S.D. Admin. R. 20:08:05:26

Current through Register Vol. 50, page 162, June 24, 2024

Section 20:08:05:26 - Investment adviser brochure

(1) General requirements: Unless otherwise provided in § 20:08:05:26, an investment adviser, registered or required to be registered pursuant to SDCL 47-31B-403 shall, in accordance with the provisions of § 20:08:05:26, furnish each advisory client and prospective advisory client with a written disclosure statement that complies with Part 2A and 2B of Form ADV [C.F.R. § 279.1] or such other information as the director may require.

(2) Delivery: An investment adviser, except as provided in § 20:08:05:26(2)(a), shall deliver the statement required by § 20:08:05:26 to an advisory client or prospective advisory client not less than 48 hours prior to entering into any investment advisory contract with such client or prospective client; or at the time of entering into any such contract, if the advisory client has a right to terminate the contract without penalty within five business days after entering into the contract.

(a) The delivery of the statement required by § 20:08:05:26(2) need not be made in connection with entering into:

(i) An investment company contract; or

(ii) A contract for impersonal advisory services requiring a payment of less than $500.

(3) Offer to deliver:

(a) An investment adviser, except as provided in § 20:08:05:26(2), annually shall, without charge, deliver or offer in writing to deliver upon written request to each of its advisory clients the statement required by § 20:08:05:26.

(b) The delivery or offer required by § 20:08:05:26(3)(a) need not be made to advisory clients receiving advisory services solely pursuant to:

(i) An investment company contract; or

(ii) A contract for impersonal advisory services requiring a payment of less than $500.

(c) With respect to an advisory client entering into a contract or receiving advisory services pursuant to a contract for impersonal advisory services which requires a payment of $500 or more, an offer of the type specified in § 20:08:05:26(3)(a) shall also be made at the time of entering into an advisory contract.

(d) Any statement requested in writing by an advisory client pursuant to an offer required by § 20:08:05:26(3)(a) must be mailed or delivered within seven days of the receipt of the request.

(4) Omission of inapplicable information. If an investment adviser renders substantially different types of investment advisory services to different advisory clients, any information required by Part 2 of Form ADV may be omitted from the statement furnished to an advisory client or prospective advisory client if such information is applicable only to a type of investment advisory service or fee which is not rendered or charged, or proposed to be rendered or charged, to that client or prospective client.

(5) Other disclosures:

(a) Nothing in § 20:08:05:26 shall relieve any investment adviser from any obligation pursuant to any provision of chapter 47-31 B or the rules thereunder or other federal or state law to disclose any information to its advisory clients or prospective advisory clients not specifically required by § 20:08:05:26.

(b) Delivery of brochures and brochure supplements made in compliance with 17 C.F.R. Part 275.204-3 are considered to be in compliance with § 20:08:05:26.

(6) Definitions. For purposes of § 20:08:05:26:

(a) "Contract for impersonal advisory services" means any contract relating solely to the provision of investment advisory services:

(i) By means of written material or oral statements which do not purport to meet the objectives or needs of specific individuals or accounts;

(ii) Through the issuance of statistical information containing no expression of opinion as to the investment merits of a particular security; or

(iii) Any combination of the foregoing services.

(b) "Entering into," does not mean, in reference to an investment advisory contract, an extension or renewal without material change of any such contract which is in effect immediately prior to such extension or renewal.

(c) "Investment company contract" means a contract with an investment company registered under the Investment Company Act of 1940 which meets the requirements of Section 15(c) of that Act.

S.D. Admin. R. 20:08:05:26

37 SDR 112, effective 12/9/2010.

General Authority: SDCL 47-31B-411(g), 47-31B-605(a)(2), 47-31B-605(b).

Law Implemented: SDCL 47-31B-103, 47-31B-403(a), 47-31B-411(g).