D.C. Mun. Regs. tit. 26, r. 26-B118

Current through Register 71, No. 45, November 7, 2024

Rule 26-B118 - FINANCIAL AND DISCIPLINARY INFORMATION THAT BROKER-DEALERS MUST DISCLOSE TO CLIENTS

1818.1

A broker-dealer shall promptly disclose in writing the financial and disciplinary history of an agent employed or associated with the broker-dealer upon the request of a current or prospective client. Disclosure of financial and disciplinary history shall be consistent with the provisions of this section.

1818.2

It shall constitute a dishonest practice within the meaning of Section 207(a) of the Act (D.C. Official Code 31-5602.07(a); D.C. Register at 47 DCR 7849) for any broker-dealer to fail to disclose to any client or prospective client in the District all material facts pertaining to its agents that is required to be disclosed to NASDR or other SRO with respect to:

(a) A financial condition of the broker-dealer that is reasonably likely to impair the ability of the broker-dealer to meet contractual commitments to clients.

(b) A legal or disciplinary event that is material to an evaluation of the broker-dealer's or their representative's integrity or ability to meet contractual commitments to clients.

(c) A failure to comply with any arbitration award issued in connection with doing business as a broker-dealer or agent.

1818.3

It shall constitute a rebuttable presumption that the following legal or disciplinary allegations involving the broker-dealer, or agent (hereinafter referred to a "person"), that were not resolved in the person's favor or subsequently reversed, suspended, or vacated are material within the meaning of this section for a period of 10 years from the time of the event. No affirmative or negative presumption of materiality shall be created under this section for events not specifically set forth in this subsection.

(a) A criminal or civil action in a court of competent jurisdiction in which the person:

(1) Was convicted or pleaded guilty or nolo contendere ("no contest") to a felony or misdemeanor, or is the named subject of a pending criminal proceeding (any of the foregoing referred to hereafter as "action"), and such action involved: an investment related business; fraud, false statements, or omissions; wrongful taking of property; or bribery, forgery, counterfeiting, or extortion;

(2) Was found to have been involved in a violation of an investment-related statute or rule; or

(3) Was the subject of any order, judgment, or decree permanently or temporarily enjoining the person or otherwise limiting the person from engaging in any investment related activity.

(b) An administrative proceeding before the SEC, the Department, or any federal or state agency (any of the foregoing being referred to hereafter as "agency") in which the person:

(1) Was found to have caused an investment related business to lose its authorization to do business; or

(2) Was found to have been involved in a violation of an investment-related statute or rule, or was the subject of an order by the agency denying, suspending, or revoking the authorization to act in, or barring or suspending the person's association with, an investment-related business; or otherwise significantly limiting the person's investment-related activities.

(c) A Self Regulatory Organization ("SRO") proceeding in which the person:

(1) Was found to have caused an investment-related business to lose its authorization to do business; or

(2) Was found to have been in violation of the SRO's rules and was the subject of an order by the SRO barring or suspending the person from membership or from association with other members, or expelling the person from membership; fining the person more than $ 2,500; or otherwise significantly limiting the person's investment-related activities.

1818.4

For purposes of calculating the 10-year period during which events are presumed to be material under these regulations, the date of the reportable event shall be the date on which the final order, judgment, or decree was entered, or the date on which any rights of appeal from preliminary orders, judgments, or decrees expired.

D.C. Mun. Regs. tit. 26, r. 26-B118

Final Rulemaking published at 40 DCR 6732 (September 24, 1993); as amended by Emergency Rulemaking published at 48 DCR 1987 (March 2, 2001) [EXPIRED]; as amended by Final Rulemaking published at 48 DCR 4106 (May 11, 2001)