Ariz. Admin. Code § 14-4-130

Current through Register Vol. 30, No. 25, June 21, 2024

Section R14-4-130 - Dishonest and Unethical Conduct

A. For purposes of A.R.S. §§ 44-1961(A)(13) and 44-1962(10), dishonest or unethical practices in the securities industry shall include but not be limited to the following:

1. Unreasonable delay in the delivery of securities or funds to the extent that the dealer or salesman is in a position to control or direct the delivery of the securities or funds. The burden of proof of inability to deliver shall rest with the dealer or salesman.

2. Representing that securities will be listed, or that application for listing will be made on a securities exchange or the National Association of Securities Dealers Automated Quotation (NASDAQ) system or other quotation system without reasonable basis in fact for the representation.

3. Inducing trading in a customer's account which is excessive in size or frequency in view of the customer's financial resources, the character of the account, and other relevant factors.

4. Recommending to a customer the purchase, sale or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the customer. Such suitability shall be determined on the basis of information furnished by the customer after such inquiry as may be necessary under the circumstances, concerning the customer's investment objectives, financial situation and needs, and other information known by the person making the recommendation. Each registered dealer shall require and maintain information regarding its customers necessary to make such determination prior to engaging in any transaction based upon a recommendation by the firm or its registered salesman.

5. Selling a security in violation of Section 15(g) of the Securities Exchange Act of 1934, 15 U.S.C.A. 78o(g) (West 1981 & Supp. 1991) ("Section 15(g)") which is incorporated herein by reference and is on file with the Office of the Secretary of State.

6. Executing a transaction on behalf of a customer without authority to do so.

7. Executing a transaction pursuant to general discretionary authority for the account of a customer without first obtaining general discretionary authority in writing from such customer. This provision shall not apply to discretion as to the price at which or the time when an order given by a customer for the purchase or sale of a definite amount of a specified security shall be executed.

8. Acting on an agency basis for both the seller and the purchaser of a security (other than U.S. Savings Bonds or municipal securities) without disclosing that fact to both the seller and the purchaser on the confirmation.

9. While acting on an agency basis for a customer in any transaction, charging the customer more than a fair commission or service charge, taking into consideration all relevant circumstances including market conditions with respect to a security at the time of the transaction, the expenses of executing the order and the value of any service rendered by reason of experience in and knowledge of the security and the market therefor.

10. While acting on a principal basis for a customer in any transaction, charging an excessive markup or markdown, taking into consideration all relevant circumstances including market conditions with respect to a security at the time of the transaction, the expenses of executing the order and the value of any service rendered by reason of experience in and knowledge of the security and the market therefor.

11. Entering into a transaction with a customer in a security at a price not reasonably related to the market price of the security.

12. Extending credit to a customer in violation of 12 CFR 220.1 through 220.18(1991) (hereinafter referred to as "Regulation T") which is incorporated herein by reference and is on file with the Office of the Secretary of State.

13. Selling an equity security to, or purchasing an equity security from, a customer without disclosing on the confirmation that the dealer is acting as a market maker in that security. "Market maker" as used herein shall mean any specialist permitted to act as a dealer, and any dealer who, with respect to a security, holds himself out (by entering quotations in an inter-dealer communications system or otherwise) as being willing to buy and sell such security for his own account on a regular or continuous basis.

14. Employing, in connection with the purchase or sale of a security, a manipulative or deceptive device or contrivance.

15. Borrowing of money or securities by a salesman from a customer, except when the customer is a relative of the salesman or a person in the business of lending funds.

16. Making unauthorized use of securities or funds of a customer or converting customer securities or funds for personal benefit.

17. While registered as a salesman, effecting securities transactions which have not been recorded on the records of the dealer with whom such salesman is registered at the time of the transaction.

18. As a registered salesman, operating an account under a fictitious name with intent to deceive or for an illegal purpose.

19. Engaging in a pattern of marking order tickets as unsolicited when the dealer or salesman directly or indirectly recommended the transaction or introduced the customer to the security.

20. Using sales materials or conducting sales presentations in a deceptive or misleading fashion.

B. To the extent that Section 15(g) or Regulation T are amended, dealers and salesmen in compliance with such amended versions shall not be subject to enforcement action by the Commission for violation of provisions of subsection (A)(5) or (12) respectively hereof to the extent that the violation results solely from the dealer's or salesman's compliance with the amended version of Section 15(g) or Regulation T.

Ariz. Admin. Code § R14-4-130

Adopted effective November 4, 1992 (Supp. 92-4). Typographical error in subsection R14-4-130(A)(5) corrected (Supp. 00-1).