Utah Administrative Code
Topic - Commerce
Title R164 - Securities
Rule R164-4 - Licensing Requirements
Section R164-4-5 - Bonding Requirements for Broker-Dealers, Broker-Dealer Agents, Issuer-Agents, and Investment Advisers
Universal Citation: UT Admin Code R 164-4-5
Current through Bulletin 2024-06, March 15, 2024
(A) Authority and Purpose
(1) The Division enacts
this rule under authority granted by Sections
61-1-4
and
61-1-24.
(2) This rule sets the surety-bond
requirements for broker-dealers, broker-dealer agents, issuer- agents, and
investment advisers.
(B) Definitions
(1) "Division" means the Division
of Securities, Utah Department of Commerce.
(2) "SEC" means the United States Securities
and Exchange Commission.
(3) "SIPC"
means the Securities Investor Protection Corporation.
(C) Bonding requirements for broker-dealers
(1) A broker-dealer who is a member of SIPC
and is not excluded from membership assessments need not provide a
bond.
(2) Every broker-dealer
licensed or required to be licensed under this Act whose business is
exclusively intrastate, who does not make use of any facility of a national
securities exchange and who is not registered under section 15 of the
Securities Exchange Act of 1934, shall be bonded in an amount of not less than
$100,000 by a bonding company qualified to do business in this state.
(D) Bonding requirements for broker-dealer agents
(1) A broker-dealer agent
need not provide a bond.
(E) Bonding requirements for issuer-agents
(1) An issuer-agent need not provide a bond
unless otherwise required by Section
R164-11-1.
(2) If an issuer-agent must provide a bond,
it must be:
(2)(a) issued by a corporate
bonding company qualified to do business in Utah;
(2)(b) on or in substantially the same form
as Division Form 4-5BI, "Corporate Indemnity Bond of Issuer"; and
(2)(c) be in the amount of $25,000.
(3) Upon written request the
Division may waive the bond requirement and accept instead the escrow of funds.
(3)(a) The issuer or issuer-agent must place
in escrow at least $25,000.
(3)(b)
The issuer or issuer-agent may place the money in escrow at any federal or
state bank or savings institution, only.
(3)(c) The term of the escrow must extend for
a period terminating no earlier than four years after expiration of the
issuer's registration statement.
(3)(d) The escrow must be on or in
substantially the same form as Division Form 4-5EIA, "Escrow Agreement", which
is available from the Division.
(3)(e) The funds in escrow may be released
only by an order of the Division, in accordance with the following:
(3)(e)(i) If claims have been made against
the issuer-agent in a court of competent jurisdiction and the court has finally
adjudicated the dispute, or the claimant and the issuer-agent have agreed in
writing to resolve the dispute, the amount of funds at issue may be ordered
released by the Division in accordance with the order or agreement, up to the
amount placed in escrow; or
(3)(e)(ii) The issuer's registration
statement expired not less than four (4) years ago.
(F) Bonding requirements for certain investment advisers
(1) Except as provided in subparagraphs
(F)(2) and (3), every investment adviser having custody of or discretionary
authority over client funds or securities shall be bonded:
(1)(a) in an amount determined by the
Division based upon the number of clients and the total assets under management
of the investment adviser, which shall be at a minimum of $10,000;
(1)(b) issued by a bonding company qualified
to do business in this state;
(1)(c) on or in substantially the same form
as Division Form 4-5BIA, Corporate Indemnity Bond of Investment
Adviser.
(2) The
requirements of subparagraph (F)(1) shall not apply to those applicants or
licensees who:
(2)(a) have custody solely as a
consequence of the adviser's authority to withdraw advisory fees from client
accounts; or
(2)(b) comply with the
requirements of Section
R164-4-4.
(3) An investment adviser that has
its principal place of business in a state other than this state shall be
exempt from the requirements of subparagraph (F)(1), provided that the
investment adviser is licensed as in investment adviser in the state where it
has its principal place of business and is in compliance with such state's
requirements relating to bonding.
(4) Upon request and for good cause shown,
the Division may waive the bond requirement and accept instead the escrow of
funds.
(4)(a) The investment adviser must
place in escrow an amount determined by the Division based upon the number of
clients and the total assets under management of the investment adviser, which
shall be at a minimum of $10,000.
(4)(b) The investment adviser may place the
money in escrow at any federal or state bank or savings institution,
only.
(4)(c) The term of the escrow
must extend for a period terminating no earlier than three years after
expiration of the investment adviser's license.
(4)(d) The escrow must be on, or in
substantially the same form as, Division Form 4-5EIA, Escrow
Agreement.
(4)(e) The funds in
escrow may be released only by an order of the Division, in accordance with the
following:
(4)(e)(i) Where claims have been
made against the investment adviser in a court of competent jurisdiction and
the court has finally adjudicated the dispute, or the claimant and the
investment adviser have agreed in writing to resolve the dispute, the amount of
funds at issue may be ordered released by the Division in accordance with the
order or agreement, up to the amount placed in escrow; or
(4)(e)(ii) The investment adviser has not
been licensed by the Division for a period of at least four years.
Disclaimer: These regulations may not be the most recent version. Utah 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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