Or. Admin. Code § 441-205-0170

Current through Register Vol. 63, No. 10, October 1, 2024

Section 441-205-0170 - Compensation of Investment Advisers

(1) The term "Fraudulent, Deceptive, or Manipulative Act or Practice," as used in these rules, is hereby defined to include entering into, extending, or renewing any investment advisory contract, or in any way performing any investment advisory contract entered into, extended or renewed after the effective date of this rule, if such contract:

(a) Provides for compensation to the investment adviser on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client, except as permitted in section (3) of this rule;

(b) Fails to provide, in substance, that no assignment of such contract shall be made by the investment adviser without the consent of the other party to the contract; or

(c) Fails to provide, in substance, that the investment adviser, if a partnership, will notify the other party to the contract of any change in the membership of such partnership within a reasonable time after such change.

(2) As used in this rule, "Investment Advisory Contract" means any contract or agreement whereby a person agrees to act as investment adviser or to manage any investment or trading account for a person other than an investment company, as defined in the Investment Company Act of 1940, as amended.

(3) An investment adviser may enter into, perform, renew or extend an investment advisory contract that provides for compensation to the investment adviser on the basis of a share of the capital gains upon, or the capital appreciation, of the funds, or any portion of the funds, if the contract does not contain a management fee exceeding 1% of the total funds to be managed pursuant to the contract and the contract is with a person who is:

(a) A natural person who or a company that immediately after entering into the contract has at least $750,000 under the management of the investment adviser;

(b) A natural person who or a company that the investment adviser entering into the contract (and any person acting on his behalf) reasonably believes, immediately prior to entering into the contract, either:

(A) Has a net worth (together, in case of a natural person, with assets held jointly with a spouse) of more than $1,500,000; or

(B) Is a qualified purchaser as defined in Section (4) of this rule; or

(c) A natural person who immediately prior to entering into the contract is:

(A) The president, any vice president in charge of a principal business unit, division, or function, any other officer who performs a policy-making function or any other person who performs similar policy-making functions for the investment adviser, any director, trustee, general partner or person serving in a similar capacity of the investment adviser; or

(B) An employee of the investment adviser (other than an employee performing solely clerical, secretarial or administrative functions with regard to the investment adviser) who, in connection with his or her regular functions or duties, participates in the investment activities of such investment adviser, providing that such employee has been performing such functions and duties for or on behalf of the investment adviser, or substantially similar functions or duties for or on behalf of another company for at least 12 months.

(4) A qualified purchaser is:

(a) Any natural person who owns not less than $5,000,000 in investments;

(b) Any person, acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in investments;

(c) Any company that owns not less than $5,000,000 in investments and that is owned directly or indirectly by or for 2 or more natural persons who are related as siblings or spouse (including former spouse), or direct lineal descendants by birth or adoption, spouses of such person, the estates of such person or foundations, charitable organizations, or trusts established by or for the benefit of such person; and

(d) Any trust that is not covered by (4)(c), was not formed for the specific purpose of acquiring the securities offered and for which the trustee or other person authorized to make decisions with respect to the trust and each person who has contributed assets to the trust is a person described in (a), (b), or (c).

Or. Admin. Code § 441-205-0170

CC 12, f. 7-12-73, ef. 9-1-73, Renumbered from 815-030-2005.2-14 and 815-030-0185; FCS 12-2001, f. 12-27-01, cert. ef. 1-1-02

Stat. Auth.: ORS 59.285

Stats. Implemented: ORS 59.205(2)