It is unlawful for any person who receives any consideration from another person primarily for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise to:
Terms Used In Utah Code 61-1-2
Contract: A legal written agreement that becomes binding when signed.
Division: means the Division of Securities established by Section 61-1-18. See Utah Code 61-1-13
Fraud: Intentional deception resulting in injury to another.
Investment adviser: includes a financial planner or other person who:
(A)
as an integral component of other financially related services, provides the investment advisory services described in Subsection (1)(q)(i) to others as part of a business;
(B)
holds the person out as providing the investment advisory services described in Subsection (1)(q)(i) to others; or
(C)
holds the person out as a financial adviser, financial consultant, or any other similar title as the division may specify in rule made in accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, in any way as to imply that the person is generally engaged in an investment advisory business, including a person who does not hold a securities license and uses a title described in this Subsection (1)(q)(ii)(C) in any advertising or marketing material. See Utah Code 61-1-13
Investment adviser representative: means a partner, officer, director of, or a person occupying a similar status or performing similar functions, or other individual, except clerical or ministerial personnel, who:
(A)
(I)
is employed by or associated with an investment adviser who is licensed or required to be licensed under this chapter; or
(II)
has a place of business located in this state and is employed by or associated with a federal covered adviser; and
(B)
does any of the following:
(I)
makes a recommendation or otherwise renders advice regarding securities;
(II)
manages accounts or portfolios of clients;
(III)
determines which recommendation or advice regarding securities should be given;
(IV)
solicits, offers, or negotiates for the sale of or sells investment advisory services; or
(V)
supervises employees who perform any of the acts described in this Subsection (1)(r)(i)(B). See Utah Code 61-1-13
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 :
(i)
an individual;
(ii)
a corporation;
(iii)
a partnership;
(iv)
a limited liability company;
(v)
an association;
(vi)
a joint-stock company;
(vii)
a joint venture;
(viii)
a trust where the interests of the beneficiaries are evidenced by a security;
purchase: means a contract for purchase of, contract to buy, or acquisition of a security or interest in a security for value. See Utah Code 61-1-13
Security: means a:
(A)
note;
(B)
stock;
(C)
treasury stock;
(D)
bond;
(E)
debenture;
(F)
evidence of indebtedness;
(G)
certificate of interest or participation in a profit-sharing agreement;
(H)
collateral-trust certificate;
(I)
preorganization certificate or subscription;
(J)
transferable share;
(K)
investment contract;
(L)
burial certificate or burial contract;
(M)
voting-trust certificate;
(N)
certificate of deposit for a security;
(O)
certificate of interest or participation in an oil, gas, or mining title or lease or in payments out of production under such a title or lease;
(P)
commodity contract or commodity option;
(Q)
interest in a limited liability company;
(R)
life settlement interest; or
(S)
in general, an interest or instrument commonly known as a "security" or a certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase an item listed in Subsections (1)(ee)(i)(A) through (R). See Utah Code 61-1-13
employ any device, scheme, or artifice to defraud the other person;
(b)
engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the other person; or
(c)
divide or otherwise split any consideration with any person not licensed under this chapter as an investment adviser or investment adviser representative.
(2)
(a)
Except as may be permitted by rule of the division, it is unlawful for any investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing that:
(i)
the investment adviser 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;
(ii)
no assignment of the contract may be made by the investment adviser without the consent of the other party to the contract; and
(iii)
the investment adviser, if a partnership, shall notify the other party to the contract of any change in the membership of the partnership within a reasonable time after the change.
(b)
Subsection 61-1-2(2)(a)(i) 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.
(c)
“Assignment,” as used in Subsection 61-1-2(2)(a)(ii), 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.
(d)
If the investment adviser is a partnership, no assignment of an investment advisory 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 one or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business.
(3)
It is unlawful for any investment adviser to take or have custody of any securities or funds of any client if:
(a)
the division by rule prohibits custody; or
(b)
in the absence of a rule, the investment adviser fails to notify the division that he has or may have custody.
(4)
The division may by rule adopt exemptions from Subsections 61-1-2(2)(a)(i), (ii), and (iii) where such exemptions are consistent with the public interest and within the purposes fairly intended by the policy and provisions of this chapter.
