Section 73-02-09-01 - Fraudulent practicesA 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. N.D. Admin Code 73-02-09-01
Effective September 1, 1990; amended effective January 1, 1998.General Authority: NDCC 10-04-03
Law Implemented: NDCC 10-04-15