Section 0780-04-03-.10 - WRITTEN DISCLOSURE STATEMENTS BY INVESTMENT ADVISERS(1) General requirement. Unless otherwise provided in this Rule, an investment adviser, registered or required to be registered pursuant to T.C.A. § 48-1-109(c) shall, in accordance with the provisions of this Rule, furnish each advisory client and prospective advisory client with a written disclosure statement which may be either a copy of Part 2 of its Form ADV or a written document containing at least the information then so required by Part 2 of Form ADV.(2) Delivery. (a) An investment adviser, except as provided in subparagraph (2)(b) of this Rule shall deliver the statement required by this subparagraph (2)(a) to an advisory client or prospective advisory client: 1. Not less than forty-eight (48) hours prior to entering into any written or oral investment advisory contract with such client or prospective client; or2. At the time of entering into any such contract, if the advisory client has a right to terminate the contract without penalty within five (5) business days after entering into the contract.(b) Delivery of the statement required by subparagraph (2)(a) of this Rule need not be made in connection with entering into a contract for impersonal advisory services as defined in the Rule.(3) Offer to deliver. (a) An investment adviser, except as provided in subparagraph (3)(b) of this Rule, annually shall, without charge, deliver or offer in writing to deliver upon written request to each of its advisory clients the statement required by this Rule.(b) The delivery or offer required by subparagraph (3)(a) of this Rule need not be made to advisory clients receiving advisory services solely pursuant to a contract for impersonal advisory services requiring a payment of less than two hundred dollars ($200).(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 two hundred dollars ($200) or more, an offer of the type specified in subparagraph (3)(a) of this Rule 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 paragraph (3) of this Rule must be mailed or delivered within seven (7) 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. Nothing in this Rule shall relieve any investment adviser from any obligation pursuant to any provision of the Act or these Rules or other federal or state law to disclose any information to its advisory clients or prospective advisory clients not specifically required by this Rule.(6) Sponsors of wrap fee programs. (a) An investment adviser, registered or required to be registered pursuant to T.C.A. § 48-1-109(c) of the Act, that is compensated under a wrap fee program for sponsoring, organizing, or administering the program, or for selecting, or providing advice to clients regarding the selection of other investment advisers in the program, shall in lieu of the written disclosure statement required by paragraph (1) of this Rule and in accordance with other provisions of this Rule, furnish each client and prospective client of the wrap fee program with a written disclosure statement containing at least the information required by Part 2A Appendix 1 of Form ADV. Any additional information included in such disclosure should be limited to information concerning wrap fee programs sponsored by the investment adviser.(b) If the investment adviser is required under this paragraph (6) to furnish disclosure statements to clients or prospective clients of more than one (1) wrap fee program, the investment adviser may omit from the disclosure statement furnished to clients and prospective clients of a wrap fee program or programs any information required by Form ADV Part 2A Appendix 1 that is not applicable to clients or prospective clients of that wrap fee program or programs.(c) An investment adviser need not furnish the written disclosure statement required by subparagraph (6)(a) of this Rule to clients and prospective clients of a wrap fee program if another investment adviser is required to furnish the written disclosure statement to all clients and prospective clients of the wrap fee program.(7) Definitions. For purposes of this Rule: (a) "Contract for impersonal advisory services" means any contract relating solely to the provision of investment advisory services: 1. By means of written material or oral statements which do not purport to meet the objectives or needs of specific individuals or accounts;2. Through the issuance of statistical information containing no expression of opinion as to the investment merits of a particular security; or3. Any combination of the foregoing services.(b) "Entering into", in reference to an investment advisory contract, does not include an extension or renewal without material change of any such contract which is in effect immediately prior to such extension or renewal.(c) "Wrap fee program" means a program under which any client is charged a specified fee or fees not based directly upon transactions in a client's account for investment advisory services (which may include portfolio management or advice concerning the selection of other investment advisers) and execution of client transactions.(8) An investment adviser that fails to make written disclosure statements as required by this Rule shall be deemed to have engaged in a dishonest and unethical practice in the securities business as provided under T.C.A. § 48-1-112(a)(2)(G).Tenn. Comp. R. & Regs. 0780-04-03-.10
Original Rule filed November 6, 1997; effective January 20, 1998. Repeal and new rule filed March 16, 2015; effective 6/14/2015.Authority: T.C.A. §§ 48-1-109, 48-1-112, 48-1-115, 48-1-116, §222 of the Investment Advisers Act of 1940, as amended by §304 of the National Securities Markets Improvement Act, and 17 C.F.R. §275.204-4.