Delaware Code Title 6 Sec. 73-305 – Advisory activities
(a) It is unlawful for an investment adviser, federal covered adviser or investment adviser representative, all as defined in this chapter, to employ any device, scheme or artifice to defraud another person, or to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon another person.
Terms Used In Delaware Code Title 6 Sec. 73-305
- Contract: A legal written agreement that becomes binding when signed.
- Director: means the Investor Protection Director, the principal executive officer of the Investor Protection Unit designated in § 73-102 of this title. See Delaware Code Title 6 Sec. 73-103
- Federal covered adviser: means a person who is registered under § 203 of the Investment Advisers Act of 1940 [15 U. See Delaware Code Title 6 Sec. 73-103
- Fraud: Intentional deception resulting in injury to another.
- Investment adviser: means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities. See Delaware Code Title 6 Sec. 73-103
- Investment adviser representative: means any partner, officer, director (or a person occupying a similar status or performing similar functions) or other individual, except clerical or ministerial personnel, who is employed by or associated with an investment adviser that is registered or required to be registered under this chapter, or who has a place of business located in this State and is employed by or associated with a federal covered adviser; and who does any of following: (A) makes any recommendations or otherwise renders advice regarding securities, (B) manages accounts or portfolios of clients, (C) determines which recommendation or advice regarding securities should be given, (D) solicits, offers or negotiates for the sale of or sells investment advisory services, or (E) supervises employees who perform any of the foregoing. See Delaware Code Title 6 Sec. 73-103
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Person: means an individual, a corporation, a partnership, an association, a joint stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government. See Delaware Code Title 6 Sec. 73-103
- Security: means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust certificate; preorganization certificate or subscription; transferable share; investment contract, including pyramid promotion which includes any plan or operation for the sale or distribution of property, services, or any other thing of value wherein a person for a consideration is offered an opportunity to obtain a benefit which is based in whole or in part on the inducement, by himself or herself or by others, of additional persons to purchase the same or a similar opportunity; voting-trust certificate; certificate of deposit for a security; certificate of interest of participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease; options on commodities; viatical settlement investment; or, in general, any interest or instrument commonly known as a "security" or any certificate of interest or participation in, temporary or interim certificate, for, receipt for guarantee of, or warrant or right to subscribe to or purchase, any of the aforegoing. See Delaware Code Title 6 Sec. 73-103
- State: means the District of Columbia or the Commonwealth of Puerto Rico or any state, territory, possession, or other jurisdiction of the United States other than the State of Delaware. See Delaware Code Title 6 Sec. 17-101
(b) It is unlawful for an investment adviser, federal covered adviser or investment adviser representative, all as defined in this chapter, in connection with giving investment advice or otherwise acting as an investment adviser, federal covered adviser or investment adviser representative to make any untrue statement of fact that a reasonable client or prospective client would deem material or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.
(c) It is unlawful for any investment adviser or investment adviser representative to enter into, extend or renew any investment advisory contract unless it provides in writing:
(1) That the investment adviser or investment adviser representative shall not be compensated 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;
(2) That no assignment of a contract may be made by the investment adviser or investment adviser representative without the consent of the other party to the contract; and
(3) That the investment adviser or investment adviser representative, if a partnership, shall notify the other party to the contract of any change in the membership or the partnership within a reasonable time after the change.
(d) Subsection (c) of this section does not prohibit an investment advisory contract which provides for compensation based upon the total value of a fund averaged over a definite period, or as of definite dates or taken as of a definite date. “Assignment,” as used in subsection (c) of this section, includes any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of a controlling block of the assignor’s outstanding voting securities by a security holder of the assignor; but if the investment adviser is a partnership, no assignment of an investment contract is considered to result from the death or withdrawal of a minority of the members of the investment adviser having only a minority interest in the business of the investment adviser, or from the admission to the investment adviser of 1 or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business.
(e) It is unlawful for any investment adviser or investment adviser representative to take or have custody of any securities or funds of a client if:
(1) The Director by rule prohibits custody; or
(2) In the absence of rule, the investment adviser or investment adviser representative fails to notify the Director that such adviser or representative has or may have custody.
6 Del. C. 1953, § ?7317; 59 Del. Laws, c. 208, § ?1; 68 Del. Laws, c. 181, § ?26; 70 Del. Laws, c. 186, § ?1; 71 Del. Laws, c. 162, § ?23; 78 Del. Laws, c. 175, §§ ?71-73, 102, 118; 79 Del. Laws, c. 182, § ?3;