Current through September 24, 2024
(1) General requirement. Unless otherwise
provided in this Rule, an investment adviser, registered or required to be
registered pursuant to T.C.A. §
48-1-109(c)
shall, in accordance with the provisions of this Rule, furnish each advisory
client and prospective advisory client with a written disclosure statement
which may be either a copy of Part 2 of its Form ADV or a written document
containing at least the information then so required by Part 2 of Form
ADV.
(2) Delivery.
(a) An investment adviser, except as provided
in subparagraph (2)(b) of this Rule shall deliver the statement required by
this subparagraph (2)(a) to an advisory client or prospective advisory client:
1. Not less than forty-eight (48) hours prior
to entering into any written or oral investment advisory contract with such
client or prospective client; or
2.
At the time of entering into any such contract, if the advisory client has a
right to terminate the contract without penalty within five (5) business days
after entering into the contract.
(b) Delivery of the statement required by
subparagraph (2)(a) of this Rule need not be made in connection with entering
into a contract for impersonal advisory services as defined in the
Rule.
(3) Offer to
deliver.
(a) An investment adviser, except as
provided in subparagraph (3)(b) of this Rule, annually shall, without charge,
deliver or offer in writing to deliver upon written request to each of its
advisory clients the statement required by this Rule.
(b) The delivery or offer required by
subparagraph (3)(a) of this Rule need not be made to advisory clients receiving
advisory services solely pursuant to a contract for impersonal advisory
services requiring a payment of less than two hundred dollars ($200).
(c) With respect to an advisory client
entering into a contract or receiving advisory services pursuant to a contract
for impersonal advisory services which requires a payment of two hundred
dollars ($200) or more, an offer of the type specified in subparagraph (3)(a)
of this Rule shall also be made at the time of entering into an advisory
contract.
(d) Any statement
requested in writing by an advisory client pursuant to an offer required by
paragraph (3) of this Rule must be mailed or delivered within seven (7) 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 2 of Form ADV may be omitted from the statement furnished to an advisory
client or prospective advisory client if such information is applicable only to
a type of investment advisory service or fee which is not 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 these 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.
(6) Sponsors of wrap fee programs.
(a) An investment adviser, registered or
required to be registered pursuant to T.C.A. §
48-1-109(c) of
the Act, that is compensated under a wrap fee program for sponsoring,
organizing, or administering the program, or for selecting, or providing advice
to clients regarding the selection of other investment advisers in the program,
shall in lieu of the written disclosure statement required by paragraph (1) of
this Rule and in accordance with other provisions of this Rule, furnish each
client and prospective client of the wrap fee program with a written disclosure
statement containing at least the information required by Part 2A Appendix 1 of
Form ADV. Any additional information included in such disclosure should be
limited to information concerning wrap fee programs sponsored by the investment
adviser.
(b) If the investment
adviser is required under this paragraph (6) to furnish disclosure statements
to clients or prospective clients of more than one (1) wrap fee program, the
investment adviser may omit from the disclosure statement furnished to clients
and prospective clients of a wrap fee program or programs any information
required by Form ADV Part 2A Appendix 1 that is not applicable to clients or
prospective clients of that wrap fee program or programs.
(c) An investment adviser need not furnish
the written disclosure statement required by subparagraph (6)(a) of this Rule
to clients and prospective clients of a wrap fee program if another investment
adviser is required to furnish the written disclosure statement to all clients
and prospective clients of the wrap fee program.
(7) Definitions. For purposes of this Rule:
(a) "Contract for impersonal advisory
services" means any contract relating solely to the provision of investment
advisory services:
1. By means of written
material or oral statements which do not purport to meet the objectives or
needs of specific individuals or accounts;
2. Through the issuance of statistical
information containing no expression of opinion as to the investment merits of
a particular security; or
3. Any
combination of the foregoing services.
(b) "Entering into", in reference to an
investment advisory contract, does not include an extension or renewal without
material change of any such contract which is in effect immediately prior to
such extension or renewal.
(c)
"Wrap fee program" means a program under which any client is charged a
specified fee or fees not based directly upon transactions in a client's
account for investment advisory services (which may include portfolio
management or advice concerning the selection of other investment advisers) and
execution of client transactions.
(8) An investment adviser that fails to make
written disclosure statements as required by this Rule shall be deemed to have
engaged in a dishonest and unethical practice in the securities business as
provided under T.C.A. §
48-1-112(a)(2)(G).
Authority: T.C.A. §§
48-1-109,
48-1-112,
48-1-115,
48-1-116, §222 of the
Investment Advisers Act of 1940, as amended by §304 of the National
Securities Markets Improvement Act, and
17 C.F.R.
§275.204-4.
