) APPLICATION FOR INVESTMENT ADVISER REGISTRATION.

(1) INITIAL APPLICATIONS. The application for initial registration as an investment adviser pursuant to Section 23-42-302(a) of the Act shall be made by completing the Uniform Application for Investment Adviser Registration (Form ADV) in accordance with the form instructions and by filing Part I and Part II of the Uniform Application for Investment Adviser Registration (Form ADV) with the IARD, along with the fee as set forth in Section 23-42-304(a) of the Act and by submitting directly to the Commissioner the following:

(a) Such financial statements as set forth in Rule 302.02(H);

(b) A corporate surety bond of fifty thousand dollars ($50,000.00) covering the applicant and each representative if the applicant holds any customer's funds or has discretionary authority over any customer's account. However, no surety bond is required if an applicant maintains its principal place of business in a state other than Arkansas and is:

(i) Registered or licensed as an investment adviser in such state; and

(ii) Is in compliance with the applicable bonding requirements of such state. In such event the applicant shall furnish, in lieu of a corporate surety bond, proof of such registration or license and a copy of the bond or other evidence exhibiting compliance with such other state's bonding requirements.

(c) Copies of investment advisory contracts to be used by the investment adviser. Investment advisory contracts must contain customer investment objectives in accordance with Rule 306.02(B)(10);

(d) An executed Consent to Service of Process in a form acceptable to the Commissioner (other than applicants with a place of business in Arkansas as provided in Section 23-42-107(a) of the Act):

(e) Copies of brochures to be used by the investment adviser as set forth in Rule 302.02(I), if different from Form ADV Part II;

(f) Any other information not specifically required by the Act or these Rules that the Commissioner may reasonably require, including, but not limited to, copies of orders, pleadings, or documents relating to any past or present litigation, regulatory proceedings, and customer complaints.

(2) ANNUAL RENEWAL. The application for annual renewal registration as an investment adviser shall be accomplished by filing a renewal application in a form acceptable to the Commissioner with the IARD, along with the fee as set forth in Section 23-42-304(a) of the Act.

(3) UPDATES AND AMENDMENTS.

(a) An investment adviser must file with IARD, in accordance with the instructions in the Uniform Application for Investment Adviser Registration (Form ADV), any amendments to Part I and Part II of the Uniform Application for Investment Adviser Registration (Form ADV);

(b) An investment adviser must file directly with the Commissioner any amendments to its corporate surety bond, investment advisory contracts, brochure if different from Uniform Application for Investment Adviser Registration (Form ADV), Part II, and financial statements as set forth in Rule 302.02(H) below;

(c) An amendment will be considered to be filed promptly if the amendment is filed within thirty days of the event that requires the filing of the amendment;

(4) COMPLETION OF FILING. An application for initial or renewal registration is not considered filed for purposes of Section 23-42-302(a) of the Act until the required fee and Part I and Part II of Uniform Application for Investment Adviser Registration (Form ADV) are received and accepted by the IARD and all other required submissions have been received and accepted by the Commissioner.

(1) INITIAL APPLICATIONS. The application for initial registration as an investment adviser representative pursuant to Section 23-42-302(a) of the Act shall be made by completing Uniform Application for Securities Industry Registration or Transfer (Form U4) in accordance with the form instructions and by filing the Uniform Application for Securities Industry Registration or Transfer (Form U4) with the IARD. The application for initial registration shall also include the following:

(a) The fee required by Section 23-42-304 of the Act;

(b) Proof of compliance by the investment adviser representative with the examination requirements of Rule 302.02(G); and

(c) Any additional exhibits or information not specifically required by these Rules but essential to a full presentation of all material facts relating to an applicant's qualifications or registration.

(2) ANNUAL RENEWAL. The application for annual renewal of registration for a registered representative shall be filed with the IARD. The application for annual renewal of registration shall include the fee required by Section 23-42-304 of the Act.

(3) UPDATES AND AMENDMENTS. The registered representative is under a continuing obligation to update information required by the Uniform Application for Securities Industry Registration or Transfer (Form U4) as changes occur. Any amendments to the representative's Uniform Application for Securities Industry Registration or Transfer (Form U4) must be filed promptly with the IARD. An amendment will be considered promptly filed if received by the IARD within thirty days of the event that requires the filing of the amendment. Proof of continued bond coverage for a registered representative must be provided to the Commissioner if submitted by the individual as a part of their initial application for registration.

(4) COMPLETION OF FILING. An application for initial or renewal registration is not considered filed for purposes of Section 23-42-302(a) until the required fee and all required submissions have been received and accepted by IARD and all other required submissions have been received and accepted by the Commissioner.

(D) ACCEPTANCE OF REGISTRATION.

(1) Promptly upon the filing of an application for registration the Commissioner will either accept such application or notify the applicant of any information, documents, or other matters necessary to complete the application.

(2) The date of effectiveness of registration shall be governed by Section 23-42-302(f) of the Act.

(3) Notification of the effectiveness of registration or of any matters set forth in paragraph (D)(1) of this subsection shall be given to an applicant by IARD or CRD.

(E) NOTICE FILING REQUIREMENTS FOR SEC REGISTERED INVESTMENT ADVISERS.

(1) NOTICE FILING. The notice filing for an SEC registered investment adviser pursuant to Section 23-42-301(c) of the Act shall be filed with IARD on an executed Uniform Application for Investment Adviser Registration (Form ADV). A notice filing of an SEC registered investment adviser shall be deemed filed when the fee required by Section 23-42-304 of the Act and the Uniform Application for Investment Adviser Registration (Form ADV) are filed with and approved by SEC.

(2) ANNUAL RENEWAL. The annual renewal of the notice filing for an SEC registered investment adviser pursuant to Section 23-42-301(c) of the Act shall be filed with IARD. The renewal of the notice filing for an SEC registered investment adviser shall be deemed filed when the fee required by Section 23-42-304 of the Act is filed with and approved by SEC.

(3) UPDATES AND AMENDMENTS. An SEC registered investment adviser must file with IARD, in accordance with the instructions in the Uniform Application for Investment Adviser Registration (Form ADV), any amendments to the SEC registered investment adviser's Uniform Application for Investment Adviser Registration (Form ADV).

(F) EXPIRATION AND TERMINATION OF REGISTRATION AND NOTICE FILING. Each registration and notice filing shall automatically expire on December 31 of each year without notification by the Commissioner, unless such registration or notice filing has been properly renewed, or has been previously withdrawn, terminated, or canceled.

(1) When a registration or notice filing expires as a result of the failure to timely renew, a subsequent application or notice filing may be considered in all respects as an original application or notice filing unless an extension has been requested and granted in writing by the Commissioner prior to expiration.

(2) A representative's registration terminates upon the termination of such representative's employment with the investment adviser with which he is registered. Such termination must be reported by the investment adviser on Uniform Termination Notice (Form U5). If a Uniform Application for Securities Industry Registration or Transfer (Form U4) is received from the representative whose employment has terminated and is processed by the Commissioner prior to the receipt of the Uniform Termination Notice (Form U5) from the investment adviser with which the representative was employed, such Uniform Application for Securities Industry Registration or Transfer (Form U4) shall be considered not only an application for initial registration with another investment adviser, but also a notification by the representative of termination or withdrawal of his previous registration or application unless, pursuant to Rule 302.02(A)(3), the representative is dually registered.

(3) Termination of an investment adviser's registration or notice filing for any reason shall automatically constitute termination of all of the registrations of the representatives registered with such investment adviser.

(G) EXAMINATION REQUIREMENTS.

(1) Examination Requirements. An individual applying to be registered as an investment adviser representative under the Act shall provide the Commissioner with proof of knowledge of the investment advisory business and the Arkansas Securities Act by obtaining a passing score within the two year period immediately preceding the filing date of the application, on one of the following examinations:

(a) The Uniform Investment Adviser Law Examination (Series 65 examination); or

(b) The General Securities Representative Examination (Series 7 examination) and the Uniform Combined State Law Examination (Series 66 examination).

(2) Waivers. The examination requirements under subsection (G)(1) of this Rule shall not apply to an individual who holds one of the following professional designations:

(a) Certified Financial Planner (CFP) awarded by the Certified Financial Planner Board of Standards;

(b) Chartered Financial Consultant (ChFC) awarded by the American College, Bryn Mawr, Pennsylvania;

(d) Chartered Financial Analyst (CFA) awarded by the CFA Institute;

(e) Chartered Investment Counselor (CIC) awarded by The Investment Adviser Association; or

(f) Such other professional designation as the Commissioner may by rule or order accept.

(3) Any individual who has been registered as an investment adviser representative in any state, commonwealth, territory, district, or province in the United States or Canada within the two years immediately preceding the filing of a completed application and who has at any time in the past met the requirements of subsection (G)(1) of this Rule shall not be required to repeat the examinations in order to become registered as an investment adviser representative.

(4) Solely in those cases where circumstances warrant because of the limited time, amount, or nature of the issue or transaction involved, the Commissioner may, upon substantiation by the applicant, waive, any or all of the examination requirements set forth above.

(5) An applicant who is an agent for a broker-dealer/investment adviser and who is not required by the agent's home jurisdiction to make a separate filing on CRD as an investment adviser representative but who has previously met the requirements of subsection (G)(1) of this Rule shall not be required to repeat the examinations in order to become registered as an investment adviser representative in this state.

(H) FINANCIAL REQUIREMENT. Financial statements, as required hereunder, unless otherwise provided, must be audited and shall consist of a balance sheet, statement of operations (income or loss), statement of cash flows, statement of changes in retained earnings, statement of changes in equity or capital. Unless otherwise provided herein, balance sheets shall be audited in accordance with generally accepted auditing standards by an independent certified public accountant, and accompanied by an opinion acceptable to the Commissioner.

(1) INITIAL REGISTRATION. Each investment adviser applying for initial registration must submit an unaudited balance sheet in a form acceptable to the Commissioner dated within thirty days of such filing. Such balance sheet shall be certified as true and accurate by the chief financial officer of the applicant as indicated on the Uniform Application for Investment Adviser (Form ADV), or, if there is no chief financial officer, the person executing the Uniform Application for Investment Adviser (Form ADV). If the applicant has been engaged in business for one year or more preceding the filing of the application, the applicant may submit audited financial statements for the last fiscal period along with an unaudited balance sheet in a form acceptable to the Commissioner dated within thirty days of such filing.

(2) ANNUAL REPORTS. Every currently registered investment adviser must file with the Commissioner annual financial statements as specified above not later than ninety days after the close of the fiscal year unless written permission to file at some other date is granted by the Commissioner in advance of the date for filing the report.

(3) Investment advisers that do not maintain customer funds or securities in their custody, nor require prepayment of client fees of more than five hundred dollars ($500.00) per client or prepayment of fees more than six months in advance, as required hereunder, shall submit unaudited statements of financial condition in a form acceptable to the Commissioner dated within thirty days of such filing. Such statements shall be certified as true and accurate by the chief financial officer of the applicant as indicated on the Uniform Application for Investment Adviser Registration (Form ADV), or, if there is no chief financial officer, by the person executing the Uniform Application for Investment Adviser Registration (Form ADV).

(4) PUBLIC RECORD. All financial statements filed with the Commissioner as part of a registration or annual filing requirement when filed shall be public, except that if the balance sheet is in a format in which is in a format which separate from the remainder of the audited financial statements and is identified as confidential, then it will be so treated.

(5) For an investment adviser applicant or registrant that maintains a principal place of business in a state other than Arkansas, the requirements of paragraphs (H)(1) and (2) above may be satisfied by filing with the Commissioner a copy of any financial reports required by and filed with the securities commissioner in such other state. The applicant or registrant shall furnish such further information as requested by the Commissioner when deemed necessary.

(I) BROCHURE REQUIREMENT. Unless otherwise provided in this Rule, an investment adviser registered or required to be registered pursuant to Section 23-42-301 of the Act shall furnish each advisory client and prospective advisory client with a written disclosure statement that may be a copy of Part II of its Uniform Application for Investment Adviser Registration (Form ADV) or written documents containing that information required by Part II of the Uniform Application for Investment Adviser Registration (Form ADV), or such other information as the Commissioner may require.

(1) DELIVERY.

(a) An investment adviser shall deliver the statement required by this section to an advisory client or prospective advisory client either:

(i) At a time not less than forty-eight hours prior to entering into any investment advisory contract with such prospective client, or

(ii) At the time of entering into any such contract so long as the advisory client has a right to terminate the contract without penalty within five business days after entering into the contract.

(b) Delivery of the statement required by paragraph (a) need not be made in connection with entering into a contract for impersonal advisory services.

(2) OFFER TO DELIVER.

(a) An investment adviser shall annually and without charge, deliver or offer in writing to deliver, upon written request, the statement required by this section to its advisory clients.

(b) The delivery or offer required by subdivision (a), need not be made to advisory clients receiving advisory services solely pursuant to a contract for impersonal advisory services of less than two hundred dollars ($200.00)

(c) With respect to an advisory client entering into a contract or receiving advisory services pursuant to a contract for impersonal advisory services that requires a fee of two hundred dollars ($200.00) or more, an offer of the type specified in subdivision (a), shall also be made at the time of entering into an advisory contract.

(3) RECEIPT OF REQUEST. Any statement requested in writing by an advisory client or prospective advisory client required by this subsection must be mailed or delivered within seven days of the receipt of the request.

(4) OMISSION OF INAPPLICABLE INFORMATION. If an investment adviser renders substantially different types of investment advisory services to different advisory clients, any information required by Part II of Uniform Application of Investment Adviser Registration (Form ADV) may be omitted from the statement furnished to an advisory client or prospective advisory client if such information is not applicable to the type of investment advisory service or fee that is rendered or charged, or proposed to be rendered or charged, to that client or prospective client.

(5) OTHER DISCLOSURES. Nothing in this rule shall relieve any investment adviser from any obligation pursuant to any provision of the Act or Rules or other federal or state law to disclose any information to its advisory clients or prospective advisory clients not specifically required by this rule.

RULE 303 MINIMUM NET CAPITAL REQUIREMENT.

303.01 CAPITAL REQUIREMENTS FOR BROKER-DEALER.

GENERAL REQUIREMENT. All broker-dealers registered under the Act shall at all times have and maintain net capital of no less than the required amount for each broker-dealer as established by SEC Rule 15 c3-1 promulgated pursuant to the Securities Act of 1934, which is hereby incorporated by reference.

303.02 CAPITAL REQUIREMENTS FOR INVESTMENT ADVISERS.

Except as otherwise provided in the Act or in these Rules, each registered investment adviser shall at all times have and maintain no less than the minimum net capital required by Section 23-42-303(a) of the Act. Net capital for purposes of Rule 303.02 shall mean the net worth of an applicant or registrant calculated by computing the excess of total assets over total liabilities. The provisions of this Rule shall not apply to an investment adviser whose principal place of business is located in a state other than Arkansas, provided that the investment adviser is registered or licensed as an investment adviser in such state and is in compliance with the net capital requirements of such state.

RULE 304 FILING FEES.

[RESERVED]

RULE 305 CORPORATE SURETY BONDS.

305.01 SURETY BONDS.

A surety bond, as required by Section 23-42-305 of the Act, for a registered broker-dealer, investment adviser, or agent of the issuer shall be maintained and in effect at all times as follows:

(A) A broker-dealer shall satisfy the fidelity bond requirements imposed by FINRA.

(B) An investment adviser that holds customer funds or has discretionary authority over customer accounts shall have a surety bond in the amount of fifty thousand dollars ($50,000).

RULE 306 RECORDS AND REPORTS - EXAMINATIONS.

306.01 RECORDS AND REPORTS OF BROKER-DEALERS.

(A) Each broker-dealer shall make, maintain, and preserve books and records in compliance with SEC Rules 17 a-3, 17a-4, 15c2-6 and 15c2-11 promulgated under the Securities Exchange Act of 1934 that are hereby incorporated by reference.

(B) The Commissioner may, by order, upon written request and for good cause shown, waive any of the requirements of this Rule.

306.02 RECORDS AND REPORTS OF INVESTMENT ADVISERS.

(A) GENERAL. All registered investment advisers shall make and keep true, accurate and current books and records relating to their investment advisory business. The records required to be maintained shall be maintained for a minimum of five years from the date on which the transaction occurred shall include the specific records set forth below. The provisions of this Rule shall not apply to an investment adviser whose principal place of business is located in a state other than Arkansas, provided that the investment adviser is registered or licensed as an investment adviser in such other state and is in compliance with the applicable books and records requirements of such other state. In all other instances, the books and records required to be maintained shall include:

(B) BUSINESS RECORDS.

(1) A journal or journals, including cash receipts and disbursements records, and any other records of original entry forming the basis of entries in any ledger.

(2) General and auxiliary ledgers (or other comparable records) reflecting asset, liability, reserve, capital, income, and expense accounts.

(3) A memorandum of each order given by the investment adviser for the purchase or sale of any security, of any instruction received by the investment adviser from the client concerning the purchase, sale, receipt of delivery of a particular security, and of any modification or cancellation of any such order or instruction. Such memoranda shall show the term and conditions of the order, instruction, modification, or cancellation; shall identify the person connected with the investment adviser who recommended the transaction to the client and the person who placed such order; and shall show the account for which entered, the date of entry, and the bank or broker-dealer by or through whom executed where appropriate. Orders entered pursuant to the exercise of discretionary power shall be so designated.

(4) All checkbooks, bank statements, canceled checks, and cash reconciliations of the investment adviser.

(5) All bills or statements (or copies thereof) paid or unpaid, relating to the business of the investment adviser as such.

(6) All trial balances, financial statements, net capital computations, and internal audit working papers relating to the business of such investment adviser.

(7) Originals of all written communications received and copies of all written communications sent by such investment adviser relating to:

(a) Any recommendation made or proposed to be made and any advice given or proposed to be given;

(b) Any receipt, disbursement, or delivery of funds or securities; or,

(d) Notwithstanding the provisions of this Rule 306.02, an investment adviser shall not be required to keep:

(i) Any unsolicited market letters and other similar communications of general public distribution not prepared by or for the investment adviser, and

(ii) A record of the names and addresses of the persons to whom any notice, circular or other advertisement offering any report, analysis, publication, or other investment advisory service to more than five persons was sent, unless such notice, circular or advertisement is distributed to persons named on any list, in which case, the investment adviser shall retain with the copy of such notice, circular or advertisement a memorandum describing the list and the source thereof.

(8) A list or other record of all accounts in which the investment adviser is vested with any discretionary power with respect to the funds, securities, or transactions of any client.

(9) All powers of attorney and other evidences of the granting of any discretionary authority by any client to the investment adviser, or copies thereof.

(10) All investment advisory contracts and other written agreements (or copies thereof) entered into by the investment adviser with any client or otherwise relating to the business of such investment adviser. Such contracts shall indicate the customer's risk tolerance and investment objectives and the risk associated with investments consistent with those objectives, and shall be signed by all persons having an interest in the account.

(11) A copy of each notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication recommending the purchase of sale of a specific security, which the investment adviser circulates or distributes, directly or indirectly, to five or more persons (other than investment supervisory clients or persons connected with such investment adviser), and if such notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication does not state the reasons for such recommendation, a memorandum of the investment adviser indicating the reasons therefore.

(12) A record of every transaction in a security in which the investment adviser or any advisory representative of such investment adviser has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, except:

(a) Transactions effected in any account over which neither the investment adviser nor any representative of the investment adviser has any direct or indirect influence or control; and

(b) Transactions in securities which are direct obligations of the United States.

Such records shall state the title and amount of the security involved, the date and nature of the transaction (including: purchase, sale of other acquisition or disposition), the price at which it was effected; and the name of the broker-dealer or bank with or through whom the transaction was effected. Such record may also contain a statement declaring that the reporting or recording of any such transaction shall not be construed as an admission that the investment adviser or advisory representative has any direct or indirect beneficial ownership in the security. A transaction shall be recorded not later than ten days after the end of the calendar quarter in which the transaction was effected.

(13) All payroll records, corporate charters, certificates of incorporation, minute books and other records routinely kept in the course of operating a business.

(C) CUSTOMER FUNDS RECORDS. If a registered investment adviser has custody or possession of securities or funds of any client, the records required to be made and kept shall include:

(1) A journal or other record showing all purchases, sales receipts and deliveries of securities (including certificate numbers) for such accounts and all other debits and credits to such accounts.

(2) A separate ledger account for each such client showing all purchases, sales, receipts and deliveries of securities, the date and price of each such purchase and sale, and all debits and credits.

(3) Copies of confirmations of all transactions effected by or for the account of any such client.

(4) A record for each security in which any such client has a position, which record shall show the name of each such client having any interest in such security, the amount of interest of each such client, and the location of each such security.

(D) SEGREGATED ACCOUNTS. Registered investment advisers shall at all times keep their customers' securities and funds in trust and segregated from their own securities and funds.

(1) All financial transactions between the investment adviser and his clients are to be effected through one or more bank accounts, each to be designated 'special account for the exclusive benefit of clients of (name of investment adviser);" each shall be separate from any other bank accounts of the investment adviser and shall at no time be used directly or indirectly as security for a loan to the investment adviser by the bank and, shall be subject to no right, lien or claim of any kind in favor of the bank or any persons claiming through the bank; and each shall be separate from any other bank account used by the investment adviser to pay operating and administrative expenses.

(2) Immediately after accepting custody or possession of funds or securities from any client, an investment adviser must notify such client in writing of the place and manner in which such funds and securities will be maintained, and thereafter, if and when there is any change in the place or manner in which such funds or securities are being maintained, must give such client written notice thereof;

(E) SUPERVISED OR MANAGED ACCOUNTS. Every registered investment adviser who renders any investment supervisory or management service to any client shall, with respect to the portfolio being supervised or managed and to the extent that the information is reasonably available to or obtainable by the investment adviser, make and keep true, accurate and current:

(1) Records showing separately for each such client the securities purchased and sold, and the date, amount and price of each such purchase and sale.

(2) For each security in which any such client has a current position, information from which the investment adviser can promptly furnish the name of each such client, and the current amount or interest of such client.

(F) COMMINGLING OF ACCOUNTS PROHIBITED. When a registered investment adviser is engaged in more than one enterprise or activity, it shall maintain separate books of accounts and records relating to its securities business and the assets shall not be commingled with those of such other businesses, and there shall be a clearly defined division with respect to income and expenses.

(G) COMPLAINT FILE. Every registered investment adviser shall keep and maintain for a period of five years a complaint file or compliance file which shall contain all complaints made against the firm or its representatives by individuals, financial institutions and other investors. The complaint file should disclose any legal action in process, settled, or threatened against the investment adviser. If the original documents are not maintained in the complaint file, the copy of the document should show the disposition of the original document. If the home office of the investment adviser is not in Arkansas, then branch office located in Arkansas shall maintain this complaint file for any complaints involving Arkansas agents or customers.

(H) RECORD SYSTEM. In accordance with Section 23-42-205(d)(2) of the Act, any books or records required by this rule may be maintained by the investment adviser in such manner that the identity of any client to whom such investment adviser renders investment supervisory services is indicated by numerical or alphabetical code or some similar designation.

RULE 307 UNLAWFUL ACTS BY INVESTMENT ADVISERS.

307.01 PERFORMANCE - BASED COMPENSATION EXEMPTION.

(A) It shall be unlawful for an investment adviser to enter into, extend or renew an investment advisory contract that provides for compensation to the investment adviser 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 unless the following conditions of this Rule are met.

(1) NATURE OF THE CLIENT. The client entering into the contract must be:

(a) A natural person or a company who, immediately after entering into the contract has at least five hundred thousand dollars ($500,000.00) under the management of the investment adviser; or

(b) A person who the investment advisers and their investment adviser representatives reasonably believe, immediately before entering into the contract, is a natural person or a company whose net worth, at the time the contract is entered into, exceeds one million dollars ($1,000,000.00) The net worth of a natural person may include assets held jointly with that person's spouse.

(2) COMPENSATION FORMULA. The compensation paid to the investment adviser under this Rule with respect to the performance of any securities over a given period shall be based on a formula that:

(a) Includes, in the case of securities for which market quotations are readily available, the realized capital losses and unrealized capital depreciation of the securities over the period;

(b) Includes, in the case of securities for which market quotations are not readily available:

(i) The realized capital losses of the securities over the period; and

(ii) If the unrealized capital appreciation of the securities over the period is included, the unrealized capital depreciation of the securities over the period; and

(c) Provides that any compensation paid to the adviser under this rule is based on the gains less the losses computed in accordance with Rule 307.01(A)(2)(a) -(b) in the client's account for a period of not less than one year.

(3) DISCLOSURE. Before entering into the advisory contract and in addition to the requirements of Part II of its Form ADV, the investment adviser must disclose in writing to the client or the client's independent agent all material information concerning the proposed advisory arrangement, including the following:

(a) That the fee arrangement may create an incentive for the investment adviser to make investments that are riskier or more speculative than would be the case in the absence of a performance fee;

(b) Where relevant, that the investment adviser may receive increased compensation with regard to unrealized appreciation as well as realized gains in the client's account;

(c) The periods that will be used to measure investment performance throughout the contract and their significance in the computation of the fee;

(d) The nature of any index that will be used as a comparative measure of investment performance, the significance of the index, and the reason the investment adviser believes that the index is appropriate, and

(e) Where the investment adviser's compensation is based in part on the unrealized appreciation of securities for which market quotations are not readily available within the meaning of Rule 2 a-4(a)(1) under the Investment Company Act of 1940, how the securities will be valued and the extent to which the valuation will be independently determined.

(4) CONTRACT. The investment adviser (and any investment adviser representative) who enters into the contract must reasonably believe, immediately before entering into the contract that the contract represents an arm's length arrangement between the parties and that the client, alone or together with the client's independent agent, understands the proposed method of compensation and its risks. The representative of a company may be a partner, director, officer or an employee of the company or the trustee, where the company is a trust, or any other person designated by the company or trustee.

(B) INDEPENDENT AGENT. Nothing in this rule shall relieve a client's independent agent from any obligation to the client under applicable law.

307.02 CUSTODY OF CLIENT FUNDS OR SECURITIES BY INVESTMENT ADVISERS.

(A) It shall be unlawful for any registered investment adviser to take or have custody of any securities or funds of any client unless:

(1) The investment adviser notifies the Commissioner in writing that the investment adviser has or may have custody. Such notification may be given on Uniform Application of Investment Adviser Registration (Form ADV);

(2) The securities of each client are segregated, marked to identify the particular client having the beneficial interest therein and held in safekeeping in some place reasonably free from risk of destruction or other loss;

(3)

(a) All client funds are deposited in one or more bank accounts containing only clients' funds,

(b) Such account(s) are maintained in the name of the investment adviser as agent or trustee for such client(s), and

(c) The investment adviser maintains a separate record for each such account showing the name and address of the bank where the account is maintained, the dates and amounts of deposits in and withdrawals from the account, and the exact amount of each client's beneficial interest in the account;

(4) Immediately after accepting custody or possession of funds or securities from any client, the investment adviser notifies the client in writing of the place where and the manner in which the funds and securities will be maintained and subsequently, if and when there is a change in the place where or the manner in which the funds or securities are maintained, the investment adviser gives written notice thereof to the client;

(5) At least once every three months, the investment adviser sends each client an itemized statement showing the funds and securities in the investment adviser's custody at the end of such period and all debits, credits and transactions in the client's account during such period; and

(6) At least once every calendar year, an independent certified public accountant or public accountant verifies all client funds and securities by actual examination at a time chosen by the accountant without prior notice to the investment adviser. A report stating that such accountant has made an examination of such funds and securities, and describing the nature and extent of the examination, shall be maintained and made available for examination.

(B) This Rule 307.02 shall not apply to an investment adviser also registered as a broker-dealer in Arkansas who is:

(1) Subject to and in compliance with SEC Rule 15 c3-1 (Net Capital Requirements for Brokers or Dealers), promulgated under the Securities Exchange Act of 1934; or

(2) A member of an exchange whose members are exempt from SEC Rule 15 c3-1, under the provisions of paragraph (b)(2) thereof, and the broker-dealer is in compliance with all rules and settled practices of the exchange imposing requirements with respect to financial responsibility and the segregation of funds or securities carried for the account of customers.

RULE 308 DENIAL, SUSPENSION, REVOCATION OR WITHDRAWAL OF REGISTRATION.

308.01 UNFAIR, MISLEADING, AND UNETHICAL PRACTICES OF BROKER-DEALER OR AGENT.

Each broker-dealer and agent shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business. The following conduct shall be considered grounds for denial, suspension or revocation of a broker-dealer or agent registration, in addition to such other unethical practices within the meaning of Sections 23-42-308 and 23-42-507 of the Act.

(A) FAILURE TO TIMELY COMPLETE THE TRANSACTION. Engaging in a pattern of unreasonable delays in delivery of securities or remittance of funds necessary to complete the transaction within the time frame customary in the trade.

(B) MISREPRESENTATIONS. Guaranteeing a customer against loss in any securities account of such customer carried by the broker-dealer or in any securities transaction effected by the broker-dealer with or for such customer, or making unjustified or untruthful representations that securities sold will subsequently become listed or traded, or making representations that a market will be established or that the securities will be subject to an increase in value.

(C) UNDISCLOSED FEES. Charging undisclosed, unreasonable and inequitable fees for services performed, including miscellaneous services such as collection of monies due for principal, dividends or interest, exchange or transfer of securities, appraisals, safekeeping, or custody of securities and other services related to its securities business, except where such fees are negotiated or have been previously disclosed to the customer.

(D) RECOMMENDATIONS TO CUSTOMERS. Recommending to a customer the purchase, sale or exchange of any security when a broker-dealer or agent does not have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs, or encouraging a customer to invest beyond his immediate financial resources.

(E) EXCESSIVE TRADING. Inducing trading in a customer's account that is excessive in size or frequency in view of the financial resources and character of the account exclusively for the purpose of accumulating profits.

(F) BOND PRE-SALES.

(1) Entering into a pre-sale contract with respect to any bond that is required by laws of the State of Arkansas to be sold at public sale, or to obtain any beneficial interest, direct or indirect, in the initial purchase of any bonds with respect to which the broker-dealer has acted as fiscal agent. This section shall not apply to industrial bonds issued under Act 9 of 1960, to school bonds for school districts if the requirements set forth in subparagraph (2) of this Rule 308.01(F) are met, or to any other bonds provided that it is shown to the satisfaction of the Commissioner in the case of such other bonds that such an arrangement is to the benefit of the issuer. For the purposes of this section the following terms shall have the indicated meanings, unless the context requires otherwise.

(a) "Bonds" means bond, notes and other evidence of indebtedness, both in definitive and in temporary form, whether as notes or bonds, issued by or in the name of any county, city, town, school district, improvement district, state educational institution, or other public issuer.

(b) "Pre-Sale Contract" means any contract for the sale and purchase of bonds entered into prior to the date advertised for the public sale of the bonds.

(c) "Fiscal Agent" means any broker-dealer employed for compensation to advise and assist in the sale of an issuer's bonds.

(2) The prohibition set forth in Rule 308.01(F)(1) shall not apply to school bonds for a school district for which a broker-dealer serves as fiscal agent if each of the following conditions are met:

(a) The broker-dealer shall disclose in the preliminary official statement for each bond issue that it has reserved the right to submit a competitive bid;

(b) The broker-dealer shall advise the school district prior to the date bids are to be received whether it will submit a bid;

(c) In the event that the only bid received by the school district is from the broker-dealer, acceptance of the bid by the school district is subject to same day review and approval by the Commissioner;

(d) The broker-dealer will receive prior to the date bids are received, written authorization from the issuer in compliance with MSRB Rule G-23; and

(e) All bids shall be submitted by electronic or sealed bid only.

(G) FISCAL AGENT OR UNDERWRITER. Encouraging a person to issue bonds in amount exceeding those not reasonable within its ability to repay, falsely and willfully leading a person to believe the broker-dealer will see that all bonds will be sold or failing to reveal to the person with which it is doing business a financial interest in other enterprises, such as construction companies, who may receive proceeds from the sale of the bonds.

(H) ADJUSTED TRADING. Utilizing a trading technique whereby a transaction or a series of transactions is executed wherein a party to the transaction or series of transactions attempts to defer the recognition of a decrease in the value of a security by:

(1) The sale of a security at a price other than at market value;

(2) The purchase of a security at a price other than at market value; or,

(3) The use of fees, payments or other consideration in such a manner that the composite design of the related transactions is to defer the recognition of a loss or decrease.

Adjusted trading may occur if more than one broker-dealer or more than one customer is involved in the transaction. Adjusted trading may occur whether the security is for future delivery, current delivery or if the security is not yet issued. If any consideration is given, other than normal payment for the security at its market value, by any party to the series of purchases or sales, such consideration shall be considered in determining if the trading technique as a whole constitutes adjusted trading.

(I) MARKUPS. Charging excessive markups or entering into a transaction with or for a customer at a price not reasonably related to the current market price of the security. Bids and offers should correspond with the actual market. Markups may vary, for among other reasons, as a result of such factors as quantity, quality, market conditions, risk to the broker-dealer and maturity, but should in all transactions be reasonable and fully competitive.

(J) MARKET VALUE. Representing that a security is being offered to a customer "at the market" or a price relevant to the market price unless such 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 is acting or with whom he is associated in such distribution, or any person controlled by, controlling or under common control with such broker-dealer; or offering to buy from or sell to any person any security at a stated price unless such broker-dealer is prepared to purchase or sell, as the case may be, at such price and under such conditions as are stated at the time of such offer to buy or sell.

(K) FAVORABLE PRICE. Effecting a transaction for or with a customer without exercising reasonable diligence to ascertain the best market price for the subject security so that the resultant price to the customer is as favorable as possible under prevailing market conditions.

(L) INTERPOSITIONING. Interjecting a third party between the broker-dealer and the best available market or the broker-dealer and the customer except in cases where the broker-dealer can demonstrate that to his knowledge at the time of the transaction the total cost of proceeds of the transaction, was equal to or better than the prevailing inter-dealer market for the security.

(M) CONTROLLING PERSONS OR AFFILIATES. Failing to disclose that the broker-dealer is controlled by, controlling, affiliated with or under common control with the issuer of any security before entering into any contract with or for a customer for the purchase or sale of such security, the existence of such control to such customer, and if such disclosure is not made in writing, it shall be supplemented by the giving or sending of written disclosure at or before the completion of the transaction.

(N) FICTITIOUS ACCOUNTS. Establishing or maintaining an account containing fictitious or disguised information.

(O) UNAUTHORIZED TRANSACTIONS. Causing the execution of a transaction which is unauthorized by a customer or the sending of a confirmation in order to cause a customer to accept transactions not actually agreed upon or exercising any discretionary power in effecting a transaction for a customer's account without first obtaining written discretionary authority from the customer, unless the discretionary power relates solely to the time and/or price for the execution of orders.

(P) MISUSE OF CUSTOMERS' FUNDS OR SECURITIES. Borrowing or unauthorized use of customers' funds or securities.

(Q) MISLEADING ADVERTISING. Using any advertising or sales material in such a fashion as to be deceptive or misleading.

(R) OUTSIDE SALES ACTIVITIES. Effecting securities or non-securities transactions not recorded on the regular books or records of the broker-dealer unless the activity is authorized in writing by the broker-dealer and such authorization is maintained in the broker-dealer's records.

(S) SHARING PROFITS. 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; or without notice to the customer dividing or otherwise splitting the agent's commission, profits or other compensation from the purchase or sale of securities.

(T) FURNISHING INFORMATION. Failing or refusing to furnish a customer, upon reasonable request, information to which he is entitled, or to respond to a formal written demand or complaint.

(U) MISUSE OF FIRM NAME. Implying that a broker-dealer is a bank or other kind of financial institution, provided this does not prohibit the use of the term "investment banker."

(V) FURNISHING DOCUMENTS. Unreasonably failing to promptly deliver or provide documents or information in possession of or under control of the registrant to the Commissioner after receipt of a written request from the Commissioner.

(W) DISHONEST USE OF SENIOR-SPECIFIC CERTIFICATIONS AND PROFESSIONAL DESIGNATIONS.

(1) Consistent with the Model Rule on the Dishonest Use of Senior-Specific Certifications and Professional Designations adopted by the NASAA on March 20, 2008, the 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 or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicates or implies 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 practice within the meaning of Rule 308.01.

(2) The prohibited use of such certifications or professional designations includes, but is not limited to, the following:

(a) Use of a certification or professional designation by a person who has not actually earned or is otherwise ineligible to use such certification or designation;

(b) Use of a nonexistent or self-conferred certification or professional designation;

(c) Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training, or experience that the person using the certification or professional designation does not have; and

(d) Use of a certification or professional designation that was obtained from a designating or certifying organization that:

(i) Is primarily engaged in the business of instruction in sales and/or marketing;

(ii) Does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

(iii) Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or

(iv) Does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.

(3) There is a rebuttable presumption that a designation or certifying organization is not disqualified solely for purposes of paragraph 2(d) above when the organization has been accredited by:

(a) The American National Standards for Certifying Institute: or

(b) The National Commission for Certifying Agencies; or

(c) An organization that is on the United States Department of Education's list entitled "Accrediting Agencies Recognized for Title IV Purposes" and the designation or credential issued there from does not primarily apply to sales and/or marketing.

(4) In determining whether a combination of words (or an acronym standing for a combination of words) constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, factors to be considered shall include:

(a) Use of one or more words such as "senior," "retirement," "elder," or like words, combined with one or more words such as "certified," "registered," "chartered," "adviser," "specialist," "consultant," "planner," or like words, in the name of the certification or professional designation; and

(b) The manner in which those words are combined.

(5) For purposes of this rule, a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:

(a) Indicates seniority or standing within the organization; or

(b) Specifies an individual's area of specialization within the organization.

For purposes of this subsection, financial services regulatory agency includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act of 1940.

(6) Nothing in this Rule shall limit the Commissioner's authority to enforce existing provisions of law.

(X) OTHER UNFAIR, MISLEADING AND UNETHICAL PRACTICES. The unfair, misleading or unethical practices set forth above are not exclusive of other activities, such as forgery, embezzlement, non-disclosure or misstatement of material facts, manipulations and various deceptions, which shall be considered grounds for suspension or revocation and the Commissioner may suspend or revoke a registration when necessary or appropriate in the public interest.

308.02 FRAUDULENT, DECEPTIVE, DISHONEST OR UNETHICAL PRACTICES OF INVESTMENT ADVISERS.

Investment advisers have a duty to act primarily for the benefit of their clients. All investment advisers and representatives shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business. The following conduct shall constitute fraudulent or deceptive practices and shall be considered grounds for denial, suspension or revocation of an investment adviser or representative registration, or for the issuance of a cease and desist order or other action under Section 23-42-209 of the Act, in addition to other dishonest or unethical practices within the meaning of Sections 23-42-307 and 23-42-308 of the Act. The provisions of this rule shall apply to an investment adviser that is neither registered nor required to register pursuant to Section 23-42-301(c) of the Act only to the extent permitted by the National Securities Markets Improvement Act of 1996 (Pub. L. No. 104-290).

(A) Recommending to a client to whom investment supervisory, management or consulting services are provided the purchase, sale or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client's investment objectives, financial situation and needs, and any other information known or acquired by the investment adviser after reasonable examination of the client's records as may be provided to the investment adviser.

(B) Placing an order to purchase or sell a security for the account of a client without authority to do so.

(C) Placing an order to purchase or sell a security for the account of a client upon instruction of a third party without first having obtained a written third-party trading authorization from the client.

(D) Exercising any discretionary authority in placing an order for the purchase or sale of securities for a client without obtaining written discretionary authority from the client, unless the discretionary authority relates solely to the price at which, or the time when, an order involving a definite amount of a specified securities shall be executed, or both.

(E) Inducing trading in a client's account that is excessive in size or frequency in view of the financial resources, investment objectives and character of the account.

(F) Borrowing money, securities, or anything of value from a client unless the client is a broker-dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds or securities.

(G) Loaning money to a client unless the investment adviser is a financial institution engaged in the business of loaning funds, a broker-dealer, or the client is an affiliate of the investment adviser.

(H) Misrepresenting to any client, or prospective advisory client, the qualifications of the investment adviser or any employee of the investment adviser, or misrepresenting the nature of the advisory services being offered or fees to be charged for such service, or omitting to state a material fact necessary to make the statements made regarding qualifications, services or fees, in light of the circumstances under which they are made, not misleading.

(I) Providing a report or recommendation to any advisory client prepared by someone other than the adviser without disclosing that fact. (This prohibition does not apply to a situation where the adviser uses published research reports or statistical analyses to render advice or where an adviser orders such a report in the normal course of providing service.)

(J) Charging a client an advisory fee that is unreasonable in light of the type of service to be provided, the experience and expertise of the investment adviser or the bargaining power of the client.

(K) Failing to disclose to a client in writing before entering into or renewing an advisory agreement with that client any material conflict of interest relating to the adviser or any of its employees that could reasonably be expected to impair the rendering of unbiased and objective advice including, but not limited to, the following:

(1) Compensation arrangements connected with advisory services to clients which are in addition to compensation from such clients for such services; and

(2) The fact that an advisory fee for rendering advice will be charged to the client when a commission for executing securities transactions pursuant to such advice will be received by the adviser or its employees.

(L) Guaranteeing a client that a specific result will be achieved (gain or no loss) as a result of the advice that will be rendered.

(M) Publishing, circulating or distributing any advertisement:

(1) That refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser or concerning any advice, analysis, report or other service rendered by such investment adviser, or

(2) That refers, directly or indirectly, to past specific recommendations of such investment adviser which were or would have been profitable to any person; provided, however, that this shall not prohibit an advertisement which sets out or offers to furnish a list of all recommendations made by such investment adviser within the immediately preceding period of not less than one year if such advertisement, and such list if it is furnished separately:

(a) State the name of each such security recommended, the date and nature of each such recommendation (for example, whether to buy, sell or hold), the market price at that time, the price at which the recommendation was to be acted upon, and the market price such security as of the most recent practicable date; and

(b) Contain the following cautionary legend on the first page thereof in print or type used in the body or text thereof: "it should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list", or

(3) That represents, directly or indirectly, that any graph, chart, formula or other device being offered can in and of itself be used to determine which securities to buy or sell, or when to buy or sell them; or which represents, directly or indirectly, that any graph, chart, formula or other device being offered will assist any person in making his own decisions as to which securities to buy or sell, or when to buy or sell them, without prominently disclosing in such advertisement the limitations thereof and the difficulties with respect to its use; or

(4) That contains any statement to the effect that any report, analysis, or other service will be furnished free or without charge, unless such report, analysis or other service actually is or will be furnished entirely free and without any condition or obligation, directly or indirectly; or

(5) That contains any untrue statement of a material fact, or which is otherwise false or misleading.

(6) For the purposes of this rule the term "advertisement" shall include any notice, circular, letter or other written communication addressed to more than one person, or any notice or other announcement in any electronic publication, by radio or television, or by any medium that offers any of the following:

(a) Any analysis, report, or publication concerning securities, or that is to be used in making any determination as to when to buy or sell any security, or that security to buy or sell;

(b) Any graph, chart, formula or other device to be used in making any determination as to when to buy or sell any security, or that security to buy or sell; or

(N) Disclosing the identity, affairs, or investment of any client to any third party unless required by law to do so, or unless consented to by the client.

(O) Taking any action, directly or indirectly, with respect to those securities or funds in which any client has any beneficial interest, where the investment adviser has custody or possession of such securities or funds in the absence of compliance with the provisions of Rule 307.02.

(P) Entering into, extending or renewing any investment advisory contract, other than a contract for impersonal advisory services, unless such contract is in writing and discloses, in substance, the services to be provided, the term of the contract, the investment objectives and risk tolerance levels for the client, the advisory fee or the formula for computing the fee, the amount or the manner of calculation of the amount of the prepaid fee to be returned in the event of contract termination or non-performance, whether the contract grants discretionary power to the adviser and that no assignment of such contract shall be made by the investment adviser without the consent of the other party to the contract.

(Q) Limiting, attempting to limit, or representing to a client the existence of any limitation on such client's ability to execute recommended transactions through any broker-dealer he may choose. An affiliate of the investment adviser may be recommended as long as the affiliate relationship is fully disclosed to the client in writing, and that the recommended affiliate is in the client's best interest.

(R) Unreasonably failing to deliver or provide documents or information in possession of or under control of the registrant to the Commissioner after receipt of a written request from the Commissioner.

(S) Failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information contrary to the provisions of Section 204 A of the Investment Advisers Act of 1940.

(T) Entering into, extending, or renewing any advisory contract contrary to the provisions of Section 205 of the Investment Advisers Act of 1940. This provision shall apply to all advisers and investment adviser representatives registered or required to be registered under this Act, notwithstanding whether such adviser or representative would be exempt from federal registration pursuant to Section 203(b) of the Investment Advisers Act of 1940.

(U) Indicating, in an advisory contract, any condition, stipulation, or provisions binding any person to waive compliance with any provision of the Act or of the Investment Advisers Act of 1940, or any other practice contrary to the provisions of Section 215 of the Investment Advisers Act of 1940.

(V) Engaging in any act, practice, or course of business which is fraudulent, deceptive, or manipulative and contrary to the provisions of Section 206(4) of the Investment Advisers Act of 1940, notwithstanding the fact that such investment adviser or investment adviser representative is not registered or required to be registered under Section 203 of the Investment Advisers Act of 1940.

(W) Engaging in conduct or any act, indirectly or through or by any other person, which would be unlawful for such person to do directly under the provisions of this act or any rule or regulation thereunder.

(X) Dishonest Use of Senior-Specific Certifications and Professional Designations