Section 710IAC4-10-1. Dishonest and unethical practices

   Dishonest and unethical practices within the meaning of IC 23-19-4-12 shall include, but not be limited to, the following:

(1) Concerning securities transactions, to represent, agree, or guarantee, directly or by implication, in writing or orally, to resell or repurchase securities in an:

(A) offer;

(B) purchase; or

(C) sale;

except for securities issued by an investment company registered under the Investment Company Act of 1940.

(2) Representing in the offer or sale of securities, either directly or by implication, in writing or orally, that:

(A) the securities will subsequently become listed or traded;

(B) a market will be established in the shares that will regularly be bought and sold;

(C) there is a guarantee against risk or loss;

(D) there is a guarantee or an assurance that a dividend or a return on the investment will be paid or maintained by the issuer;

(E) an investor's capital will increase or that the purchase involves a preservation of original capital and protection against loss in value;

(F) dividends or other distributions, cash or otherwise, will be paid to shareholders of the issuer, unless the dividends or distributions have actually been declared;

(G) there is an impending but undeclared dividend or distribution, used as an inducement for the immediate purchase of securities;

(H) a purchase will result in an assured, immediate, or extensive increase in value, market price, or return on the investment;

(I) there will be or that the issuer contemplates a:

(i) stock split;

(ii) merger; or

(iii) consolidation;

unless the action has been announced or declared by the issuer;

(J) the investor will become a member of the board of directors or some other management or advisory group of the issuer, except when the investor is knowledgeable in business and financial affairs or has acted on the advice of legal counsel; or

(K) the next or succeeding issue of securities of the same issuer will sell for a higher price than the present issue of securities.

(3) Concerning securities transactions, making false, misleading, deceptive, exaggerated, or flamboyant representations or predictions in the offer, purchase, or sale of securities about an issuer's management ability or competency, an issuer's:

(A) financial condition;

(B) earnings;

(C) dividends;

(D) distributions;

(E) growth; or

(F) future success;

a stable, continuous, dependable, or liberal return, or that there will be a specific rate of return or about market conditions, marketability, listing, or trading.

(4) Representing or implying in the offer or sale of securities a return on an investment based on figures that combine income and distributions from capital or any other source.

(5) Representing or implying in the offer or sale of securities distributions from:

(A) capital;

(B) depreciation; or

(C) similar distributions;

and failing to point out that the distributions reduce the value of the investment.

(6) Inducing a customer to invest beyond his or her known immediate financial resources.

(7) Effecting transactions pursuant to discretionary authority that are excessive in size or frequency in relation to the financial resources of the customer or the character of his or her account.

(8) Effecting transactions in the account of a customer without his or her knowledge or maintaining discretionary accounts without written authorization.

(9) Knowingly effecting transactions in a customer account for the purpose of accumulating or compounding commissions.

(10) Engaging or aiding in "boiler-room" operations or high pressure tactics in connection with the promotion of speculative offerings or "hot-issues" by means of an intensive telephone campaign or unsolicited calls to persons not known by or having an account with the salesperson or broker-dealer represented by the salesperson, whereby the prospective purchaser is encouraged to make a hasty decision to buy, irrespective of his or her investment needs and objectives.

(11) In relation to market value or with unreasonable or excessive markups or commissions:

(A) offering;

(B) purchasing; or

(C) selling;

securities at unreasonable or excessive prices.

(12) In relation to communications:

(A) charging;

(B) paying; or

(C) receiving;

any commissions, selling charges, expenses, or any other kind of remuneration greater than those disclosed in a registration statement under IC 23-19-3-3 or IC 23-19-3-4.

(13) Using unpublished information learned from an issuer's management, directors, or employees (normally referred to as inside information) for personal benefit, directly or indirectly, in the:

(A) offer;

(B) sale; or

(C) purchase;

of securities.

(14) Buying or selling securities as principal or agent without disclosing to the customer in writing before the completion of the transaction that the broker-dealer or agent, either directly or indirectly, controls the issuer or that the issuer has a material interest in the broker-dealer.

(15) Creating an impression of false supply or demand or manipulating a market to create false supply or demand.

(16) Publishing or causing to be published a two-way market when the broker-dealer or agent has an interest in only one (1) side of the market or has just an occasional interest.

(17) In relation to communications, giving, offering, or permitting the giving or offering, either directly or indirectly, of anything of value to another for the purpose of influencing or rewarding the publication or circulation of any matter in any:

(A) newspaper;

(B) investment service; or

(C) similar publication;

of any matter that has or was intended to have an effect upon the marketability or market price of any security except matters that are clearly distinguishable as paid advertising.

(18) As part of compensation, giving, offering, or permitting the giving or offering of, directly or indirectly, anything of value to any employee, agent, or representative of a broker-dealer or issuer for the purpose of influencing or rewarding the act of the employee, agent, or representative in relation to the business of the employer of the employee, principal, agent, or represented party without the prior knowledge and consent of the:

(A) employer;

(B) principal; or

(C) represented party.

(19) Selling or offering securities registered under IC 23-19-3-3 or IC 23-19-3-4 without the use and dissemination of the required prospectus or making oral or written statements contrary to or inconsistent with the disclosures contained therein.

(20) Selling or offering securities registered under IC 23-19-3-4 using selling or advertising materials, copies of which have not been filed with the division as required by 710 IAC 4-6-5.

(21) Making any reference to the registration or regulation of a security with or by any state or federal authority without explaining that:

(A) this does not involve approval or supervision of management or investment practices; and

(B) the authorities do not pass upon the merits of the security as an investment.

(22) Failing to properly supervise agents and employees. Supervision includes approval of all transactions and correspondence by an officer or branch manager.

(23) Engaging in a practice that is in violation of the standards of honesty and ethics that are generally accepted in the securities trade and industry.

(24) In communication with the customer, recommending to a customer the purchase, sale, or exchange of any security without reasonable grounds to believe that the transaction or recommendation is suitable for the customer based upon reasonable inquiry concerning:

(A) the customer's investment objectives;

(B) the customer's financial situation;

(C) the customer's needs; and

(D) any other relevant information known by the broker-dealer.

(25) Failure or refusal to furnish a customer upon reasonable request, information to which he or she is entitled, or to respond to a formal written request or complaint.

(Securities Division; 710 IAC 4-10-1; filed Jun 28, 2010, 2:36 p.m.: 20100728-IR-710100044FRA; readopted filed May 12, 2016, 1:47 p.m.: 20160608-IR-710160136RFA)