Current through September 24, 2024
(1) It shall constitute an act, practice, or
course of business which operates or would operate as a fraud or deceit upon
another person within the meaning of T.C.A. §
48-1-121(b)(2) of
the Act for any investment adviser acting as principal for his own account to:
(a) Knowingly sell any security to or to
purchase any security from a client without:
1. Disclosing to such client, in writing,
before the completion of such transaction, the capacity in which he is acting;
and
2. Obtaining the consent of the
client to such transaction; or
(b) Knowingly effect any sale or purchase of
any security for the account of such client, while acting as broker-dealer for
a person other than such client, without:
1.
Disclosing to such client, in writing, before the completion of such
transaction, the capacity in which he is acting; and
2. Obtaining the consent of the client to
such transaction.
The prohibitions of this paragraph (1) shall not apply to any
transaction with a customer of a broker-dealer if such broker-dealer is not
acting as an investment adviser in relation to such transaction.
(2) An
investment adviser registered under T.C.A. §
48-1-109, or a person registered
as a broker-dealer under T.C.A. §
48-1-109 and controlling,
controlled by, or under common control with an investment adviser registered
under T.C.A. §
48-1-109 shall be deemed not to be
in violation of the provisions of this Rule and T.C.A. §
48-1-121(b)(2) in
effecting an agency cross transaction for an advisory client, if:
(a) The advisory client has executed a
written consent prospectively authorizing the investment adviser, or any other
person relying on this Rule, to effect agency cross transactions for such
advisory client, provided that such written consent is obtained after full
written disclosure with respect to agency cross transactions for which the
investment adviser or such other person will act as broker-dealer for, receive
commissions from, and have a potentially conflicting division of loyalties and
responsibilities regarding, both parties to such transactions;
(b) The investment adviser, or any other
person relying on this Rule, sends to each client a written confirmation at or
before the completion of each such transaction, which confirmation includes:
1. A statement of the nature of such
transaction;
2. The date such
transaction took place;
3. An offer
to furnish upon request, the time when such transaction took place;
and
4. The source and amount of any
other remuneration received or to be received by the investment adviser and any
other person relying on this paragraph (2) in connection with the
transaction;
(c) The
investment adviser, or any other person relying on this Rule, sends to each
client, at least annually, and with or as part of any written statement or
summary of such account form the investment adviser of such other person:
1. A written disclosure statement identifying
the total number of such transactions during the period since the date of the
last such statement or summary; and
2. The total amount of all commissions or
other remuneration received or to be received by the investment adviser or any
other person relying on this Rule in connection with such transactions during
such period;
(d) Each
written disclosure and confirmation required by this Rule includes a
conspicuous statement that the written consent referred to in subparagraph
(2)(a) of this Rule may be revoked at any time by written notice to the
investment adviser, or any other person relying on this paragraph, from the
advisory client; and
(e) No such
transaction is effected in which the same investment adviser or an investment
adviser and any person controlling, controlled by, or under common control with
such investment adviser recommended the transaction to both any seller and any
purchaser.
(3) For
purposes of this Rule, the term "agency cross transaction for an advisory
client" shall mean a transaction in which a person acts as an investment
adviser in relation to a transaction in which such investment adviser, or any
person controlling, controlled by, or under common control with such investment
adviser, acts as broker-dealer for both such advisory client and for another
person on the other side of the transaction.
(4) For purposes of part (2)(b)4. of this
Rule, the written confirmation referred to in such Rule may state whether any
other remuneration has been or will be received and that the source and amount
of such other remuneration will be furnished upon written request of such
customer if:
(a) In the case of a purchase,
neither the investment adviser nor any other person relying on paragraph (2)
was participating in a distribution; or
(b) In the case of a sale, neither the
investment adviser nor any other person relying on this paragraph was
participating in a tender offer.
(5) This Rule shall not be construed as
relieving in any way the investment adviser or another person relying on this
Rule from acting in the best interests of the advisory client, including
fulfilling the duty with respect to the best price and execution for the
particular transaction for the advisory client; nor shall it relieve such
person or persons from any disclosure obligation which may imposed by T.C.A.
§
48-1-121(b)(2) or
by other applicable provisions of the Act.
Authority: T.C.A. §§
48-1-109,
48-1-115,
48-1-116,
48-1-121, Public Acts of 1997,
Chapter 164, §7, §222 of the Investment Advisers Act of 1940, as
amended by §304 of the National Securities Markets Improvement Act of
1996, and 17 C.F.R. §275.206(3)-2.
