A person shall not:
(1) Offer or sell a security except in accordance with this chapter;
(2) Deliver to a purchaser a security required to be registered under § 31- 5603.01 unless accompanied or preceded by a registration statement that meets the requirements of § 31-5603.02(b), § 31-5603.03(b), or § 31- 5603.04(b);
(3) Act as a broker-dealer, agent, investment adviser, or investment adviser representative unless licensed as required under § 31-5602.01 or § 31- 5602.02; or
(4) Fail to file with the Commissioner an application, report, or document required to be filed under this chapter, or any rule or regulation adopted by the Commissioner under this chapter, or to fail to comply with the terms of an order issued by the Commissioner issued under this chapter.
(Oct. 26, 2000, D.C. Law 13-203, § 501, 47 DCR 7837.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For Law 13-203, see notes following § 31-5601.01.
(a) A person shall not:
(1) In connection with the rendering of investment advice or in connection with the offer, sale, or purchase of an investment or security, including a security exempt under § 31-5604.01 sold in a transaction exempt under § 31- 5604.02, directly or indirectly:
(A) Employ a device, scheme, or artifice to defraud;
(B) Obtain money or property by means of an untrue statement of a material fact or an omission to state a material fact in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or
(C) Engage in a transaction, practice, or course of business which operates, or would operate, as a fraud or deceit upon a person;
(2) Except as provided in subsection (b) of this section, publish, give publicity to, or circulate a notice, circular, advertisement, newspaper, article, letter, investment service, communication, or broadcast which, though not purporting to offer a security for sale, describes the security for a consideration received or to be received directly or indirectly from an issuer, underwriter, or dealer, or an agent or employee of an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of the consideration and the amount of the consideration;
(3) In a matter within the jurisdiction of the Commissioner, falsify, conceal, or cover up, by a trick, scheme, or device, a material fact, make any false, fictitious, or fraudulent statement or representation, or make or use any false writing or document, knowing the same to contain a false, fictitious, or fraudulent statement or entry; or
(4) Except as provided in subsections (b) and (h) of this section, when acting as principal for the person's own account, knowingly sell a security to, or purchase a security from, a client, or acting as broker for a person other than the client, or knowingly effect a sale or purchase of a security for the account of the client, without disclosing to the client in writing before the completion of such transaction the capacity in which the person is acting and obtaining the consent of the client to the transaction.
(b) The prohibition of subsection (a)(2) of this section shall not apply to any information published or circulated relating to a federal covered security. The prohibition of subsection (a)(4) of this section shall not apply to a transaction with a federal covered adviser or to a transaction with a customer of a broker-dealer if the broker-dealer is not acting as an investment adviser in relation to the transaction.
(c) For purposes of this section, the term "investment" means a commitment of money or property principally induced by a representation that an economic benefit may be derived from the commitment; provided, that the term "investment" shall not include a commitment of money or property for:
(1) The purchase of a business opportunity, a business enterprise, or real property; or
(2) The purchase of tangible personal property through a person not engaged in telephone solicitation if there are no specific representations or guarantees made by the offeror or seller as to the economic benefit to be derived from the purchase.
(d) In the solicitation of, or dealings with, advisory clients, a person shall not knowingly make an untrue statement of a material fact, or 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.
(e) Except as may be permitted by rule or order of the Commissioner, an investment adviser shall not enter into, extend, or renew an investment advisory contract unless it provides in writing that:
(1) Except as provided in subsections (f)(1) and (h) of this section, the investment adviser shall not be compensated on the basis of a share of capital gains upon, or capital appreciation of, the funds or a portion of the funds of the client;
(2) Except as provided in subsection (h) of this section, no assignment of the contract may be made by the investment adviser without the consent of the other party to the contract; and
(3) Except as provided in subsection (h) of this section, the investment adviser, if a partnership, shall notify the other party to the contract of a change in the membership of the partnership within a reasonable time after the change.
(f)(1) The requirement of subsection (e)(1) of this section shall not prohibit an investment advisory contract which provides for compensation based upon the total value of a fund averaged over a definite period, as of definite dates, or taken as of a definite date.
(2) The term "assignment," as used in subsection (e)(2) of this section, includes any direct or indirect transfer or pledge without delivery or possession of an investment advisory contract by the assignor or of a controlling block of the assignor's outstanding voting securities by a security holder of the assignor; provided, that if the investment adviser is a partnership, no assignment of an investment advisory contract shall be considered to result from the death or withdrawal of a minority of the members of the investment adviser having only a minority interest in the business of the investment adviser or from the admission to the investment adviser of one or more members who, after admission, will constitute a minority of the members and will own a minority interest in the business.
(g) An investment adviser shall not take or have custody of any securities or funds of a client if:
(1) The Commissioner, by rule, prohibits custody; or
(2) In the absence of rule, the investment adviser fails to notify the Commissioner that he or she has custody.
(h) The Commissioner may, by rule or order, adopt exemptions from subsections (a)(4), (e)(1), (e)(2), and (e)(3) of this section if the exemptions are consistent with the public interest and within the purposes fairly intended by the policy and provisions of this chapter.
(Oct. 26, 2000, D.C. Law 13-203, § 502, 47 DCR 7837.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For Law 13-203, see notes following § 31-5601.01.
(a) A person shall not, directly or indirectly, in the District:
(1) Quote a fictitious price for a security;
(2) Effect a transaction in a security which involves no change in the beneficial ownership of the security for the purpose of creating a false or misleading appearance of active trading in a security or for the market for the security;
(3) Enter an order for the purchase of a security with the knowledge that an order of substantially the same size and at substantially the same time and price for the sale of the security has been, or will be, entered by or for the same, or an affiliated, person for the purpose of creating a false or misleading appearance of active trading in a security or with respect to the market for the security;
(4) Enter an order for the sale of a security with knowledge that an order of substantially the same size and at substantially the same time and price for the purchase of the 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 a security or with respect to the market for the security; or
(5) Employ any other deceptive or fraudulent device, scheme, or artifice to manipulate the market in a security.
(b) A transaction effected in compliance with, or conduct that does not violate, the applicable provisions of the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder, shall not constitute a violation of subsection (a) of this section.
(Oct. 26, 2000, D.C. Law 13-203, § 503, 47 DCR 7837.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For Law 13-203, see notes following § 31-5601.01.
A person shall not make, or cause to be made, in a document filed with the Commissioner or in any proceeding under this chapter, a 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.
(Oct. 26, 2000, D.C. Law 13-203, § 504, 47 DCR 7837.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For Law 13-203, see notes following § 31-5601.01.
(a) The filing of an application for a registration or notice filing under subchapter II, the filing of a registration statement or notice filing under subchapter III, or registration of a person or security shall not constitute a finding by the Commissioner that any document filed under this chapter is true, complete, and not misleading. Such filings, licensure, or registration, or that an exemption or exception is available for a security or a transaction, shall not mean the Commissioner has passed upon the merits or qualifications of, or recommended or given approval to, a person, security, or transaction.
(b) A person shall not make, or cause to be made, to a prospective purchaser, customer, or client a representation inconsistent with subsection (a) of this section.
(Oct. 26, 2000, D.C. Law 13-203, § 505, 47 DCR 7837.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For Law 13-203, see notes following § 31-5601.01.
