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Law Offices of Eric Norstedt, P.A.
2924 Davie Road, Suite 200
Davie, Florida, 33314
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Securities Law
FEDERAL SECURITIES LAW
 - Securities Act of 1933
 - Securities Act of 1934
    - Rules Promulgated under
      the Securities Act of 1934

STATE SECURITIES LAW

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Selected Sections of the

North Dakota Securities Act

 

Sections included on this page:


NORTH DAKOTA ADMINISTRATIVE CODE

10-04-10.1. Advisory activities.

1.   It is unlawful for any person who receives, directly or indirectly, any consideration from another person 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 the other 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.

2.   It is unlawful for any person, in the solicitation of a client for investment advisory services, to make any false or misleading statement of material fact, or to fail to disclose a material fact.

3.   It is unlawful for any person who provides investment advisory services subject to the provisions of this chapter to knowingly sell any security to or purchase any security from a client while acting for the person’s own account or as a broker for another client unless the person first makes a written disclosure to the client of the capacity in which the person is acting and obtains the client’s written consent to the transaction.

4.   It is unlawful for any person who provides investment advisory services subject to the provisions of this chapter to engage in dishonest or unethical practices as the commissioner may define by rule.

5.   It is unlawful for any investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing that:

a.   The investment adviser shall not be compensated on the basis of a share of capital gains, earnings, or capital appreciation of the funds or any portion of the funds of the client. This does not prohibit an investment advisory contract that provides for compensation based on the total value of a fund determined as of a definite date or averaged as of definite dates or over a definite period.

b.   An assignment of the investment advisory contract may not be made by the investment adviser unless the investment adviser notifies the client of the intended assignment and obtains the prior written consent of the client.

c.   The investment adviser shall provide written notice to the client within fifteen days of any change of ownership in excess of five percent.

d.   The investment adviser shall provide written notice to the client within fifteen days of a change of controlling interest of the investment adviser. The client may terminate the investment advisory contract without penalty by providing a written notice to the investment adviser within thirty days after the client’s receipt of the notice of change of controlling interest.
6.   It is unlawful for any investment adviser to take or have custody of any securities or funds of any client unless the investment adviser acts as a fiduciary pursuant to duties as an executor, guardian, conservator, receiver, or trustee.

10-04-15. Fraudulent practices.

It shall be a fraudulent practice and it shall be
unlawful:

1.   For any person knowingly to subscribe to, or make or cause to be made, any material false statement or representation in any application, financial statement, or other document or statement required to be filed under any provision of this chapter, or to omit to state any material statement or fact in any such document or statement which is necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading.

2.   For any person, in connection with the offer, sale, or purchase of any security, directly or indirectly, to:

a.   Employ any device, scheme, or artifice to defraud;
b.   Make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; or
c.   Engage in any act, practice, or course of business which operates or would operate as a fraud or deception upon purchasers or the public.

3.   For any person that advises others for compensation, either directly or indirectly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation as part of a regular business, issues or promulgates analyses or reports relating to securities:

a.   To employ a device, scheme, or artifice to defraud another person; or
b.   To engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person or the public.

4.   For any person, in connection with the offer, sale, or purchase of any security, or advising a person to offer, sell, or purchase any security, directly or indirectly, to effect a series of transactions creating actual or apparent active trading in any security, or to raise or depress the price of a security, for the purpose of inducing the purchase of the security.

10-04-17. Remedies.

1. Every sale or contract for sale made in violation of any of the provisions of this chapter, or of any rule or order issued by the commissioner under any provisions of this chapter, shall be voidable at the election of the purchaser. The person making such sale or contract for sale, and every director, officer, or agent of or for such seller who shall have participated or aided in any way in making such sale shall be jointly and severally liable to such purchaser who may sue either at law or in equity to recover the full amount paid by such purchaser, together with all taxable court costs, interest as provided in this subsection, and reasonable attorney's fees, less the amount of any income received on the securities, upon tender to the seller, in person or in open court, of the securities sold or of the contracts made, or for damages if the purchaser no longer owns the securities. Damages are the amount that would be recoverable upon a tender less the value of the securities when the purchaser disposed of them and interest as provided in subsection 2 from the date of disposition. No purchaser shall claim or have the benefit of this section if the purchaser shall have refused or failed to accept, within thirty days from the date of such offer, an offer in writing of the seller to take back the securities in question and to refund the full amount paid by such purchaser, together with interest on such amount for the period from the date of payment by such purchaser down to the date of repayment. Any offer made pursuant to this subsection must be registered or exempt from registration under this chapter in order to preclude a subsequent civil action by the purchaser. For the purposes of this subsection, interest shall be computed as follows:

            a. In case such securities consist of interest-bearing obligations, at the same rate as provided in such securities, less the amount of any income received on the securities

            .b. In case such securities consist of other than interest-bearing obligations, at the legal rate specified in section 47-14-05, less the amount of any income received on the securities.

2. Any person that receives directly or indirectly any consideration for providing investment advice to another person and violates this chapter is liable to the other
person as follows:

            a. For violations of section 10-04-15, the person is liable for the actual damages caused by the violative conduct, interest at the rate as specified in section 47-14-05, costs, and reasonable attorney's fees, less the amount of any income received as a result of the violative conduct.

            b. For all other violations of this chapter, or any rule promulgated thereunder, the person is liable for all income collected in connection with the violative conduct.

3. The provisions of this section do not apply to a violation of section 10-04-08.4.

4. Nothing in this chapter shall limit any statutory or common-law right of any person in any court for any act involved in the sale of securities.

5. No action may be taken under this section after five years from the date that the aggrieved party knew or reasonably should have known about the facts that are the basis for the alleged violation.

6. Each of the following persons are liable jointly and severally with and to the same effect as persons liable under this section:

a.   A person who controls, supervises, or serves as an officer, director, or managing partner of a person liable under this section, unless the person did not know, and in the exercise of reasonable care could not have known, of the conduct by reason of which the liability is alleged to exist.

b.   An individual who is an employee of or associated with a person liable under this section and who materially aids the conduct giving rise to the liability, unless the individual did not know, and in the exercise of reasonable care could not have known, of the conduct by reason of which the liability is alleged to exist.

c.   A person who is a broker-dealer, agent, investment adviser, or investment adviser representative that materially aids the conduct giving rise to the liability under this section, unless the person did not know, and in the exercise of reasonable care could not have known, of the conduct by reason of which the liability is alleged to exist.

NORTH DAKOTA ADMINISTRATIVE CODE

CHAPTER 73-02-09
FRAUDULENT AND UNETHICAL SALES PRACTICES AND MANIPULATIVE CONDUCT 

73-02-09-01.    Fraudulent  practices.  

 A  person  who  engages  in  one  or  more  of  the  following  practices  has  engaged  in  an  "act,  practice,  or  course  of  business which operates or would operate as a fraud" under North Dakota Century  Code  section  10-04-15  but  acts  or  practices  not  described  in  this  rule  may  also  be fraudulent.

1.         Entering  into  a  transaction  with  a   customer  in  any  security  at  an excessive  price  or  at  a  price  not  reasonably  related  to  the  current  market  price  of  the  security  or  receiving  an  excessive  commission  or  profit under the rules of the national association of securities dealers.

2.         Contradicting or negating the importance of any information contained  in  a  prospectus  or  other  offering  materials  with  intent  to  deceive  or  mislead  or  using  any  advertising  or  sales  presentation  in  a  deceptive  or misleading manner.

3.         For  any  person,  in  connection  with  the  offer,  sale,  or  purchase  of  a security,  or  the  recommendation  of  an  offer,  sale,  or  purchase  of  a security, to lead a customer to believe that the person is in possession of  material,  nonpublic  information  which  would  impact  on  the  value  of the security.

4.         In   connection   with   the   solicitation   of   a   sale   or   purchase   of   a  security,   engaging  in  a  pattern  or  practice  of  making  contradictory  recommendations  to  different  investors  who  have  similar  investment objectives for some investors to sell and others to purchase the same security  at  approximately  the  same  time,  when  not  justified  by  the particular circumstance of each investor.

5.         Failing to make a bona fide public offering of all the securities allotted to a broker-dealer for distribution by:

                        a. Transferring  securities  to  a  customer,  another  broker-dealer,  or  a fictitious  account  with  the  understanding  that  those  securities  will  be returned to the broker-dealer or its nominees;

                        b.Parking, hiding, delaying, or withholding securities from trading; or

                        c. Engaging   in   any   unreasonable   delay   in   delivery   of   securities
purchased  by  any  customers  or  in  the  payment  upon  request  of  free credit balances.

6. Although  nothing  in  this  section  precludes  application  of  the  general  antifraud  provisions  against  anyone  for  practices  similar  in  nature  to  the  practices  discussed  in  this  subsection,  the  following  subsections specifically apply only in connection with the solicitation of a purchase  or  sale  of  over  the  counter  equity  securities  that  are  not  listed  on  the national association of securities dealers automated quotation system  (NASDAQ):

a. Failing to disclose the firm's present bid and ask price of a particular security at the time of solicitation and confirmation.

b. Failing  to  advise  the  customer,   both  at  the  time  of  solicitation  and  on  the  confirmation,  of  any  and  all  compensation  related  to  a  specific  securities  transaction  to  be  paid  to  the  agent  including commissions, sales charges, or concessions.

c. In connection with a principal transaction, failing to disclose, both at  the time of solicitation and confirmation, a short inventory position  in  the  firm's  account  of  more  than  five  percent  of  the  issued  and outstanding shares of the class of securities of the issuer if the firm  is a market maker at the time of the solicitation.

d. Conducting sales contests in a particular security.

e. After  a  solicited  purchase  by  a  customer,  failing  or  refusing,  in connection  with  a  principal  transaction,  to  promptly  execute  sell orders.

f. Soliciting a secondary market transaction when there has not been a bona fide distribution in the primary market.

g. Engaging   in   a   pattern of compensating   an   agent   in different  amounts for effecting sales and purchases in the same security.

7.  Effecting  any  transaction  in,  or  inducing  the  purchase  or  sale  of  any  security  by  means  of  any  manipulative,  deceptive,  or  other  fraudulent  scheme  or  course  of  actions  including,  but  not  limited  to,  the  use  of  boilerroom tactics or use of fictitious or nominee accounts.

8.   Failure to deliver a prospectus as required by federal law.

73-02-09-02.  Unethical practices of dealers.

The purpose of this section is to identify practices in the securities business which are dishonest or unethical.  The following must be deemed "dishonest or unethical practices" by any person other  than a sales agent, as used in North Dakota Century Code section 10-04-11.  This section is not intended to be all inclusive, and thus, acts or practices not enumerated herein may also be deemed dishonest or unethical.

1.         Engaging in any unreasonable and unjustifiable delay in the delivery of       securities  purchased  by  any  of  its  customers  or  in  the  payment  upon  request of free credit balances reflecting completed transactions of any of its customers.

2.         Inducing  trading  in  a  customer's  account  which  is  excessive  in  size or  frequency  in  view  of  the  financial  resources  and  character  of  the account.

3.         Recommending to a customer the purchase, sale, or exchange of any  securities without reasonable grounds to believe that such transaction  or recommendation is suitable for the customer based upon reasonable inquiry   concerning   the   customer's   investment   objectives,   financial situation  and  needs,  and  any  other  relevant  information  known  by  the dealer.

4.         Executing  a  transaction on  behalf  of  a customer  without  authorization to  do so.

5.         Exercising   any   discretionary   power   in   effecting   a   transaction for  a   customer's   account   without   first   obtaining   written   discretionary  authority  from  the  customer,  unless  the  discretionary  power  relates solely to the time or price for the execution of orders.

6.         Executing  any  transaction  in  a  margin  account  without  securing  from the customer a properly executed written margin agreement prior to the initial transaction in the account.

7.         Failing  to  segregate  customers'  free  securities  or  securities  held  in safekeeping.

8.         Hypothecating  a  customer's  securities  without  having  a  lien  thereon unless the dealer secures from the customer a properly executed written consent  promptly  after  the  initial  transaction,  except  as  permitted  by rules of the securities and exchange commission.

9.         Entering   into   a   transaction   with   or   for   a   customer   at   a   price   not reasonably   related   to   the   current   market   price   of   the   security   or receiving an unreasonable commission or profit.

10.       Failing  to  furnish  to  a  customer  purchasing  securities  in  an  offering registered  pursuant  to  North  Dakota  Century  Code  section  10-04-07 or  10-04-08,  no  later  than  the  date  of  confirmation  of  the  transaction, either a final prospectus or a preliminary prospectus and an additional document,  which  together  include  all  information  set  forth  in  the  final prospectus; if the offering is not registered pursuant to section 10-04-07 or 10-04-08, the dealer shall furnish disclosure documents customarily available.

11.       Charging  unreasonable  and  inequitable  fees  for  services  performed, including  miscellaneous  services  such  as  collection  of  moneys  due for principal,  dividends,  or  interest;  exchange  or transfer  of  securities; appraisals,  safekeeping,  or  custody  of  securities,  and  other  services related to its securities business.

12.       Offering to buy from or sell to any person any security at a stated price unless  such  dealer  is  prepared  to  purchase  or  sell,  as  the  case  may be, at such price and under such conditions as are stated at the time of such offer to buy or sell.

13.       Representing  that  a  security  is  being  offered  to  a  customer  at  the market or a price relevant to the market price unless such dealer knows or  has  reasonable  grounds  to  believe  that  a  market  for  such  security exists other than that made, created, or controlled by such dealer, or by any person for whom it is acting or with whom it is associated in such distribution, or any person controlled by, controlling, or under common control with such dealer.

14.       Effecting  any  transaction  in,  or  inducing  the  purchase  or  sale  of,  any security by means of any manipulative, deceptive, or fraudulent device, practice, plan, program, design, or contrivance, which may include, but not be limited to:

                        a.         Effecting any transaction in a security which involves no change in the beneficial ownership thereof;

                        b.         Entering an 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  substantially  the  same price, for the sale of any such security, has been or will be entered by or for the same or different parties 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; provided, however, nothing in this subsection shall prohibit a dealer from entering bona fide agency cross transactions for its
customers;  or

                        c.         Effecting,  alone  or  with  one  or  more  other  persons,  a  series  of transactions  in  any  security  creating  actual  or  apparent  active trading in such security or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.

15.       Guaranteeing a customer against loss in any securities account of such customer carried by the dealer or in any securities transaction effected by the dealer with or for such customer.

16.       Publishing or circulating,  or causing to be published or circulated, any notice,  circular,  advertisement,  newspaper article,  investment service, or communication of any kind which purports to report any transaction as a purchase or sale of any security unless such dealer believes that such transaction was a bona fide purchase or sale of such security; or which  purports  to  quote  the  bid  price  or  asked  price  for  any  security, unless such dealer believes that such quotation represents a bona fide bid for, or offer of, such security.

17.       Using  any  advertising  or  sales  presentation  in  such  a  fashion  as  to be  deceptive  or  misleading.    An  example  of  such  practice  would  be a  distribution  of  any  nonfactual  data,  material,  or  presentation  based on  conjecture,  unfounded  or  unrealistic  claims  or  assertions  in  any brochure,  flyer,  or  display  by  words,  pictures,  graphs,  or  otherwise designed   to   supplement,   detract   from,   supersede,   or   defeat   the purpose or effect of any prospectus or disclosure.

18.       Failing to disclose that the dealer is controlled by, controlling, affiliated with,  or  under  common  control  with  the  issuer  of  any  security  before entering  into  any  contract  with  or  for  a  customer  for  the  purchase  or sale  of  such  security,  the  existence  of  such  control to  such  customer; and if such disclosure is not made in writing, it must be supplemented by  the  giving  of  written  disclosure  at  or  before  the  completion  of  the transaction.

19.       Failing to make a bona fide public offering of all of the securities allotted to a dealer for distribution, whether acquired as an underwriter, a selling group member, or from a member participating in the distribution as an underwriter or selling group member.

20.       Failing  or  refusing  to  furnish  a  customer,  upon  reasonable  request, information to which the customer is entitled, or to respond to a formal written request or complaint.

21.       Failing or refusing to provide, within fourteen days or such lesser time as prescribed by the securities commissioner, information requested by the  commissioner  or  the  commissioner's  representatives  pursuant  to the commissioner's investigative authority.

22.       Extending credit to a customer in violation of the Securities Exchange Act of 1934 or the regulations of the federal reserve board.

23.       Engaging in acts or practices enumerated in section 73-02-09-01.

24.       Failing  to  promptly  provide  the  most  current  prospectus,   the  most recently  filed  periodic  report  filed  under  section  13  of  the  Securities Exchange Act or other research reports when requested to do so by a customer in the solicitation of a sale or purchaser of an over the counter non-national   association   of   securities   dealers   automated   quotation system security.

25.       Marking  any  order  tickets  or confirmations  as  unsolicited  when  in  fact the transaction is solicited.

26.       Failing  to  provide  each  customer  with  a  statement  of  account  which, with respect to all over the counter non-national association of securities dealers  automated  quotation  system  equity  securities  in  the  account, contains a value for each security based on the closing market bid on a date certain for any month in which activity has occurred in a customer's account, but in no event less than every three months; provided that, this subsection shall apply only if the firm has been a market maker in such security at any time during the period for which the monthly or quarterly statement is issued.

27.       Engaging or aiding in boilerroom operations or high pressure tactics in connection with the promotion of speculative offerings or hot issues by means  of  an  intensive  telephone  campaign,  whereby  the  prospective purchaser is encouraged to make a hasty  decision to buy irrespective of the purchaser's investment needs and objectives.

28.       Engaging in other conduct such as forgery, embezzlement, nondisclosure,   incomplete   disclosure   or   misstatement   of   material facts, or manipulative or deceptive practices.

29.       Failing   to   comply   with   any   applicable   provision   of   the   Rules   of Fair   Practice   of   the   national   association   of   securities   dealers   or any   applicable   fair   practice   or   ethical   standard   promulgated   by the   securities   and   exchange   commission   or   by   a   self-regulatory organization approved by the securities and exchange commission.

73-02-09-03.   Unethical  practices  of  sales  agents.  

The  purpose  of  this section  is  to  identify  practices  in  the  securities  industry  which  are  dishonest  or unethical.  The following must be deemed "dishonest or unethical practices" by an agent, as used in North Dakota Century Code section 10-04-11.  This section is not intended to be all inclusive, and thus, act or practices not enumerated herein may also be deemed dishonest or unethical.

1.         Engaging  in  the  practice  of  lending  or  borrowing  money  or  securities from  a customer,  or acting as a custodian for money,  securities,  or an executed stock power of a customer unless the customer is a member of the agent's family and the act or practice is approved in advance by supervisory personnel.

2.         Effecting  securities  transactions  not  recorded  on  the  regular  books or   records   of   the   dealer   which   the   agent   represents,   unless   the transactions  are  authorized  in  writing  by  the  dealer  prior  to  execution of the transactions.

3.         Establishing or maintaining an account containing fictitious information in order to execute transactions which would otherwise be prohibited.

4.         Sharing directly or indirectly in profits or losses in the account of any customer without  the  written  authorization  of  the  customer  and  the  dealer  which  the  agent represents.

5.         Dividing or otherwise splitting the agent's commissions, profits, or other compensation from the purchase or sale of securities with any person not also registered as an agent for the same dealer, or for a dealer under direct or indirect common control.

6.         Engaging in acts or practices specified in subsections 2, 3, 4, 5, 6, 9, 10, 14, 15, 16, 17, 21, 23, 24, 25, 26, 27, 28, and 29 of section 73-02-09-02.


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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.

 
 
 
 

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