Selected Sections of the
New Hampshire Securities Act
Sections included on this page:
This chapter may be cited as the Uniform Securities Act.
When used in this chapter, unless the context otherwise requires:
I. ""Administrative hearing'' means a proceeding in which the legal rights, duties, immunities, or privileges of a respondent are required by law or rule to be determined by the department after an opportunity for a hearing.
I-a. ""Advertisement'' shall include any notice, circular, letter, or other written communication given to more than one person, or any notice or other announcement in any publication or verbal communication by radio, television, or other electronic media, which offers:
(a) Any analysis, report, or publication concerning securities or which is to be used in making any determination as when to buy or sell securities; or
(b) Any graph, chart, formula, or other device to be used in making any determination concerning when to buy or sell any security, or which security to buy or sell.
I-b. ""Affiliate'' means any person directly or indirectly controlling, controlled by, or under common control with another person.
II. ""Agent'' means any individual, other than a broker-dealer, issuer or issuer-dealer, who represents a broker-dealer, issuer or issuer-dealer in effecting or attempting to effect purchases or sales of securities or an individual other than an investment adviser who represents an investment adviser by providing investment advice or who is an investment adviser representative. ""Agent'' does not include an individual who represents an issuer in:
(a) Effecting transactions in a security exempted by RSA 421-B:17, I(a), (b), (c), (d), (e), (g), (h) or (j);
(b) Effecting transactions exempted from RSA 421-B:17, II(a), (d), (e), (f), (g), (i), (j), (k), (l), (m), (n), (o), (p)(1), or (q);
(c) Effecting transactions with existing employees, partners or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state;
(d) Effecting transactions in securities registered by notification under RSA 421-B:12 if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state;
(e) Effecting other transactions, if such individual is an officer or director of the issuer, no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state, and upon application, such individual is specifically authorized by name in an order issued by the secretary of state; or
(f) Effecting transactions under RSA 421-B:11, I-a(e), if such individual is an officer or director of the issuer to whom no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state.
III. ""Broker-dealer'' means any person engaged in the business of effecting transactions in securities for the account of others or for his own account. ""Broker-dealer'' does not include:
(a) An agent;
(b) An issuer;
(c) A bank, savings institution or trust company;
(d) A person who has no place of business in this state if he effects transactions in this state exclusively with or through:
(1) The issuers of the securities involved in the transactions,
(2) Other broker-dealers, or
(3) Banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit sharing trusts, or other financial institutions or institutional buyers, or to broker-dealers, whether the purchaser is acting for itself or in some fiduciary capacity;
(e) A designated matching service; or
(f) Other persons not within the intent of this paragraph whom the secretary of state by rule or order designates.
IV. ""Attorney general'' means the attorney general or delegee.
IV-a. ""Branch office'' means any location other than the main office, identified by any means to issuers, other broker-dealers or investment advisers or to the public, customers, or clients as a location at which a broker-dealer or investment adviser conducts a securities or investment advisory business. ""Branch office'' shall not include:
(a) A location identified solely in a telephone directory line listing or on a business card or letterhead if:
(1) The listing, card or letterhead also sets forth the address and telephone number of a New Hampshire office of the broker-dealer or investment adviser from which individuals conducting business from such identified location are directly supervised; and
(2) No more than one agent or investment adviser agent transacts business on behalf of the broker-dealer or investment adviser from such identified location; or
(b) Any other location not within the intent of this paragraph as the secretary of state may determine.
IV-b. ""Complaint'' means a written statement submitted within a reasonable time following the incident complained of by a person, association, partnership, corporation, state agency (including the staff of the department) or by any other legal entity that sets forth specific allegations and requests administrative action by the department.
V. ""Department'' means the department of state.
V-a. ""Designated matching service'' means a matching service designated by rule or order by the secretary of state under this section in accordance with RSA 421-B:17, II(s).
V-b. ""Designated matching service facility'' means an Internet location or computer system operated, or a seminar or meeting conducted, by a designated matching service in accordance with RSA 421-B:17, II(s).
V-c. ""Ex parte communication'' means the transmittal of information or argument concerning the merits of the subject matter of any adjudicatory proceeding to or from a decision maker in that proceeding without proper notice to and opportunity to participate in by all parties.
V-d. ""Federal covered adviser'' means a person who is registered under section 203 of the Investment Advisers Act of 1940.
V-e. ""Federal covered security'' means any security that is a covered security under Section 18(b) of the Securities Act of 1933 or rules or regulations promulgated thereunder.
VI. ""Fraud,'' ""deceit,'' and ""defraud'' are not limited to common law deceit.
VII. ""Guaranteed'' means guaranteed as to payment of principal and interest or principal and dividends.
VII-a. ""Hearing'' means the receipt and consideration by the department of evidence or argument, or both, in accordance with these rules and applicable law, and includes:
(a) Conducting trial-type evidentiary hearings;
(b) Directing the filing of exhibits, affidavits, memoranda or briefs;
(c) Directing the delivery of oral argument; or
(d) Any combination of these or similar methods.
VIII. ""Industrial bond'' means any obligation issued by a governmental unit (including the United States, any state, any political subdivision of a state, or any agency, or corporate or other instrumentality, of one or more of them) other than a general obligation of a governmental unit having power to tax property or of an agency of the state of New Hampshire:
(a) Which is issued as part of an issue, all or a major portion of the proceeds of which are to be used directly or indirectly in any trade or business, and
(b) The payment of the principal or interest on which (under the terms of such obligation or any underlying arrangement) is, in whole or in major part:
(1) Secured by any interest in property used or to be used in a trade or business or in payment in respect of such property, or
(2) To be derived from payments in respect of property or borrowed money, used or to be used in a trade or business.
IX. ""Investment adviser'' means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities, or other investments, or as to the advisability of investing in, purchasing or selling securities, or as to the advisability of making other investments, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities, or other investments. ""Investment adviser'' also includes financial planners and other persons who, as an integral component of other financially related services, provide the foregoing investment advisory services to others for compensation and as part of a business or who hold themselves out as providing the foregoing investment advisory services to others for compensation. ""Investment adviser'' does not include:
(a) A bank, savings institution or trust company;
(b) A lawyer, accountant, engineer or teacher whose performance of these services is solely incidental to the practice of the profession;
(c) A broker-dealer whose performance of these services is solely incidental to the conduct of business as a broker-dealer and who receives no special compensation for them;
(d) A publisher of any bona fide newspaper, news magazine or business or financial publication of general, regular, and paid circulation;
(e) A person whose advice, analyses, or reports relate only to securities exempted by RSA 421-B:17, I(a);
(f) A person who has no place of business in this state if the person's only clients in this state are other investment advisers, federal covered advisers, broker-dealers or persons to whom sales are exempted under RSA 421-B:17, II(g);
(g) A person who transacts business in the field of insurance, provided such business is solely and exclusively in the field of insurance;
(h) Any real estate broker who does not promote or sell any interest in any limited partnership;
(i) Any person that is a federal covered adviser;
(j) A person who has no place of business in this state and who, during the preceding 12 month period, has had not more than 5 clients, other than those specified in subparagraph (f), who are residents of this state;
(k) Such other persons not within the intent of this paragraph as the secretary of state may by rule or order designate.
IX-a. ""Investment adviser representative'' means any partner, officer, director, or a person occupying a similar status or performing similar functions, or other individual, except clerical or ministerial personnel, who is employed by or associated with an investment adviser that is licensed or required to be licensed under this chapter, or who has a place of business located in this state and is employed by or associated with a federal covered adviser; and who does any of the following:
(a) Makes any recommendations or otherwise renders advice regarding securities or other investments;
(b) Manages accounts or portfolios of clients;
(c) Determines which recommendation or advice regarding securities or other investments should be given;
(d) Solicits, offers, or negotiates for the sale of or sells investment advisory services; or
(e) Supervises employees who perform any of the functions in subparagraphs (a)-(d).
IX-b. ""Investment advisory contract'' means any contract or agreement whereby a person agrees to act as an investment adviser or to manage any investment or trading account for a person other than an investment adviser as defined in RSA 421-B:2, IX.
X. ""Investment metal'' means any object which contains gold, silver, or platinum, or any other metal which the secretary of state may specify by rule upon a showing that such other metal is being purchased and sold by the public as an investment.
XI. ""Investment gem'' means any gem which the secretary of state may specify by rule upon a showing that such gem is being purchased and sold by the public as an investment.
XII. ""Investment metal contract'' or ""investment gem contract'':
(1) A sale of an investment metal or investment gem in which the seller or an affiliate of the seller retains physical possession of the investment metal or investment gem; or
(2) A contract of purchase or sale which provides for the future delivery of an investment metal or investment gem, or any option to purchase or option to sell such a contract; or
(3) A sale of an investment metal or investment gem pursuant to a contract known to the trade as a margin account, margin contract, leverage account, or leverage contract provided, however, that, for the purposes of this paragraph, the term ""leverage contract'' shall also mean any contract for the purchase or sale of any investment metal or investment gem, whereby the seller, or an agent, affiliate or representative of the seller, directly or indirectly arranges, or offers to arrange, for the financing of any portion of the total amount of the purchase or sale of the investment metal or investment gem.
(b) But shall not include:
(1) The sale of an investment metal or investment gem where the seller has reasonable grounds to believe that the investment metal or investment gem is being acquired for manufacturing, commercial or industrial purposes; or
(2) The sale, or contract for the future purchase or sale, of jewelry, art objects or other manufactured or crafted goods other than bullion or bulk sales of coins; or
(3) The sale of an investment metal or investment gem where full payment is made to the seller and physical delivery is made to the purchaser personally, and not to an agent, within 20 days of the date of purchase provided that a purchaser may designate a bank, savings institution, trust company, or licensed broker-dealer, within this state only, and not within any other state, to accept physical delivery on his behalf if such bank, savings institution, trust company or licensed broker-dealer maintains such investment metal or investment gem in safekeeping and as the specifically identifiable property of the purchaser; or
(4) Any futures contracts traded on a commodities exchange registered under the Federal Commodity Futures Trading Commission Act of 1974.
XII-a. ""Investor member'' means an investor who has been properly qualified by and uses a designated matching service. Any of the following investors are properly qualified: any institutional buyer as described in RSA 421-B:17, II(g), any accredited investor as defined in Regulation D, 230.501 of the Securities and Exchange Act of 1933; or any individual investor who certifies that such investor possesses sufficient knowledge and experience in business and financial matters so as to be capable of evaluating the merits and the risks of prospective investments.
XIII. ""Issuer'' means any person who issues or proposes to issue any security and any promoter who acts for an issuer to be formed, except:
(a) With respect to certificates of deposit or trust certificates, ""issuer'' means the person performing the act and assuming the duties of depositor, manager or trustee pursuant to the provisions of the trust or other instrument under which the security is issued;
(b) With respect to certificates of interest or participation in oil, gas or mining rights, titles or leases, ""issuer'' means the owner of any such right, title or lease, who creates a fractional interest therein for the purposes of sale.
XIII-a. ""Issuer-dealer'' means any person including, but not limited to, a corporation, partnership, limited liability company, association, joint stock company, trust where the interests of the beneficiaries are evidenced by a security, unincorporated organization, government, political subdivision of a government, or any other entity, organized in this state or having its principal office in this state, and issuing its own securities for sale directly to any member of the general public who is not a general partner, executive officer, manager, or director of the issuer.
XIII-b. ""Issuer-member'' means an issuer who uses a designated matching service facility in accordance with RSA 421-B:17, II(s).
XIV. ""Non-issuer'' means not directly or indirectly for the benefit of the issuer or an affiliate of the issuer.
XIV-a. ""NSMIA'' means the National Securities Improvement Act of 1996, or rules or regulations promulgated thereunder.
XV. ""Open end mutual fund'' means an open end management company as defined in the Investment Company Act of 1940.
XV-a. ""Order'' means an order issued pursuant to this chapter.
XV-b. ""Other investment company'' means a closed end management company, face amount certificate company, or unit investment trust as such terms are defined in the Investment Company Act of 1940.
XVI. ""Person'' means an individual, corporation, partnership, association, joint stock company, trust where the interests of the beneficiaries are evidenced by a security, unincorporated organization, a government, political subdivision of a government, or any other entity.
XVI-a. ""Petition'' means a written request for action by the secretary of state including a staff petition for relief and any petition for rehearing pursuant to RSA 541.
XVI-b. ""Presiding officer'' means a person to whom the secretary of state has delegated the authority to preside over some or all of an administrative hearing.
XVII. ""Purchasing for investment'' means a purchase made for investment and not for the purpose of resale. In determining whether securities have been purchased for investment, the length of the period for which the securities are held will be one of the factors considered. Securities held for 2 years after their purchase shall be conclusively deemed to have been purchased for investment.
XVII-a. ""Revocation'' means the recall and cancellation of a license, registration, or privilege for either a definite or indefinite period of time. A new application and fee shall be submitted prior to the issuance of a new license or registration if the applicant otherwise qualifies.
XVIII. ""Rule'' means a rule as defined in RSA 541-A:1, XV, subject to all of the requirements of RSA 541-A.
XIX. ""Sale,'' ""sell,'' ""offer for sale,'' or ""offer to sell'' includes the following meanings and transactions:
(a) ""Sale'' or ""sell'' includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value.
(b) ""Offer'' or ""offer to sell'' includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.
(c) Any security given or delivered with, or as a bonus on account of; any purchase of securities or any other thing is considered to constitute part of the subject of the purchase and to have been offered and sold for value.
(d) A purported gift of assessable stock is considered to involve an offer and sale.
(e) Every sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert into another security of the same or another issuer, is considered to include an offer of the other security.
(f) The terms defined in this paragraph do not include:
(1) Any bona fide pledge or loan; or
(2) Any stock dividend, whether or not the corporation distributing the dividend is the issuer of the stock.
XIX-a. ""Sanction'' means any penalty imposed or authorized for imposition by the secretary of state, pursuant to RSA 421-B, including but not limited to license suspension or revocation, order to cease and desist or monetary penalties.
XIX-b. ""Secretary of state'' means the secretary of state or designee.
XIX-c. ""Securities Act of 1933,'' ""Securities Exchange Act of 1934,'' ""Investment Advisers Act of 1940,'' and ""Investment Company Act of 1940'' mean the federal statutes of those names as amended before or after the effective date of this paragraph.
XX. (a) ""Security'' means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit sharing agreement; membership interest in a limited liability company; partnership interest in a registered limited liability partnership; partnership interest in a limited partnership; collateral trust certificate; preorganization certificate or subscription; transferable shares; investment contract; investment metal contract or investment gem contract; voting trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas or mining right, title or lease or in payments out of production under such a right, title or lease; or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. ""Security'' does not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum or periodically for life or for some other specified period.
(b) Notwithstanding subparagraph (a), a membership interest in a limited liability company or a partnership interest in a registered limited liability partnership is not a security if:
(1) The secretary of state, by rule or order, determines that it is not a security;
(2) The limited liability company is a professional limited liability company or foreign professional limited liability company under RSA 304-D; or
(3) The registered limited liability partnership or foreign registered limited liability partnership:
(A) Is licensed, registered, certified, or otherwise authorized under the provisions of RSA 309-B, 310-A, 311, 315, 316, 317-A, 318, 326-B, 327, 329, 330-A or 332-B to render professional services, as defined in RSA 304-D:1, VI, including necessary related services, or
(B) Is related to a registered limited liability partnership or foreign registered limited liability partnership licensed, registered, certified, or otherwise authorized under the provisions of RSA 309-B, 310-A, 311, 315, 316, 317-A, 318, 326-B, 327, 329, 330-A or 332-B to render professional services, as defined in RSA 304-D:1, VI.
(c) For purposes of subparagraph (b)(3) of this paragraph, a registered limited liability partnership or foreign registered limited liability partnership is related to a registered limited liability partnership or foreign registered limited liability partnership engaged in the rendering of professional services if:
(1) Such registered limited liability partnership or foreign registered limited liability partnership provides services related or complementary to the professional services rendered by, or provides services or facilities to, the registered limited liability partnership or foreign registered limited liability partnership engaged in the rendering of professional services; and
(A) At least a majority of the partners in one partnership are partners in the other partnership, or
(B) At least a majority of partners in each partnership also hold interests or are members in another person, and each partnership renders services pursuant to an agreement with such other person, or
(C) The partnerships are affiliates within the meaning of RSA 421-B:2, I.
(D) In connection with the issuance of a cease and desist order issued by the secretary of state, and any hearings conducted, under RSA 421-B:23, I(a), the secretary may presume that a membership interest in a limited liability company or a partnership interest in a registered limited liability partnership is a security, and the person relying on subparagraph (b) of this paragraph has the burden of proving that the interest is not a security under the provisions of subparagraph (b).
XX-a. ""Staff'' means the employees of the department including but not limited to classified employees, contract employees, and shall include students involved in paid or unpaid programs.
XXI. ""State'' means any state, territory, or possession of the United States, the District of Columbia or Puerto Rico.
XXII. ""Suspension'' means the temporary recall or denial of any license, registration or privilege granted for a specified period of time. Such license, registration or privilege shall be reinstated and returned to the person when he otherwise qualifies without the necessity of a new application or fee, provided any suspended license, registration, or privilege has not expired in the interim.
SUITABILITY OF RECOMMENDATION: REASONABLE GROUNDS REQUIRED
I. In recommending to a customer the purchase, sale, or exchange of a security, a broker-dealer or broker-dealer agent must have reasonable grounds for believing that the recommendation is suitable for the customer upon the basis of the facts, if any, disclosed by the customer after reasonable inquiry as to his or her other security holdings and as to his or her financial situation and needs.
II. Before the execution of a transaction recommended to a noninstitutional customer, other than transactions with customers where investments are limited to money market mutual funds, a broker-dealer, salesperson, investment adviser, or investment adviser representative shall make reasonable efforts to obtain information concerning:
(a) The customer's financial status.
(b) The customer's tax status.
(c) The customer's investment objectives.
(d) Such other information used or considered to be reasonable by the broker-dealer, salesperson, investment adviser, or investment adviser representative in making recommendations to the customer.
I. It is unlawful for any person who receives any consideration from another person primarily for advising the other person as to the value of securities or their purchase or sale whether through the issuance of analyses or reports or otherwise:
(a) To employ any device, scheme, or artifice to defraud another person; or
(b) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the other person.
II. It is unlawful for any investment adviser or investment adviser agent to enter into, extend, or renew any investment advisory contract the terms of which are in contravention of such rules as the secretary of state may adopt as necessary or appropriate in the public interest or for the protection of investors.
III. It is unlawful for any investment adviser or investment adviser agent to take or have custody of any securities or funds of any client in contravention of such rules as the secretary of state may adopt as necessary or appropriate in the public interest or for the protection of investors.
IV. It shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of paragraph I for any investment adviser or investment adviser agent who has custody or possession of any funds or securities in which any client has any beneficial interest, to do any act or take any action, directly or indirectly, with respect to any such funds or securities, unless:
(a) All such securities of each such client are segregated, marked to identify the particular client who has the beneficial interest therein, and held in safekeeping in some place reasonably free from risk of destruction or other loss; and
(b) All such funds of such clients are deposited in one or more bank accounts which contain only clients' funds, such account or accounts are maintained in the name of the investment adviser as agent or trustee for such clients, and the investment adviser maintains a separate record for each such account which shows the name and address of the bank where such account is maintained, the dates and amounts of deposits in and withdrawals from such account, and the exact amount of each client's beneficial interest in such account; and
(c) Such investment adviser, immediately after accepting custody or possession of such funds or securities from any client, notifies 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, gives each such client written notice thereof; and
(d) Such investment adviser sends to each client, not less frequently than once every 3 months, an itemized statement showing the funds and securities in the custody or possession of the investment adviser at the end of such period, and all debits, credits, and transactions in such client's account during such period; and
(e) (1) All such funds and securities of clients are verified by actual examination at least once during each calendar year by an independent public accountant at a time that shall be chosen by such accountant without prior notice to the investment adviser. A certificate of such accountant stating that an examination of such funds and securities has been made, and describing the nature and extent of the examination, shall be attached to a completed Form ADV-E (17 C.F.R. 279.8) and transmitted to the secretary of state promptly after each examination.
(2) Subparagraph IV(e)(1) shall not apply to an investment adviser also registered as a broker-dealer under section 15 of the Securities Exchange Act of 1934 if (i) such broker-dealer is subject to and in compliance with Rule 15c3-1 (Reg. 240.15c3-1, 25,126) under the Securities Exchange Act of 1934, or (ii) such broker-dealer is a member of an exchange whose members are exempt from Rule 15c3-1 (Reg. 240.15c3-1, 25,126) under the provisions of paragraph (b)(2) thereof, and such broker-dealer is in compliance with all rules and settled practices of such exchange imposing requirements with respect to financial responsibility and the segregation of funds or securities carried for the account of customers.
(f) (1) Direct deduction (automatic payment) of investment adviser fees from a client account to the investment adviser does not constitute custody of client funds if:
(A) The client provides written authorization permitting the adviser's fees to be paid directly from the client's account held by an independent custodian.
(B) The adviser sends to the client and the custodian at the same time, a bill showing the amount of the fee, the value of the client's assets on which the fee was based, and the specific manner in which the adviser's fee was calculated.
(C) The custodian agrees to send to the client a statement, at least quarterly, indicating all amounts disbursed from the account including the amount of advisory fees paid directly to the advisers.
(2) Absent any of the conditions in subparagraphs(f)(1)(A)-(C), the adviser is deemed to have custody of client funds.
IV-a. It shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of paragraph I for any investment adviser licensed or required to be licensed to fail to disclose to any client or prospective client all material facts with respect to:
(a) A financial condition of the adviser that is reasonably likely to impair the ability of the adviser to meet contractual commitments to clients, if the adviser has discretionary authority (express or implied) or custody over such client's funds or securities, or requires prepayment of advisory fees of more than $500 from such client, 6 months or more in advance; or
(b) A legal or disciplinary event that is material to an evaluation of the advisers integrity or ability to meet contractual commitments to clients.
V. A person who is an investment adviser or investment adviser agent is a fiduciary and has a duty to act primarily for the benefit of the person's clients. While the extent and nature of this duty varies according to the nature of the relationship between an investment adviser and the clients and the circumstances of each case, an investment adviser or investment adviser agent shall not engage in unethical business practices which constitute violations of paragraph I, including the following:
(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 by the investment adviser or investment adviser agent.
(b) Exercising any 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 oral discretionary authority, 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 shall be executed, or both.
(c) Introducing 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 in light of the fact that an adviser in such situations can directly benefit from the number of securities transactions effected in a client's account. This subparagraph appropriately forbids an excessive number of transaction orders to be induced by an investment adviser or investment adviser agent for a client's account.
(d) Placing an order to purchase or sell a security for the account of a client without the authority to do so.
(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) Borrowing money or securities from a client unless a client is a broker-dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds.
(g) Loaning money to a client unless the investment adviser is a financial institution engaged in the business of loaning funds or the client is an affiliate of the investment adviser.
(h) Misrepresenting to any advisory client, or prospective advisory client, the qualifications of the investment adviser, investment adviser agent, or any employee of the investment adviser, or misrepresenting the nature of the advisory services being offered or fees to be charged for such services, 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 investment adviser or investment adviser agent without disclosing that fact. This prohibition does not apply to a situation where the investment adviser or investment adviser agent uses published research reports or statistical analysis to render advice or where an adviser orders such a report in the normal course of providing service.
(j) Charging a client an unreasonable advisory fee.
(k) Failing to disclose to clients in writing before any advice is rendered any material conflict of interest relating to the investment adviser, investment adviser agent, or any of its employees which could reasonably be expected to impair the rendering of unbiased and objective advice including:
(1) Compensation arrangements connected with advisory services to clients which are in addition to compensation from such clients or such services; and
(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.
(l) Guaranteeing a client that a specific result will be achieved, such as gain or no loss, with advice which will be rendered.
(m) Publishing, circulating, or distributing any advertisement which does not comply with Rule 206(4)-1 under the Investment Advisers Act of 1940.
(n) Disclosing the identity, affairs, or investments of any client unless required by law to do so, or unless consented to in writing 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 or investment adviser agent has custody or possession of such securities or funds when the adviser's action is subject to and does not comply with the requirements of Reg. 206(4)-2 under the Investment Advisers Act of 1940.
(p) Entering into, extending, or renewing any investment adviser contract unless such contract is in writing and discloses, in substance, the services to be provided, the term of the contract, the advisory fee, the formula for computing the fee, the amount of prepaid fee to be returned in the event of contract termination or non-performance, whether the contract grants discretionary power to the investment adviser or investment adviser agent, that no assignment of such contract shall be made by the investment adviser without the written consent of the other party to the contract, or that:
(1) 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 except that this subparagraph shall not:
(A) Be construed to prohibit an investment advisory contract which provides for compensation based upon the total value of a fund averaged over a definite period, or as of definite dates, or taken as of a definite date; or
(B) Apply to an investment advisory contract with a person (except a trust, governmental plan, collective trust fund, or separate account), provided that the contract relates to the investment of assets in excess of $1,000,000, if the contract provides for compensation based on the asset value of the company or fund under management averaged over a specified period and increasing and decreasing proportionately with the investment performance of the company or fund over a specified period in relation to the investment record of an appropriate index of securities prices or such other measure of investment performance as the secretary of state by rule may specify.
(2) The provisions of subparagraph (1) shall not be deemed to prohibit an investment adviser from entering into, performing, renewing or extending an investment advisory contract that provides for compensation to the investment adviser on the basis of a share of the capital gains upon, or the capital appreciation of, the funds, or any portion of the funds, of a client, provided that the client entering into the contract subject to this section is a qualified client defined as:
(A) A natural person who or a company that immediately after entering into the contract has as least $750,000 under the management of the investment adviser.
(B) A natural person who or a company that the investment adviser entering into the contract (and any person acting on his behalf) reasonably believes, immediately prior to entering into the contract, either:
(i) Has a net worth (together, in the case of a natural person, with assets held jointly with a spouse) of more than $1,500,000 at the time the contract is entered into; or
(ii) Is a qualified purchaser as defined in section 2(a)(51)(A) of the Investment Company Act of 1940 (14 U.S.C. section 802-a(a)(51)(A)) at the time the contract is entered into.
(C) A natural person who immediately prior to entering into the contract is:
(i) An executive officer, director, trustee, general partner, or person serving in a similar capacity, of the investment adviser; or
(ii) An employee of the investment adviser (other than an employee performing solely clerical, secretarial or administrative functions with regard to the investment adviser) who, in connection with his or her regular functions or duties, participates in the investment activities of such investment adviser, provided that such employee has been performing such functions and duties for or on behalf of the investment adviser, or substantially similar functions or duties for or on behalf of another company for at least 12 months.
(3) The secretary of state, by rule, upon his or her own motion, or by order upon application, may conditionally or unconditionally exempt any person or transaction, or any class or classes of persons or transactions, from subparagraph (1), if and to the extent that the exemption relates to an investment advisory contract with any person that the secretary of state determines does not need the protections of subparagraph (1), on the basis of such factors as financial sophistication, net worth, knowledge of and experience in financial matters, amount of assets under management, relationship with a licensed investment adviser, and such other factors as the secretary of state determines are consistent with this paragraph.
(q) Failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information in violation of section 204A of the Investment Advisers Act of 1940.
(r) Entering into, extending, or renewing any advisory contract which would violate section 205 of the Investment Advisers Act of 1940 and the rules promulgated thereunder. This provision shall apply to all investment advisers and investment adviser agents licensed or required to be licensed under this chapter.
(s) Indicating, in an advisory contract, any condition, stipulation, or provisions binding any person to waive compliance with any provision of this chapter or of the Investment Advisers Act of 1940 or any other practice that would violate 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 in contravention of section 206(4) of the Investment Advisers Act of 1940, notwithstanding the fact that such 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 this chapter or any rule adopted under it.
The conduct set forth above is not inclusive. Engaging in other conduct such as nondisclosure, incomplete disclosure, or deceptive practices, shall be deemed an unethical business practice. The federal statutory and regulatory provisions referenced in this paragraph shall apply to investment advisers and investment adviser agents, regardless of whether the federal provision limits its application to advisers subject to federal registration.
It is unlawful for any person to effect any transaction in, or to induce the purchase or sale of any security by means of any manipulative, deceptive or otherwise fraudulent device or contrivance, including any fictitious quotation. The terms ""manipulative, deceptive, or otherwise fraudulent device or contrivance'' shall include, but shall not be limited to, the following practices:
I. Effecting any transaction in a security which involves no change in the beneficial ownership thereof, or entering any order or orders for the purchase or sale of any security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale or purchase of the security, have been or will be entered by or for the same or affiliated persons, for the purpose of creating a false or misleading appearance of active trading in the security or a false or misleading appearance with respect to the market for the security.
II. Effecting, alone or with one or more other persons, a series of transactions in any security creating actual or apparent active trading in the security or raising or depressing the price of the security, for the purpose of inducing the purchase or sale of the security by others.
III. Inducing the purchase or sale of any security by the circulation or dissemination of information to the effect that the price of the security will or is likely to rise or fall because of market operations of any one or more persons conducted for the purpose of raising or depressing the price of the security, if he is selling or offering to sell, or purchasing or offering to purchase the security, or is receiving a consideration, directly or indirectly, from any such person.
IV. Any act of any broker-dealer designed to effect with or for any customer's account, in respect to which such broker-dealer or his or her agent or employee is vested with any discretionary power, any transaction for the purchase or sale of a security unless:
(a) Immediately after effecting such transaction such broker-dealer makes a record of such transaction, which record includes:
(1) The name of such customer.
(2) The name, amount, and price of the security.
(3) The date and time when such transaction took place.
(b) Such broker-dealer sends each month to each customer, in whose account such broker-dealer exercises any discretionary authority, an itemized statement showing the funds and securities in the custody or possession of the broker-dealer at the end of such period, and all debits, credits, and transactions in such client's account during such period.
V. Using information in violation of Rule 10b-5 of the Securities Exchange Act of 1934 about an issuer, learned from the issuer's officers, directors, or key employees, which is not generally available to the public and which would significantly affect the market price of the issuer's securities for personal benefit, directly or indirectly, in the offer, sale, or purchase of the issuer's securities, as a basis for making a recommendation regarding a security.
VI. Creating an atmosphere of false supply or demand in a market for publicly traded securities or engaging in market manipulations.
VII. Creating unreasonable delays in delivering securities.
VIII. Representing that securities will be listed on a national exchange or that application for listing will be made, without any basis in fact for such representation.
IX. Selling or soliciting the purchase of one security from a market in publicly traded securities conditioned upon the customer's agreement to purchase another security.
It is unlawful for any person to make or cause to be made in any document filed under this chapter or in any proceeding under this chapter any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect or, in connection with such statement, to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.
I. Any person who willfully violates any provisions of RSA 421-B:3, 421-B:4, 421-B:5 or fails to comply with an order from the secretary of state to cease and desist or for an injunction issued pursuant to RSA 421-B:23, or who fails to comply with an order to pay a fine, penalty, rescission, restitution, or disgorgement greater than $10,000 pursuant to RSA 421-B:10, 421-B:23, or 421-B:26, or who violates RSA 421-B:19 knowing that the statement was false or misleading in any material respect, shall be guilty of a class B felony. Each of the acts specified shall constitute a separate offense and a prosecution or conviction for any one of such offenses shall not bar prosecution or conviction for any other offense.
II. Any person who willfully violates RSA 421-B:6, 421-B:11 or 421-B:20 shall be guilty of a class A misdemeanor if a natural person, and guilty of a felony if any other person. Each of the acts specified shall constitute a separate offense and a prosecution or conviction for any one of such offenses shall not bar prosecution or conviction for any other offense. For any subsequent offense, any person shall be guilty of a class B felony.
IV. Nothing in this chapter limits the power of the state to punish any person for any conduct which constitutes a crime by statute.
I. Any person who sells a security in violation of RSA 421-B:11 or 421-B:20, I or of any condition imposed under RSA 421-B:14, IV or RSA 421-B:15, V, VI and VII, is liable to the person purchasing the security from him, who may sue either in equity for rescission upon tender of the security or at law for damages if he no longer owns the security. In any action for rescission, the purchaser shall be entitled to recover the consideration paid for the security together with interest at the legal rate, costs, and reasonable attorney's fees, less the amount of any income received on the securities. In an action at law, damages shall be the consideration paid for the security together with interest at the legal rate to the date of disposition, costs, and reasonable attorney's fees, less the value of the security at the date of disposition.
II. Any person who violates RSA 421-B:3 in connection with the purchase or sale of any security shall be liable to any person damaged by the violation of that section who sold such security to him or to whom he sold such security, and any person who violates RSA 421-B:5 in connection with the purchase or sale of any security shall be liable to any person damaged by the conduct proscribed by RSA 421-B:5. Any person who violates RSA 421-B:4 in connection with the purchase or sale of any security shall be liable to any investment advisory client of his who is damaged by the violation of that section. Damages in an action pursuant to this paragraph shall include the actual damages sustained plus interest from the date of payment or sale, costs, and reasonable attorney's fees.
III. Every person who directly or indirectly controls a person liable under paragraph I or II, every partner, principal executive officer, or director of such person, every person occupying a similar status or performing a similar function, every employee of such person who materially aids in the act or transaction constituting the violation, and every broker-dealer or agent who materially aids in the acts or transactions constituting the violation, are also liable jointly and severally with and to the same extent as such person. There is contribution as in cases of contract among the several persons so liable.
IV. No person shall be liable under paragraphs I and III who shall sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the existence of facts by reason of which the liability is alleged to exist.
V. Any tender specified in this section may be made at any time before entry of judgment. Tender by a purchaser shall require only notice of willingness to exchange the security for the amount computed pursuant to paragraph I. Tender by a seller shall require only notice of willingness to pay the amount specified in exchange for the security. Any notice may be given by service as in civil actions or by certified mail to the last known address of the person liable.
VI. Every cause of action under this chapter survives the death of any person who might have been a plaintiff or defendant.
VII. A person may not recover under this section in actions commenced more than 6 years after his first payment of money to the broker-dealer or issuer in the contested transaction.
VIII. No purchaser may commence an action under paragraph I if, before suit is commenced, the purchaser has received a written offer to repurchase the security for cash payable on delivery of the security equal to the consideration paid, together with interest at the legal rate from the date of payment, less the amount of any income received on the security or, if the purchaser no longer owns the security, an offer to pay an amount in cash equal to the damages computed in accordance with paragraph I and the purchaser has failed to accept such offer in writing within 30 days of its receipt. No offer shall be effective to prevent suit under this section unless a duplicate copy thereof shall have been filed with the secretary of state at least 20 days prior to its delivery to the offeree and the secretary of state shall not have objected to the offer within that time. The offer shall be in the form and contain the information the secretary of state by rule or order prescribes. If the offer is not performed in accordance with its terms, suit by the offeree under this section shall be permitted without regard to this subdivision.
IX. No person who has made or engaged in the performance of any contract in violation of any provision of this section or any rule or order under this section or has acquired any purported rights under any such contract with knowledge of the facts by reason of which its making or performance was in violation may base any suit on such violation under the contract.
X. Any condition, stipulation or provision binding any person to waive compliance with any provision of this chapter or any rule or order under this chapter in the purchase or sale of any security is void.
XI. The rights and remedies promulgated by this chapter are in addition to any other right or remedy that may exist at law or in equity, but this chapter does not create any cause of action not specified in this section or RSA 421-B:8, V. No civil cause of action may be based solely upon the failure of a broker-dealer or agent to comply with the requirements of RSA 421-B:6, I or III, except a cause of action arising under RSA 421-B:23.
I. Prior law exclusively governs all suits, actions, prosecutions, or proceedings which are pending or may be initiated on the basis of facts or circumstances occurring before January 1, 1982, except that no civil suit or action may be maintained to enforce any liability under prior law unless brought within any period of limitation which applied when the cause of action accrued and in any event within 3 years after January 1, 1982.
II. All effective licenses and qualifications under prior law, all administrative orders relating to such registrations, and all conditions imposed upon such registrations remain in effect so long as they would have remained in effect if this chapter had not been passed. They are considered to have been filed, entered, or imposed under this chapter, but are governed by prior law.
III. Prior law applies in respect of any offer or sale made within one year after January 1, 1982, pursuant to an offering begun in good faith before that date on the basis of an exemption available under prior law.
IV. Judicial review of all administrative orders as to which review proceedings have not been instituted by January 1, 1982, are governed by this chapter, except that no review proceeding may be instituted unless the petition is filed within any period of limitation which applied to a review proceeding when the order was entered and in any event within 60 days after January 1, 1982.
The above is not the complete act. This page contains only certain sections of the statute which we believe you may find informative. We do not and cannot guarantee the above sections are current law in this state. Legislatures may enact revised statutes at any time. Moreover these sections are presented for informational purposes only and are presented “as is” with all faults and with no warranties or guarantees as to the accuracy. Further, The content on these pages are not offered or intended to be legal advice by this firm for any purpose or manner whatsoever. If you require the current and complete version of the Law in your state, you should visit the Legislature home page of the particular state for more information or contact an attorney for advice on obtaining such information.