Nevada Administrative Code
Chapter 90 - Securities
Section 90.Sec. 5 - NEW
Universal Citation: NV Admin Code 90.Sec. 5
Current through February 27, 2024
1. A person who is an investment adviser, a representative of an investment adviser or a federal covered adviser is a fiduciary and has a duty to act primarily for the benefit of the clients of the investment adviser, representative of the investment adviser or federal covered adviser, as applicable.
2. An investment adviser, representative of an investment adviser or federal covered adviser shall not violate subsection 1 by engaging in unethical business practices, including, without limitation, the following conduct:
(a) If investment supervisory services are
provided to a client, recommending to the client 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 relating to the investment objectives, financial
situation and needs of the client and any other information known by the
investment adviser;
(b) Exercising
discretionary power in placing an order for the purchase or sale of securities
for a client without obtaining written discretionary authority from the client
within 10 business days after the date of the first transaction placed,
pursuant to the oral discretionary authority of the client, unless the
discretionary power relates solely to the price at which, or the time when, an
order involving a definite amount of a specified security must be executed, or
both;
(c) Inducing trading in the
account of a client that is excessive in size or frequency in view of the
financial resources, investment objectives and character of the account in
light of the fact that the investment adviser or a representative of the
investment adviser in the situation can directly benefit from the number of
securities transactions effected in the account of the client;
(d) Placing an order to purchase or sell a
security for the account of a client without authority;
(e) 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;
(f) Loaning money to a
client unless:
(1) The investment adviser is a
financial institution engaged in the business of loaning funds; or
(2) The client is an affiliate of the
investment adviser;
(g)
Borrowing money or securities from a client unless the client is:
(1) A broker-dealer;
(2) An affiliate of the investment adviser;
or
(3) A financial institution
engaged in the business of loaning funds;
(h) Misrepresenting to an advisory client or
prospective advisory client:
(1) The
qualifications of the investment adviser or any employee of the investment
adviser; or
(2) The nature of the
advisory services being offered or fees to be charged for the
service;
(i) Omitting or
failing to state to an advisory client or prospective advisory client a
material fact necessary to make a comprehensive statement regarding:
(1) The qualifications of the investment
adviser or any employee of the investment adviser; or
(2) The nature of the advisory services being
offered or fees being charged for the services of the investment
adviser;
(j) Providing a
report or recommendation to any advisory client prepared by someone other than
the investment adviser without disclosing that fact to the client;
(k) Charging a client an unreasonable
advisory fee;
(l) Failing to
disclose to a client, in writing before rendering advice, any material conflict
of interest relating to the investment adviser, or any of its employees, which
could reasonably be expected to impair the rendering of unbiased and objective
advice, including, without limitation, a conflict of interest relating to:
(1) A compensation arrangement connected with
advisory services to a client that is in addition to compensation for the
advisory services; or
(2) Charging
a client an advisory fee for rendering advice when a commission for executing
securities transactions pursuant to such advice will be received by the adviser
or its employees;
(m)
Making a guarantee to a client that a specific result will be achieved,
regardless of whether the guarantee relates to a gain or loss;
(n) Disclosing the identity, affairs or
investments of a client unless:
(1) Required
by law; or
(2) The consent of the
client is obtained by the investment adviser or a representative of the
investment adviser;
(o)
Taking any action, directly or indirectly, with respect to a security or fund
in which the client has a beneficial interest, where the investment adviser has
custody or possession of the security or fund and the action of the investment
adviser violates section 7;
(p)
Entering into, extending or renewing an investment advisory contract, unless
the contract is:
(1) In writing; and
(2) Discloses, in substance:
(I) The services to be provided;
(II) The term of the contract;
(III) The advisory fee;
(IV) The formula for computing the fee
described in sub-subparagraph (III);
(V) The amount of the prepaid fee to be
returned in the event of contract termination or non-performance;
(VI) Whether the contract grants
discretionary power to the investment adviser; and
(VII) That an assignment of the contract must
not be made by the investment adviser without the consent of the parties to the
contract;
(q)
Failing to establish, maintain and enforce written policies and procedures
reasonably designed to prevent the misuse of material nonpublic information,
the use of which is contrary to the provisions of section 204A of the
Investment Advisers Act of 1940;
(r) Entering into, extending or renewing any
advisory contract contrary to the provisions of section 205 of the Investment
Advisers Act of 1940;
(s)
Indicating in an advisory contract any condition, stipulation or provision
which binds any person to waive compliance with a provision of chapter 90 of
NRS or the Investment Advisers Act of 1940, or any other practice contrary to
the provisions of section 215 of the Investment Advisers Act of 1940;
(t) 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 the investment adviser or a representative of the
investment adviser is not registered or required to be registered under section
203 of the Investment Advisers Act of 1940;
(u) 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 chapter 90 of NRS or any rule or
regulation adopted by the Administrator;
(v) Accessing the account of a client by
using the unique identifying information of the client; or
(w) Failing to establish, maintain and
enforce a required policy or procedure.
3. The provisions of this section apply to a federal covered adviser:
(a) To the extent
that the alleged conduct violating subsection 1 is fraudulent or deceptive;
and
(b) As permitted by section
203A of the Investment Advisers Act of 1940 and the National Securities Markets
Improvement Act of 1996, Public Law No. 104-290.
4. The provisions of paragraph (r) of subsection 2 apply to all investment advisers and representatives of investment advisers who are registered or required to be registered pursuant to law or regulation, notwithstanding whether the adviser or representative would be exempt from federal registration pursuant to section 203(b) of the Investment Advisers Act of 1940.
5. The provisions of paragraph (j) of subsection 2 do not apply to an investment adviser who:
(a) Uses published research
reports or statistical analyses to render advice; or
(b) Orders any such report or analysis in the
normal course of providing service.
6. As used in this section, "unique identifying information":
(a) Includes,
without limitation, the username and password used by a client to access the
account of the client; and
(b) Does
not include data aggregation software if:
(1)
The investment adviser does not know, or have access to, the password of the
client used for the client account;
(2) There is an agreement between the data
aggregation software company and the custodian or online account platform which
permits back-door access to the client account; and
(3) The data is supplied in a manner in which
the investment adviser may only view the information and cannot effectuate any
changes to the underlying account of the client.
Added to NAC by Sec'y of State by R018-21A, eff. 6/2/2023
NRS 90.575, 90.750
Disclaimer: These regulations may not be the most recent version. Nevada may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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