§ 73-305 — Advisory activities

Delaware § 73-305

• Jurisdiction: Delaware
• Title: 6
• Ch. 73: SECURITIES ACT
• Subch.: Provisions Relating to Broker-Dealers, Broker-Dealer Agents, Issuer Agents, Investment Advisers, Federal Covered Advisers, and Investment Adviser Representatives

Text

(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.

(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 all of the following:

(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, except as provided by rule or order of the Director.

(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.

(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.

Legislative History

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 ; 84 Del. Laws, c. 230, § 15