SECURITIES
CHAPTER 50
REGULATION OF SECURITIES OFFERINGS AND THOSE WHO ENGAGE
IN THE SECURITIES BUSINESS
[Appeared as Ch 17, 1973 IDR]
[Prior to 10/22/86, Insurance Department[510]]
DIVISION I
DEFINITIONS AND ADMINISTRATION
191—50.1(502) Definitions. For the purposes of this chapter, the definitions in Iowa Code chapter 502 and the following definitions shall apply unless the context otherwise requires:
“Act” means Iowa Code chapter 502, the Iowa Uniform Securities Act (Blue Sky Law).
“Administrator” means the commissioner of insurance or the deputy administrator appointed under Iowa Code section 502.601.
“CCH NASAA Reports” means the official statements of policy of the North American Securities Administrators Association, Inc., printed by Commerce Clearing House, the official reporter for NASAA.
“CRD” means the Central Registration Depository.
“CSRU” means the Iowa child support recovery unit.
“FDIC” means the Federal Deposit Insurance Corporation.
“FINRA” means the Financial Industry Regulatory Authority.
“Form ADV” means Uniform Application for Investment Adviser Registration.
“Form ADV-E” means the Certificate of Accounting of Client Securities and Funds in the Possession or Custody of an Investment Adviser.
“Form ADV-H” means Notice of Hardship Application for Investment Adviser Registration.
“Form ADV-W” means Notice of Withdrawal from Registration as Investment Adviser.
“Form BD” means Uniform Application for Broker-Dealer Registration.
“Form BDW” means Uniform Request for Broker-Dealer Withdrawal.
“Form 1CP” means Agricultural Cooperative Notice of Sales of Notes or Evidences of Indebtedness.
“Form F-7” means Registration Statement Under the Securities Act of 1933, for registration of securities of certain Canadian issuers offered for cash upon the exercise of rights granted to existing security holders.
“Form F-8” means Registration Statement Under the Securities Act of 1933, for registration of securities of certain Canadian issuers to be issued in exchange offers or a business combination.
“Form F-9” means Registration Statement Under the Securities Act of 1933, for registration of certain investment grade debt or investment grade preferred securities of certain Canadian issuers.
“Form F-10” means Registration Statement Under the Securities Act of 1933, for registration of securities of certain Canadian issuers.
“Form NF” means Uniform Investment Company Notice Filing.
“Form S-1” means Registration Statement Under the Securities Act of 1933, for registration of securities for which no other form is authorized or prescribed.
“Form SB-2” means Registration Statement Under the Securities Act of 1933, for registration of securities to be sold to the public by small business issuers.
“Form U-1” means Uniform Application to Register Securities.
“Form U-2” means Uniform Consent to Service of Process.
“Form U-2A” means Uniform Corporate Resolution.
“Form U-4” means Uniform Application for Securities Industry Registration or Transfer.
“Form U-5” means Uniform Termination Notice for Securities Industry Registration.
“Form U-6” means Uniform Disciplinary Action Reporting Form.
“Form U-7” means Small Corporate Offering Registration Form.
“Form USR-1” means Investment Company Report of Sales.
“Gift” means a rendering of anything of value in return for which legal consideration of equal or greater value is not given and received.
“IARD” means the Investment Advisory Registration Depository.
“Immediate family” includes parent, mother-in-law, father-in-law, spouse, former spouse, brother, sister, brother-in-law, sister-in-law, son-in-law, daughter-in-law, child and stepchild. In addition, “immediate family” includes any other person who is supported, directly or indirectly, to a material extent by an agent.
“Investment contract” as used in Iowa Code section 502.102(28) includes:
	1.	Any investment in a common enterprise with the expectation of profit to be derived through the essential managerial efforts of someone other than the investor.
	(1)	“Common enterprise” in this definition means an enterprise in which the fortunes of the investor are tied to the efficacy of the efforts and successes of those seeking the investment or of a third party.
	(2)	“Profit” in this definition includes income or a return on the investment, including a fixed rate of return, dividends, other periodic payments, or the increased value of the investment; or
	2.	Any investment by which an offeree furnishes initial value to an offerer, and a portion of this initial value is subjected to the risks of the enterprise, and the furnishing of the initial value is induced by the offerer’s promises or representations which give rise to a reasonable understanding that a valuable benefit of some kind over and above the initial value will accrue to the offeree as a result of the operation of the enterprise, and the offeree does not exercise practical and actual control over the managerial decisions of the enterprise.
“Loan” means an agreement to advance property, including but not limited to money, in return for the promise that payment will be made for use of the property.
“NASAA” means the North American Securities Administrators Association, Inc.
“NASDAQ” means the NASDAQ Stock Market.
“NCUA” means the National Credit Union Association.
“NSMIA” means the National Securities Markets Improvement Act of 1996, Public Law 104-290.
“NYSE” means the New York Stock Exchange.
“OTC” means over the counter.
“PCAOB” means the Public Company Accounting Oversight Board.
“SAI” means Statement of Additional Information.
“SEC” means the United States Securities and Exchange Commission as established pursuant to 15 U.S.C. Section 78(d).
“SOIF” means Solicitation of Interest Form.
This rule is intended to implement Iowa Code section 502.605(1).
[ARC 9169B, IAB 10/20/10, effective 11/24/10; ARC 1076C, IAB 10/2/13, effective 11/6/13; ARC 2175C, IAB 9/30/15, effective 11/4/15]
191—50.2(502) Cost of audit or inspection.
	50.2(1) The administrator may assess the broker-dealer or investment adviser for reasonable charges of travel, lodging, and other expenses incurred by division staff or independent persons conducting an audit or inspection and directly attributable to an audit or inspection made pursuant to Iowa Code section 502.411(4). The assessment of costs of meals, lodging, transportation, and other actual and necessary travel expenses, if any, incurred by persons conducting an audit or inspection shall be determined in accordance with one of the following, as agreed by the administrator and the persons conducting an audit or inspection:
	a. 	The department of administrative services (DAS) state accounting enterprise Accounting Policy and Procedures Manual guidelines for employee travel (https://das.iowa.gov/state-accounting/sae-policies-procedures-manual) and the DAS form Travel Section Policy and Procedures (https://das.iowa.gov/state-accounting/travel-relocation) in effect at the time of the audit or inspection.
	b. 	The department of administrative services state accounting enterprise Accounting Policy and Procedures Manual guidelines for travel for in-state board, commission, advisory council, and task force member expenses.
	c. 	The United States General Services Administration Continental United States (“CONUS”) per diem travel allowances for lodging, meals and incidental expenses.
	d. 	A reimbursement schedule as agreed by the administrator and the persons conducting the audit or inspection.
	50.2(2) If costs are assessed under subrule 50.2(1), the administrator may, upon completion of the examination, or at such regular intervals prior to completion as the administrator determines, prepare an account of the costs incurred in performing and preparing the report of the examination which shall be charged to and paid by the broker-dealer or investment adviser examined.
	50.2(3) The administrator shall notify the broker-dealer or investment adviser of the expenses attributable to the audit or inspection as soon as practicable.
	50.2(4) Assessments collected pursuant to this rule shall be paid by the broker-dealer or investment adviser as directed by the administrator either to the administrator or to the persons conducting the audit or inspection. The persons conducting the audit or inspection shall be reimbursed only for the actual and necessary costs incurred in conducting the audit or inspection.
This rule is intended to implement Iowa Code section 502.411(4).
[ARC 1076C, IAB 10/2/13, effective 11/6/13; ARC 2175C, IAB 9/30/15, effective 11/4/15]
191—50.3(502) Interpretative opinions or no-action letters. Interested persons may request the administrator to issue an interpretative opinion pursuant to Iowa Code section 502.605(4). These requests will be answered by means of a no-action letter. Requests for confirmation of the availability of an exemption shall be answered in the same manner. The following procedure is recommended for the submission of such requests:
	50.3(1) The request should be in writing and include the factual situation involved, a citation to the applicable part of the rule or statute, and the question sought to be answered. Any disclosure or informational materials which pertain to the issue should also be filed.
	50.3(2) The administrator, or any person delegated under Iowa Code section 502.601(1), may respond to the request by determining to take or not to take a no-action position or by declining to reach a determination due to insufficient facts, conflicting case or administrative law or such other reasons as the administrator’s discretionary power allows.
	50.3(3) All no-action determinations shall be based upon the representations made by the requesting party in the letter and information filed, since any different facts or conditions might require a different conclusion. The no-action letter shall express the division’s position on enforcement action only and shall not purport to express any legal conclusion on the questions presented. No determination shall take a position on whether or not any disclosure materials satisfactorily comply with the antifraud and civil liability sections of the Act.
	50.3(4) A no-action determination issued under this rule may be provided to interested persons for a filing fee of $100.
This rule is intended to implement Iowa Code section 502.605(4).
191—50.4 to 50.9  Reserved.
DIVISION II
REGISTRATION OF BROKER-DEALERS AND AGENTS
191—50.10(502) Broker-dealer registrations, renewals, amendments, succession, and withdrawals.
	50.10(1) An applicant for an initial registration to conduct business as a broker-dealer must:
	a. 	File a current Form BD. If the applicant is a member of FINRA, Form BD shall be filed with CRD. If the applicant is not a member of FINRA, Form BD shall be signed and notarized and filed with the administrator; and
	b. 	Pay a $200 filing fee. If the applicant is a member of FINRA, the fee shall be remitted to the CRD. If the applicant is not a member of FINRA, the fee shall be remitted to the administrator.
	50.10(2) No application for initial registration will be deemed complete for purposes of Iowa Code section 502.406(3) until the applicant has been approved as a member of FINRA.
	50.10(3) An applicant that is a member of FINRA and that seeks renewal of a broker-dealer registration shall comply with the renewal time frames established by FINRA for renewal on the CRD system and shall:
	a. 	File with CRD an updated Form BD;
	b. 	Pay to the CRD a $200 renewal filing fee.
	50.10(4) An applicant that is not a member of FINRA and that seeks renewal of a broker-dealer registration shall by November 30 of each year:
	a. 	File with the administrator an updated Form BD, manually signed and notarized;
	b. 	File with the administrator the renewal applicant’s most recent audited financial statements if they were not previously submitted to the administrator pursuant to subrule 50.10(1);
	c. 	Pay a $200 renewal filing fee, which shall be remitted to the administrator.
	50.10(5) Failure to comply with the requirements of subrule 50.10(3) or 50.10(4) shall be deemed a request for withdrawal of the broker-dealer registration, and the registration will be terminated as of December 31 of the renewal year.
	50.10(6) A registered broker-dealer that is a FINRA member shall submit a withdrawal request by filing an accurate and complete Form BDW with CRD. A registered broker-dealer that is not a FINRA member shall submit a withdrawal request by filing an accurate and complete Form BDW with the administrator.
	50.10(7) For purposes of Iowa Code section 502.406(2), a correcting amendment to the information or a record contained in either an initial or renewal application shall be considered to be filed “promptly” with the administrator if filed within 30 days of the event necessitating the correcting amendment.
	50.10(8) Succession and change in registration.
	a. 	In the case of an organizational change, including a change in the state of incorporation or form of organization, not involving a material change in financial condition or management, a broker-dealer shall file all applicable amendments to Form BD.
	b. 	In the case of an organizational change, including a change in the state of incorporation or form of organization, involving a material change in financial condition or management, a broker-dealer shall file a new application for registration pursuant to subrule 50.10(1). The filing must include the fee pursuant to paragraph 50.10(1)“c” and registration fees for all Iowa-registered agents.
	c. 	In the case of a change in name, a broker-dealer shall file all applicable amendments to Form BD.
	50.10(9) Upon the administrator’s oral or written request, a broker-dealer shall provide to the administrator the broker-dealer’s most recent financial reports, audited or unaudited, within two business days of the request. A broker-dealer may utilize express mail delivery or transmission via electronic means to comply with a request pursuant to this subrule. Financial reports not received by the filing deadline are subject to a late fee of $50 per day beyond the filing deadline, not to exceed an aggregate penalty of $500. Imposition of the late fee is not a reportable event. In the event of the broker-dealer’s continued noncompliance, the administrator may also pursue sanctions authorized by Iowa Code section 502.412.
This rule is intended to implement Iowa Code section 502.411(2).
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.11(502) Principals. Every registered broker-dealer shall have at least two officers or partners registered with FINRA as principals, appropriate to the function(s) to be performed.
This rule is intended to implement Iowa Code section 502.406.
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.12(502) Agent and issuer registrations, renewals and amendments.
	50.12(1) Agent registration. Every applicant for registration as an agent of a broker-dealer shall:
	a. 	Pass the Uniform Securities Agent State Law Examination (Series 63) or the Uniform Combined State Law Examination (Series 66);
	b. 	Pass the appropriate qualifying examination administered by the Financial Industry National Regulatory Authority (FINRA). In the event that an applicant for registration as an agent has received a waiver by FINRA of a FINRA examination otherwise required by this paragraph, the FINRA waiver will be accepted in lieu of the examination requirement;
	c. 	File an accurate and complete Form U-4 with CRD; and
	d. 	Pay a $40 filing fee to FINRA if applying for registration as an agent of a FINRA member broker-dealer, or to the administrator if applying for registration as an agent of a non-FINRA member broker-dealer.
	50.12(2) Any individual who is out of the business of effecting transactions in securities for less than two years from the date of filing an application and who has previously passed an examination required in subrule 50.12(1) shall not be required to retake the examination to be eligible to be relicensed upon application.
	50.12(3) Renewals, amendments, and withdrawal requests.
	a. 	A registered agent of a FINRA member broker-dealer shall submit all renewals, renewal fees, amendments to Form U-4, and withdrawal requests to CRD. A withdrawal request shall be made by filing an accurate and complete Form U-5 with CRD.
	b. 	A registered agent of a non-FINRA member broker-dealer shall submit all renewals, renewal fees, amendments to Form U-4, and withdrawal requests to the administrator. A withdrawal request shall be made by filing an accurate and complete Form U-5 with the administrator.
	50.12(4) An issuer seeking to employ persons as agents of the issuer within the meaning of Iowa Code section 502.102(2) must apply in writing to the administrator for such authority. The application shall include:
	a. 	A statement of the issuer’s intent to employ agents for the sale of its securities;
	b. 	The name, address, social security number, and proof of satisfaction of subrule 50.12(1) for each agent;
	c. 	A complete description of the subject securities;
	d. 	A complete and accurate Form U-4; and
	e. 	A $40 filing fee.
This rule is intended to implement Iowa Code section 502.406.
[ARC 9169B, IAB 10/20/10, effective 11/24/10; ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.13(502) Agent continuing education requirements. Every registered agent shall comply with all applicable continuing education requirements adopted by FINRA, NYSE, or any other self-regulatory agency. Failure to comply with any such requirements may be a basis for discipline pursuant to Iowa Code section 502.412(4)“n.”
This rule is intended to implement Iowa Code section 502.411(8).
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.14(502) Broker-dealer record-keeping requirements.
	50.14(1) Unless otherwise provided by an SEC order, each broker-dealer registered or required to be registered under the Act shall make, maintain and preserve books and records in compliance with SEC Rules 17a-3 (17 CFR 240.17a-3), 17a-4 (17 CFR 240.17a-4), 15c2-6 (17 CFR 240.15c2-6) and 15c2-11 (17 CFR 240.15c2-11).
	50.14(2) To the extent that the SEC amends the above-referenced rules, broker-dealers complying with such rules as amended shall not be subject to enforcement action by the administrator for violating this rule to the extent that the violation results solely from the broker-dealer’s compliance with the amended rule.
This rule is intended to implement Iowa Code section 502.411(3).
191—50.15(502) Broker-dealer minimum financial requirements and financial reporting requirements.
	50.15(1) Each broker-dealer registered or required to be registered under the Act shall comply with SEC Rules 15c3-1 (17 CFR 240.15c3-1), 15c3-2 (17 CFR 240.15c3-2), and 15c3-3 (17 CFR 240.15c3-3).
	50.15(2) Each broker-dealer registered or required to be registered under the Act shall comply with SEC Rule 17a-11 (17 CFR 240.17a-11) and shall file with the administrator copies of notices of financial deficiencies, as required under SEC Rule 17a-11 (17 CFR 240.17a-11).
	50.15(3) To the extent that the SEC amends the above-referenced rules, broker-dealers complying with such rules as amended shall not be subject to enforcement action by the administrator for violations resulting solely from the broker-dealer’s compliance with the amended rules.
This rule is intended to implement Iowa Code section 502.411(2).
191—50.16(502) Dishonest or unethical practices in the securities business.
	50.16(1) Dishonest or unethical business practices by any person in the securities business, other than an agent, investment adviser, investment adviser representative, or federal covered investment adviser, as prohibited pursuant to Iowa Code section 502.412(4)“m” include, but are not limited to, the following:
	a. 	Engaging in any unreasonable and unjustifiable delay in delivering securities purchased by any customers or paying, upon request, free credit balances reflecting completed transactions of any customers;
	b. 	Inducing in a customer’s account trading which is excessive in size or frequency relative to the financial resources and character of the account;
	c. 	Suitability:
	(1)	Failing to use reasonable diligence, in regard to the opening and maintenance of every account, to know and retain the essential facts concerning every customer and concerning the authority of each person acting on behalf of such customer;
	(2)	Recommending a transaction or investment strategy involving a security or securities without a reasonable basis to believe that the transaction or investment strategy is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the broker-dealer or agent in connection with such recommendation;
	d. 	Executing a transaction on behalf of a customer without authorization;
	e. 	Exercising any discretionary power in effecting a transaction for a customer’s account without first obtaining written discretionary authority from the customer, unless the discretionary power relates solely to the time or price for executing the orders;
	f. 	Executing any transaction in a margin account without securing from the customer a properly executed written margin agreement prior to the initial transaction in the account;
	g. 	Failing to segregate customers’ free securities or securities held in safekeeping;
	h. 	Hypothecating a customer’s securities without having a lien on them unless the broker-dealer secures from the customer a properly executed written consent promptly after the initial transaction, except as otherwise permitted by SEC rules;
	i. 	Entering into a transaction with or for a customer at a price not reasonably related to the current market price of the security or receiving an unreasonable commission or profit;
	j. 	Failing to furnish on or before the transaction confirmation date a final prospectus, or, if a final prospectus is not available, a preliminary prospectus together with additional documents which include all information that would be set forth in the final prospectus, to a customer purchasing securities in an offering registered pursuant to Iowa Code section 502.303 or 502.304 or that is subject to a notice filing made pursuant to Iowa Code section 502.302. If the offering is not registered, the broker-dealer shall furnish those disclosure documents that are customarily available;
	k. 	Charging unreasonable and inequitable fees for services performed, including miscellaneous services such as collecting moneys due for principal, dividends or interest, exchange or transfer of securities, appraisals, safekeeping, custody of securities or other services regarding the securities business;
	l. 	Offering to buy from or sell to any person any security at a stated price unless the broker-dealer is prepared to purchase or sell the security at the stated price and under the conditions as stated at the time of the offer to buy or sell the security;
	m. 	Representing that a security is being offered to a customer “at the market” or a price relevant to the market price unless the broker-dealer knows or has reasonable grounds to believe that a market for the security exists other than that made, created or controlled by the broker-dealer, or by any person for whom the broker-dealer is acting or with whom the broker-dealer is associated in the distribution, or any person controlled by, controlling or under common control with such broker-dealer;
	n. 	Effecting any transaction in, or inducing the purchase or sale of, any security by any manipulative, deceptive or fraudulent device, practice, plan, program, design or contrivance, including but not limited to:
	(1)	Effecting any transaction in a security involving no change in the beneficial ownership thereof;
	(2)	Entertaining an order for the purchase or sale of any security knowing that an order or orders of substantially the same size have been or will be entered by or for the same or different parties at substantially the same time and price for the purpose of creating a false or misleading appearance of active trading in the security or a false or misleading appearance regarding the market for the security. Nothing in this subparagraph shall prohibit a broker-dealer from entering bona fide agency cross transactions for the broker-dealer’s customers;
	(3)	Effecting, alone or with one or more persons, a series of transactions in any security which creates actual or apparent active trading in a security or raising or depressing the price of the security for the purpose of inducing the purchase or sale of the security by others;
	o. 	Guaranteeing a customer against loss in any securities account of the customer carried by the broker-dealer or in any securities transaction effected by the broker-dealer with or for the customer;
	p. 	Publishing or circulating, or causing to be published or circulated, any notice, circular, advertisement, newspaper article, investment service, or communication of any kind purporting to report any transaction as a purchase or sale of any security unless the broker-dealer believes that the transaction was a bona fide purchase or sale of such security, or purporting to quote the bid price or asked price for any security unless the broker-dealer believes that the quotation represents a bona fide bid for or offer of such security;
	q. 	Using any advertising or sales presentation in a deceptive or misleading fashion including but not limited to a distribution of any nonfactual data, material or presentation based on conjecture, unfounded or unrealistic claims or assertions in any brochure or flyer, or display by words, pictures, graphs or other medium designed to supplement, detract from, supersede or defeat the purpose or effect of any prospectus or disclosure;
	r. 	Failing to disclose that the broker-dealer is controlled by, controlling, affiliated with or under common control of the issuer of any security before entering into any contract with or for a customer for the purchase or sale of the security. The existence of any control or affiliation shall be disclosed to the customer in writing prior to completion of the transaction;
	s. 	Failing to make a bona fide public offering of all of the securities allotted to a broker-dealer for distribution, whether the securities were acquired by the broker-dealer as an underwriter, as a selling group member, or from a member participating in the distribution as an underwriter or selling group member;
	t. 	Failing or refusing to furnish a customer, upon reasonable request, information to which the customer is entitled or to respond to a formal written request or complaint from the customer;
	u. 	Failing or refusing to provide information requested in writing by the administrator within 14 days or a later time as prescribed by the administrator;
	v. 	Extending credit to a customer in violation of the Securities Exchange Act of 1934 or the regulations of the Federal Reserve Board;
	w. 	Engaging in acts or practices enumerated in rule 191—50.100(502);
	x. 	Failing in the solicitation of a sale or purchase of an OTC non-NASDAQ security to promptly provide, upon the customer’s request, the most current prospectus, the most recent periodic report filed pursuant to Section 13 of the Securities Exchange Act of 1934, or any other available research reports;
	y. 	Marking any order tickets or confirmations as unsolicited when the transaction is solicited;
	z. 	Failing to provide each customer, on no greater than a quarterly basis, a statement of account that, for all OTC non-NASDAQ equity securities in the account for which the firm has been a market maker during the reportable period, contains a value for each security based on the closing market bid on a date certain for any month in which activity has occurred in a customer’s account;
	aa. 	Failing to comply with any applicable provision of the FINRA Conduct Rules or any applicable fair practice or ethical standard promulgated by the SEC or by a self-regulatory organization approved by the SEC; and
	bb. 	Engaging in 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, nor having an account with, the agent or broker-dealer represented by the agent, where the prospective purchaser is encouraged to make a hasty decision to buy, irrespective of the purchaser’s investment needs and objectives.
	50.16(2) Dishonest or unethical practices by an agent in the securities business as prohibited pursuant to Iowa Code section 502.412(4)“m” include, but are not limited to, the following:
	a. 	Lending money or securities to or borrowing money or securities from a customer or acting as a custodian for money, securities, or an executed stock power of a customer unless the customer is a member of the agent’s immediate family and the act or practice is approved in advance by the agent’s supervisory personnel;
	b. 	Effecting securities transactions not recorded on the regular books or records of the broker-dealer the agent represents unless the transactions are authorized in writing by the broker-dealer prior to executing the transaction;
	c. 	Establishing or maintaining an account containing fictitious information for the purpose of executing transactions otherwise prohibited;
	d. 	Sharing, directly or indirectly, in profits or losses in any customer account without the written authorization of the customer and the broker-dealer the agent represents;
	e. 	Dividing or otherwise splitting the agent’s commissions, profits, or other compensation from the purchase or sale of securities with any person who is not registered as an agent for the same broker-dealer or for a broker-dealer under direct or indirect common control;
	f. 	Soliciting or accepting a gift, directly or indirectly, from an unrelated customer that in the aggregate exceeds $250 in a calendar year. A gift accepted by an immediate family member from an unrelated customer shall be included in the aggregate limit. An agent shall not solicit or accept from a customer a gift transferred through a relative or third party to the agent’s benefit that would have the effect of evading this paragraph;
	g. 	Soliciting or accepting being named as a beneficiary, executor, or trustee in a will or trust of an unrelated customer;
	h. 	Evading or otherwise negating the requirements of paragraph 50.16(2)“a,” “f” or “g” by terminating the customer relationship for the purpose of soliciting or accepting a loan or gift or being named as a beneficiary, executor or trustee in a will or trust that the agent is otherwise not permitted to solicit or accept. An agent is not in violation of this paragraph if the agent has made a bona fide termination of the customer relationship and conducted no securities-related business or other business for a period of three years with the customer;
	i. 	Engaging in conduct specified in subrule 50.16(1), paragraphs “b” to “f,” “i,” “j,” “n” to “q,” “u,” and “w” to “aa”;
	j. 	Engaging in conduct deemed dishonest or unethical in rule 191—50.55(502); and
	k. 	Employing any method or tactic which uses undue pressure, force, fright, or threat, whether explicit or implied, to solicit the purchase or sale of securities, or committing any act which shows that the agent has exerted undue influence over a person.
This rule is intended to implement Iowa Code section 502.412(4)“m.”
[ARC 9169B, IAB 10/20/10, effective 11/24/10; ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.17(502) Rules of conduct.
	50.17(1) Each broker-dealer, after executing and before completing each transaction with its customer, shall give or send the customer a written confirmation. A broker-dealer not registered pursuant to the Securities Exchange Act of 1934 shall provide a written confirmation including, at a minimum:
	a. 	A description of the security purchased or sold, the date of the transaction, the price at which the security was purchased or sold and any commission charged;
	b. 	A statement as to whether the broker-dealer was acting for its own account, as the agent for the customer, as the agent for some other person, or as the agent for both the customer and some other person;
	c. 	When the broker-dealer is acting as an agent for the customer, the name of the person from whom the security was purchased or to whom it was sold or the fact that such information will be furnished upon the customer’s request.
	50.17(2) A broker-dealer registered pursuant to the Securities Exchange Act of 1934 shall comply with all requirements of the Securities Exchange Act of 1934 and its implementing rules regarding written confirmations.
	50.17(3) Each broker-dealer shall establish written supervisory procedures and a system for applying those procedures which may reasonably be expected to prevent and detect any violations of Iowa Code chapter 502, its implementing rules, and any orders issued pursuant to it. Each broker-dealer shall designate and qualify a number of supervisory employees reasonable in relation to the number of its registered agents, offices, and transactions in Iowa.
	50.17(4) Each broker-dealer whose principal office is located in Iowa shall have at least one partner, officer or registered agent employed on a full-time basis at its principal office.
This rule is intended to implement Iowa Code sections 502.411(3) and 502.412(4)“i.”
191—50.18(502) Limited registration of Canadian broker-dealers and agents.
	50.18(1) A Canadian broker-dealer may register under this rule if the broker-dealer:
	a. 	Files with the administrator an application in the form required by the jurisdiction in which the broker-dealer has its principal office;
	b. 	Files with the administrator a consent to service of process on Form U-2;
	c. 	Is registered as a broker-dealer and is in good standing in the jurisdiction from which the broker-dealer is effecting transactions into Iowa and files with the administrator satisfactory evidence thereof;
	d. 	Is a member of a self-regulatory organization or stock exchange in Canada; and
	e. 	Pays a $200 filing fee.
	50.18(2) An agent representing a Canadian broker-dealer registered under this rule in effecting transactions in securities in Iowa may register under this rule if the agent:
	a. 	Files with the administrator an application in the form required by the jurisdiction in which the broker-dealer has its principal office;
	b. 	Files with the administrator a consent to service of process;
	c. 	Is registered and is in good standing in the jurisdiction from which the agent is effecting transactions into Iowa and files with the administrator satisfactory evidence thereof; and
	d. 	Pays a $40 filing fee.
	50.18(3) A Canadian broker-dealer that is resident in Canada and has no office or other physical presence in Iowa may, provided that the broker-dealer is registered under this rule, effect transactions in Iowa:
	a. 	With or for a person from Canada temporarily residing in Iowa with whom the Canadian broker-dealer had a bona fide broker-dealer-client relationship before the person entered the United States;
	b. 	With or for a person from Canada currently residing in Iowa whose transactions are in a self-directed, tax-advantaged retirement plan in Canada of which the person is the holder or contributor; or
	c. 	With or through:
	(1)	The issuers of the securities involved in the transactions;
	(2)	Other registered broker-dealers;
	(3)	Banks, savings institutions, trust companies, insurance companies, or investment companies as the term is defined in the Investment Company Act of 1940;
	(4)	Pension or profit-sharing trusts; or
	(5)	Other financial institutions or institutional investors, whether acting on their own behalf or as trustees.
	50.18(4) An agent registered pursuant to subrule 50.18(2) representing a Canadian broker-dealer registered pursuant to subrule 50.18(1) may effect all securities transactions that the broker-dealer is authorized by subrule 50.18(3) to effect.
	50.18(5) If no denial order is in effect and no proceeding is pending pursuant to Iowa Code section 502.304, a registration filed pursuant to this rule becomes effective on the forty-fifth day after an application is filed, unless otherwise provided by order of the administrator.
	50.18(6) A Canadian broker-dealer registered under this rule shall:
	a. 	Maintain provincial or territorial registration and membership in a self-regulatory organization or stock exchange and remain in good standing in each;
	b. 	Provide, upon the administrator’s request, all books and records relating to its business in Iowa as a broker-dealer;
	c. 	Promptly inform the administrator of any criminal action taken against the broker-dealer or of any finding or sanction imposed on the broker-dealer as a result of a self-regulatory or other regulatory action involving fraud, theft, deceit, misrepresentation, or like conduct; and
	d. 	Disclose in writing to each of the broker-dealer’s clients in Iowa that the broker-dealer and its agents are not subject to the full regulatory requirements of the Act.
	50.18(7) An agent of a Canadian broker-dealer registered under this rule shall:
	a. 	Maintain the agent’s provincial or territorial registration and remain in good standing; and
	b. 	Promptly inform the administrator of any criminal action taken against the agent or of any finding or sanction imposed on the agent as a result of a self-regulatory or other regulatory action involving fraud, theft, deceit, misrepresentation, or like conduct.
	50.18(8) Renewal applications for Canadian broker-dealers and agents under this rule must be filed before December 1 each year and may be made by filing with the administrator the most recent renewal application, if any, filed in the jurisdiction in which the broker-dealer has its principal office or, if no such renewal application is required, the most recent application filed pursuant to paragraph 50.18(1)“a” or 50.18(2)“a.”
	50.18(9) Every applicant for registration or renewal registration pursuant to this rule shall pay the applicable fee for broker-dealers and agents as set forth in Iowa Code section 502.410.
	50.18(10) A Canadian broker-dealer or agent registered under this rule and in compliance with paragraph 50.18(3)“c” is exempt from all the requirements of the Act, except for the antifraud sections and the requirements set out in this rule.
	50.18(11) All transactions in securities effected between Canadian broker-dealers or agents registered under this rule and Canadian persons meeting the requirements of paragraph 50.18(3)“a” or “b” are exempt from Iowa Code sections 502.301 and 502.504.
This rule is intended to implement Iowa Code section 502.401(4).
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.19(502) Brokerage services by national and state banks.
	50.19(1) A bank may, without registering as a broker-dealer, effect:
	a. 	Transactions pursuant to Iowa Code section 502.102(4)“c”; or
	b. 	Transactions permitted by order of the administrator.
	50.19(2) A bank that has entered into a contract with an Iowa-registered broker-dealer may provide the following ministerial securities services without registering as a broker-dealer:
	a. 	Provide bank customers and the public with a telephone number of the broker-dealer and provide telephone facilities on bank premises for customers and members of the public to use in contacting the broker-dealer;
	b. 	Distribute literature to bank customers and members of the public about particular services provided by the broker-dealer, subject to the requirements of subrule 50.19(4);
	c. 	Provide broker-dealer account applications to bank customers and members of the public and provide assistance in completing the forms. The disclosures required pursuant to subrule 50.19(4), in the form prescribed by subrule 50.19(5), shall be included on either the account application or an attachment to the application. If the disclosures are provided on an attachment to the application, both the application and attachment must be signed by the applicant. The bank may mail the completed account applications to a broker-dealer;
	d. 	Assist bank customers wishing to transfer funds into and out of their bank accounts for securities transactions; and
	e. 	Provide mailers to bank customers and members of the public and assist them in transmitting securities and securities documents to the broker-dealer.
	50.19(3) A bank that has entered into a contract with an Iowa-registered broker-dealer may attempt to effect and effect securities transactions without registering as a broker-dealer if all of the following requirements are met:
	a. 	Any bank employee who attempts to effect and effects securities transactions is a registered agent of the broker-dealer and:
	(1)	Has passed an acceptable subject matter examination pursuant to paragraph 50.12(1)“a”;
	(2)	Has passed the FINRA Series 63 or Series 66 examination;
	(3)	Is registered with FINRA; and
	(4)	Is registered as an agent of the broker-dealer pursuant to rule 191—50.12(502).
	b. 	If the broker-dealer provides securities services in an area of public access on the bank premises in which banking services are not provided, the bank requires that the broker-dealer clearly distinguish the area in which securities services are provided. If securities services and banking services are provided in the same public area on the bank premises, there shall be a sign clearly identifying the broker-dealer providing the securities services.
	c. 	The bank receives only the following types of compensation from the broker-dealer:
	(1)	Transaction-related compensation, subject to the restrictions provided by paragraph 50.19(7)“b”;
	(2)	An administrative fee;
	(3)	Payments for compensation of employees jointly employed by the bank and the broker-dealer; and
	(4)	Lease payments.
	50.19(4) A bank attempting to effect and effecting securities transactions pursuant to a contract with an Iowa-registered broker-dealer may distribute advertisements or promotional materials without registering as a broker-dealer if the advertisements or promotional materials clearly and prominently:
	a. 	Identify the broker-dealer;
	b. 	State in bold typeface that securities transactions and related earnings or profits are not insured by the FDIC;
	c. 	State that the securities offered by the broker-dealer are not guaranteed by, nor are they obligations of, the bank; and
	d. 	State that the bank and the broker-dealer are separate organizations.
	50.19(5) The following or a similar statement printed in bold typeface and capital letters shall satisfy the disclosure requirements of subrule 50.19(4): [NAME OF BROKER-DEALER] IS NOT A BANK, AND SECURITIES OFFERED BY [NAME OF BROKER-DEALER] ARE NOT BACKED OR GUARANTEED BY ANY BANK NOR ARE THEY INSURED BY THE FDIC.
	50.19(6) The disclosure requirements of subrule 50.19(4) shall not apply to radio or television advertisements not exceeding 30 seconds in length.
	50.19(7) A bank shall not engage in the following securities activities:
	a. 	Distribute prospectuses to bank customers or to members of the public regarding securities unless done so:
	(1)	In the exercise of trust functions permitted to banks;
	(2)	Pursuant to registration as a broker-dealer; or
	(3)	In the performance of securities activities as permitted by subrule 50.19(1), 50.19(2), or 50.19(3);
	b. 	Allow registered joint bank and broker-dealer employees to split commissions or other transaction-related remuneration received from customers with unregistered bank employees;
	c. 	Transmit account statements, confirmations, or other broker-dealer communications to bank customers or members of the public unless the communications contain a disclosure statement as required by subrule 50.19(4);
	d. 	Permit bank employees who are not registered securities agents of the broker-dealer to receive or transmit orders to the broker-dealer from customers or the public, except as permitted by subrule 50.19(1); and
	e. 	Permit bank employees who are not registered agents of the broker-dealer to perform securities functions directly involving customer contact, except as provided in subrules 50.19(1) and 50.19(2).
This rule is intended to implement Iowa Code sections 502.102(4)“c” and 502.401.
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.20(502) Broker-dealers having contracts with national and state banks.
	50.20(1) A broker-dealer engaging in securities activities with banks as permitted by subrules 50.19(2) and 50.19(3) shall maintain for three years and make available to the administrator upon request the following records:
	a. 	Copies of all advertisements and promotional literature disseminated by the bank and broker-dealer regarding securities services and products offered by the broker-dealer to bank customers and the public;
	b. 	Copies of each contract executed between the bank and the broker-dealer which propose to sell securities to bank customers or the public;
	c. 	Copies of new account forms to be completed by bank customers or members of the public who open an account with the broker-dealer;
	d. 	A list of every bank employee who is a registered securities agent of the broker-dealer and the employee’s social security number and CRD number; and
	e. 	Copies of compliance and procedures manuals regarding the securities activities of the bank.
	50.20(2) In addition to any responsibilities assumed pursuant to subrule 50.69(5), a broker-dealer engaging in securities transactions pursuant to a contract with a bank as permitted by subrules 50.19(2) and 50.19(3) shall not allow a person who is not an Iowa-registered securities agent of the broker-dealer to use the broker-dealer name, logo, or trademark on business cards or letterheads.
This rule is intended to implement Iowa Code sections 502.102(4)“c” and 502.401.
191—50.21(502) Brokerage services by credit unions, savings banks, and savings and loan institutions.
	50.21(1) A credit union, savings bank, or savings and loan institution may, without registering as a broker-dealer, effect:
	a. 	Transactions pursuant to Iowa Code section 502.102(4)“c”; and
	b. 	Transactions permitted by order of the administrator.
	50.21(2) A credit union, savings bank, or savings and loan institution that has entered into a contract with an Iowa-registered broker-dealer may provide the following ministerial securities services without registering as a broker-dealer:
	a. 	Provide customers and the public with a telephone number of the broker-dealer and provide telephone facilities on its premises for customers and members of the public to use in contacting the broker-dealer;
	b. 	Distribute literature to its customers and members of the public about particular services provided by the broker-dealer, subject to the requirements of subrule 50.21(4);
	c. 	Provide broker-dealer account applications to its customers and members of the public and provide assistance in completing the forms. The disclosures required pursuant to subrule 50.21(4) shall be included on either the account application or an attachment to the application. If the disclosures are provided on an attachment to the application, both the application and attachment must be signed by the applicant. The credit union, savings bank, or savings and loan institution may mail the completed account applications to a broker-dealer;
	d. 	Assist its customers wishing to transfer funds into and out of their accounts for securities transactions; and
	e. 	Provide mailers to its customers and members of the public and assist them in transmitting securities and securities documents to the broker-dealer.
	50.21(3) A credit union, savings bank, or savings and loan institution that has entered into a contract with an Iowa-registered broker-dealer may attempt to effect and effect securities transactions without registering as a broker-dealer if all of the following requirements are met:
	a. 	Any credit union, savings bank, or savings and loan institution employee who attempts to effect and effects securities transactions is a registered agent of the broker-dealer and:
	(1)	Has passed an acceptable subject matter examination pursuant to paragraph 50.12(1)“a”;
	(2)	Has passed the FINRA Series 63 or Series 66 examination;
	(3)	Is registered with FINRA; and
	(4)	Is registered as an agent of the broker-dealer pursuant to rule 191—50.12(502).
	b. 	If the broker-dealer provides securities services in an area of public access on the credit union, savings bank, or savings and loan institution premises in which credit union, savings bank, or savings and loan institution services are not provided, the credit union, savings bank, or savings and loan institution requires that the broker-dealer clearly distinguish the area in which securities services are provided. If securities services and credit union, savings bank, or savings and loan institution services are provided in the same public area on the bank premises, there shall be a sign clearly identifying the broker-dealer providing the securities services.
	c. 	The credit union, savings bank, or savings and loan institution receives only the following types of compensation from the broker-dealer:
	(1)	Transaction-related compensation, subject to the restrictions provided by paragraph 50.19(7)“b”;
	(2)	An administrative fee;
	(3)	Payments for compensation of employees jointly employed by the credit union, savings bank, or savings and loan institution and the broker-dealer; and
	(4)	Lease payments.
	50.21(4) Credit unions, savings banks, and savings and loan institutions attempting to effect and effecting securities transactions under contracts with Iowa-registered broker-dealers may distribute advertisements or promotional materials without registering as broker-dealers if the advertisements or promotional materials clearly and prominently:
	a. 	Identify the broker-dealer.
	b. 	Disclose in bold print that securities transactions and related earnings or profits are not insured by:
	(1)	The FDIC, in the case of savings banks and savings and loan institutions, or
	(2)	The NCUA, in the case of credit unions.
	c. 	Disclose that securities offered by the broker-dealer are not guaranteed by, nor are they obligations of, the credit union, savings bank, or savings and loan institution.
	d. 	Disclose that the credit union, savings bank, or savings and loan institution and the broker-dealer are separate organizations.
	50.21(5) The following or a similar statement in bold print and capital letters will satisfy the disclosure requirements of subrule 50.21(4): [NAME OF BROKER-DEALER] IS NOT A [SAVINGS BANK, SAVINGS AND LOAN INSTITUTION, OR CREDIT UNION], AND SECURITIES OFFERED BY [NAME OF BROKER-DEALER] ARE NOT BACKED OR GUARANTEED BY ANY [SAVINGS BANK, SAVINGS AND LOAN INSTITUTION, OR CREDIT UNION] NOR ARE THEY INSURED BY THE [FDIC OR NCUA].
	50.21(6) The disclosure requirements of subrule 50.21(4) shall not apply to radio or television advertisements not exceeding 30 seconds in length.
	50.21(7) Credit unions, savings banks, and savings and loan institutions shall not:
	a. 	Distribute prospectuses for securities to customers or to members of the public except:
	(1)	In the exercise of trust functions permitted to them;
	(2)	Pursuant to registration as a broker-dealer; or
	(3)	In the performance of securities activities as permitted by subrules 50.21(1) to 50.21(3); or
	b. 	Engage in any of the activities proscribed if performed by an unregistered bank by paragraphs 50.19(7)“b” to “e.”
This rule is intended to implement Iowa Code sections 502.102(4)“c” and 502.401.
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.22(502) Broker-dealers having contracts with credit unions, savings banks, and savings and loan institutions.
	50.22(1) A broker-dealer engaging in securities activities with credit unions, savings banks, or savings and loan institutions as permitted by subrules 50.21(2) and 50.21(3) shall maintain for three years and make available to the administrator upon request the following records:
	a. 	Copies of all advertisements and promotional literature disseminated by the credit union, savings bank, or savings and loan institution and the broker-dealer regarding securities services and products offered by the broker-dealer to credit union, savings bank, or savings and loan institution customers and the public;
	b. 	Copies of each contract executed between the credit union, savings bank, or savings and loan institution and the broker-dealer which proposes to sell securities to credit union, savings bank, or savings and loan institution customers or the public;
	c. 	Copies of new account forms to be completed by credit union, savings bank, or savings and loan institution customers or members of the public who open an account with the broker-dealer;
	d. 	A list of every credit union, savings bank, or savings and loan institution employee who is a registered securities agent of the broker-dealer and the employee’s social security number and CRD number; and
	e. 	Copies of compliance and procedures manuals regarding the securities activities of the credit union, savings bank, or savings and loan institution.
	50.22(2) In addition to any responsibilities assumed pursuant to subrule 50.69(5), a broker-dealer engaging in securities transactions pursuant to a contract with a credit union, savings bank, or savings and loan institution as permitted by subrules 50.21(2) and 50.21(3) shall not allow a person who is not an Iowa-registered securities agent of the broker-dealer to use the broker-dealer name, logo, or trademark on business cards or letterheads.
This rule is intended to implement Iowa Code sections 502.102(4)“c” and 502.401.
191—50.23 to 50.29  Reserved.
DIVISION III
REGISTRATION OF INVESTMENT ADVISERS,
INVESTMENT ADVISER REPRESENTATIVES,
AND FEDERAL COVERED INVESTMENT ADVISERS
191—50.30(502) Electronic filing with designated entity.
	50.30(1) Designation. Pursuant to Iowa Code sections 502.406 and 502.608(3)“a,” the administrator designates the IARD operated by FINRA to receive and store filings and collect related fees from investment advisers on behalf of the administrator.
	50.30(2) Use of IARD. Unless otherwise provided, all investment adviser applications, amendments, reports, notices, related filings and fees required to be filed with the administrator pursuant to the rules promulgated under the Act shall be filed electronically with and transmitted to IARD. The following additional conditions relate to such electronic filings:
	a. 	Electronic signature. When a signature or signatures are required by the particular instructions of any filing to be made through IARD, a duly authorized signatory of the applicant, as required, shall affix the duly authorized signatory’s electronic signature to the filing by typing the duly authorized signatory’s name in the appropriate fields and submitting the filing to IARD. Submission of a filing in this manner shall constitute irrefutable evidence of legal signature by any individuals whose names are typed on the filing.
	b. 	When filed. Solely for purposes of a filing made through IARD, a document is considered filed with the administrator when all fees are received and the filing is accepted by IARD on behalf of the state.
This rule is intended to implement Iowa Code sections 502.102(8), 502.406 and 502.608(3)“a.”
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.31(502) Investment adviser applications and renewals.
	50.31(1) Investment adviser applications—required filings. The application for initial registration as an investment adviser shall be made by:
	a. 	Filing Form ADV Parts 1 and 2 with IARD; and
	b. 	Remitting the $100 filing fee to IARD pursuant to Iowa Code section 502.410(3).
	50.31(2) Investment adviser applications—discretionary filings. The administrator may require that an application for initial registration also include the following:
	a. 	Financial statements as set forth in paragraph 50.42(1)“f” including, but not limited to, a copy of the balance sheet for the last fiscal year and, if the balance sheet is prepared as of a date more than 45 days from the date of the filing of the application, an unaudited balance sheet prepared in accordance with subrule 50.40(7);
	b. 	A copy of the surety bond required pursuant to rule 191—50.41(502), if any; and
	c. 	Any other information necessary for determining whether registration is appropriate.
	50.31(3) Investment adviser renewals—required filings. Annual renewals by investment advisers shall be made by:
	a. 	Filing an annual renewal registration with IARD; and
	b. 	Remitting the $100 filing fee to IARD as required pursuant to Iowa Code section 502.410(3).
	50.31(4) Investment adviser renewals—discretionary filings. The administrator may require the filing of a copy of the surety bond, if any, required pursuant to rule 191—50.41(502).
	50.31(5) Completion of filing. An application for initial or renewal registration is considered filed for the purposes of Iowa Code section 502.406 when the required fee and all required submissions have been received by IARD and the administrator.
	50.31(6) Updates and amendments. The investment adviser is under a continuing obligation to update information provided on Form ADV as follows:
	a. 	An updated Form ADV must be filed with IARD within 90 days of the end of the investment adviser’s fiscal year; and
	b. 	Any amendment to Form ADV must be filed with IARD within 30 days of the event causing the required amendment.
	50.31(7) Succession and change in registration.
	a. 	In the case of an organizational change, including a change in the state of incorporation or form of organization, not involving a material change in financial condition or management, an investment adviser shall file all applicable amendments to Form ADV.
	b. 	In the case of an organizational change, including a change in the state of incorporation or form of organization, involving a material change in financial condition or management, an investment adviser must file a new application for registration pursuant to subrule 50.31(1). The filing must include the fee pursuant to paragraph 50.31(1)“b” and registration fees for all Iowa-registered investment adviser representatives.
	c. 	In the case of a change in name, an investment adviser shall file all applicable amendments to Form ADV.
This rule is intended to implement Iowa Code sections 502.102(8) and 502.406.
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.32(502) Application for investment adviser representative registration.
	50.32(1) Designation. Pursuant to Iowa Code sections 502.406 and 502.608(3)“a,” the administrator designates the CRD operated by FINRA to receive and store filings and collect related fees from investment adviser representatives on behalf of the administrator.
	50.32(2) Initial application. The application for initial registration as an investment adviser representative made pursuant to Iowa Code section 502.406(1) shall be made by filing Form U-4 with the CRD. The following shall be submitted to the CRD with the application:
	a. 	Proof of compliance by the investment adviser representative with the examination requirements of rule 191—50.33(502); and
	b. 	If applicable, the $30 fee required pursuant to Iowa Code section 502.410(4).
	50.32(3) Annual renewal. Annual renewals by investment adviser representatives shall be made by:
	a. 	Filing an annual renewal registration with CRD; and
	b. 	If applicable, remitting the $30 filing fee to CRD as required pursuant to Iowa Code section 502.410(4).
	50.32(4) Completion of filing. An application for initial or renewal registration is considered filed for the purposes of Iowa Code section 502.406 when the required fee and all required submissions have been received by the CRD.
	50.32(5) Updates, amendments, withdrawals and terminations. The investment adviser representative is under a continuing obligation to update information provided on Form U-4 as follows:
	a. 	Any amendment to information provided on Form U-4 must be filed with CRD within 30 days of the event causing the required amendment; and
	b. 	A withdrawal request or termination must be filed with CRD within 30 days of the event causing the necessity of a withdrawal request or termination. A withdrawal request shall be made by filing an accurate and complete Form U-5 with CRD.
This rule is intended to implement Iowa Code sections 502.102(8) and 502.406.
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.33(502) Examination requirements.
	50.33(1) Except as exempted by subrule 50.33(2), a person applying to be registered as an investment adviser representative shall provide the administrator with proof that the person has obtained a passing score on one of the following examinations:
	a. 	The Series 65 examination as implemented January 1, 2000; or
	b. 	The Series 7 examination and Series 66 examination as implemented January 1, 2000. In the event that an applicant for registration as an investment adviser representative has received a waiver by FINRA of the Series 7 examination otherwise required by this paragraph, the FINRA waiver will be accepted in lieu of the examination requirement.
	50.33(2) Unless otherwise ordered by the administrator in connection with a violation of the Act, the following individuals shall be exempt from the examination requirements of subrule 50.33(1):
	a. 	Any individual who is registered as an investment adviser or investment adviser representative in any jurisdiction in the United States on or before January 19, 2000.
	b. 	Any individual who is registered as an investment adviser or investment adviser representative in any jurisdiction in the United States after November 1, 2001, provided that the jurisdiction in which the investment adviser or investment adviser representative is registered requires the passage of the examinations in subrule 50.33(1).
	c. 	Any individual who has not been registered as an investment adviser or investment adviser representative in any jurisdiction for a period of two years shall be required to comply with the examination requirements of this rule.
	d. 	Any individual who currently holds one of the following professional designations:
	(1)	Certified Financial Planner or CFP designation awarded by the Certified Financial Planner Board of Standards, Inc.;
	(2)	Chartered Financial Consultant (ChFC) designation awarded by The American College, Bryn Mawr, Pennsylvania;
	(3)	Personal Financial Specialist (PFS) designation administered by the American Institute of Certified Public Accountants;
	(4)	Chartered Financial Analyst (CFA) designation granted by the Association for Investment Management and Research;
	(5)	Chartered Investment Counselor (CIC) designation granted by the Investment Counsel Association of America; or
	(6)	Any other professional designation recognized by order of the administrator.
This rule is intended to implement Iowa Code section 502.412(5).
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.34(502) Notice filing requirements for federal covered investment advisers.
	50.34(1) Notice filing. The notice filing for a federal covered investment adviser pursuant to Iowa Code section 502.405 shall be filed with IARD on an executed Form ADV. A notice filing of a federal covered investment adviser shall be deemed filed for purposes of this subrule when Form ADV and the fee of $100 required pursuant to Iowa Code section 502.410(5) are received by IARD.
	50.34(2) Form ADV Part 2. The administrator may:
	a. 	Accept a copy of Part 2 of Form ADV as filed electronically with IARD; or
	b. 	Deem Part 2 of Form ADV filed if a federal covered investment adviser provides, within five days of a request, Part 2 of Form ADV to the administrator. Because the administrator deems Part 2 of Form ADV to be filed, a federal covered investment adviser is not required to submit Part 2 of Form ADV to the administrator unless specifically requested to do so.
	50.34(3) Renewal. The annual renewal of the notice filing for a federal covered investment adviser pursuant to Iowa Code section 502.405 shall be filed with IARD. The renewal of the notice filing shall be deemed filed for purposes of this subrule when the $100 fee required pursuant to Iowa Code section 502.410(5) is accepted by IARD.
	50.34(4) Updates and amendments. A federal covered investment adviser must file with IARD any amendments to the federal covered investment adviser’s Form ADV.
This rule is intended to implement Iowa Code section 502.405.
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.35(502) Withdrawal of investment adviser registration. The application for withdrawal of registration as an investment adviser pursuant to Iowa Code section 502.409 shall be completed on Form ADV-W and filed with IARD.
This rule is intended to implement Iowa Code section 502.409.
191—50.36(502) Investment adviser brochure.
	50.36(1) General requirements.
	a. 	Unless otherwise provided in this rule, an investment adviser registered or required to be registered pursuant to Section 403 of the Act shall furnish each advisory client and prospective advisory client with:
	(1)	A brochure which may be a copy of Part 2A of its Form ADV or written documents containing the information required by Part 2A of Form ADV;
	(2)	A copy of its Part 2B brochure supplement for each individual:
	1.	Providing investment advice and having direct contact with clients in this state; or
	2.	Exercising discretion over assets of clients in this state, even if no direct contact is involved;
	(3)	A copy of its Part 2A Appendix 1 wrap fee brochure if the investment adviser sponsors or participates in a wrap fee account;
	(4)	A summary of material changes, which may be included in Form ADV Part 2 or given as a separate document; and
	(5)	Such other information as the administrator may require.
	b. 	The brochure must comply with the language, organizational format and filing requirements specified in the Instructions to Form ADV Part 2.
	c. 	Notwithstanding the SEC’s Instructions for Part 2A of Form ADV, fee changes constitute material changes requiring an update to all parts of Form ADV.
	50.36(2) Delivery.
	a. 	Initial delivery. An investment adviser, except as provided in paragraph 50.36(2)“c,” shall deliver the Part 2A brochure and any brochure supplements required by rule 191—50.36(502) to a prospective advisory client:
	(1)	Not less than 48 hours before an investment adviser enters into any advisory contract with such client or prospective client; or
	(2)	At the time an advisory client enters into any such contract, if the advisory client has a right to terminate the contract without penalty within five business days after entering into the contract.
	b. 	Annual delivery. An investment adviser, except as provided in paragraph 50.36(2)“c,” must:
	(1)	Deliver within 120 days of the end of its fiscal year a free, updated brochure and related brochure supplements which include or are accompanied by a summary of material changes; or
	(2)	Deliver a summary of material changes that includes an offer to provide a copy of the updated brochures and supplements and information on how the client may obtain a copy of the brochures and supplements, provided that advisers are not required to deliver a summary of material changes if no material changes have taken place since the last summary and brochure delivery.
	c. 	Exceptions to delivery. Delivery of the brochure and related brochure supplements required by paragraphs 50.36(2)“a” and “b” need not be made to:
	(1)	Clients who receive only impersonal advice and who pay less than $500 in fees per year; or
	(2)	An investment company registered under the Investment Company Act of 1940; or
	(3)	A business development company as defined in the Investment Company Act of 1940 and whose advisory contract meets the requirements of Section 15c of that Act.
	d. 	Electronic delivery. Delivery of the brochure and related supplements may be made electronically if the investment adviser:
	(1)	In the case of an initial delivery to a potential client, obtains verification that readable copies of the brochure and supplements were received by the client;
	(2)	In the case of other than initial deliveries, obtains each client’s prior consent to provide the brochure and supplements electronically;
	(3)	Prepares the electronically delivered brochure and supplements in the format prescribed in subrule 50.36(1) and Instructions to Form ADV Part 2;
	(4)	Delivers the brochure and supplements in a format that can be retained by the client in either electronic or paper form; or
	(5)	Establishes procedures to supervise personnel transmitting the brochure and supplements and to prevent violations of this rule.
	50.36(3) Other disclosures. Nothing in this rule shall relieve any investment adviser from any obligation pursuant to any provision of the Act or the rules thereunder or other federal or state law to disclose any information to its advisory clients or prospective advisory clients not specifically required by this rule.
	50.36(4) Definitions. For the purpose 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; or
	(3)	Any combination of the foregoing services.
	b. 	“Entering into,” in reference to an 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.
This rule is intended to implement Iowa Code section 502.411(7).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.37(502) Cash solicitation.
	50.37(1) Payment of a cash fee, directly or indirectly, by an investment adviser to a solicitor for solicitation activities shall constitute an act, practice, or course of conduct operating as a fraud or deceit upon a person, pursuant to Iowa Code section 502.502(2), if:
	a. 	The solicitor:
	(1)	Is subject to an order issued by the administrator pursuant to Iowa Code section 502.412(4);
	(2)	Has been convicted of a felony or within the previous ten years has been convicted of a misdemeanor involving conduct described in Iowa Code section 502.412(4)“c”; or
	(3)	Is found by the administrator to have engaged or has been convicted of engaging in any of the conduct specified in Iowa Code section 502.505, 502.412(4)“b” or 502.412(4)“i”; has materially aided in violating Iowa Code section 502.412(4)“d”; or is subject to an order, judgment, or decree pursuant to Iowa Code section 502.412(4)“d” to “f.”
	b. 	The cash fee is not paid pursuant to a written agreement to which the investment adviser is a party. If the cash fee is paid pursuant to a written agreement, the written agreement must:
	(1)	Describe the solicitation activities to be engaged in by the solicitor on behalf of the investment adviser and the compensation to be received for the solicitation activities;
	(2)	Contain an undertaking by the solicitor to perform the solicitor’s duties under the agreement in a manner consistent with the instructions of the investment adviser and the provisions of the Act and its implementing rules, as applicable; and
	(3)	Require that the solicitor, at the time of any solicitation activities for which compensation is paid or is to be paid by the investment adviser, provide the client with a current copy of the investment adviser’s written disclosure statement required by subparagraph 50.36(2)“a”(2) or SEC Rule 204-3, if applicable, and a separate written disclosure statement as described in subrule 50.37(2). Prior to or upon entering into a written or oral investment advisory contract with a client, the investment adviser shall obtain a signed and dated acknowledgment of receipt by the client of the investment adviser’s and solicitor’s written disclosure statements. Additionally, the investment adviser shall make a bona fide effort to ascertain whether the solicitor has complied in all aspects with the written agreement, and shall have a reasonable basis for believing that the solicitor has complied.
	c. 	The cash fee is paid to a solicitor:
	(1)	For solicitation activities regarding anything other than impersonal advisory services; or
	(2)	Who is a partner, officer, director, or employee of the investment adviser or is a partner, officer, director, or employee of a person who controls, is controlled by, or is under common control with the investment adviser without disclosure of the status of the solicitor as a partner, officer, director, or employee of the investment adviser or other person and of any affiliation between the investment adviser and the solicitor to the client at the time of solicitation or referral.
	50.37(2) The separate written disclosure statement required to be furnished pursuant to subparagraph 50.37(1)“b”(3) shall contain the following information:
	a. 	The name of the solicitor;
	b. 	The name of the investment adviser;
	c. 	The nature of the relationship, including any affiliation, between the solicitor and the investment adviser;
	d. 	A statement that the solicitor will be compensated for the solicitor’s solicitation services by the investment adviser;
	e. 	The terms of such compensation arrangement, including a description of the compensation paid or to be paid to the solicitor; and
	f. 	The amount, if any, the client will be charged for the cost of obtaining the client’s account in addition to the advisory fee, and the differential, if any, in advisory fees charged by the investment adviser if the differential is the result of the investment adviser’s agreement to compensate the solicitor for soliciting or referring clients.
	50.37(3) Nothing in this rule relieves any person of any fiduciary duty or other obligation to which the person may be subject pursuant to contract or law.
	50.37(4) For the purpose of this rule:
“Client” includes any prospective client.
“Impersonal advisory services” means investment advisory services provided solely through written materials or oral statements not purporting to meet the objectives or needs of the specific client, statistical information containing no expressions of opinion as to the investment merits of particular securities, or any combination of the foregoing.
“Principal place of business” of an investment adviser means the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser.
“Solicitor” means any person who, directly or indirectly, solicits any client for or refers any client to an investment adviser.
	50.37(5) An investment adviser shall retain a copy of each written agreement, acknowledgment and solicitor disclosure statement required by this rule in accordance with Iowa Code section 502.411(3) and paragraph 50.42(1)“o.” However, an investment adviser registered in Iowa whose principal place of business is located outside Iowa shall not be subject to the record maintenance requirements of this subrule and the applicable provisions of paragraph 50.42(1)“o” if:
	a. 	The investment adviser is registered or licensed as an investment adviser in the state in which the investment adviser maintains the investment adviser’s principal place of business;
	b. 	The investment adviser complies with the applicable books and records requirements of the state in which the investment adviser maintains the investment adviser’s principal place of business; and
	c. 	The provisions of this rule would require the investment adviser to maintain books or records in addition to those required by the laws of the state in which the investment adviser maintains the investment adviser’s principal place of business.
This rule is intended to implement Iowa Code section 502.502(2).
191—50.38(502) Prohibited conduct in providing investment advice.
	50.38(1) An investment adviser, an investment adviser representative, or a federal covered investment adviser is a fiduciary and has a duty to act primarily for the benefit of its clients. Rule 191—50.38(502) applies to federal covered investment advisers to the extent that the alleged conduct is fraudulent, deceptive, or as otherwise permitted by the NSMIA. While the extent and nature of this duty varies according to the nature of the relationship between an investment adviser, an investment adviser representative, or a federal covered investment adviser and its clients and the circumstances of each case, an investment adviser, an investment adviser representative, or a federal covered investment adviser shall not engage in prohibited fraudulent, deceptive, or manipulative conduct including, but not limited to:
	a. 	Recommending to a client to whom investment advisory services are provided the purchase, sale, or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client’s investment objectives, financial situation and needs, and any other information known by the investment adviser, investment adviser representative, or federal covered investment adviser;
	b. 	Exercising any discretionary authority in placing an order for the purchase or sale of securities for a client without obtaining written discretionary authority from the client within ten business days after the date of the first transaction placed pursuant to discretionary authority, unless the discretionary authority relates solely to the price at which, or the time when, an order for a definite amount of a specified security shall be executed, or both;
	c. 	Inducing trading in a client’s account that is excessive in size or frequency compared to the financial resources, investment objectives, and character of the account;
	d. 	Placing an order to purchase or sell a security for a client account without authority to do so;
	e. 	Placing an order to purchase or sell a security for a client account upon instruction of a third party without first obtaining a written third-party trading authorization from the client;
	f. 	Borrowing money or securities from a client unless the client is a broker-dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds;
	g. 	Loaning money or securities to a client unless the investment adviser is a financial institution engaged in the business of loaning funds or the client is an affiliate of the investment adviser;
	h. 	Misrepresenting to any client, or prospective client, the qualifications of the investment adviser, investment adviser representative, or federal covered investment adviser or any employee, or affiliated persons, or misrepresenting the nature of the advisory services being offered or fees to be charged for such service, or omitting to state a material fact necessary to make the statements made regarding qualifications, services or fees, in light of the circumstances under which they are made, not misleading;
	i. 	Providing a report or recommendation to any advisory client prepared by someone other than the investment adviser, investment adviser representative, or federal covered investment adviser without disclosing that fact. This prohibition does not apply when the investment adviser, investment adviser representative, or federal covered investment adviser uses published research reports or statistical analyses to render advice or when an investment adviser, investment adviser representative, or federal covered investment adviser orders such a report in the normal course of providing service;
	j. 	Charging a client an unreasonable fee;
	k. 	Failing to disclose to clients in writing before any advice is rendered any material conflict of interest regarding the investment adviser, investment adviser representative, or federal covered investment adviser or any of its employees, or affiliated persons which could reasonably be expected to impair the rendering of unbiased and objective advice including, but not limited to:
	(1)	Compensation arrangements connected with investment advisory services to clients which are in addition to compensation from such clients for such services; and
	(2)	Charging a client an investment advisory fee for rendering advice when compensation for effecting securities transactions pursuant to such advice will be received by the investment adviser, investment adviser representative, or federal covered investment adviser or its employees or affiliated persons;
	l. 	Knowingly selling any security to or purchasing any security from a client while acting as principal for an advisory account of the investment adviser, investment adviser representative, or federal covered investment adviser, or knowingly effecting any sale or purchase of any security for the account of the client while acting as broker-dealer for a person other than the client, without disclosing to the client in writing before the completion of the transaction the capacity in which the investment adviser, investment adviser representative, or federal covered investment adviser is acting and without obtaining the written consent of the client to the transaction.
	(1)	The prohibitions of paragraph 50.38(1)“l” shall not apply to any transaction with a customer of a broker-dealer if the broker-dealer is not acting as an investment adviser in relation to the transaction.
	(2)	The prohibitions of paragraph 50.38(1)“l” shall not apply to any transaction with a customer of a broker-dealer if the broker-dealer acts solely as an investment adviser:
	1.	By means of publicly distributed written materials or publicly made oral statements;
	2.	By means of written materials or oral statements not purporting to meet the objectives or needs of specific individuals or accounts;
	3.	Through the issuance of statistical information containing no expressions of opinion as to the investment merits of a particular security; or
	4.	Any combination of the foregoing services.
	(3)	Publicly distributed written materials or publicly made oral statements shall disclose that, if the purchaser of the advisory communication uses the investment adviser’s services in connection with the sale or purchase of a security which is a subject of the communication, the investment adviser may act as principal for its own account or as agent for another person. Compliance by the investment adviser with the foregoing disclosure requirement shall not relieve the investment adviser of any other disclosure obligations under the Act.
	(4)	Definitions for purposes of rule 191—50.38(502):
	1.	“Publicly distributed written materials” means written materials which are distributed to 35 or more persons who pay for those materials.
	2.	“Publicly made oral statements” means oral statements made simultaneously to 35 or more persons who pay for access to those statements.
	m. 	Guaranteeing a client that a specific result will be achieved with advice rendered;
	n. 	Making, in the solicitation of clients, any untrue statement of a material fact, or omitting to state a material fact necessary in order to make the statement made, in light of the circumstances under which they are made, not misleading;
	o. 	Disclosing the identity, affairs, or investments of any client unless required by law to do so, or unless disclosed with the client’s consent;
	p. 	Taking any action, directly or indirectly, regarding securities or funds in which any client has any beneficial interest when the investment adviser has custody or possession of such securities or funds and when the action of the investment adviser or investment adviser representative is subject to and in violation of the custody requirements provided by rule 191—50.39(502);
	q. 	Failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information in violation of Section 204A of the Investment Advisers Act of 1940;
	r. 	Engaging in any act, practice, or course of business which is fraudulent, deceptive, manipulative, or unethical;
	s. 	Engaging in conduct or any act, indirectly or through or by any other person, which is unlawful for such person to do directly under the provisions of this Act, its implementing rules, or order of the administrator;
	t. 	Failing to disclose or providing incomplete disclosure to a client regarding any securities-related activities, or engaging in deceptive practices;
	u. 	Soliciting or accepting a gift, directly or indirectly, from an unrelated customer that in the aggregate exceeds $250 in a calendar year. A gift accepted by an immediate family member from an unrelated client shall be included in the aggregate limit. An investment adviser shall not solicit or accept from a client a gift transferred through a relative or third party to the investment adviser’s benefit that would have the effect of evading this paragraph;
	v. 	Soliciting or accepting being named as a beneficiary, executor, or trustee in a will or trust of an unrelated customer;
	w. 	Evading or otherwise negating the requirements of paragraph 50.38(1)“f,” “g,” “u” or “v,” by terminating the customer relationship for the purpose of soliciting or accepting a loan or gift or being named as a beneficiary, executor or trustee in a will or trust that the agent is otherwise not permitted to solicit or accept. An investment adviser or investment adviser representative will not be in violation of this rule if the investment adviser or investment adviser representative has made a bona fide termination of the client relationship and conducted no securities-related business or other business for a period of three years with the client;
	x. 	Engaging in conduct deemed dishonest or unethical in rule 191—50.55(502); and
	y. 	Employing any method or tactic which uses undue pressure, force, fright, or threat, whether explicit or implied, in connection with providing investment advice, or committing any act which shows that an investment adviser or investment adviser representative has exerted undue influence over a client.
	50.38(2) An investment adviser, investment adviser representative, or federal covered investment adviser shall not, directly or indirectly, publish, circulate, or distribute any advertisement that does any one of the following:
	a. 	Refers to any testimonial of any kind concerning the investment adviser, investment adviser representative, or federal covered investment adviser or concerning any advice, analysis, report, or other service rendered by such investment adviser, investment adviser representative, or federal covered investment adviser.
	b. 	Refers to past specific recommendations of the investment adviser, investment adviser representative, or federal covered investment adviser that were or would have been profitable to any person, except that an investment adviser, investment adviser representative, or federal covered investment adviser may furnish or offer to furnish a list of all recommendations made by the investment adviser, investment adviser representative, or federal covered investment adviser within the immediately preceding period of not less than one year if the advertisement or list also includes both of the following:
	(1)	The name of each security recommended, the date and nature of each recommendation, the market price at that time, the price at which the recommendation was to be acted upon, and the most recently available market price of each such security.
	(2)	A legend on the first page in prominent print or type that states that the reader should not assume that recommendations made in the future will be profitable or will equal the performance of the securities in the list.
	c. 	Represents that any graph, chart, formula, or other device being offered can in and of itself be used to determine which securities to buy or sell, or when to buy or sell them; or which represents, directly or indirectly, that any graph, chart, formula, or other device being offered will assist any person in making that person’s own decisions as to which securities to buy or sell, or when to buy or sell them, without prominently disclosing in such advertisement the limitations thereof and the difficulties with respect to the use of any graph, chart, formula or device.
	d. 	Represents that any report, analysis, or other service will be furnished for free or without charge, unless such report, analysis, or other service actually is or will be furnished entirely free and without any direct or indirect condition or obligation.
	e. 	Represents that the administrator has approved any advertisement.
	f. 	Contains any untrue statement of a material fact, or any statement that is otherwise false or misleading.
	50.38(3) With respect to federal covered investment advisers, the provisions of subrule 50.38(2) apply only to the extent permitted by Section 203A of the Investment Advisers Act of 1940.
	50.38(4) For the purposes of subrule 50.38(2), the term “advertisement” shall include any notice, circular, letter, or other written communication addressed to more than one person, or any notice or other announcement in any electronic or paper publication, by radio or television, or by any medium, that offers any one of the following:
	a. 	Any analysis, report, or publication concerning securities.
	b. 	Any analysis, report, or publication that is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell.
	c. 	Any graph, chart, formula, or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell.
	d. 	Any other investment advisory service with regard to securities.
	50.38(5) The prohibitions of rule 191—50.38(502) shall not apply to an investment adviser effecting an agency cross transaction for an advisory client provided the following conditions are met:
	a. 	The advisory client executes a written consent prospectively authorizing the investment adviser to effect agency cross transactions for such client;
	b. 	Before obtaining such written consent from the client, the investment adviser makes full written disclosure to the client that, with respect to agency cross transactions, the investment adviser will act as broker-dealer for, receive commissions from, and have a potentially conflicting division of loyalties and responsibilities regarding both parties to the transactions;
	c. 	At or before the completion of each agency cross transaction, the investment adviser or any other person relying on subrule 50.38(5) sends the client a written confirmation. The written confirmation shall include:
	(1)	A statement of the nature of the transaction;
	(2)	The date the transaction took place;
	(3)	An offer to furnish, upon request, the time when the transaction took place; and
	(4)	The source and amount of any other remuneration the investment adviser received or will receive in connection with the transaction. In the case of a purchase, if the investment adviser was not participating in a distribution, or, in the case of a sale, if the investment adviser was not participating in a tender offer, the written confirmation may state whether the investment adviser has been receiving or will receive any other remuneration and that the investment adviser will furnish the source and amount of such remuneration to the client upon the client’s written request;
	d. 	At least annually, and with or as part of any written statement or summary of the account from the investment adviser, the investment adviser or any other person relying on subrule 50.38(5) sends each client a written disclosure statement identifying:
	(1)	The total number of agency cross transactions for the client during the period since the date of the last such statement or summary; and
	(2)	The total amount of all commissions or other remuneration the investment adviser received or will receive in connection with agency cross transactions for the client during the period;
	e. 	Each written disclosure and confirmation required by subrule 50.38(5) must include a conspicuous statement indicating that the client may revoke the written consent required under paragraph 50.38(5)“a” at any time by providing written notice to the investment adviser;
	f. 	No agency cross transaction may be effected in which the same investment adviser recommended the transaction to both any seller and any purchaser;
	g. 	“Agency cross transaction for an advisory client,” for purposes of subrule 50.38(5), means a transaction in which a person acts as an investment adviser in relation to a transaction in which the investment adviser, or any person controlling, controlled by, or under common control with such investment adviser, including an investment adviser representative, acts as a broker-dealer for both the advisory client and for another client on the other side of the transaction. When acting in such capacity, such person acting as an investment adviser, or any person controlling, controlled by, or under common control with such investment adviser, including an investment adviser representative, is required to be registered as a broker-dealer in this state unless excluded from the definition of investment adviser;
	h. 	Nothing in subrule 50.38(5) shall be construed to relieve an investment adviser or investment adviser representative from acting in the best interests of the client, including fulfilling the duty with respect to the best price and execution for the particular transaction for the client, nor shall subrule 50.38(5) relieve any investment adviser or investment adviser representative of any other disclosure obligations imposed by the Act.
This rule is intended to implement Iowa Code section 502.502(2).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.39(502) Custody of client funds or securities by investment advisers.
	50.39(1) Safekeeping required. It is unlawful and deemed to be a fraudulent, deceptive, or manipulative act, practice, or course of business for an investment adviser, registered or required to be registered, to have custody of client funds or securities unless the following conditions are met:
	a. 	Notice to administrator. The investment adviser notifies the administrator promptly in writing that the investment adviser has or may have custody. Such notification is required to be given on Form ADV.
	b. 	Qualified custodian. A qualified custodian maintains those funds and securities:
	(1)	In a separate account for each client under that client’s name; or
	(2)	In accounts that contain only the investment adviser’s clients’ funds and securities, under the investment adviser’s name as agent or trustee for the clients, or, in the case of a pooled investment vehicle that the investment adviser manages, in the name of the pooled investment vehicle.
	c. 	Notice to clients. If an investment adviser opens an account with a qualified custodian on its client’s behalf, under the client’s name, under the name of the investment adviser as agent, or under the name of a pooled investment vehicle, the investment adviser must notify the client in writing of the qualified custodian’s name and address and the manner in which the funds or securities are maintained, promptly when the account is opened and following any changes to this information. If the investment adviser sends account statements to a client to whom the investment adviser is required to provide this notice, the investment adviser must include in the notification provided to that client and in any subsequent account statement the investment adviser sends that client a statement urging the client to compare the account statements from the custodian with those from the investment adviser.
	d. 	Account statements. The investment adviser has a reasonable basis, after due inquiry, for believing that the qualified custodian sends an account statement, at least quarterly, to each client for which the qualified custodian maintains funds or securities, identifying the amount of funds and of each security in the account at the end of the period and setting forth all transactions in the account during that period.
	e. 	Special rule for limited partnerships and limited liability companies. If the investment adviser or a related person is a general partner of a limited partnership (or managing member of a limited liability company, or holds a comparable position for another type of pooled investment vehicle):
	(1)	The account statements required under paragraph 50.39(1)“d” must be sent to each limited partner (or member or other beneficial owner); and
	(2)	The investment adviser must:
	1.	Enter into a written agreement with an independent party who is obliged to act in the best interest of the limited partners, members, or other beneficial owners to review all fees, expenses and capital withdrawals from the pooled accounts; and
	2.	Send all invoices or receipts to the independent party, detailing the amount of the fee, expenses or capital withdrawal and the method of calculation such that the independent party can:
	●	Determine that the payment is in accordance with the pooled investment vehicle standards (generally the partnership agreement or membership agreement); and
	●	Forward, to the qualified custodian, approval for payment of the invoice with a copy to the investment adviser.
	f. 	Independent verification. The client funds and securities of which the investment adviser has custody are verified by actual examination at least once during each calendar year, by an independent certified public accountant (CPA), pursuant to a written agreement between the investment adviser and the independent CPA, at a time that is chosen by the independent CPA without prior notice or announcement to the investment adviser and that is irregular from year to year. The written agreement must provide for the first examination to occur within six months of execution of the written agreement, except that, if the investment adviser maintains client funds or securities pursuant to rule 191—50.38(502) as a qualified custodian, the agreement must provide for the first examination to occur no later than six months after the investment adviser obtains the internal control report. The written agreement must require the independent CPA to:
	(1)	File a certificate on Form ADV-E with the administrator within 120 days of the time chosen by the independent CPA in paragraph 50.39(1)“f,” stating that the independent CPA has examined the funds and securities and describing the nature and extent of the examination;
	(2)	Notify the administrator within one business day of the finding of any material discrepancies during the course of the examination, by means of a facsimile transmission or electronic mail, followed by first-class mail, directed to the attention of the administrator; and
	(3)	File within four business days of the resignation or dismissal from, or other termination of, the engagement, or removing itself or being removed from consideration for being reappointed, Form ADV-E accompanied by a statement that includes:
	1.	The date of such resignation, dismissal, removal, or other termination, and the name, address, and contact information of the independent CPA; and
	2.	An explanation of any problems relating to examination scope or procedure that contributed to such resignation, dismissal, removal, or other termination.
	g. 	Investment advisers acting as qualified custodians. If the investment adviser maintains, or if the investment adviser has custody because a related person maintains, client funds or securities pursuant to rule 191—50.39(502) as a qualified custodian in connection with advisory services the investment adviser provides to clients:
	(1)	The independent CPA that the investment adviser retains to perform the independent verification required by paragraph 50.39(1)“f” must be registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules; and
	(2)	The investment adviser must obtain, or receive from its related person, within six months of execution of the written agreement and thereafter no less frequently than once each calendar year a written internal control report prepared by an independent CPA.
	1.	The internal control report must include an opinion of an independent CPA as to whether controls have been placed in operation as of a specific date, and are suitably designed and are operating effectively to meet control objectives relating to custodial services, including the safeguarding of funds and securities held by either the investment adviser or a related person on behalf of the investment adviser’s clients, during the year;
	2.	The independent CPA must verify that the funds and securities are reconciled to a custodian other than the investment adviser or the investment adviser’s related person; and
	3.	The independent CPA must be registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules.
	h. 	Independent representatives. A client may designate an independent representative to receive, on the client’s behalf, notices and account statements as required under paragraphs 50.39(1)“c” and “d.”
	50.39(2) Exceptions.
	a. 	Shares of mutual funds. With respect to shares of an open-end company as defined in Section 5(a)(1) of the Investment Company Act of 1940 (“mutual fund”), the investment adviser may use the mutual fund transfer agent in lieu of a qualified custodian for purposes of complying with subrule 50.39(1).
	b. 	Certain privately offered securities.
	(1)	The investment adviser is not required to comply with paragraph 50.39(1)“b” with respect to securities that are:
	1.	Acquired from the issuer in a transaction or chain of transactions not involving any public offering;
	2.	Uncertificated and ownership thereof is recorded only on the books of the issuer or its transfer agent in the name of the client; and
	3.	Transferable only with prior consent of the issuer or holders of the outstanding securities of the issuer.
	(2)	Notwithstanding subparagraph 50.39(2)“b”(1), the provisions of paragraph 50.39(2)“b” are available with respect to securities held for the account of a limited partnership (or limited liability company, or other type of pooled investment vehicle) only if the limited partnership is audited, and the audited financial statements are distributed, as described in paragraph 50.39(2)“d,” and the investment adviser notifies the administrator in writing that the investment adviser intends to provide audited financial statements, as described in this subparagraph. Such notification is required to be provided on Form ADV.
	c. 	Fee deduction. Notwithstanding paragraph 50.39(1)“f,” an investment adviser is not required to obtain an independent verification of client funds and securities maintained by a qualified custodian if all of the following conditions are met:
	(1)	The investment adviser has custody of the funds and securities solely as a consequence of its authority to make withdrawals from client accounts to pay its advisory fee;
	(2)	The investment adviser has written authorization from the client to deduct advisory fees from the account held with the qualified custodian;
	(3)	Each time a fee is directly deducted from a client account, the investment adviser concurrently:
	1.	Sends the independent party designated pursuant to subparagraph 50.39(1)“e”(2) an invoice or statement of the amount of the fee to be deducted from the client’s account; and
	2.	Sends the client an invoice or statement itemizing the fee. Itemization includes the formula used to calculate the fee, the amount of assets under management on which the fee is based, and the time period covered by the fee; and
	(4)	The investment adviser notifies the administrator in writing that the investment adviser intends to use the safeguards provided in paragraph 50.39(2)“c.” Such notification is required to be given on Form ADV.
	d. 	Limited partnerships subject to annual audit. An investment adviser is not required to comply with paragraphs 50.39(1)“c” and “d” and shall be deemed to have complied with paragraph 50.39(1)“f” with respect to the account of a limited partnership (or limited liability company, or another type of pooled investment vehicle) if each of the following conditions is met:
	(1)	The adviser sends to all limited partners (or members or other beneficial owners), at least quarterly, a statement showing:
	1.	The total amount of all additions to and withdrawals from the fund as a whole as well as the opening and closing value of the fund at the end of the quarter based on the custodian’s records;
	2.	A listing of all long and short positions on the closing date of the statement in accordance with the Financial Accounting Standards Board, Rule ASC 946-210-50; and
	3.	The total amount of additions to and withdrawals from the fund by the investor as well as the total value of the investor’s interest in the fund at the end of the quarter;
	(2)	At least annually the fund is subject to an audit and distributes the fund’s audited financial statements prepared in accordance with generally accepted accounting principles to all limited partners (or members or other beneficial owners) and the administrator within 120 days of the end of the fund’s fiscal year;
	(3)	The audit is performed by an independent CPA that is registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules;
	(4)	Upon liquidation, the adviser distributes the fund’s final audited financial statements prepared in accordance with generally accepted accounting principles to all limited partners (or members or other beneficial owners) and the administrator promptly after the completion of such audit;
	(5)	The written agreement with the independent CPA must require the independent CPA, upon resignation or dismissal from, or other termination of, the engagement, or upon removing itself or being removed from consideration for being reappointed, to notify the administrator within four business days accompanied by a statement that includes:
	1.	The date of such resignation, dismissal, removal, or other termination, and the name, address, and contact information of the independent CPA; and
	2.	An explanation of any problems relating to audit scope or procedure that contributed to such resignation, dismissal, removal, or other termination;
	(6)	The investment adviser must also notify the administrator in writing that the investment adviser intends to employ the use of the statement delivery and audit safeguards described in paragraph 50.39(2)“d.” Such notification is required to be given on Form ADV.
	e. 	Registered investment companies. The investment adviser is not required to comply with rule 191—50.39(502) with respect to the account of an investment company registered under the Investment Company Act of 1940.
	50.39(3) Delivery to related persons. Sending an account statement under paragraph 50.39(1)“e” or distributing audited financial statements under paragraph 50.39(2)“d” shall not satisfy the requirements of rule 191—50.39(502) if such account statements or financial statements are sent solely to limited partners (or members or other beneficial owners) that themselves are limited partnerships (or limited liability companies, or another type of pooled investment vehicle) and are related persons of the investment adviser.
	50.39(4) Definitions. For the purposes of this rule:
	a. 	“Control” means the power, directly or indirectly, to direct the management or policies of a person whether through ownership of securities, by contract, or otherwise. “Control” includes the following:
	(1)	Each of the investment adviser’s officers, partners, or directors exercising executive responsibility (or persons having similar status or functions) is presumed to control the investment adviser;
	(2)	A person is presumed to control a corporation if the person:
	1.	Directly or indirectly has the right to vote 25 percent or more of a class of the corporation’s voting securities; or
	2.	Has the power to sell or direct the sale of 25 percent or more of a class of the corporation’s voting securities;
	(3)	A person is presumed to control a partnership if the person has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the partnership;
	(4)	A person is presumed to control a limited liability company if the person:
	1.	Directly or indirectly has the right to vote 25 percent or more of a class of the interests of the limited liability company;
	2.	Has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the limited liability company; or
	3.	Is an elected manager of the limited liability company; or
	(5)	A person is presumed to control a trust if the person is a trustee or managing agent of the trust.
	b. 	“Custody” means holding, directly or indirectly, client funds or securities, having any authority to obtain possession of client funds or securities, or having the ability to appropriate client funds or securities. The investment adviser has custody if a related person holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with advisory services the investment adviser provides to clients.
	(1)	“Custody” includes:
	1.	Possession of client funds or securities unless received inadvertently and returned to the sender within three business days of receiving them and the investment adviser maintains the records required under paragraph 50.42(1)“v”;
	2.	Any arrangement including, but not limited to, a general power of attorney pursuant to which the investment adviser is authorized or permitted to withdraw client funds or securities maintained with a custodian upon the investment adviser’s instruction; and
	3.	Any capacity including, but not limited to, general partner of a limited partnership, managing member of a limited liability company, a comparable position for another type of pooled investment vehicle, or trustee of a trust that gives the investment adviser or a person supervised by the investment adviser legal ownership of or access to client funds or securities.
	(2)	Receipt of checks drawn by clients and made payable to third parties will not meet the definition of custody if forwarded to the third party within three business days of receipt and the investment adviser maintains the records required under paragraph 50.42(1)“v.”
	c. 	“Independent certified public accountant” means a certified public accountant that meets the standards of independence described in Rule 2-01(b) and (c) of Regulation S-X (17 CFR 210.2-01(b) and (c)).
	d. 	“Independent representative” means a person who:
	(1)	Acts as agent for an advisory client including, in the case of a pooled investment vehicle, limited partners of a limited partnership, members of a limited liability company, or other beneficial owners of another type of pooled investment vehicle, and who is by law or contract required to act in the best interest of the advisory client or the limited partners or members, or other beneficial owners;
	(2)	Does not control, is not controlled by, and is not under common control with the investment adviser; and
	(3)	Does not have and has not had within the past two years a material business relationship with the investment adviser.
	e. 	“Qualified custodian” means the following independent institutions or entities that are not affiliated with the investment adviser by any direct or indirect common control and have not had a material business relationship with the investment adviser in the previous two years:
	(1)	A bank or savings association that has deposits insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act;
	(2)	A broker-dealer registered in Iowa and with the SEC holding client assets in customer accounts;
	(3)	A registered futures commission merchant registered pursuant to Section 4(f)(a) of the Commodity Exchange Act that is holding client funds and security futures or other securities incidental to transactions in contracts for the purchase or sale of a commodity for future delivery and options thereon in customer accounts; and
	(4)	A foreign financial institution that customarily holds financial assets for its customers, provided that the foreign financial institution keeps the advisory clients’ assets in customer accounts segregated from its proprietary assets.
	f. 	“Related person” means any person, directly or indirectly, controlling or controlled by the investment adviser, and any person that is under common control with the investment adviser.
This rule is intended to implement Iowa Code section 502.411(5).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.40(502) Minimum financial requirements for investment advisers.
	50.40(1) An investment adviser registered or required to be registered under the Act that has custody of client funds or securities shall maintain at all times a minimum net worth of $35,000 except:
	a. 	An investment adviser that has custody solely due to direct fee deduction and that is also in compliance with the applicable safekeeping requirements of paragraph 50.39(2)“c” and the record-keeping requirements of rule 191—50.42(502) is not required to comply with the net worth requirements of this rule; and
	b. 	An investment adviser having custody solely due to advising pooled investment vehicles and that is in compliance with the applicable safekeeping requirements of paragraph 50.39(1)“e” or 50.39(2)“d” and the record-keeping requirements of rule 191—50.42(502) is not required to comply with the net worth requirements of this rule.
	50.40(2) An investment adviser registered or required to be registered pursuant to the Act that has discretionary authority over client funds or securities but does not have custody of client funds or securities shall maintain a minimum net worth of $10,000 at all times.
	50.40(3) An investment adviser registered or required to be registered pursuant to the Act shall maintain a positive net worth at all times.
	50.40(4) Unless otherwise exempted, an investment adviser registered or required to be registered pursuant to the Act shall notify the administrator if the investment adviser’s net worth is less than the minimum required. Notice must be filed in a report to the administrator no later than the close of business on the next business day following the decrease in net worth. Additionally, an investment adviser shall file by the close of business on the next business day a report with the administrator of the investment adviser’s financial condition including, at a minimum, the following:
	a. 	A trial balance of all ledger accounts;
	b. 	A list of all client funds or securities which are not segregated;
	c. 	A computation of the aggregate amount of client ledger debit balances; and
	d. 	The total number of client accounts managed by the investment adviser.
	50.40(5) The administrator may require the submission of a current appraisal for the purpose of establishing the worth of any asset.
	50.40(6) An investment adviser that has its principal place of business in a state other than this state is not required to maintain the minimum capital required by this rule provided that the investment adviser is registered as an investment adviser in the state in which the investment adviser has its principal place of business and is in compliance with that state’s laws regarding minimum capital requirements.
	50.40(7) For purposes of this rule:
	a. 	“Net worth” means an excess of assets over liabilities calculated in accordance with generally accepted accounting principles. The calculation of assets shall not include the following: prepaid expenses (except those prepaid expenses classified as assets under generally accepted accounting principles); deferred charges, goodwill, franchise rights, organizational expenses, patents, copyrights, marketing rights, unamortized debt discount and expense, and all other assets of intangible nature; in the case of an individual, home(s), home furnishings, automobile(s), or any other personal items not readily marketable; in the case of a corporation, advances or loans to stockholders or officers; and in the case of a partnership, advances or loans to partners.
	b. 	“Custody” means the same as defined in paragraph 50.39(4)“b.”
	c. 	An investment adviser shall not be deemed to be exercising discretion when the investment adviser places trade orders with a broker-dealer pursuant to a third-party trading agreement if:
	(1)	The investment adviser has executed a separate investment adviser contract exclusively with the investment adviser’s client which acknowledges that a third-party trading agreement will be executed to allow the investment adviser to effect securities transactions for the client in the client’s broker-dealer account;
	(2)	The investment adviser contract specifically states that the client does not grant discretionary authority to the investment adviser and the investment adviser in fact does not exercise discretion with respect to the account; and
	(3)	A third-party trading agreement is executed between the client and a broker-dealer which specifically limits the investment adviser’s authority in the client’s broker-dealer account to the placement of trade orders and deduction of investment adviser fees.
This rule is intended to implement Iowa Code section 502.411(1).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.41(502) Bonding requirements for investment advisers.
	50.41(1) Every investment adviser registered or required to be registered under the Act:
	a. 	Having custody of or discretionary authority over client funds or securities shall be bonded in an amount determined by the administrator based upon the number of clients and the total assets under management of the investment adviser; and
	b. 	Having custody of or discretionary authority over client funds or securities when the investment adviser does not meet the minimum net worth standard provisions of subrules 50.40(1) and 50.40(2) must be bonded in the amount of the net worth deficiency rounded up to the nearest $5,000.
	50.41(2) A bond required by this rule shall be issued by a company qualified to do business in this state in the form determined by the administrator and shall be subject to the claims of clients of the investment adviser regardless of the client’s state of residence.
	50.41(3) An investment adviser that has a principal place of business in a state other than Iowa is exempt from this rule provided that the investment adviser is registered as an investment adviser in the state in which the investment adviser has its principal place of business and is in compliance with that state’s laws regarding bonding requirements.
	50.41(4) For purposes of this rule, “custody” means the same as defined in paragraph 50.39(4)“b.”
This rule is intended to implement Iowa Code section 502.411(5).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.42(502) Record-keeping requirements for investment advisers.
	50.42(1) An investment adviser registered or required to be registered pursuant to the Act shall make and keep true, accurate and current the following books, ledgers and records:
	a. 	A journal or journals, including cash receipts and disbursements records, and any other records of original entry forming the basis of any ledger entries.
	b. 	General and auxiliary ledgers (or other comparable records) reflecting asset, liability, reserve, capital, income, and expense accounts.
	c. 	A memorandum of each order given by the investment adviser for the purchase or sale of any security, of any instruction received by the investment adviser from the client concerning the purchase, sale, receipt or delivery of a particular security, and of any modification or cancellation of any such order or instruction. The memorandum shall describe the terms and conditions of the order, instruction, modification or cancellation; identify the person connected with the investment adviser who recommended the transaction to the client and the person who placed the order; indicate whether discretionary power was exercised; and indicate the account for which entered, the date of entry, and, where applicable, the bank or broker-dealer by or through whom executed.
	d. 	All checkbooks, bank statements, canceled checks and cash reconciliations of the investment adviser.
	e. 	All invoices, bills, or statements, or copies of those documents, relating to the investment adviser’s business as an investment adviser regardless of whether the expense or debt is paid or unpaid.
	f. 	All trial balances, financial statements, and internal audit working papers relating to the investment adviser’s business as an investment adviser. For the purposes of this paragraph, “financial statements” means a balance sheet prepared in accordance with generally accepted accounting principles, an income statement, a cash flow statement, and a net worth computation, if applicable, as required by subrule 50.40(7).
	g. 	Originals of all written communications received by and copies of all written communications sent by the investment adviser relating to:
	(1)	Any recommendation made or proposed to be made and any advice given or proposed to be given;
	(2)	Any receipt, disbursement, or delivery of funds or securities; or
	(3)	The placing or execution of any order to purchase or sell any security, except:
	1.	The investment adviser shall not be required to keep any unsolicited market letters and other similar communications of general public distribution not prepared by or for the investment adviser; and
	2.	The investment adviser is not required to keep a record of the names and addresses of persons to whom a notice, circular, or other advertisement offering any report, analysis, publication or other investment advisory service is sent if sent to more than ten persons; however, if the notice, circular, or other advertisement is distributed to persons named on any list, the investment adviser must retain with the copy of the notice, circular, or advertisement a memorandum describing the list and its source.
	h. 	A list or other record of all accounts identifying the accounts in which the investment adviser is vested with any discretionary power with respect to the funds, securities or transactions of any client.
	i. 	Copies of all powers of attorney and other documents granting discretionary authority by any client to the investment adviser.
	j. 	Copies of each agreement entered into by the investment adviser with any client, and all other written agreements otherwise relating to the investment adviser’s business as an investment adviser.
	k. 	A file containing copies of each notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication including electronic media that the investment adviser circulates or distributes, directly or indirectly, to two or more persons not affiliated with the investment adviser and, if the notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication including one in electronic media format recommends the purchase or sale of a specific security and does not state the reasons for the recommendation, a memorandum indicating the investment adviser’s reasons for the recommendation.
	l. 	Transactions involving beneficial ownership.
	(1)	A record of every transaction in a security in which the investment adviser or any advisory representative of the investment adviser has or by reason of any transaction acquires a direct or indirect beneficial ownership, except the following:
	1.	Transactions effected in any account over which neither the investment adviser nor any advisory representative of the investment adviser has any direct or indirect influence or control; and
	2.	Transactions in securities which are direct obligations of the United States.
	(2)	The required record shall state, at a minimum, the title and amount of the security involved, the date and nature of the transaction (i.e., purchase, sale or other acquisition or disposition), the price at which the transaction was effected, and the name of the bank or broker-dealer with or through which the transaction was effected. The record may also contain a statement declaring that the reporting or recording of any transaction shall not be construed as an admission that the investment adviser or advisory representative has any direct or indirect beneficial ownership in the security. A transaction must be recorded no later than ten days after the end of the calendar quarter in which the transaction was effected. An investment adviser shall not be in violation of this paragraph because of a failure to record securities transactions of an advisory representative if the investment adviser establishes that the investment adviser instituted adequate procedures and used reasonable diligence to promptly obtain reports of all transactions required by this paragraph to be recorded.
	m. 	Notwithstanding the provisions of paragraph 50.42(1)“l,” when the investment adviser is primarily engaged in a business or businesses other than advising investment advisory clients, a record must be maintained of every transaction in a security in which the investment adviser or any advisory representative of the investment adviser has, or by reason of any transaction acquires, any direct or indirect beneficial ownership, except:
	(1)	Transactions effected in any account over which neither the investment adviser nor any advisory representative of the investment adviser has any direct or indirect influence or control; or
	(2)	Transactions in securities which are direct obligations of the United States.
The record shall state the title and amount of the security involved, the date and nature of the transaction (i.e., purchase, sale, or other acquisition or disposition), the price at which it was effected, and the name of the broker-dealer or bank with or through which the transaction was effected. The record may also contain a statement declaring that the reporting or recording of any transaction shall not be construed as an admission that the investment adviser or advisory representative has any direct or indirect beneficial ownership in the security. A transaction shall be recorded not later than ten days after the end of the calendar quarter in which the transaction was effected. An investment adviser shall not be deemed to have violated the provisions of this subparagraph because of a failure to record securities transactions of an advisory representative if the investment adviser establishes that the investment adviser instituted adequate procedures and used reasonable diligence to promptly obtain reports of all transactions required to be recorded.
	n. 	A copy of each written statement and each amendment or revision, given or sent to any client or prospective client of the investment adviser in accordance with rule 191—50.36(502), and a record of the dates on which each written statement, amendment and revision was given or offered to be given to any client or any prospective client who subsequently becomes a client.
	o. 	For each client that was obtained by the investment adviser by means of a solicitor to whom a cash fee was paid by the investment adviser:
	(1)	A copy of any written agreement relating to the payment of a cash fee to which the investment adviser is a party;
	(2)	A signed and dated acknowledgment of receipt from the client evidencing the client’s receipt of the investment adviser’s disclosure statement and a written disclosure statement of the solicitor; and
	(3)	A copy of the solicitor’s written disclosure statement.
The written agreement, acknowledgment and solicitor disclosure statement will be deemed to be in compliance if such documents comply with Rule 275.206(4)-3 of the Investment Advisers Act of 1940.
	p. 	All accounts, books, internal working papers, and any other records or documents that are necessary to form the basis for or demonstrate the calculation of the performance or rate of return of all managed accounts or securities recommendations provided in any notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication, including electronic media, that is directly or indirectly circulated or distributed by the investment adviser to two or more persons (other than persons connected with the investment adviser). However, with respect to the performance of managed accounts only, the retention of all account statements reflecting all debits, credits, and other transactions in a client’s account for the period of the statement, and the retention of all worksheets necessary to demonstrate the calculation of the performance or rate of return of the managed account shall satisfy the requirements of this paragraph.
	q. 	A file containing copies of all written communications received or sent regarding any litigation or customer or client complaints involving the investment adviser or any investment adviser representative or employee.
	r. 	The basis, in writing, for any recommendation or investment advice provided to an investment advisory client.
	s. 	Copies of all written procedures regarding the supervision of the employees and investment adviser representatives that are reasonably designed to achieve compliance with securities laws and regulations.
	t. 	A file containing a copy of each document (other than any notices of general dissemination) that was filed with or received from any state or federal agency or self-regulatory organization pertaining to the investment adviser or its investment adviser representatives, as defined by subrule 50.42(11), including but not limited to all applications, amendments, renewal filings, and correspondence.
	u. 	Original copies signed by the lawful signatory of the investment adviser and the investment adviser representative of each initial Form U-4 and each U-4 Amendment to Disclosure Reporting Pages (DRPs).
	v. 	For each transaction in which the investment adviser inadvertently held or obtained the client’s securities or funds and returned them to the client within three business days of receipt or forwarded a check drawn by a client and made payable to a third party within three business days of receipt, a ledger or list of all funds or securities held or obtained with the following information:
	(1)	Issuer;
	(2)	Type of security and series;
	(3)	Date of issue;
	(4)	For debt instruments, the denomination, interest rate and maturity date;
	(5)	Certificate number, including alphabetical prefix or suffix;
	(6)	Name in which registered;
	(7)	Date submitted to the investment adviser;
	(8)	Date sent to client or sender;
	(9)	Form of delivery to client or sender, or copy of the form of delivery to client or sender; and
	(10)	Mail confirmation number, if applicable, or confirmation by client or sender of the return of the security or fund.
	w. 	If an investment adviser obtains possession of securities that are acquired from the issuer in a transaction or chain of transactions not involving a public offering that comply with the exception from custody in paragraph 50.39(2)“b,” the adviser shall keep:
	(1)	A record showing the issuer’s or current transfer agent’s name, address, telephone number, and other applicable contact information pertaining to the party responsible for recording the client’s interests in the securities; and
	(2)	A copy of any legend, shareholder agreement, or other agreement providing that the securities are transferable only with prior consent of the issuer or holders of the outstanding securities of the issuer.
	50.42(2) In addition to the retention requirements of subrule 50.42(1), an investment adviser having custody of client funds or securities, as defined by paragraph 50.39(3)“b,” shall retain the following records:
	a. 	Copies of all documents executed by each client, including but not limited to a limited power of attorney, pursuant to which the investment adviser is authorized or permitted to withdraw a client’s funds or securities maintained with a custodian upon the adviser’s instruction to the custodian;
	b. 	A journal or other record for all accounts reflecting all purchases, sales, receipts, and deliveries of securities, including but not limited to certificate numbers, and all other debits and credits to the accounts;
	c. 	A separate ledger account for each client showing all purchases, sales, receipts and deliveries of securities, the date and price of each purchase or sale, and all debits and credits;
	d. 	Copies of confirmations of all transactions effected by or for the account of any client;
	e. 	A record for each security in which any client has a position showing, at a minimum, the name of each client having an interest in the security, the amount of interest of each client in the security, and the location of each security;
	f. 	A copy of each client’s quarterly account statements as generated and delivered by the qualified custodian. Additionally, if the investment adviser generates a statement that is delivered to the client, the investment adviser shall retain copies of those statements along with information indicating the dates on which the statements were provided to the client;
	g. 	If applicable, a copy of the special examination report, financial statements, and letter verifying the completion of and describing the nature and extent of an examination by an independent certified public accountant and documentation describing the nature and extent of the examination and a record regarding any findings of any material discrepancies found during the examination; and
	h. 	If applicable, evidence of the client’s designation of an independent representative.
	50.42(3) An investment adviser deemed to have custody of client securities or funds because the investment adviser advises a pooled investment vehicle shall, in addition to any other applicable record retention requirements, keep the following records:
	a. 	True, accurate, and current account statements;
	b. 	If utilizing the exception provided by paragraph 50.39(2)“c,” the date(s) of the audit, a copy of the audited financial statements, and evidence of the mailing of the audited financial statements to all limited partners, members, or other beneficial owners within 120 days of the end of the fiscal year;
	c. 	If subject to paragraph 50.39(1)“e,” a copy of the written agreement with the independent party reviewing all fees and expenses and describing the responsibilities of the independent third party, and copies of all invoices and receipts showing approval by the independent third party for payment through the qualified custodian.
	50.42(4) Each investment adviser subject to subrule 50.42(1) that renders investment supervisory or management services to any client shall, with respect to the portfolio being supervised or managed and to the extent that the information is reasonably available to or obtainable by the investment adviser, retain the following records:
	a. 	For each client, detailed information regarding the securities purchased and sold including, but not limited to, the date of the purchase or sale, the total dollar amount of the purchase or sale, and the price at which the security was purchased or sold.
	b. 	For each security in which any client has a current position, the name of each client and current amount or interest of the client.
	50.42(5) Records required to be retained pursuant to rule 191—50.42(502) shall be kept as follows:
	a. 	Except as provided in paragraphs 50.42(1)“k” and “p,” all records required to be made under subrules 50.42(1) to 50.42(3) and paragraph 50.42(4)“a” shall be maintained and preserved in a readily accessible location for a period of not less than five years from the end of the fiscal year during which the last entry was made on record, with no less than the first two years being kept in the principal office of the investment adviser.
	b. 	Partnership articles and any amendments, articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor shall be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise.
	c. 	Books and records required to be retained pursuant to paragraphs 50.42(1)“k” and 50.42(1)“p” shall be maintained and preserved in a readily accessible location for a period of not less than five years from the end of the fiscal year during which the investment adviser last published or otherwise disseminated, directly or indirectly, the notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication including by electronic media, with no less than the first two years being kept in the principal office of the investment adviser.
	d. 	Books and records required to be retained pursuant to paragraphs 50.42(1)“q” to “v” shall be maintained and preserved in a readily accessible location for a period of not less than five years from the end of the fiscal year during which the last entry was made on such record, with no less than the first two years being kept in the principal office of the investment adviser, or the time period during which the investment adviser is registered or required to be registered in this state, whichever is less.
	e. 	Notwithstanding other record preservation requirements of rule 191—50.42(502), an investment adviser that has rendered or renders investment advisory services shall maintain at all times the following records at the investment adviser’s business location from which the customer or client is being provided or has been provided investment advisory services during the applicable retention period:
	(1)	All records required to be preserved pursuant to paragraphs 50.42(1)“c,” “g” to “j,” “n,” “o,” and “q” to “s” and subrules 50.42(2) to 50.42(4); and
	(2)	All records required pursuant to paragraphs 50.42(1)“k” to “p” identifying the name of the investment adviser representative providing investment advice from that business location, or identifying the physical address, mailing address, electronic mailing address, or telephone number of the business location. The records will be maintained for the period described in paragraph 50.42(5)“a.”
	50.42(6) An investment adviser subject to subrule 50.42(1) that ceases to conduct or discontinues business as an investment adviser shall arrange for and be responsible for the retention of the records required to be retained pursuant to this rule for the applicable retention period. The investment adviser shall notify the administrator in writing prior to ceasing to conduct or discontinuing business as an investment adviser of the exact address where the books and records will be maintained during the retention period.
	50.42(7) An investment adviser required to retain records pursuant to this rule may maintain the records in such manner that the identity of any client to whom the investment adviser renders investment supervisory services is indicated by numerical code, alphabetical code, or similar designation.
	50.42(8) Record maintenance.
	a. 	Pursuant to subrule 50.42(4), the records required to be maintained and preserved may be immediately produced or reproduced, and maintained and preserved for the required time, by an investment adviser in:
	(1)	Paper or hard-copy form, as those records are kept in their original form; or
	(2)	Micrographic media, including microfilm, microfiche, or any similar medium; or
	(3)	Electronic storage media, including any digital storage medium or system, that meet the terms of this subrule.
	b. 	The investment adviser must:
	(1)	Arrange and index the records in a way that permits easy location, access, and retrieval of any particular record;
	(2)	Provide promptly any of the following that the administrator may request:
	1.	A legible, true, and complete copy of the record in the medium and format in which it is stored;
	2.	A legible, true, and complete printout of the record; and
	3.	Means to access, view, and print the records; and
	(3)	Separately store, for the time required for preservation of the original record, a duplicate copy of the record in any medium allowed by this subrule.
	c. 	In the case of records created or maintained in electronic storage media, the investment adviser must establish and maintain procedures:
	(1)	To maintain and preserve the records, so as to reasonably safeguard them from loss, alteration, or destruction;
	(2)	To limit access to the records to properly authorized personnel and the administrator; and
	(3)	To reasonably ensure that any reproduction of a nonelectronic original record in electronic storage media is complete, true, and legible when retrieved.
	50.42(9) Compliance with any substantially similar record-keeping requirements of Rules 17a-3 [17 CFR 240.17a-3] and 17a-4 [17 CFR 240.17a-4] of the Securities Exchange Act of 1934 shall be deemed to be in compliance with this rule.
	50.42(10) Every investment adviser that is registered or required to be registered in this state and that has its principal place of business in a state other than this state shall be exempt from the requirements of this rule, provided the investment adviser is properly registered in that state and is in compliance with that state’s record-keeping requirements.
	50.42(11) For purposes of this rule:
“Advisory representative” means any partner, officer or director of the investment adviser; any employee who participates in any way in the determination of which recommendations shall be made; any employee who, in connection with the employee’s duties, obtains any information concerning which securities are being recommended prior to the effective dissemination of the recommendations; and any of the following persons who obtain information concerning securities recommendations being made by the investment adviser prior to the effective dissemination of the recommendations:
	1.	Any person in a relationship of control with the investment adviser;
	2.	Any person affiliated with a controlling person; and
	3.	Any person affiliated with an affiliated person.
“Control” means the power to exercise a controlling influence over the management or policies of a company, unless that power results solely from an official position with the company. Any person who owns beneficially, either directly or through one or more controlled companies, more than 25 percent of the voting securities of a company shall be presumed to control the company.
An investment adviser shall not be deemed to be exercising a discretionary power as to the price at which or the time when a transaction is effected or is to be effected if, before the order is given by the investment adviser, the client has directed or approved the purchase or sale of a definite amount of the particular security.
“Investment adviser primarily engaged in a business or businesses other than advising investment advisory clients” means an investment adviser that for each of the most recent three fiscal years or for the period of time since organization, whichever is less, derives on an unconsolidated basis more than 50 percent of total sales and revenues and income (or loss) before income taxes and extraordinary items from business activities other than advising investment advisory clients.
“Investment supervisory services” means continuous advice regarding investment of funds provided to each client on the basis of the individual needs of the client.
“Solicitor” means any person or entity that for compensation acts as an agent of an investment adviser in referring potential clients.
This rule is intended to implement Iowa Code section 502.411(3).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.43(502) Financial reporting requirements for investment advisers.
	50.43(1) Every registered investment adviser that has custody of client funds or securities or requires payment of advisory fees six months or more in advance and in excess of $500 per client shall file with the administrator an audited balance sheet as of the end of the investment adviser’s fiscal year. Each balance sheet filed pursuant to this rule must be:
	a. 	Examined in accordance with generally accepted auditing standards and prepared in conformity with generally accepted accounting principles;
	b. 	Audited by an independent certified public accountant; and
	c. 	Accompanied by an opinion of the accountant as to the report of financial position, and by a note stating the principles used to prepare the opinion, the basis of included securities, and any other explanations required for clarity.
	50.43(2) Every registered investment adviser that has discretionary authority over, but not custody of, client funds or securities shall file with the administrator a balance sheet, which need not be audited, but which must be prepared in accordance with generally accepted accounting principles or such other basis of accounting acceptable to the administrator and represented by the investment adviser or the person who prepared the statement as true and accurate, as of the end of the investment adviser’s fiscal year.
	50.43(3) The financial statements required by this rule shall be filed with the administrator within 90 days following the end of the investment adviser’s fiscal year.
	50.43(4) Every investment adviser that has its principal place of business in a state other than this state shall file only such reports as required by the state in which the investment adviser maintains its principal place of business, provided the investment adviser is licensed in such state and is in compliance with such state’s financial reporting requirements.
This rule is intended to implement Iowa Code section 502.411(2).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.44(502) Solely incidental services by certain professionals.
	50.44(1) General approach.
	a. 	Certain professionals may rely on an exclusion from the definition of “investment adviser” contained in Iowa Code section 502.102(15)“b” for lawyers, accountants, engineers or teachers whose performance of investment advice is solely incidental to the practice of the person’s profession. Whether the exclusion from the definition of “investment adviser” is available to a lawyer, accountant, engineer or teacher providing investment advisory services within the meaning of Iowa Code section 502.102(15)“b” depends upon the relevant facts and circumstances.
	b. 	In general, the administrator will determine whether the investment advisory services provided and the fees charged are solely incidental to the total services provided to the individual client by comparing whether the aggregate of such fees and services is solely incidental to the aggregate of services provided to all clients. In addition, the administrator will take other relevant factors into consideration in determining the applicability of the exclusion including, but not limited to, whether the firm establishes a separate subsidiary, division, or other business entity to perform advisory services or maintains an investment adviser registration with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. In this context, the administrator would refer to U.S. Securities and Exchange Commission Release IA-1092 relating to the analogous exclusion in the Investment Advisers Act of 1940 which states that “. . . the exclusion . . . is not available . . . to a lawyer or accountant who holds himself out to the public as providing financial planning, pension consulting, or other financial advisory services. In such a case it would appear that the performance of investment advisory services by the person would not be solely incidental to his practice as a lawyer or accountant.”
	50.44(2) General versus specific advice. A lawyer, accountant, engineer or teacher, whether or not holding oneself out to the public as providing financial planning or other financial advisory services, who does not render advice with respect to investing in specific securities, types of securities, or categories of securities need not register as an investment adviser. Registration is not required when the securities advice provided to clients in this state is limited to a general recommendation that the client should be more aggressive or more conservative in securities investments, a general recommendation as to the percentage of the client’s assets that should be in securities, or a general recommendation that the client pursue an income-producing or growth-oriented investment strategy, provided the recommendation does not identify specific securities, types of securities, or categories of securities. For the purpose of this subrule, the phrase “types of securities” means classes of securities in which the issuer is not specifically identified, such as common stock, preferred stock, options, warrants, bonds, and mutual funds, and the phrase “categories of securities” means general areas of securities investments where neither the issuer nor the types of securities are identified such as cyclical securities, automotive industry securities, international securities, and NYSE securities. Asset allocation recommendations, however, generally do include advice on types of securities.
Example:  An accountant provides clients accounting and financial planning services. No advice with respect to specific securities, types of securities, or categories of securities is provided. The accountant need not register as an investment adviser.
	50.44(3) Professional does not hold self out as a financial planner. When the securities advice is provided by a lawyer, accountant, engineer, or teacher who does not hold oneself out to the public as providing financial planning or other financial advisory services, the availability of the exclusion from the definition of “investment adviser” contained in Iowa Code section 502.102(15)“b” for securities advice rendered solely incidental to the profession will depend on those factors set forth in paragraph 50.44(1)“b.”
Example A:  An accountant who does not hold oneself out to the public as providing financial planning or other financial advisory services provides the client both accounting and financial planning services. The services involve advice with respect to specific securities, types of securities, or categories of securities. Whether the accountant is excluded from the definition of investment adviser depends on those factors set forth in paragraph 50.44(1)“b,” including a comparison of the extent of the securities advisory services provided to any client as contrasted with the accounting services provided to that client. The comparison is measured by the compensation paid for each service.
Example B:  An accountant provides a client financial planning services only. The financial planning services involve advice with respect to specific securities, types of securities, or categories of securities. The accountant is not excluded from the definition of investment adviser and therefore must register as an investment adviser.
	50.44(4) Professional holds self out as a financial planner.
	a. 	If the investment advice provided by a lawyer, accountant, engineer, or teacher who holds oneself out to the public as providing financial planning or other financial advisory services is part of the financial plan being provided to a financial planning client, the professional cannot rely on the exclusion from the definition of “investment adviser” contained in Iowa Code section 502.102(15)“b” for investment advice rendered incidentally to the practice of the profession.
Example:  An accountant who holds oneself out to the public as providing financial planning or other financial advisory services provides the client both accounting and financial planning services. The financial planning services involve advice with respect to specific securities, types of securities, or categories of securities. The accountant is not excluded from the definition of investment adviser no matter how insignificantly the securities advice compares to the other financial planning advice or accounting services rendered.
	b. 	When a lawyer, accountant, engineer, or teacher holding oneself out to the public as providing financial planning or other financial advisory services does not provide advice on specific securities, types of securities, or categories of securities as part of financial planning services but provides such advice in connection with the practice of the profession, in most instances the exclusion from the definition of investment adviser would be unavailable because the professional is holding oneself out as a financial planner or financial adviser. If, however, securities advice is not part of financial planning services and is both limited and isolated, the exclusion may still be available.
Example:  An accountant who holds oneself out to the public as providing financial planning or other financial advisory services provides clients both accounting and financial planning services. No securities advice is rendered as part of the financial planning services. Clients, on a few occasions, request the accountant’s advice on investing in certain limited partnerships. The fees charged to such a client for the advice total only a small percentage of the fees charged to that client for accounting services provided. The accountant is excluded from the definition of investment adviser. The example presented is intentionally narrow in order to illustrate that once the accountant holds oneself out as a financial planner or financial adviser, even if the only securities advice provided for compensation is not part of the financial planning or advisory activities, only limited and isolated securities advice may be provided without registration as an investment adviser.
This rule is intended to implement Iowa Code section 502.102(15)“b.”
191—50.45(502) Registration exemption for investment advisers to private funds.
	50.45(1) Definitions. For purposes of this rule, the following definitions shall apply:
“3(c)(1) fund” means a qualifying private fund that is eligible for the exclusion from the definition of an investment company under Section 3(c)(1) of the Investment Company Act of 1940, 15 U.S.C. 80a-3(c)(1).
“Private fund adviser” means an investment adviser who provides advice solely to one or more qualifying private funds.
“Qualifying private fund” means a private fund that meets the definition of a qualifying private fund in SEC Rule 203(m)-1, 17 CFR § 275.203(m)-1.
“Value of primary residence” means the fair market value of a person’s primary residence, less the amount of debt secured by the property up to its fair market value.
“Venture capital fund” means a private fund that meets the definition of a venture capital fund in SEC Rule 203(l)-1, 17 CFR § 275.203(l)-1.
	50.45(2) Exemption for private fund advisers.  Subject to the additional requirements of subrule 50.45(3), a private fund adviser shall be exempt from the registration requirements of Iowa Code section 502.403 if the private fund adviser satisfies each of the following conditions:
	a. 	Neither the private fund adviser nor any of its advisory affiliates are subject to a disqualification as described in Rule 262 of SEC Regulation A, 17 CFR § 230.262;
	b. 	The private fund adviser files with the state each report and amendment thereto that an exempt reporting adviser is required to file with the SEC pursuant to SEC Rule 204-4, 17 CFR § 275.204-4;
	c. 	The private fund adviser pays any applicable fees.
	50.45(3) Additional requirements for private fund advisers to certain 3(c)(1) funds. In order to qualify for the exemption described in subrule 50.45(2), a private fund adviser who advises at least one 3(c)(1) fund that is not a venture capital fund shall, in addition to satisfying each of the conditions specified in paragraph 50.45(3)“b,” comply with the following requirements:
	a. 	The private fund adviser shall advise only those 3(c)(1) funds (other than venture capital funds) whose outstanding securities (other than short-term paper) are beneficially owned entirely by persons who, after deducting the value of the primary residence from the person’s net worth, would each meet the definition of a qualified client in SEC Rule 205-3, 17 CFR § 275.205-3, at the time the securities are purchased from the issuer.
	b. 	At the time of purchase, the private fund adviser shall disclose the following in writing to each beneficial owner of a 3(c)(1) fund that is not a venture capital fund:
	(1)	All services, if any, to be provided to individual beneficial owners;
	(2)	All duties, if any, the private fund adviser owes to the beneficial owners; and
	(3)	Any other material information affecting the rights or responsibilities of the beneficial owners.
	c. 	The private fund adviser shall obtain on an annual basis audited financial statements of each 3(c)(1) fund that is not a venture capital fund and shall deliver a copy of such audited financial statements to each beneficial owner of the fund.
	50.45(4) Federal covered investment advisers. If a private fund adviser is registered with the SEC, the adviser shall not be eligible for this exemption and shall comply with the state notice filing requirements applicable to federal covered investment advisers.
	50.45(5) Investment adviser representatives. A person is exempt from the registration requirements if the person is employed by or associated with an investment adviser that is exempt from registration in this state pursuant to rule 191—50.45(502) and does not otherwise act as an investment adviser representative.
	50.45(6) Electronic filing. The report filings described in paragraph 50.45(2)“b” shall be made electronically through the IARD. A report shall be deemed filed when the report and the fee required are filed and accepted by the IARD on the state’s behalf.
	50.45(7) Transition. An investment adviser that becomes ineligible for the exemption provided by rule 191—50.45(502) must comply with all applicable laws and rules requiring registration or notice filing within 90 days from the date the investment adviser’s eligibility for this exemption ceases.
	50.45(8) Grandfathering for investment advisers to 3(c)(1) funds with nonqualified clients. An investment adviser to a 3(c)(1) fund (other than a venture capital fund) that has one or more beneficial owners who are not qualified clients as described in paragraph 50.45(3)“a” is eligible for the exemption contained in subrule 50.45(2) if the following conditions are satisfied:
	a. 	The subject fund existed prior to November 6, 2013;
	b. 	As of November 6, 2013, the subject fund ceases to accept beneficial owners who are not qualified clients, as described in paragraph 50.45(3)“a”;
	c. 	The investment adviser discloses in writing the information described in paragraph 50.45(3)“b” to all beneficial owners of the fund; and
	d. 	As of November 6, 2013, the investment adviser delivers audited financial statements as required by paragraph 50.43(3)“c.”
This rule is intended to implement Iowa Code section 502.403.
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.46(502) Contents of investment advisory contract. The provisions of this rule shall apply to federal covered investment advisers to the extent that the conduct alleged is fraudulent, deceptive, or as otherwise permitted by the National Securities Markets Improvement Act of 1996.
	50.46(1) It is unlawful for any investment adviser, investment adviser representative, or federal covered investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing:
	a. 	The services to be provided, the term of the contract, the investment advisory fee, the formula for computing the fee, the amount of prepaid fee to be returned in the event of termination or nonperformance of the contract, and any grant of discretionary power to the investment adviser, investment adviser representative, or federal covered investment adviser;
	b. 	That no direct or indirect assignment or transfer of the contract may be made by the investment adviser, investment adviser representative, or federal covered investment adviser without the consent of the client or other party to the contract;
	c. 	That the investment adviser, investment adviser representative, or federal covered 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;
	d. 	That the investment adviser, investment adviser representative, or federal covered investment adviser, if a partnership, shall notify the client or other party to the investment contract of any change in the membership of the partnership within a reasonable time after the change.
	50.46(2) It is unlawful for any investment adviser, investment adviser representative, or federal covered investment adviser to:
	a. 	Include in an advisory contract any condition, stipulation, or provisions binding any person to waive compliance with any provision of this Act or of the Investment Advisers Act of 1940, or any other practice contrary to the provisions of Section 215 of the Investment Advisers Act of 1940; or
	b. 	Enter into, extend or renew any advisory contract contrary to the provisions of Section 205 of the Investment Advisers Act of 1940. This provision shall apply to all advisers and investment adviser representatives registered or required to be registered under this Act, notwithstanding whether such adviser or representative would be exempt from federal registration pursuant to Section 203(b) of the Investment Advisers Act of 1940.
	50.46(3) Notwithstanding paragraph 50.46(1)“c,” an investment adviser may enter into, extend or renew an investment advisory contract which provides for compensation to the investment adviser 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 if the conditions in paragraphs 50.46(3)“a” to “d” are met.
	a. 	The client entering into the contract must be:
	(1)	A natural person or a company that, immediately after entering into the contract, has at least $750,000 under the management of the investment adviser; or
	(2)	A person that the investment adviser and its investment adviser representatives reasonably believe, immediately before entering into the contract, is a natural person or a company whose net worth, at the time the contract is entered into, exceeds $1,500,000. The net worth of a natural person may include assets held jointly with that person’s spouse.
	b. 	The compensation paid to the investment adviser with respect to the performance of any securities over a given period must be based on a formula with the following characteristics:
	(1)	In the case of securities for which market quotations are readily available within the meaning of Rule 2a-4(a)(1) under the Investment Company Act of 1940 (definition of “current net asset value” for use in computing periodically the current price of redeemable security), the formula must include the realized capital losses and unrealized capital depreciation of the securities over the period;
	(2)	In the case of securities for which market quotations are not readily available within the meaning of Rule 2a-4(a)(1) under the Investment Company Act of 1940, the formula must include:
	1.	The realized capital losses of securities over the period; and
	2.	If the unrealized capital appreciation of the securities over the period is included, the unrealized capital depreciation of the securities over the period; and
	(3)	The formula must provide that any compensation paid to the investment adviser under paragraph 50.46(3)“b” is based on the gains less the losses (computed in accordance with subparagraphs 50.46(3)“b”(1) and (2)) in the client’s account for a period of not less than one year.
	c. 	Before entering into the advisory contract and in addition to the requirements of Form ADV, the investment adviser must disclose in writing to the client or the client’s independent agent all material information concerning the proposed advisory arrangement, including the following:
	(1)	That the fee arrangement may create an incentive for the investment adviser to make investments that are riskier or more speculative than would be the case in the absence of a performance fee;
	(2)	Where relevant, that the investment adviser may receive increased compensation with regard to unrealized appreciation as well as realized gains in the client’s account;
	(3)	The periods which will be used to measure investment performance throughout the contract and their significance in the computation of the fee;
	(4)	The nature of any index which will be used as a comparative measure of investment performance, the significance of the index, and the reason the investment adviser believes that the index is appropriate; and
	(5)	When the investment adviser’s compensation is based in part on the unrealized appreciation of securities for which market quotations are not readily available within the meaning of Rule 2a-4(a)(1) under the Investment Company Act of 1940, how the securities will be valued and the extent to which the valuation will be independently determined.
	d. 	The investment adviser (and any investment adviser representative) that enters into the contract must reasonably believe, immediately before entering into the contract, that the contract represents an arm’s length arrangement between the parties and that the client (or in the case of a client which is a company as defined in paragraph 50.46(6)“d,” the person representing the company), alone or together with the client’s independent agent, understands the proposed method of compensation and its risks. The representative of a company may be a partner, director, officer or an employee of the company or of the trustee, where the company is a trust, or any other person designated by the company or trustee, but must satisfy the definition of client’s independent agent set forth in paragraph 50.46(6)“c.”
	50.46(4) Any person entering into or performing an investment advisory contract under rule 191—50.46(502) is not relieved of any obligations under rule 191—50.38(502) or any other applicable provision of the Act or any rule or order thereunder.
	50.46(5) Nothing in rule 191—50.46(502) shall relieve a client’s independent agent from any obligation to the client under applicable law.
	50.46(6) The following definitions apply for purposes of rule 191—50.46(502):
	a. 	“Affiliate” shall have the same definition as in Section 2(a)(3) of the Investment Company Act of 1940.
	b. 	“Assignment,” as used in paragraph 50.46(1)“b,” includes, but is not limited to, any transaction or event that results in any change to the individuals or entities with the power, directly or indirectly, to direct the management or policies of, or to vote more than 50 percent of any class of voting securities of, the investment adviser or federal covered investment adviser as compared to the individuals or entities that had such power as of the date when the contract was first entered into, extended or renewed.
	c. 	“Client’s independent agent” means any person who agrees to act as an investment advisory client’s agent in connection with the contract. “Client’s independent agent” does not include:
	(1)	The investment adviser relying on rule 191—50.46(502);
	(2)	An affiliated person of the investment adviser or an affiliated person of an affiliated person of the investment adviser including an investment adviser representative;
	(3)	An interested person of the investment adviser;
	(4)	A person who receives, directly or indirectly, any compensation in connection with the contract from the investment adviser, an affiliated person of the investment adviser, an affiliated person of an affiliated person of the investment adviser or an interested person of the investment adviser; or
	(5)	A person with any material relationship between the person (or an affiliated person of that person) and the investment adviser (or an affiliated person of the investment adviser) that exists, or has existed at any time during the past two years.
	d. 	“Company” means a corporation, partnership, association, joint stock company, trust, or any organized group of persons, whether incorporated or not; or any receiver, trustee in a case under Title 11 of the United States Code, or similar official or any liquidating agent for any of the foregoing, in the liquidating agent’s capacity as such. “Company” shall not include:
	(1)	A company required to be registered under the Investment Company Act of 1940 but which is not so registered;
	(2)	A private investment company is an entity which would be defined as an investment company under Section 3(a) of the Investment Company Act of 1940 but for the exception from that definition provided by Section 3(c)(1) of that Act;
	(3)	An investment company registered under the Investment Company Act of 1940; or
	(4)	A business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, unless each of the equity owners of any such company, other than the investment adviser entering into the contract, is a natural person or a company within the meaning of “company.”
	e. 	“Interested person” means:
	(1)	Any member of the immediate family of any natural person who is an affiliated person of the investment adviser;
	(2)	Any person who knowingly has any direct or indirect beneficial interest in, or who is designated as trustee, executor, or guardian of any legal interest in, any security issued by the investment adviser or by a controlling person of the investment adviser if that beneficial or legal interest exceeds:
	1.	One-tenth of one percent of any class of outstanding securities of the investment adviser or a controlling person of the investment adviser; or
	2.	Five percent of the total assets of the person seeking to act as the client’s independent agent; or
	(3)	Any person or partner or employee of any person who has acted as legal counsel for the investment adviser within the past two years.
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.47 to 50.49  Reserved.
DIVISION IV
RULES COVERING ALL REGISTERED PERSONS
191—50.50(502) Internet advertising by broker-dealers, investment advisers, broker-dealer agents, investment adviser representatives, and federal covered investment advisers.
	50.50(1) Broker-dealers, investment advisers, broker-dealer agents, investment adviser representatives, and federal covered investment advisers who use the Internet, the World Wide Web, or similar proprietary or common carrier electronic systems (collectively described as the “Internet”) to disseminate information regarding products and services through communications directed generally to anyone having access to the Internet and transmitted through posting on bulletin boards, displays on home pages or similar methods (hereinafter “Internet communications”) will not be considered to be transacting business in Iowa pursuant to Iowa Code section 502.401, 502.402, 502.403, 502.404, or 502.405 based solely on that communication, if:
	a. 	The Internet communication contains a legend clearly stating that:
	(1)	The broker-dealer, investment adviser, broker-dealer agent, investment adviser representative, or federal covered investment adviser may only transact business in a state if first registered pursuant to or excluded or exempt from the state broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative registration requirements, or federal covered investment adviser notice requirement; and
	(2)	The broker-dealer, investment adviser, broker-dealer agent, investment adviser representative, or federal covered investment adviser will not effect or attempt to effect transactions in securities or render personalized investment advice for compensation absent compliance with applicable state broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative registration requirements, or federal covered investment adviser notice requirement or applicable exemption or exclusion;
	b. 	The Internet communication contains a mechanism, including but not limited to technical firewalls or other policies and procedures, to ensure that, prior to effecting or attempting to effect transactions with customers in Iowa or prior to direct communication with prospective customers or clients in Iowa, the broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative is first registered in Iowa or, in the case of a federal covered investment adviser, has made a notice filing, or qualifies for an exemption or exclusion from registration requirements;
	c. 	The Internet communication is limited to general information regarding products and services, and the broker-dealer, investment adviser, broker-dealer agent, investment adviser representative, or federal covered investment adviser does not effect or attempt to effect transactions in securities in Iowa or provide personalized investment advice for compensation; and
	d. 	In the case of a broker-dealer agent or investment adviser representative:
	(1)	The agent’s broker-dealer, investment adviser, or federal covered investment adviser affiliation is prominently disclosed within the Internet communication;
	(2)	The broker-dealer, investment adviser, or federal covered investment adviser with whom the agent or representative is affiliated reviews and approves the content of any Internet communication by the broker-dealer agent or investment adviser representative;
	(3)	The broker-dealer, investment adviser, or federal covered investment adviser with whom the agent or representative is associated first authorizes the dissemination of information on the particular products and services through the Internet communication; and
	(4)	The broker-dealer agent or investment adviser representative acts within the scope of the authority granted by the broker-dealer, investment adviser, or federal covered investment adviser in the dissemination of information through the Internet communication.
	50.50(2) Nothing in this rule shall excuse broker-dealer, investment adviser, broker-dealer agent, investment adviser representative, and federal covered investment adviser compliance with applicable securities registration, notice filing, antifraud or related provisions.
	50.50(3) Nothing in this rule shall be construed to affect the activities of any broker-dealer, investment adviser, broker-dealer agent, investment adviser representative, or federal covered investment adviser engaged in business in Iowa that is not subject to the jurisdiction of the administrator as a result of NSMIA.
This rule is intended to implement Iowa Code sections 502.401 to 502.405.
191—50.51(502) Consent to service.
	50.51(1) Every consent appointing the administrator or successor to be an attorney to receive service of any lawful process as required by Iowa Code section 502.611 shall be properly notarized and shall contain, at a minimum, the following information:
	a. 	Name of the applicant;
	b. 	Address of the applicant;
	c. 	A statement that the consent is irrevocable;
	d. 	A statement that the consent is valid as to any noncriminal suit, action or proceeding against the applicant or the successor, executor or administrator of the applicant which arises out of the Act; and
	e. 	A statement that the applicant stipulates and agrees that service upon the administrator shall have the same validity as if served personally upon the applicant.
	50.51(2) A form of consent to service of process provided by the administrator, a Form U-2, or a consent to service of process contained in any other form authorized or required to be filed by these rules shall satisfy subrule 50.51(1).
	50.51(3) A broker-dealer, investment adviser, agent, investment adviser representative, federal covered investment adviser, or issuer may incorporate by reference any consent to service of process required to be filed pursuant to Iowa Code sections 502.302(1)“a,”502.302(3), 502.303(2), 502.304(2), 502.406(1) and 502.611, or the administrative rules implementing these sections.
This rule is intended to implement Iowa Code section 502.611.
191—50.52(252J) Denial, suspension or revocation of agent or investment adviser representative registration for failure to pay child support.
	50.52(1) Upon receipt of a certificate of noncompliance from the CSRU for default on debts owed to or collected by the CSRU, the administrator shall issue a notice to a securities agent or investment adviser representative applicant or registrant that any pending application for registration will be denied or any current registration will be suspended or revoked 30 days after the date of the notice. The notice shall be served by restricted certified mail, return receipt requested, or by personal service as provided by the Iowa Rules of Civil Procedure, unless the applicant or registrant accepts service personally or through authorized counsel.
	50.52(2) The administrator shall provide the applicant or registrant with a copy of the certificate of noncompliance and shall provide a notice advising the applicant that:
	a. 	The administrator intends to deny an application or to suspend or revoke a registration due to receipt of a certificate of noncompliance from the CSRU;
	b. 	The applicant or registrant must contact the CSRU to schedule a conference or to otherwise obtain a withdrawal of a certificate of noncompliance;
	c. 	Unless the CSRU furnishes a withdrawal of a certificate of noncompliance to the administrator within 30 days of issuance of the notice, the application shall be denied or the registration shall be suspended or revoked;
	d. 	The applicant or registrant does not have a right to a hearing before the administrator, but may, pursuant to Iowa Code section 252J.9, request a court hearing within 30 days of provision of notice by the administrator; and
	e. 	The filing of an application for hearing with the district court will stay the proceedings of the division.
	50.52(3) The filing of an application for hearing with the district court under Iowa Code section 252J.9 automatically stays action of the administrator until the administrator is notified of the resolution of the application.
	50.52(4) If the administrator does not receive a withdrawal of the certificate of noncompliance from the CSRU or a notice that an application for district court hearing has been filed, the administrator shall deny, suspend or revoke the application or registration 30 days after the notice prescribed in subrule 50.52(2) is issued.
	50.52(5) Upon receiving a withdrawal of the certificate of noncompliance from the CSRU, the administrator shall immediately halt action to deny an application or suspend or revoke a registration. The applicant or registrant shall be notified that action has been halted. If the application has already been denied or if a registration has already been suspended or revoked, the applicant or former registrant shall reapply for registration. The application shall be granted if the individual is otherwise in compliance with applicable laws, rules, regulations and orders.
	50.52(6) All application fees must be paid by the applicant before a registration will be issued after the administrator has denied, suspended, or revoked a registration pursuant to Iowa Code chapter 252J.
	50.52(7) Notwithstanding any statutory confidentiality provision, the administrator may share information with the CSRU for the sole purpose of identifying applicants or registrants subject to enforcement pursuant to Iowa Code chapter 252J.
This rule is intended to implement Iowa Code chapter 252J.
191—50.53(261) Denial, suspension or revocation of agent or investment adviser representative registration for failure to pay debts owed to or collected by the college student aid commission.
	50.53(1) Upon receipt of a certificate of noncompliance from the college student aid commission for defaults on debts owed to or collected by the commission, the administrator shall issue a notice to a securities agent or investment adviser representative applicant or registrant that any pending application for registration or any current registration will be denied, suspended or revoked 30 days after the date of the notice. The notice shall be served by restricted certified mail, return receipt requested, or by personal service as provided by the Iowa Rules of Civil Procedure, unless the applicant or registrant accepts service personally or through authorized counsel.
	50.53(2) The administrator shall provide the applicant or registrant with a copy of the certificate of noncompliance and shall provide a notice advising the applicant or registrant that:
	a. 	The administrator intends to deny an application or suspend or revoke a registration due to receipt of a certificate of noncompliance from the college student aid commission;
	b. 	The applicant or registrant must contact the college student aid commission to schedule a conference or to otherwise obtain a withdrawal of a certificate of noncompliance;
	c. 	Unless the college student aid commission furnishes a withdrawal of a certificate of noncompliance to the administrator within 30 days of issuance of the notice, the application shall be denied or the registration shall be suspended or revoked;
	d. 	The applicant or registrant does not have a right to a hearing before the administrator but may, pursuant to Iowa Code section 261.126, request a district court hearing within 30 days of provision of notice by the administrator; and
	e. 	The filing of an application for hearing with the district court will stay the proceedings of the division.
	50.53(3) The filing of an application for hearing with the district court under Iowa Code section 261.127 automatically stays action of the administrator until the administrator is notified of the resolution of the application.
	50.53(4) If the administrator does not receive a withdrawal of the certificate of noncompliance from the college student aid commission or a notice that an application for district court hearing has been filed, the administrator shall deny the application or suspend or revoke the registration 30 days after the notice prescribed in subrule 50.53(2) is issued.
	50.53(5) If the administrator receives a withdrawal of the certificate of noncompliance from the college student aid commission, the administrator shall immediately halt action to deny, suspend or revoke an application or registration. The applicant or registrant shall be notified that action has been halted. If the application or registration has already been denied, suspended or revoked, the applicant or former registrant shall reapply for registration. The application shall be granted if the individual is otherwise in compliance with applicable laws, rules, regulations and orders.
	50.53(6) All application fees must be paid by the applicant before a registration will be issued after the administrator has denied, suspended, or revoked a registration pursuant to Iowa Code section 261.126.
	50.53(7) Notwithstanding any statutory confidentiality provision, the administrator may share information with the college student aid commission for the sole purpose of identifying applicants or registrants subject to enforcement pursuant to Iowa Code section 261.126.
This rule is intended to implement Iowa Code section 261.126.
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.54(272D) Denial, suspension or revocation of agent or investment adviser representative registration for failure to pay state debt.
	50.54(1) Upon receipt of a certificate of noncompliance from the centralized collection unit of the department of revenue (CCU), the administrator shall issue a notice to a securities agent or investment adviser representative applicant or registrant that any pending application for registration will be denied or any current registration will be suspended or revoked 60 days after the date of the notice. The notice shall be served by restricted certified mail, return receipt requested, or by personal service as provided by the Iowa Rules of Civil Procedure, unless the applicant or registrant accepts service personally or through authorized counsel.
	50.54(2) The administrator shall provide the applicant or registrant with a copy of the certificate of noncompliance and shall provide a notice advising the applicant that:
	a. 	The administrator intends to deny an application or to suspend or revoke a registration due to receipt of a certificate of noncompliance from the CCU;
	b. 	The applicant or registrant must contact the CCU to schedule a conference or to otherwise obtain a withdrawal of a certificate of noncompliance;
	c. 	Unless the CCU furnishes a withdrawal of a certificate of noncompliance to the administrator within 60 days of issuance of the notice, the application shall be denied or the registration shall be suspended or revoked;
	d. 	The applicant or registrant does not have a right to a hearing before the administrator, but may file an application for hearing in district court pursuant to Iowa Code section 272D.9; and
	e. 	The filing of an application for hearing with the district court will stay the proceedings of the division.
	50.54(3) The filing of an application for hearing with the district court under Iowa Code section 272D.9 automatically stays action of the administrator until the administrator is notified of the resolution of the application.
	50.54(4) If the administrator does not receive a withdrawal of the certificate of noncompliance from the CCU or a notice that an application for district court hearing has been filed, the administrator shall deny, suspend or revoke the application or registration 60 days after the notice prescribed in subrule 50.54(2) is issued.
	50.54(5) Upon receiving a withdrawal of the certificate of noncompliance from the CCU, the administrator shall immediately halt action to deny an application or suspend or revoke a registration. The applicant or registrant shall be notified that action has been halted. If the application has already been denied or if a registration has already been suspended or revoked, the applicant or former registrant shall reapply for registration. The application shall be granted if the individual is otherwise in compliance with applicable laws, rules, regulations and orders.
	50.54(6) All application fees must be paid by the applicant before a registration will be issued after the administrator has denied, suspended, or revoked a registration pursuant to Iowa Code chapter 272D.
	50.54(7) Notwithstanding any statutory confidentiality provision, the administrator may share information with the CCU for the sole purpose of identifying applicants or registrants subject to enforcement pursuant to Iowa Code chapter 272D.
This rule is intended to implement Iowa Code chapter 272D.
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.55(502) Use of senior-specific certifications and professional designations.
	50.55(1) The use of a senior-specific certification or designation by any person in connection with the offer, sale, or purchase of securities or the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicate or imply that the user has special certification or training in advising or servicing senior citizens or retirees in such a way as to mislead any person shall be a dishonest and unethical practice in the securities, commodities, investment, franchise, banking, finance, or insurance business within the meaning of Iowa Code section 502.412(4)“m.” The prohibited use of such certifications or professional designation includes, but is not limited to, the following:
	a. 	Use of a certification or professional designation by a person who has not actually earned or is otherwise ineligible to use such certification or designation;
	b. 	Use of a nonexistent or self-conferred certification or professional designation;
	c. 	Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training, or experience that the person using the certification or professional designation does not have; and
	d. 	Use of a certification or professional designation that was obtained from a designating or certifying organization that:
	(1)	Is primarily engaged in the business of instruction in sales or marketing;
	(2)	Does not have reasonable standards or procedures for ensuring the competency of its designees or certificants;
	(3)	Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or
	(4)	Does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.
	50.55(2) There is a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of 50.55(1)“d” when the organization has been accredited by:
	a. 	The American National Standards Institute;
	b. 	The National Commission for Certifying Agencies; or
	c. 	An organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the designation or credential issued therefrom does not primarily apply to sales or marketing.
	50.55(3) In determining whether a combination of words or an acronym standing for a combination of words constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, the administrator shall consider the following factors:
	a. 	Use of one or more words such as “senior,” “retirement,” “elder,” or similar words combined with one or more words such as “certified,” “registered,” “chartered,” “adviser,” “specialist,” “consultant,” “planner,” or similar words in the name of the certification or professional designation; and
	b. 	The manner in which those words are combined.
	50.55(4) For purposes of this rule, a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:
	a. 	Indicates seniority or standing within the organization; or
	b. 	Specifies an individual’s area of specialization within the organization.
For purposes of this subrule, financial services regulatory agency includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act of 1940.
	50.55(5) Nothing in this rule shall limit the administrator’s authority to enforce existing provisions of law.
This rule is intended to implement Iowa Code section 502.605(1).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.56 to 50.59  Reserved.
DIVISION V
REGISTRATION OF SECURITIES
191—50.60(502) Notice filings for investment company securities offerings.
	50.60(1) Except as provided in subrule 50.60(5), no investment company that is registered under the Investment Company Act of 1940 or that has a currently filed registration statement under the Securities Act of 1933 is required to file with the administrator, either prior to the initial offer or after the initial offer in Iowa of a security which is a covered security under Section 18(b)(2) of the Securities Act of 1933, a copy of any document which is part of a federal registration statement filed with the SEC or is part of an amendment to such federal registration statement.
	50.60(2) Prior to the initial offer of a federal covered security in Iowa, an investment company that is registered under the Investment Company Act of 1940 or that has filed a registration statement under the Securities Act of 1933 shall file with the administrator:
	a. 	A notice of filing on Form NF;
	b. 	A filing fee; and
	c. 	A consent to service of process.
	50.60(3) A notice of filing may be renewed prior to expiration by filing the following with the administrator:
	a. 	A notice of filing on Form NF; and
	b. 	Payment of the applicable fee under Iowa Code section 502.302(1)“a.”
	50.60(4) Amendments to notice filings are made on Form NF and are effective upon receipt by the administrator. Withdrawal or termination of a notice filing is made by filing Form NF or providing the administrator with notice of the withdrawal or termination in a similar format. An amendment, withdrawal, or termination is effective upon receipt by the administrator of the required notice and all fees required by Iowa Code section 502.302(1)“a.”
This subrule is intended to implement Iowa Code section 502.302.
	50.60(5) An investment company that is registered under the Investment Company Act of 1940 or that has filed a registration statement under the Securities Act of 1933 shall file, upon written request of the administrator and within the time period set forth in the request, a copy of any document identified in the request that is part of the federal registration statement filed with the SEC or part of an amendment to such federal registration statement.
	50.60(6) An investment company that makes a notice filing under subrule 50.60(2) and that pays an initial $400 filing fee under Iowa Code section 502.302(1)“a” shall pay a $400 renewal fee prior to the notice filing’s annual renewal date. Notice filings that are not renewed by the annual renewal date shall expire.
This subrule is intended to implement Iowa Code section 502.302.
This rule is intended to implement Iowa Code section 502.302(1).
[ARC 2175C, IAB 9/30/15, effective 11/4/15; ARC 2731C, IAB 9/28/16, effective 11/2/16]
191—50.61(502) Registration of small corporate offerings.
	50.61(1) Form U-7 may be obtained from the NASAA Web site at www.nasaa.org. Form U-7 has been developed under the Small Business Investment Incentive Act of 1980 which prescribes state and federal cooperation in furthering the policies of the Act: diminishing the burden of raising investment capital and minimizing interference with the business of capital formation.
	50.61(2) To be eligible to use Form U-7, the issuer shall comply with each of the following requirements:
	a. 	The issuer shall:
	(1)	Be a corporation or limited liability company organized under the laws of the United States or Canada, or any state, province, or territory or possession thereof, or the District of Columbia and have its principal place of business in one of the foregoing;
	(2)	Not be subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934;
	(3)	Not be an investment company registered or required to be registered under the Investment Company Act of 1940;
	(4)	Not be engaged in or propose to be engaged in petroleum exploration and production, mining, or other extractive industries;
	(5)	Not be a development stage company that either has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies or other entity or person; and
	(6)	Not be disqualified under subrule 50.61(3).
	b. 	The offering price for common stock or common ownership interests (hereinafter, collectively referred to as “common stock”), the exercise price for options, warrants, or rights to common stock, or the conversion price for securities convertible into common stock must be greater than or equal to U.S. $1 per share or unit of interest. The issuer must agree with the administrator that the issuer will not split its common stock, or declare a stock dividend for two years after the effective date of the registration if such action has the effect of lowering the price below U.S. $1.
	c. 	Commissions, fees or other remuneration for soliciting any prospective purchaser in connection with the offering in the state are only paid to persons who, if required to be registered or licensed, the issuer believes, and has reason to believe, are appropriately registered or licensed in the state.
	d. 	Financial statements shall be prepared in accordance with either U.S. or Canadian generally accepted accounting principles. If appropriate, a reconciliation note should be provided. If the company has not conducted significant operations, statements of receipts and disbursements shall be included in lieu of statements of income. Interim financial statements may be unaudited. All other financial statements shall be audited by independent certified public accountants, provided, however, that if each of the following four conditions are met, such financial statements in lieu of being audited may be reviewed by independent certified public accountants in accordance with the Accounting and Review Service Standards promulgated by the American Institute of Certified Public Accountants or the Canadian equivalent:
	(1)	The company shall not have previously sold securities through an offering involving the general solicitation of prospective investors by means of advertising, mass mailings, public meetings, “cold call” telephone solicitation, or any other method directed toward the public;
	(2)	The company has not been previously required under federal, state, provincial or territorial securities laws to provide audited financial statements in connection with any sale of its securities;
	(3)	The aggregate amount of all previous sales of securities by the company (exclusive of debt financing with banks and similar commercial lenders) shall not exceed U.S. $1 million; and
	(4)	If the offering is a Rule 504 offering, the amount of the present offering does not exceed U.S. $1 million.
	e. 	The offering shall be made in compliance with Rule 504 of Regulation D, Regulation A, or Section 3(a)(11) of the Securities Act of 1933.
	f. 	The issuer shall comply with the General Instructions to SCOR in Part I of the NASAA SCOR Issuer’s Manual.
	50.61(3) Disqualifications.
	a. 	Unless the administrator determines that it is not necessary under the circumstances that the disqualification under this subrule be applied, application for registration referred to in subrule 50.61(2) shall be denied if the issuer, any of its officers, directors, stockholders who own 10 percent or greater of the issuer, promoters, or selling agents, or any officer, director or partner of any selling agent:
	(1)	Has filed a registration statement which is subject to a currently effective stop order entered pursuant to any state or provincial securities laws within five years prior to the filing of the registration statement;
	(2)	Has been convicted, within five years prior to the filing of the registration statement, of any felony or misdemeanor in connection with the offer, purchase, or sale of securities, or of any felony involving fraud or deceit including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to defraud;
	(3)	Is currently subject to any state or provincial administrative enforcement order or judgment entered by that state’s or province’s securities administrator within five years prior to the filing of the registration statement;
	(4)	Is subject to any state or provincial administrative enforcement order or judgment in which fraud or deceit including, but not limited to, making untrue statements of material facts and omitting to state material facts, was found, and the order or judgment was entered within five years prior to the filing of the current application for registration;
	(5)	Is subject to any state or provincial administrative enforcement order or judgment which prohibits, denies, or revokes the use of any exemption from registration in connection with the offer, purchase or sale of securities;
	(6)	Is currently subject to any order, judgment, or decree of any court of competent jurisdiction that temporarily, preliminarily, or permanently restrains or enjoins such party from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security, or involving the making of any false filing with the state, entered within five years prior to the filing of the registration statement; or
	(7)	Has violated the law of a foreign jurisdiction governing or regulating any aspect of the business of securities or banking or, within the past five years, has been the subject of an action of a securities regulator of a foreign jurisdiction denying, revoking or suspending the right to engage in the business of securities as a broker-dealer, agent or investment adviser or is the subject of an action of any securities exchange or self-regulatory organization operating under the authority of the securities regulator of a foreign jurisdiction suspending or expelling such person from membership in such exchange or self-regulatory organization.
	b. 	The prohibitions of subparagraphs (1) to (3) and (5) of paragraph 50.61(3)“a” shall not apply if the person subject to the disqualification is duly registered or licensed to conduct securities-related business in the state or province in which the administrative order or judgment was entered against such person, or if the broker-dealer employing such person is registered or licensed in the state and the Form BD filed in the state discloses the order, conviction, judgment or decree relating to such person.
	c. 	No person disqualified shall act in any capacity other than the capacity for which the person is registered or licensed.
	d. 	Disqualification is automatically waived if the jurisdiction which created the basis for disqualification determines upon a showing of good cause that it is not necessary under the circumstances that registration be denied.
This rule is intended to implement Iowa Code section 502.304.
[ARC 2175C, IAB 9/30/15, effective 11/4/15]
191—50.62(502) Streamlined registration for certain equity securities.
	50.62(1) An equity security meeting the conditions of this rule may be registered pursuant to Iowa Code section 502.303 if all of the following conditions are satisfied, unless waived by the administrator, and except as provided by subrule 50.62(2):
	a. 	The issuer must be a corporation organized under the laws of one of the states or possessions of the United States;
	b. 	The offering price for common stock, the exercise price if the securities are options, warrants, or rights for common stock, or the conversion price if the securities are convertible into common stock must be equal to or greater than $5 per share;
	c. 	The issuer of the security has (or will have upon completion of the offering) total assets exceeding $10 million;
	d. 	The security will be offered under a firm underwriting;
	e. 	The security is the subject of a registration statement filed on Form S-1 or Form SB-2 with the SEC; and
	f. 	The registration statement filed with the administrator contains audited financial statements for each of the two most recently concluded fiscal years of its operations, and the audit for the most recent fiscal year does not include an auditor’s report expressing substantial doubt about the issuer’s ability to continue as a going concern.
	50.62(2) Registration pursuant to this rule is not available if:
	a. 	The issuer is a blind pool or other offering for which the specific business or properties cannot now be described; or
	b. 	The issuer, a principal officer or a principal shareholder thereof, or a broker-dealer offering or selling the securities:
	(1)	Is subject to statutory disqualification, as defined by subparagraphs (A), (B), (C), or (D) of Section 3(a)(39) of the Securities Exchange Act of 1934;
	(2)	Has been convicted of any felony under federal or state law regarding the offer, purchase, or sale of any security, or any felony under federal or state law involving fraud or deceit in the ten years prior to the date of the offering;
	(3)	Is currently named in and subject to any order, judgment, or decree of any court of competent jurisdiction acting under federal or state law temporarily or permanently restraining or enjoining the person from engaging in or continuing any conduct or practice in connection with the offer, purchase, or sale of a security;
	(4)	Has filed a registration statement which is currently the subject of a stop order entered pursuant to any state’s securities law within five years prior to the offering;
	(5)	Is currently subject to any state administrative enforcement order or judgment entered by that state’s securities administrator within five years prior to the offering, or is currently subject to any state’s administrative enforcement order or judgment in which fraud or deceit was found within five years prior to the offering; or
	(6)	Is currently subject to any state’s administrative order or judgment prohibiting, denying, or revoking the use of any exemption from registration regarding the offer, sale, or purchase of any security, or involving the making of a false filing with the state within five years of the offering.
	50.62(3) The unavailability of streamlined registration pursuant to this rule as a result of the disqualification of a party pursuant to paragraph 50.62(2)“b” may be waived by the administrator if the order, conviction, judgment or decree relating to the party’s disqualification was disclosed in writing to the administrator and the administrator determines, based upon good cause shown, that the public interest no longer requires the party to be disqualified.
	50.62(4) The administrator shall review a filing made pursuant to this rule within ten business days of receipt. Registration shall be effective upon review, or earlier if the administrator permits a shorter time frame, or comments explaining noncompliance will be promptly sent to the applicant.
	50.62(5) The administrator shall not deny the effectiveness of a registration made pursuant to this rule based on subrule 50.66(13) or 50.66(15), or based upon the financial condition of the issuer under Iowa Code section 502.306(1)“h.”
	50.62(6) The following securities shall be the subject of a lockup with the managing underwriter for no less than 180 days, or a longer period if requested by the managing underwriter of the offering:
	a. 	A security issued to a promoter within three years immediately preceding the offering or to be issued to a promoter for consideration substantially less than the offering price; or
	b. 	A security issued to a promoter for a consideration other than cash, unless the registrant demonstrates that the value of the noncash consideration received in exchange for the security is substantially equal to the offering price for the security. A copy of the lockup agreement shall be filed with the administrator.
	50.62(7) For purposes of this rule, a “promoter” is:
	a. 	A person who, acting alone or in concert with one or more other persons, founds or organizes the business or enterprise of the issuer;
	b. 	An officer or director owning securities of the issuer, or a person who owns, beneficially or of record, 10 percent or more of a class of securities of the issuer if the officer, director, or person acquires any of those securities in a non-arm’s-length transaction within the three years prior to the filing of the registration statement pursuant to this rule; or
	c. 	A member of the immediate family of a person described in paragraph “a” or “b” of subrule 50.62(7) if the family member receives securities of the issuer from that person in a non-arm’s-length transaction within the three years prior to the filing of the registration statement pursuant to this rule.
This rule is intended to implement Iowa Code section 502.303.
191—50.63(502) Registration of multijurisdictional offerings.
	50.63(1) Pursuant to Iowa Code section 502.303(2), offerings filed on SEC Form F-7, Form F-8, Form F-9 or Form F-10 shall become effective the later of three days after filing, or the effective date with the SEC.
	50.63(2) Pursuant to Iowa Code section 502.605(3), financial statements and financial information for offerings filed under subrule 50.63(1) shall comply with instructions provided with SEC Form F-7, Form F-8, Form F-9 or Form F-10.
	50.63(3) In a Rights Offering, SEC Form F-7 will be accepted in lieu of any state form required to claim an exemption for any transaction pursuant to an offer to existing securities holders.
	50.63(4) After the SEC has declared effective an issuer’s Form F-8, Form F-9 or Form F-10 registration statement, a nonissuer transaction in any class of the issuer’s securities is exempt from registration, whether or not the transaction is effected through a broker-dealer.
This rule is intended to implement Iowa Code sections 502.303(2) and 502.605(3).
191—50.64(502) Form of financial statements.
	50.64(1) Except as otherwise provided by this rule, the balance sheet, statement of cash flows, and statement of income required by Iowa Code section 502.304(2)“q” shall be certified by an independent certified public accountant who shall also issue an opinion on the financial statements. The audit and opinion requirements may be waived by the administrator upon written application and for good cause shown.
	50.64(2) The balance sheet, statement of cash flows, and statement of income provided for compliance with the four-month requirement of Iowa Code section 502.304(2)“q” need not be certified in accordance with subrule 50.64(1) if such certification was submitted for the last fiscal year prior to the application and the date of the financial statements subject to certification is not more than 12 months prior to the registration date.
This rule is intended to implement Iowa Code section 502.304.
191—50.65(502) Reports contingent to registration by qualification. In the administrator’s discretion, a registration by qualification statement filed pursuant to Iowa Code section 502.304 may not become effective until one or both of the following are filed:
	1.	When the value, after its purchase, of certain property does or will constitute a material portion of the assets of the issuer or any other person whose financial condition is significant to the registration, the report of any appraiser or engineer; and
	2.	When the ownership of any such property is material to the registration, a signed opinion of legal counsel regarding ownership of any property.
This rule is intended to implement Iowa Code section 502.304(2A).
191—50.66(502) NASAA guidelines and statements of policy.
	50.66(1) Overview of national models. In cooperation with the securities administrators of other states and with a view to effectuating a policy to achieve maximum uniformity of regulations regarding the registration of securities, registration and business practices of securities industry and investment advisory registrants, and enforcement of antifraud laws, and in the interest of streamlining the rules contained in Chapter 50, the administrator incorporates by reference the following guidelines and statements of policy promulgated by NASAA. This rule does not include any later amendments or editions of the incorporated matter.
The NASAA Web site allows access to statements of policy, comment letters, model rules, NASAA proposals published for comment, and state rule proposals and may be found at www.nasaa.org, under “regulatory & legal activity.”
	50.66(2) Registration of oil and gas programs. All oil and gas programs filing for registration by coordination or qualification shall substantially comply, as determined by the administrator, with the NASAA Guidelines for Registration of Oil and Gas Programs, which were initially adopted by the NASAA membership on September 22, 1976, as amended on October 12, 1977; October 31, 1979; April 23, 1983; July 1, 1984; September 3, 1987; September 14, 1989; October 24, 1991; May 7, 2007; and May 6, 2012; and published in CCH NASAA Reports at paragraph 2621.
	50.66(3) Uniform disclosure guidelines—legend. All registrations of securities filing for registration by coordination or qualification shall substantially comply, as determined by the administrator, with the NASAA Guidelines for Cover Legends as adopted by the NASAA membership on October 2, 2004, and published in CCH NASAA Reports at paragraph 1351.
	50.66(4) Omnibus guidelines. All registrations of limited or general partnerships, joint ventures, unincorporated associations, or similar organizations, other than a corporation formed and operated for the primary purpose of investment in and the operation of or gain from and interest in the assets to be acquired by such entity for which statements of policy have not been adopted by the NASAA membership, filing for registration by coordination or qualification shall substantially comply, as determined by the administrator, with the NASAA Omnibus Guidelines as adopted by the NASAA membership on March 29, 1992, as amended on May 7, 2007; and published in CCH NASAA Reports at paragraph 2321.
	50.66(5) Registration of commodity pool programs. All registrations of securities filing for registration by coordination or qualification shall substantially comply, as determined by the administrator, with the NASAA Guidelines for Registration of Commodity Pool Programs as adopted by the NASAA membership on September 21, 1983, effective January 1, 1984, amended August 30, 1990, amended May 7, 2007, amended May 6, 2012, and published in CCH NASAA Reports at paragraph 1201.
	50.66(6) Registration of equipment programs. All registrations of securities filing for registration by coordination or qualification shall substantially comply, as determined by the administrator, with the NASAA Guidelines for Equipment Programs as adopted by the NASAA membership on November 20, 1986, effective January 1, 1987, amended April 22, 1988, October 24, 1991, May 7, 2007, and May 6, 2012, and published in CCH NASAA Reports at paragraph 1601.
	50.66(7) Registration of real estate programs. All registrations of securities filing for registration by coordination or qualification shall substantially comply, as determined by the administrator, with the NASAA Guidelines for Real Estate Programs as adopted by the NASAA membership on September 29, 1993, last revised, May 7, 2007, and published in CCH NASAA Reports at paragraph 3601.
	50.66(8) Registration of mortgage programs. All registrations of securities filing for registration by coordination or qualification shall substantially comply, as determined by the administrator, with the NASAA Guidelines for Mortgage Programs as adopted by the NASAA membership on September 10, 1996, amended May 2007, and published in CCH NASAA Reports, paragraph 701.
	50.66(9) Real estate investment trusts. The registration of a real estate investment trust may be disallowed if it does not substantially comply, as determined by the administrator, with the NASAA Statement of Policy Regarding Real Estate Investment Trusts as revised and adopted by the NASAA membership on September 29, 1993, as revised on May 7, 2007, and published in CCH NASAA Reports at paragraph 3401.
	50.66(10) Corporate securities definitions. For securities registration purposes, the administrator adopts the various definitions set out in the NASAA Statement of Policy Regarding Corporate Securities Definitions as adopted by the NASAA membership on April 27, 1997, and as amended September 28, 1999, and March 31, 2008, and published in CCH NASAA Reports at paragraph 3812.
	50.66(11) Impoundment of proceeds. When an impoundment of proceeds is necessary, it shall substantially comply, as determined by the administrator, with the NASAA Statement of Policy Regarding the Impoundment of Proceeds as adopted by the NASAA membership on April 27, 1997, and as amended September 28, 1999, and March 31, 2008, and published in CCH NASAA Reports at paragraph 2151.
	50.66(12) Loans and other material affiliated transactions. When there have been or will be loans or other material affiliated transactions, the transactions shall substantially comply, as determined by the administrator, with the NASAA Statement of Policy Regarding Loans and Other Material Affiliated Transactions as amended by the NASAA membership on April 27, 1997, and March 31, 2008, and published in CCH NASAA Reports at paragraph 374.
	50.66(13) Options and warrants. The issuance of options and warrants may be allowed by the administrator if the issuance is in substantial compliance, as determined by the administrator, with the NASAA Statement of Policy Regarding Options and Warrants as adopted by the NASAA membership on November 17, 1997, and as amended September 28, 1999, and as amended March 31, 2008, and published in CCH NASAA Reports at paragraph 2801.
	50.66(14) Preferred stock. A public offering of preferred stock may be allowed by the administrator if the offering substantially complies, as determined by the administrator, with the NASAA Statement of Policy Regarding Preferred Stock as adopted by the NASAA membership on April 27, 1997, and as amended March 31, 2008, and published in CCH NASAA Reports at paragraph 3001.
	50.66(15) Promotional shares. The registration of a security may include promotional shares if it substantially complies, as determined by the administrator, with the NASAA Statement of Policy Regarding Promotional Shares as adopted by the NASAA membership on April 27, 1997, and as amended September 28, 1999, and March 31, 2008, and published in CCH NASAA Reports at paragraph 3201.
	50.66(16) Risk disclosure. All registrations of securities filing for registration by coordination or qualification shall substantially comply, as determined by the administrator, with the NASAA Guidelines for Risk Disclosure as adopted by the NASAA membership on September 8, 2001, and published in CCH NASAA Reports at paragraph 1362.
	50.66(17) Unsound financial condition. An issuer may be deemed to be in an unsound financial condition if it substantially meets, as determined by the administrator, the conditions provided within the NASAA Statement of Policy Regarding Unsound Financial Condition as adopted by the NASAA membership on April 27, 1997, and as amended September 28, 1999, and March 31, 2008, and published in CCH NASAA Reports at paragraph 3821.
	50.66(18) Use of proceeds. The registration of a security may be disallowed if it does not substantially comply, as determined by the administrator, with the NASAA Statement of Policy Regarding Specificity in Use of Proceeds as adopted by the NASAA membership on April 27, 1997, and as amended September 28, 1999, and March 31, 2008, and published in CCH NASAA Reports at paragraph 3831.
	50.66(19) Registration of asset-backed securities. All registrations of securities filing for registration by coordination or qualification shall substantially comply, as determined by the administrator, with the NASAA Guidelines for Registration of Asset-Backed Securities as adopted by the NASAA membership on October 25, 1995, amended May 7, 2007, and May 6, 2012, and published in CCH NASAA Reports at paragraph 501.
This rule is intended to implement Iowa Code sections 502.305(6) and 502.306(1).
[ARC 1076C, IAB 10/2/13, effective 11/6/13; ARC 2175C, IAB 9/30/15, effective 11/4/15]
191—50.67(502) Amendments to registration by qualification. A registration statement registered by qualification pursuant to Iowa Code section 502.304 is presumed to be reasonably current for purposes of Iowa Code section 502.305(9) if:
	1.	The issuer notifies the administrator in writing of any change in a material fact contained in the registration statement no later than 7 days after the issuer learns of the change; and
	2.	The issuer notifies the administrator in writing of the results of an annual audit or semiannual report no later than 14 days after receiving such audit results or semiannual report unless the results constitute a change in material fact subject to the provisions of paragraph “1.”
This rule is intended to implement Iowa Code section 502.305(9).
191—50.68(502) Delivery of prospectus. As a condition to registration by qualification pursuant to Iowa Code section 502.304, a prospectus containing the information required by Iowa Code section 502.304(2) shall be delivered to each person to which an offer is made, before or concurrently with the earliest of the following events:
	1.	The first offer made in a record to each person otherwise than by means of a public advertisement, by or for the account of the issuer or any other person on whose behalf the offering is made, or by any underwriter or broker-dealer offering part of an unsold allotment or subscription taken as a participant in the distribution;
	2.	The confirmation of any sale made by or for the account of the person;
	3.	The payment pursuant to any such sale; or
	4.	The delivery of the security pursuant to any such sale.
This rule is intended to implement Iowa Code section 502.304(5).
191—50.69(502) Advertisements.
	50.69(1) The following advertising regarding the offer, sale or purchase of any security in Iowa is exempt from the filing requirements of Iowa Code section 502.504:
	a. 	A prospectus published or circulated regarding an offering of a security registered pursuant to Iowa Code section 502.303 or 502.304 that is not yet effective, or an offering of a security for which a notice or application for exemption, including the prospectus, has been filed pursuant to Iowa Code section 502.201 or 502.202;
	b. 	Advertising which provides information regarding only from whom a prospectus may be obtained, a description of the security offered for sale, the price of the security, or the names of broker-dealers having an interest in its sale;
	c. 	Advertising published by a registered broker-dealer or investment adviser concerning the qualifications or business of the registrant, the general advisability of investing in securities or market quotations or other factual information relating to particular securities or issuers, provided the advertising contains no recommendation concerning the purchase or sale of a particular security;
	d. 	Unless specifically requested by the administrator, advertising filed with FINRA or that satisfies the requirements of Securities Act of 1933 Rules 230.135a, 230.156, or 230.482; and
	e. 	Any other advertising the administrator may specify by order.
	50.69(2) All advertising required to be filed with the administrator by a registrant shall be filed prior to the date of use. All advertising required to be filed by a person other than a registrant shall be filed at least ten days prior to the date of use, or a shorter period if provided by the administrator. The advertising shall not be used in Iowa until the registrant receives approval from the administrator.
	50.69(3) Sales literature of an investment company registered pursuant to the Investment Company Act of 1940 which is materially misleading within the meaning of rules or a statement of policy of the SEC constitutes false or misleading advertising as prohibited by Iowa Code section 502.504(2A).
	50.69(4) False or misleading advertisements prohibited by Iowa Code section 502.504(2A) include, but are not limited to, the following:
	a. 	Comparison charts or graphs showing a distorted, unfair, or unrealistic relationship between the issuer’s past performance, progress, or success and that of another company, business, industry, or investment media;
	b. 	Layout or format omitting information necessary to make the entire advertisement a fair and truthful representation;
	c. 	Statements or representations without accreditation predicting future profit, success, appreciation, or performance, or otherwise addressing the merit or potential of the securities;
	d. 	Generalizations, generalized conclusions, opinions, representations, and general statements based upon a particular set of facts and circumstances unless those facts and circumstances are stated and modified or explained by additional facts or circumstances as are necessary to make the entire advertisement a full, fair, and truthful representation;
	e. 	Sales kits or film clips, displays or exposures, which alone or by sequence and progressive compilation present a misleading impression of guaranteed or exaggerated potential, profit, safety, or return;
	f. 	Distribution of any nonfactual or inaccurate data or material by words, pictures, charts, or graphs, or otherwise based upon conjectural, unfounded, extravagant, or flamboyant claims, assertions, or predictions, or upon excessive optimism; and
	g. 	Any package or bonus deal, prize, gimmick, or similar inducement regarding the offer or sale of a security that is combined with or dependent upon the sale of some other product, contract, or service unless the combination has been fully disclosed and specifically described and identified in the advertisement.
	50.69(5) Any business card or other advertisement containing the name of an agent shall:
	a. 	Clearly designate the agent as a securities agent or registered representative of the broker-dealer, as applicable, and indicate clearly that the broker-dealer is a broker-dealer;
	b. 	Contain no advertising other than agent name, office address, broker-dealer name, and broker-dealer logo or trademark on the business cards;
	c. 	Provide the office address and telephone number of the location where the agent conducts securities business; and
	d. 	Clearly state the business of that entity and the relationship of the agent to that entity if the name, logo or trademark of any business entity other than that of the broker-dealer appears on the business card or in an advertisement.
	50.69(6) A firm employing a sales agent who is offering securities on its behalf is responsible for ensuring that the name of the broker-dealer is displayed on the agent’s business cards as prominently as the individual’s name.
	50.69(7) For the purpose of this rule, “advertisement” means any written or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, or other electronic communications media, published regarding the offer, sale, or purchase of a security.
This rule is intended to implement Iowa Code section 502.504.
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.70(502) Fee for securities registration filings under Iowa Code section 502.305. Except as provided in Iowa Code sections 502.302(3) and 502.304A(3)“g,” a person who files a registration statement or a notice filing pursuant to Iowa Code section 502.305 as amended by 2016 Iowa Acts, House File 2394, section 2, shall pay the following fees:
	50.70(1) For the initial filing, $400 for one year; and
	50.70(2) On each anniversary date of the initial filing, an annual renewal fee of $400.
This rule is intended to implement Iowa Code section 502.305.
[ARC 2731C, IAB 9/28/16, effective 11/2/16]
191—50.71 to 50.79  Reserved.
DIVISION VI
EXEMPTIONS
191—50.80(502) Uniform limited offering exemption.
	50.80(1) This rule is the NASAA Uniform Limited Offering Exemption as adopted in September 1983, with amendments adopted through April 29, 1989, without any of the footnotes and may be cited as the “Uniform Limited Offering Exemption.”
	a. 	Nothing in this exemption is intended to or should be in any way construed as relieving issuers or persons acting on behalf of issuers from providing disclosure to prospective investors adequate to satisfy the antifraud provisions of Iowa Code chapter 502 and these rules.
	b. 	In view of the objective of this rule and the purposes and policies underlying Iowa Code chapter 502, the exemption is not available to any issuer for any transaction which, although in technical compliance with this rule, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this rule.
	c. 	Nothing in this rule is intended to relieve registered broker-dealers or agents from the due diligence, suitability, “know your customer” standards, or any other requirements of law otherwise applicable to such registered persons.
	50.80(2) Under the authority delegated to the administrator to promulgate rules by Iowa Code sections 502.203 and 502.605(1), the following transaction is exempt from the registration provisions of the Act:
	a. 	Any offer or sale of securities offered or sold in compliance with the Securities Act of 1933, Regulation D, Rule 230.505, including any offer or sale made exempt by Rule 508(a), as made effective in Release No.	33-6389 and as amended by Release Nos. 33-6437, 33-6663, 33-6758, and 33-6825, and which satisfies all of the following:
	(1)	No commission, fee or other remuneration shall be paid or given, directly or indirectly, to any person for soliciting any prospective purchaser in Iowa unless the person is registered under Iowa Code section 502.406 or is exempt from registration as a broker-dealer by Iowa Code section 502.401(2).
	(2)	It is a defense to a violation of this subrule if the issuer sustains the burden of proof to establish that the issuer did not know, and in the exercise of reasonable care could not have known, that the person receiving a commission, fee, or other remuneration was not appropriately registered in Iowa.
	b. 	No exemption under this rule is available for the securities of any issuer if any of the parties described in the Securities Act of 1933, Regulation A, Rule 230.262(a), (b), or (c):
	(1)	Has filed a registration statement subject to a currently effective registration stop order entered under any state’s securities law within five years prior to filing the notice required under this exemption;
	(2)	Has been convicted, within five years prior to filing the notice required under this exemption, of any felony or misdemeanor regarding the offer, purchase or sale of any security or any felony involving fraud or deceit including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to defraud;
	(3)	Is currently subject to any state administrative enforcement order or judgment entered by that state’s securities administrator within five years prior to filing the notice required under this exemption, or is currently subject to any state’s administrative enforcement order or judgment in which fraud or deceit including, but not limited to, making untrue statements of material facts and omitting to state material facts, was found and the order or judgment was entered within five years prior to filing the notice required under this exemption;
	(4)	Is currently subject to any state administrative enforcement order or judgment prohibiting, denying, or revoking the use of any exemption from registration regarding the offer, purchase or sale of securities; or
	(5)	Is currently subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or permanently restraining or enjoining the party from engaging in or continuing any conduct or practice regarding the purchase or sale of any security, or involving the making of any false filing with the state entered within five years prior to filing the notice required under this exemption.
	(6)	The disqualification of a person under paragraph 50.80(2)“b” may be waived by the administrator if the order, conviction, judgment or decree relating to the person’s disqualification has been disclosed in writing to the administrator and the administrator has determined, for good cause shown, that the public interest no longer requires the person to be disqualified.
	(7)	It is a defense to a violation of this subrule if the issuer sustains the burden of proof to establish that the issuer did not know, and in the exercise of reasonable care could not have known, that a disqualification under this subrule existed.
	c. 	In all sales to nonaccredited investors in Iowa, one of the following conditions must be satisfied or the issuer and any person acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that one of the following conditions is satisfied:
	(1)	The investment is suitable for the purchaser based upon facts, if any, disclosed by the purchaser regarding the purchaser’s other security holdings, financial situation and needs. For this condition only, it is presumed that if the investment does not exceed 10 percent of the investor’s net worth, it is suitable.
	(2)	The purchaser, either alone or with a purchaser’s representative, has such knowledge and experience in financial and business matters that the purchaser is, or they are, capable of evaluating the merits and risks of the prospective investment.
	50.80(3) The failure to comply with a term, condition or requirement of subparagraph 50.80(2)“a”(1), paragraph 50.80(2)“c” or paragraph 50.80(2)“e” will not result in loss of the exemption from the requirements of Iowa Code section 502.301 for any offer or sale to a particular individual or entity if the person relying on the exemption shows:
	a. 	The failure to comply did not pertain to a term, condition or requirement directly intended to protect that particular individual or entity;
	b. 	The failure to comply was insignificant regarding the offering as a whole; and
	c. 	A good-faith and reasonable attempt was made to comply with all applicable terms, conditions, and requirements of subparagraph 50.80(2)“a”(1), paragraph 50.80(2)“c” and paragraph 50.80(2)“e.”
	50.80(4) Where an exemption is established only through reliance upon subrule 50.80(3), the failure to comply is actionable under Iowa Code sections 502.603 and 502.604.
	50.80(5) Transactions exempt under this rule may not be combined with offers and sales exempt under any other rule or provision of the Act. However, nothing in this limitation shall act as an election. Should for any reason the offer and sale fail to comply with all of the conditions for this exemption, the issuer may claim the availability of any other applicable exemption.
	50.80(6) The administrator may, by rule or order, increase the number of purchasers or waive any other conditions of this exemption.
This rule is intended to implement Iowa Code section 502.203.
[ARC 2175C, IAB 9/30/15, effective 11/4/15]
191—50.81(502) Notice filings for Rule 506 offerings. Beginning January 1, 2016, an issuer offering a security that is a covered security pursuant to Section 18(b)(4)(D) of the Securities Act of 1933 shall submit no later than 15 days after the first sale of such federal covered security in Iowa an electronic filing and fees through www.efdnasaa.org, under “filers and issuers.”
This rule is intended to implement Iowa Code section 502.302(3).
[ARC 2175C, IAB 9/30/15, effective 11/4/15]
191—50.82(502) Notice filings for agricultural cooperative associations.
	50.82(1) An agricultural cooperative association issuing notes or other evidence of indebtedness shall notify the administrator in writing 30 days before the security is initially sold. Notification shall include:
	a. 	The name of the issuer, the date of organization of the issuer, and the name of a contact person.
	b. 	A description of the class of persons to whom the offer of securities will be made. If the offering is being made to certain persons or within a specified area, a description of such offerees or area shall be included.
	c. 	A description of the type of security to be offered which includes information regarding interest and interest payment schedules, default, redemption, reinvestment, and other facts regarding the rights of holders that the issuer deems material to the offering.
	d. 	Financial statements of the agricultural cooperative association including a balance sheet as of the end of its most recent fiscal year, prepared under generally accepted accounting principles and accompanied by an independent auditor’s report and any other audited financial statements of the association that are available. However, if the filing by the agricultural cooperative association is made within 90 days of the end of its most recent fiscal year and current audited financial statements are not yet available, the filing may consist of an audited balance sheet and other available audited financial statements for the previous fiscal year, prepared under generally accepted accounting principles and accompanied by an independent auditor’s report. The agricultural cooperative association shall file an audited balance sheet and any other available audited financial statements for the most recent fiscal year end as soon as they become available, but in no event later than 90 days after the end of its fiscal year.
	50.82(2) If, after the anniversary date of its initial notice filing, an agricultural cooperative association continues to issue notes or other evidence of indebtedness under its initial notice filing in order to maintain the exemption, the agricultural cooperative association shall on an annual basis file with the administrator an audited balance sheet and any other audited financial statements within 30 days of the anniversary of its initial notice filing. An agricultural cooperative association making its initial filing based upon a previous year’s audited financial statements because of the unavailability of current audited financial statements shall consider its anniversary date to be the date on which the cooperative filed the audited financial statements for the most recent fiscal year. An agricultural cooperative association not issuing notes or other evidence of indebtedness after an anniversary date of its initial filing is not required to make any further filing of financial information as a condition of qualifying for the exemption from registration.
This rule is intended to implement Iowa Code section 502.201(8B)“b.”
[ARC 2175C, IAB 9/30/15, effective 11/4/15]
191—50.83(502) Unsolicited order exemption.
	50.83(1) Any unregistered broker-dealer effecting a transaction under an unsolicited order or offer to buy and claiming an exemption from registration based solely upon Iowa Code section 502.202(6) shall obtain acknowledgment from the customer on or before the settlement date of the transaction that the transaction is unsolicited.
	50.83(2) The acknowledgment shall take one of the following forms:
	a. 	A confirmation statement, as required pursuant to subrule 50.83(1), displaying in bold print on the face of the statement the words “Unsolicited Order, Notify Immediately if Otherwise”; or
	b. 	A signed statement from the customer acknowledging that the order was unsolicited and containing the name of the customer, the name of the securities involved, the number of securities involved in the transaction, the purchase price of the securities, the transaction date, and the total dollar amount, including commissions paid, of the transaction.
	50.83(3) The customer will be presumed to have acknowledged that the transaction was unsolicited if the customer does not indicate otherwise on or before the settlement date.
	50.83(4) A broker-dealer shall notify the administrator in writing that it is executing unsolicited orders in a security when both of the following conditions are met:
	a. 	More than six unsolicited orders or offers to buy such security are received during any three consecutive business days; and
	b. 	The broker-dealer is relying solely upon the exemption provided by Iowa Code section 502.202(6).
This rule is intended to implement Iowa Code section 502.202(6).
191—50.84(502) Solicitation of interest exemption.
	50.84(1) An offer, but not a sale, of a security made by or on behalf of an issuer for the sole purpose of soliciting an indication of interest in receiving a prospectus (or its equivalent) for such security is exempt from registration pursuant to Iowa Code section 502.301 if:
	a. 	The issuer is or will be a business entity organized under the laws of one of the states or possessions of the United States or one of the provinces or territories of Canada, is engaged in or proposes to engage in a business other than petroleum exploration or production or mining or other extractive industries, and is not a blind pool offering or other offering for which the specific business or properties cannot now be described.
	b. 	The offerer intends to register the security in Iowa and conduct its offering pursuant to either Regulation A or Rule 504 of Regulation D, as promulgated by the SEC.
	c. 	The offerer files with the administrator a SOIF along with any other materials to be used to conduct solicitations of interest including, but not limited to, the script of any broadcast to be made and a copy of any notice to be published no less than ten business days prior to the initial solicitation of interest.
	d. 	The issuer files with the administrator all amendments to any materials filed pursuant to paragraph “c” or additional materials it proposes to use in conducting solicitations of interest, except for materials provided to a particular investor solely pursuant to a request by that investor, no less than five business days prior to use.
	e. 	The offerer does not use any SOIF, script, advertisement, or other material which the administrator has ordered or notified the offerer may not be used for the purpose of solicitations of interest.
	f. 	Except for scripted broadcasts and except to the extent necessary to obtain information needed to provide a SOIF, the offerer does not orally communicate with any prospective investor about the contemplated offering unless the investor is provided with the most current SOIF at or before the time of the communication or within five days after the communication.
	g. 	The offerer does not solicit or accept money or a commitment to purchase securities during the solicitation of interest period.
	h. 	The offerer does not make a sale until at least seven days after delivery to the purchaser of a final prospectus or delivery of a preliminary prospectus as provided by Iowa Code section 502.202(17).
	50.84(2) Unless the offerer does not know, and in the exercise of reasonable care could not know, the exemption under this rule is not available for securities of an offerer, if any of the issuer’s officers, directors, promoters, or 10 percent shareholders:
	a. 	Have filed a registration statement which is the subject of a current effective registration stop order entered under any federal or state securities law within five years prior to filing the SOIF.
	b. 	Have been convicted within five years prior to filing the SOIF of any felony or misdemeanor regarding the offer, purchase or sale of any security or any felony involving fraud or deceit including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to defraud.
	c. 	Are currently subject to any federal or state administrative enforcement order or judgment entered by any state securities administrator or the SEC within five years prior to filing the SOIF in which fraud or deceit, including, but not limited to, the making of untrue statements of material facts and omitting to state material facts, was found.
	d. 	Are subject to any federal or state administrative order or judgment prohibiting, denying, or revoking the use of any exemption from registration regarding the offer, purchase or sale of securities.
	e. 	Are currently subject to any order, judgment, or decree of any court of competent jurisdiction entered within five years prior to filing the SOIF temporarily, preliminarily, or permanently restraining or enjoining the person or entity from engaging in or continuing any conduct or practice regarding the purchase or sale of any security or the making of any false filing with any state.
The disqualifications listed in this subrule shall not apply if the person or entity subject to the disqualification is licensed or registered to conduct securities-related business in the state in which the administrative order or judgment was entered against the person or entity, or if the broker-dealer employing the person or entity is licensed or registered in Iowa and the Form BD filed with the administrator discloses the order, conviction, judgment, or decree. No person disqualified under this subrule may act in a capacity other than that for which the person is licensed or registered. Any disqualification caused by this subrule is automatically waived if the agency creating the disqualification determines for good cause shown that the exemption should not be denied.
	50.84(3) The failure to comply with a term, condition or requirement of this rule shall not result in the loss of the exemption from the requirements of Iowa Code section 502.301 for an offer to a particular individual or entity if the offerer establishes all of the following:
	a. 	The failure to comply did not pertain to a term, condition or requirement directly intended to protect that particular individual or entity; and
	b. 	The failure to comply was insignificant regarding the offering as a whole; and
	c. 	A good-faith and reasonable attempt was made to comply with all applicable terms, conditions and requirements of this rule.
Where an exemption is established only through reliance upon subrule 50.84(2), the failure to comply is still actionable as a violation of the Act by the administrator under Iowa Code section 502.603 or 502.604.
	50.84(4) The offerer shall comply with the following requirements:
	a. 	Any published notice or script for broadcast and any printed material delivered apart from the SOIF, unless a SOIF containing the disclosures described below was previously delivered to the person, shall contain, at a minimum, the identity of the chief executive officer of the issuer, a brief and general description of the issuer’s business and products, and the following disclosure printed in capital letters and boldface type at least as large as that used in the body of the printed materials:
	(1)	NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED AND NONE WILL BE ACCEPTED.
	(2)	NO SALES OF SECURITIES WILL BE MADE OR A COMMITMENT TO PURCHASE ACCEPTED UNTIL THE DELIVERY OF AN OFFERING CIRCULAR THAT INCLUDES COMPLETE INFORMATION ABOUT THE ISSUER AND THE OFFERING.
	(3)	AN INDICATION OF INTEREST MADE BY A PROSPECTIVE INVESTOR INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND.
	(4)	THIS OFFER IS BEING MADE PURSUANT TO AN EXEMPTION UNDER FEDERAL AND STATE SECURITIES LAWS. NO SALE MAY BE MADE UNTIL THE OFFERING STATEMENT IS QUALIFIED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION AND IS REGISTERED IN IOWA.
	b. 	All communications with prospective investors made in reliance upon this rule shall cease after a registration statement is filed with the administrator, and no sale may be made until at least 20 calendar days after the last communication made in reliance upon this rule.
	c. 	A preliminary prospectus may be used with an offering for which indications of interest have been solicited under this rule only if the offering is conducted by a registered broker-dealer.
Failure to comply with the requirements of this subrule shall not result in losing the exemption from the requirements of Iowa Code section 502.301, but is a violation of the Act, is actionable by the administrator under Iowa Code section 502.603 or 502.604, and constitutes grounds for denying or revoking the exemption for specific transactions.
	50.84(5) Upon written application by the offerer and for good cause shown, the administrator may waive any condition of the solicitation of interest exemption. Neither compliance nor attempted compliance with this rule, nor the absence of any objection or order by the administrator regarding an offer of securities made under this rule, constitutes a waiver of any condition of the rule or a confirmation by the administrator of the availability of the rule.
	50.84(6) Offers made in reliance upon this rule shall not be integrated with subsequent offers or sales of securities registered in Iowa. Issuers on whose behalf indications of interest are solicited under this rule may not make offers or sales in reliance upon Iowa Code section 502.202(14) or rule 191—50.80(502) until at least 12 months after the last communication with a prospective investor made pursuant to this rule.
	50.84(7) Nothing in this rule limits the application of Iowa Code section 502.401, 502.402, 502.501 or 502.509 to offers made in reliance upon this rule.
	50.84(8) The administrator may review the materials filed under this rule. Materials filed, if reviewed, will be judged under antifraud principles. Any discussion in the offering documents of the potential rewards of the investment must be balanced by a discussion of the possible risks.
	50.84(9) Any offer effected in violation of this rule may constitute an unlawful offer of an unregistered security for which civil liability attaches under Iowa Code section 502.501 et seq. Any misrepresentation or omission may also give rise to civil liability under the Act. A subsequent registration of the security does not cure the previous unlawful offer. Only a rescission offer made in compliance with the Act can effect a cure.
This rule is intended to implement Iowa Code section 502.202(17).
191—50.85(502) Internet offers exemption. Offers of securities made by, or on behalf of, issuers on or through the Internet are exempt from registration pursuant to Iowa Code sections 502.301 and 502.504 if:
	1.	The Internet offer states, directly or indirectly, that the securities are not being offered to state residents; and
	2.	The Internet offer is not specifically directed to any person in Iowa by, or on behalf of, the issuer of the securities; and
	3.	No sales of the issuer’s securities are made in Iowa as a result of the Internet offering until such time as the securities being offered have been registered under Iowa Code sections 502.301 and 502.504, and a final prospectus or Form U-7 is delivered to Iowa investors prior to such sales, or the issuer qualifies for the exemption provided in Iowa Code section 502.202(13).
This rule is intended to implement Iowa Code section 502.203.
191—50.86(502) Denial, suspension, revocation, condition, or limitation of limited offering transaction exemption. The administrator shall view the following as reasons for entering an order under Iowa Code section 502.204 to deny or revoke an exemption provided under Iowa Code section 502.202(14):
	1.	A public advertisement is used to promote the sale of securities for which such exemption is claimed; or
	2.	The offering is part of a registered offering under the Securities Act of 1933.
This rule is intended to implement Iowa Code section 502.204.
191—50.87(502) Nonprofit securities exemption.
	50.87(1) Church extension funds or similar organizations making continuous offerings shall be exempt pursuant to Iowa Code section 502.201(7)“b” provided the issuer:
	a. 	Applies for the exemption;
	b. 	Files an offering circular and otherwise substantially complies with the NASAA Statement of Policy Regarding Church Extension Funds as adopted by the NASAA membership on April 17, 1994, and amended by the NASAA membership on April 18, 2004, and published in CCH NASAA Reports at paragraph 1951;
	c. 	Files all sales and advertising literature;
	d. 	Files a consent to service of process;
	e. 	Unless disallowed by the administrator within 15 days after the applicant has filed the items required by paragraphs 50.87(1)“a” to “d,” is authorized beginning 15 days after the filing is received to sell pursuant to the exemption;
	f. 	After authorization, may sell securities for a period of 12 months; and
	g. 	Upon the expiration of the 12-month period in paragraph 50.87(1)“f,” files a renewal application that complies with the requirements of this subrule.
	50.87(2) Church bonds and other one-time offerings for a single specific project shall be exempt pursuant to Iowa Code section 502.201(7)“a” provided the issuer:
	a. 	Files a notice specifying the material terms of the offering that comply with the NASAA Statement of Policy Regarding Church Bonds as adopted by the NASAA membership on April 14, 2002, and published in CCH NASAA Reports at paragraph 1001; and
	b. 	Files a consent to service of process.
This rule is intended to implement Iowa Code section 502.201(7).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.88(502) Transactions with specified investors. The administrator grants the exemption for transactions with specified investors to the following persons:
	50.88(1) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer.
	50.88(2) Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of the purchase exceeds $1 million, excluding the value of the primary residence of the natural person.
	50.88(3) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
	50.88(4) Any venture or seed capital company. For purposes of this subrule, a venture or seed capital company is a corporation, partnership or association that has been in existence for five years or whose net assets exceed $250,000 and whose primary business is investing in developmental stage companies or “eligible small business companies” as that term is defined in the regulations of the Small Business Administration.
This rule is intended to implement Iowa Code section 502.202(13).
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.89(502) Designated securities manuals. Nationally recognized securities manuals for purposes of Iowa Code section 502.202(2)“d” include Mergent’s Manuals, S & P Capital IQ Standard Corporation Descriptions, Fitch Investment Services, and Best’s Insurance Reports, Life-Health.
This rule is intended to implement Iowa Code section 502.202(2)“d.”
[ARC 1076C, IAB 10/2/13, effective 11/6/13]
191—50.90(502) Intrastate crowdfunding exemption.
	50.90(1) Purpose and authority.
	a. 	The purpose of this rule is to set out the requirements, procedures and fees relating to the registration and conduct of intrastate crowdfunding, as established by Iowa Code section 502.202.
	b. 	This rule is authorized by Iowa Code sections 502.202 and 502.605.
	50.90(2) Definitions. For purposes of this rule, the definitions in Iowa Code chapter 502 and the following definitions shall apply unless the context requires otherwise:
“Administrator’s Web site” means the Web site of the Iowa insurance division, www.iid.iowa.gov.
“Issuer” means a person that has filed a certificate of formation with the Iowa secretary of state and is authorized to do business in Iowa and has been approved by the administrator as a crowdfunding issuer pursuant to paragraph 50.90(8)“a.”
“Management” means an issuer’s directors or executive officers or the individuals who perform such functions for the issuer.
“Portal Web site” means the Internet Web site through which a registered Iowa crowdfunding portal provides intrastate crowdfunding offers and sales of exempt securities in Iowa.
“Purchaser” means an investor or person that purchases crowdfunding securities through an Iowa crowdfunding intermediary.
	50.90(3) Intermediary registration. To act as a registered intermediary as defined and required by Iowa Code section 502.202:
	a. 	A broker-dealer shall comply with the registration requirements of Iowa Code section 502.401; or
	b. 	An entity that is not a broker-dealer acting as an Iowa crowdfunding portal shall register with the administrator by filing an Iowa crowdfunding portal registration, pursuant to subrule 50.90(4), and receiving approval of the registration by the administrator.
	50.90(4) Iowa crowdfunding portal registration. To request administrator approval of a registration as an Iowa crowdfunding portal as defined and required by Iowa Code section 502.202, a person shall submit all of the following to the administrator:
	a. 	A completed Iowa crowdfunding portal registration form, available on the administrator’s Web site, including all required schedules and supplemental information.
	b. 	A completed Form U-4, available on the administrator’s Web site, for each agent as defined in Iowa Code section 502.102(2).
	c. 	Any other information requested by the administrator to determine the financial responsibility, business reputation, or qualifications of the Iowa crowdfunding portal.
	d. 	The registration fee of $100.
	50.90(5) Registration renewal. Registration as an Iowa crowdfunding portal expires at the close of the calendar year. An Iowa crowdfunding portal may renew registration for the succeeding year by submitting to the administrator the appropriate renewal fee and a written request for renewal, including any material changes to the information submitted in the prior application. The administrator may request additional information as necessary.
	50.90(6) Duties of an Iowa crowdfunding portal.
	a. 	Creation, maintenance and availability of portal Web site. A registered Iowa crowdfunding portal shall create the portal Web site and shall maintain the portal Web site and make information and services available on or through the portal Web site in compliance with this rule.
	b. 	Background and regulatory checks. Prior to offering securities to residents of Iowa, the Iowa crowdfunding portal shall conduct a reasonable investigation of the background and regulatory history of each issuer whose securities are offered on the portal Web site and of each of the issuer’s control persons. “Control persons” for purposes of this subrule means the issuer’s officers or directors; other persons having the power, directly or indirectly, to direct the management or policies of the issuer, whether by contract or otherwise; and persons holding more than 20 percent of the outstanding equity of the issuer. The Iowa crowdfunding portal shall deny an issuer access to the portal Web site if:
	(1)	The issuer or any of its control persons are subject to a disqualification under Iowa Code section 502.202(24)“b”(5) or this rule;
	(2)	The issuer has engaged in or is engaging in or the offering involves any act, practice, or course of business that will, directly or indirectly, operate as a fraud or deceit upon any person; or
	(3)	The Iowa crowdfunding portal cannot adequately or effectively assess the risk of fraud by the issuer or the issuer’s potential offering.
	c. 	Purchaser screening. Before a security is sold through an Iowa crowdfunding portal, the Iowa crowdfunding portal shall ensure that the purchaser does all of the following:
	(1)	Reviews the information provided in the offering documents.
	(2)	Provides to the Iowa crowdfunding portal an acknowledgment in writing from the purchaser that the purchaser received and acknowledged the disclosure statement provided to the purchaser by the issuer pursuant to paragraph 50.90(8)“b.”
	(3)	Provides to the Iowa crowdfunding portal an affirmative representation that the purchaser is an Iowa resident.
	d. 	Information about the issuer and the offering. The Iowa crowdfunding portal shall make available on the portal Web site information about the issuer and the offering. The information shall include all of the following:
	(1)	A copy of the disclosure statement required by paragraph 50.90(8)“b.”
	(2)	A summary of the offering, including all of the following:
	1.	A description of the entity; its form of business, principal office, history, and business plan; and its intended use of the offering proceeds, including compensation paid to any owner, executive officer, director, or manager.
	2.	The identity of the executive officers, directors, and managers, including their titles and their prior experience, and the identity of all persons owning more than 20 percent of the ownership interests of any class of securities of the company.
	3.	A description of the securities being offered and of any outstanding securities of the company, the amount of the offering, and the percentage ownership of the company represented by the offered securities.
	e. 	Portal Web site forum. The Iowa crowdfunding portal shall maintain a forum on its portal Web site. The forum shall be available to all potential purchasers as well as to the administrator. The portal Web site shall contain a disclaimer which states that access to securities offered on the portal Web site is limited to Iowa residents and that offers and sales of the securities appearing on the portal Web site are limited to persons that are Iowa residents. Potential purchasers may ask questions and receive answers concerning the terms and conditions of the offering and may obtain any additional information which the crowdfunding issuer possesses or can acquire without unreasonable effort or expense necessary to verify the accuracy or clarify the information provided on the portal Web site.
	f. 	Enforcement of investment limits. The Iowa crowdfunding portal shall take reasonable measures to ensure that no purchaser exceeds the sales limits set forth in Iowa Code section 502.202(24)“c.”
	g. 	Administrator access. The Iowa crowdfunding portal shall provide the administrator purchaser-level access at all times to the portal Web site, pursuant to Iowa Code section 502.202(24)“g”(8).
	50.90(7) Prohibited conduct for Iowa crowdfunding portals. An Iowa crowdfunding portal and individuals of the Iowa crowdfunding portal’s management:
	a. 	Shall have no ownership or other financial interest in the crowdfunding issuer.
	b. 	Shall not hold, manage, possess, or otherwise handle purchaser funds or securities.
	c. 	Shall not compensate employees, agents or other persons not registered with the administrator for soliciting offers or sales of securities displayed or referenced on the Iowa crowdfunding portal.
	d. 	Shall not hold, manage, possess or otherwise handle purchaser funds or securities.
	e. 	Shall not be affiliated with or under common control with an issuer whose securities appear on the portal Web site.
	f. 	Shall not hold a financial interest in any issuer offering securities on the portal Web site.
	g. 	Shall not receive a financial interest in an issuer as compensation for services provided to or on behalf of an issuer.
	50.90(8) Duties of a crowdfunding issuer.
	a. 	Notice to administrator. Pursuant to Iowa Code section 502.202, at least 30 days prior to the offer of any security in this state in reliance upon the exemption provided by this rule, the crowdfunding issuer shall file with the administrator for approval a crowdfunding exemption notice application form, available on the administrator’s Web site.
	(1)	The following entities may not act as issuers nor may they file a crowdfunding exemption notice application form:
	1.	A company that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities.
	2.	A company that has not yet defined its business operations, that has no business plan, that has no stated investment goal for the funds being raised, or that plans to engage in a merger or acquisition with an unspecified business entity.
	(2)	For a filing to be approved, the crowdfunding issuer shall demonstrate to the satisfaction of the administrator the following:
	1.	The crowdfunding issuer is an Iowa entity that has filed a certificate of formation with the Iowa secretary of state and is authorized to do business in Iowa;
	2.	The principal office of the issuer is located in Iowa;
	3.	At least 80 percent of the issuer’s gross revenue during its most recent fiscal year prior to the offering is derived from the operation of a business in Iowa;
	4.	At least 80 percent of the issuer’s assets at the end of its most recent semiannual period prior to the offering are located in Iowa; and
	5.	At least 80 percent of the net proceeds of this offering will be used by the issuer in connection with the operation of its business within Iowa.
	b. 	Disclosure document. A disclosure document shall be made readily available and accessible on the portal Web site to each potential purchaser at the time the offer of securities is made to the potential purchaser. The disclosure document shall contain all of the following information:
	(1)	That no ready market exists for the sale of the securities acquired from the offering; that it may be difficult or impossible for a purchaser to sell or otherwise dispose of the investment; and that a purchaser may be required to hold and bear the financial risks of this investment indefinitely.
	(2)	That the securities have not been registered under federal or state securities laws and, therefore, cannot be resold unless the securities are registered or qualify for an exemption from registration under federal and state law.
	(3)	That, in making an investment decision, purchasers shall rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved.
	(4)	That no federal or state securities commission or regulatory authority has confirmed the accuracy or determined the adequacy of the disclosure statement or any other information on the portal Web site.
	(5)	All information material to the offering, including, where appropriate, a discussion of significant factors that make the offering speculative or risky. Guidance on information to be included may be found by reviewing the small corporate offering registration (SCOR) information provided on the administrator’s Web site. Topics to be addressed include, but are not limited to:
	1.	General description of the issuer’s business;
	2.	History of the issuer’s operations and organization;
	3.	Management of the company and principal stockholders;
	4.	How the proceeds from the offering will be used;
	5.	Target offering amounts and escrow requirements, related to subrule 50.90(11);
	6.	Financial information about the issuer;
	7.	Description of the securities being offered; and
	8.	Litigation and legal proceedings.
	(6)	Current financial statements certified by the principal executive officer to be true and complete in all material respects and in accordance with generally accepted accounting principles (GAAP). If the issuer has prepared within the prior three years audited or reviewed financial statements, those shall also be provided to purchasers.
	c. 	Provision of sales reports. An issuer shall provide to the administrator a sales report detailing the amount of securities sold in Iowa at the close of the offering. The administrator may request additional reports at any time.
	50.90(9) Compensation and fees.
	a. 	A commission or other remuneration shall not be paid or given, directly or indirectly, for the offer or sale of the securities unless the person receiving such compensation is acting as an Iowa crowdfunding portal pursuant to subrule 50.90(3) or is an agent identified by the Iowa crowdfunding portal pursuant to paragraph 50.90(4)“b.”
	b. 	The issuer shall not provide a financial interest in the issuer as compensation for services provided to or on behalf of the issuer to a person acting as an Iowa crowdfunding portal pursuant to subrule 50.90(3) or as an agent identified by the Iowa crowdfunding portal pursuant to paragraph 50.90(4)“b.”
	50.90(10) Advertising and communications.
	a. 	The crowdfunding issuer shall not advertise the specific details of the offering, except for notices which direct potential purchasers to the portal Web site. Notwithstanding the foregoing, the issuer may distribute a notice within Iowa that the issuer is conducting an offering of securities and that includes the name of the registered Iowa crowdfunding portal through which the offering is being conducted and a link directing the potential investor to the registered Iowa crowdfunding portal. The notice shall contain a disclaimer that the offer or sale of the security is limited to persons that are Iowa residents.
	b. 	Communications. All communications between the issuer and potential purchasers taking place during the offer of securities pursuant to this rule shall occur through the portal Web site of the registered Iowa crowdfunding portal. During the time the securities are being offered on the portal Web site, the Iowa crowdfunding portal shall, pursuant to paragraphs 50.90(6)“d” and “e,” provide channels through which potential purchasers can communicate with one another and with the issuer about the securities being offered. These communications shall be visible to all those with access to the portal Web site.
	(1)	An issuer shall respond within ten days to requests for information made by potential purchasers or by the administrator through the portal Web site.
	(2)	If such additional information is material and not previously included on the portal Web site, the crowdfunding issuer and the Iowa crowdfunding portal shall immediately amend the information contained on the portal Web site to provide such material information.
	50.90(11) Target amount, offering period, and escrow requirements.
	a. 	The crowdfunding issuer shall establish a target offering amount and include it in the disclosure document. More information regarding the establishment of a target amount may be found on the administrator’s Web site.
	b. 	The offering period shall not exceed 12 months from the date of filing of the notice required by paragraph 50.90(8)“a.”
	c. 	All offering proceeds shall be held in an escrow account, maintained in a custodial account in a state or federal financial institution located in Iowa, until offering proceeds (less any offering proceeds from the crowdfunding issuer or its management or affiliates) totaling at least the target offering amount are received.
	d. 	If the target offering amount is not received by the end of the offering period, the proceeds shall be returned to the purchasers within 30 days.
	e. 	All purchasers shall have the right to withdraw their investments, without deduction of any kind, until such time as offering proceeds totaling at least the target offering amount are received and the offering proceeds are released by the qualified custodian from the escrow account to the crowdfunding issuer.
	50.90(12) Offering price. The offering price of the securities offered and sold pursuant to this exemption shall be the same for all purchasers and shall not be increased during the offering period. The offering price may be lowered, but only if all previous purchasers in the particular offering are notified of the change and allowed to rescind their previous investment and participate at the lower offering price.
	50.90(13) Resales of securities. On the document that is to serve as evidence of ownership, the issuer shall place a prominent notice which states that the securities have not been registered and which sets forth limitations on resale contained in SEC Rule 147(e), 17 CFR §230.147(e), including that, for a period of nine months from the date of last sale by the issuer of the securities in the offering, all resales by any person shall be made only to Iowa residents.
This rule is intended to implement Iowa Code section 502.202.
[ARC 2259C, IAB 11/25/15, effective 1/1/16; ARC 2731C, IAB 9/28/16, effective 11/2/16]
191—50.91 to 50.99  Reserved.
DIVISION VII
FRAUD AND OTHER PROHIBITED CONDUCT
191—50.100(502) Fraudulent practices.
	50.100(1) An issuer of securities registered under the Act, or any person who is an officer, director or controlling person of such issuer, is presumed to employ a “device, scheme or artifice to defraud” the purchasers of such securities under Iowa Code section 502.501(1) if such person applies, authorizes or causes to be applied any material part of the proceeds from the sale of such securities in any material way contrary to the purposes specified in the prospectus used in offering such securities and not reasonably related to the business of the issuer as described in the prospectus.
	50.100(2) A broker-dealer or agent employing one or more of the following practices engages in an “act, practice, or course of business which operates or would operate as a fraud” under Iowa Code section 502.501(3):
	a. 	Entering into any security transaction with a customer at an unreasonable price or at a price not reasonably related to the current market price of the security or receiving an unreasonable commission or profit.
	b. 	Contradicting or negating the importance of any information contained in a prospectus or other offering materials with intent to deceive or mislead or using any advertising or sales presentation in a deceptive or misleading manner.
	c. 	In connection with the offer, sale, or purchase of a security, falsely leading a customer to believe that the broker-dealer or agent possesses material, nonpublic information impacting the value of the security.
	d. 	In connection with the solicitation of a sale or purchase of a security, engaging in a pattern or practice of making contradictory recommendations to different investors of similar investment objectives for some to sell and others to purchase the same security, at or about the same time, when the recommendation is not justified by the particular circumstances of each investor.
	e. 	Failing to make a bona fide public offering of all the securities allotted to a broker-dealer for distribution by, among other things, (1) transferring securities to a customer, another broker-dealer or a fictitious account with the understanding that those securities will be returned to the broker-dealer or its nominees, or (2) parking or withholding securities.
	f. 	Effecting any transaction in, or inducing the purchase or sale of, any security by means of any manipulative, deceptive or other fraudulent device or contrivance including, but not limited to, the use of “boiler-room” tactics such as repeated or harassing unsolicited telephone calls or the use of fictitious or nominee accounts.
	50.100(3) Although nothing in this rule precludes applying the general antifraud provisions to any person who engages in practices similar to paragraphs “a” through “h” listed below, the listed practices apply only to soliciting a purchase or sale of OTC non-NASDAQ equity securities and excludes interests in direct participation programs and shares in open-end mutual funds:
	a. 	Failing to disclose the entity’s present bid and ask price of a particular security at the time of solicitation.
	b. 	Failing to advise the customer, both at the time of solicitation and on confirmation, of the total of all charges and fees related to a specific securities transaction.
	c. 	In connection with a principal transaction, failing to disclose, both at the time of solicitation and upon confirmation, a short inventory position in the entity’s account of more than 5 percent of the issued and outstanding shares of that class of securities of the issuer, if the entity is a market maker at the time of solicitation.
	d. 	Conducting sales contests in a particular security.
	e. 	After a solicited purchase by a customer, failing or refusing, for a principal transaction, to promptly execute sell orders.
	f. 	Refusing to sell existing securities held by the customer unless the customer executes a purchase transaction.
	g. 	Soliciting a secondary market when there has not been a bona fide distribution in the primary market.
	h. 	Engaging in a pattern of compensating an agent in different amounts for effecting sales and purchases in the same security.
This list is not intended to be all-inclusive. Engaging in other conduct including, but not limited to, forgery, embezzlement, conversion, nondisclosure, incomplete disclosure or misstatement of material facts may also be deemed fraudulent.
This rule is intended to implement Iowa Code section 502.501.
191—50.101(502) Rescission offers.
	50.101(1) Rescission offers made pursuant to Iowa Code section 502.510 shall be typed or printed and shall be captioned “RESCISSION OFFER” in boldface print or type. The rescission offer shall be delivered to each offeree personally or shall be sent by certified mail to the offeree’s last-known address and shall contain the following information:
	a. 	The name of the security which is the subject of the offer.
	b. 	A reasonably detailed statement indicating why liability under Iowa Code section 502.509 may have arisen and fairly and adequately advising the offeree of the offeree’s rights pursuant to the Act.
	c. 	An offer to repurchase the security pursuant to Iowa Code section 502.510(1)“b” to “f,” as applicable.
	d. 	A statement that the offeree’s right to bring an action under the Act may be lost unless the offeree accepts the offer within 30 days after receiving the offer, or any shorter period, of not less than three days, that the administrator, by order, specifies.
	e. 	Sufficient information about the issuer and the security offered to permit the offeree to make an informed decision regarding acceptance of the rescission offer including, but not limited to, information about the issuer’s organization and management, its operations and plan of business, and its financial condition as shown by a current financial statement prepared under generally accepted accounting principles.
	f. 	A form by which the offeree may accept the offer and a statement explaining that the offeree may accept the offer by returning the form to the offerer at the provided address by first-class mail, or any other type of mail.
	g. 	If the basis for relief under Iowa Code section 502.510 alleges a violation of Iowa Code section 502.509 which employed a device, scheme, or artifice to defraud, made an untrue statement of material fact necessary in order to make the statement made, in light of the circumstances under which it was made, not misleading, or engaged in an act, practice, or course of business that operated or would operate as a fraud or deceit on another person, in capital letters and boldface type at least as large as that used in the body of the printed materials, and placed immediately before the signature of the offerer, the following statement:
THIS IS A RESCISSION OFFER MADE PURSUANT TO Iowa Code section 502.510, A COPY OF WHICH IS ON FILE WITH THE IOWA SECURITIES AND REGULATED INDUSTRIES BUREAU. THE BUREAU MAKES NO RECOMMENDATION AS TO WHETHER THE OFFER SHOULD BE ACCEPTED OR REJECTED NOR HAS THE BUREAU PASSED UPON THE ADEQUACY OR ACCURACY OF THIS OFFER.
	50.101(2) If the basis for relief under Iowa Code section 502.510 alleges a violation of Iowa Code section 502.509 which employed a device, scheme, or artifice to defraud, made an untrue statement of material fact necessary in order to make the statement made, in light of the circumstances under which it was made, not misleading, or engaged in an act, practice, or course of business that operated or would operate as a fraud or deceit on another person, prior to making a rescission offer pursuant to Iowa Code section 502.510, the offerer shall file with the administrator:
	a. 	A copy of the rescission offer;
	b. 	The names and addresses of all holders or sellers who are to receive the rescission offer; and
	c. 	Financial statements proving that the offerer’s assets are sufficient to meet its obligations should all offerees accept the rescission offer.
	50.101(3) Rescission offers made pursuant to Iowa Code section 502.510 shall be tendered to all persons to whom liability exists or may exist pursuant to Iowa Code section 502.509.
	50.101(4) A rescission offer may be accepted at any time during the period stated in the rescission offer even if an offeree previously rejected the offer.
	50.101(5) Rescission offers are subject to the provisions of Iowa Code sections 502.501, 502.501A, 502.505, 502.506, and 502.506A.
	50.101(6) The administrator may, in the administrator’s discretion, require proof by the offerer of compliance with this rule and the terms of the rescission offer.
	50.101(7) A proposal or the making of a rescission offer shall not limit the administrator’s administrative or enforcement authority provided by the Act.
This rule is intended to implement Iowa Code sections 502.509 and 502.510.
191—50.102(502) Fraudulent, deceptive or manipulative act, practice, or course of business in providing investment advice.
	50.102(1) It shall constitute a fraudulent, deceptive or manipulative act, practice, or course of business for an investment adviser or an investment adviser representative acting as principal for such person’s own account, knowingly to sell any security to or purchase any security from a client or, acting as broker for a person other than such client, knowingly to effect any sale or purchase of any security for the account of such client, without disclosing to such client in writing before the completion of such transaction the capacity in which the investment adviser is acting and obtaining the consent of the client to such transaction. The prohibitions of this subrule shall not apply to any transaction with a customer of a broker-dealer if such broker-dealer is not acting as an investment adviser in relation to such transaction.
	50.102(2) It shall constitute a fraudulent, deceptive or manipulative act, practice, or course of business for an investment adviser or an investment adviser representative to fail to disclose to any client or prospective client all material facts regarding financial and disciplinary information as provided in 17 CFR Section 275.206(4)-4.
	50.102(3) Pooled investment vehicles.
	a. 	It shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of Iowa Code section 502.502(2) for any investment adviser to a pooled investment vehicle to:
	(1)	Make any untrue statement of a material fact or to omit to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, to any investor or prospective investor in the pooled investment vehicle; or
	(2)	Otherwise engage in any act, practice, or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in the pooled investment vehicle.
	b. 	For purposes of this subrule, “pooled investment vehicle” means any investment company as defined in Section 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(a)) or any company that would be an investment company under Section 3(a) of that Act but for the exclusion provided from that definition by either Section 3(c)(1) or Section 3(c)(7) of that Act (15 U.S.C. 80a-3(c)(1) or (7)).
This rule is intended to implement Iowa Code section 502.502(2).
191—50.103(502) Investment advisory contracts.
	50.103(1) It is unlawful for any investment adviser to enter into, extend, or renew any investment advisory contract unless the contract provides in writing all of the following:
	a. 	That the investment adviser shall not be compensated on the basis of a share of capital gains or capital appreciation of the funds or any portion of the funds of the client.
	b. 	That no assignment of the contract may be made by the investment adviser without the consent of the other party to the contract.
	c. 	That 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.
	50.103(2) The provisions of subrule 50.103(1) shall be construed consistent with Sections 205(b) through (d) of the Investment Advisers Act of 1940, the terms of which shall be defined by Investment Advisers Act of 1940 Rules 275.205-1 and 275.205-2.
	50.103(3) The provisions of subrule 50.103(1) shall not prohibit compensation on the basis of a share of capital gains or capital appreciation of the funds or any portion of the funds of the client in compliance with the exemption in 17 CFR Section 275.205-3.
This rule is intended to implement Iowa Code section 502.502(3).
191—50.104 to 50.109  Reserved.
DIVISION VIII
VIATICAL SETTLEMENT INVESTMENT CONTRACTS
191—50.110(502) Application by viatical settlement investment contract issuers and registration of agents to sell viatical settlement investment contracts.
	50.110(1) Under this rule, the term “viatical settlement investment contract issuer” includes, but is not limited to, any individual, company, corporation or other entity that offers or sells, directly or indirectly, viatical settlement investment contracts to investors.
	50.110(2) A viatical settlement investment contract issuer employing agents in Iowa must make prior application to the administrator for this authority. The application shall be made by letter and shall include:
	a. 	A statement of the issuer’s intent to employ agents for the sale of its viatical settlement investment contracts; and
	b. 	The name, address, social security number and proof of satisfaction of subrule 50.110(3) for each agent.
	50.110(3) An applicant for registration as an Iowa-registered agent of an issuer of viatical settlement investment contracts shall file with the administrator:
	a. 	Proof of obtaining a passing grade on the FINRA Series 7 examination;
	b. 	Proof of obtaining a passing grade on the FINRA Series 63 examination;
	c. 	An accurate, complete and signed Form U-4; and
	d. 	A $30 filing fee.
This rule is intended to implement Iowa Code sections 502.102(2), 502.301 and 502.402.
[ARC 9169B, IAB 10/20/10, effective 11/24/10]
191—50.111(502) Risk disclosure. Viatical settlement investment contract issuers and registered agents of issuers must provide specific, written disclosures of risk to Iowa investors at the time of the initial offer to sell a viatical settlement investment contract. These disclosures must be preceded by the following caption, which must be in bold, 16-point typeface:
IMPORTANT RISK DISCLOSURE INFORMATION—READ BEFORE SIGNING ANY
VIATICAL SETTLEMENT INVESTMENT CONTRACT.
The disclosure must include, at a minimum, the following information:
	1.	That the actual annual rate of return on any viatical settlement investment contract is dependent upon an accurate projection of the viator’s life expectancy and the actual date of the viator’s death and that an annual “guaranteed” rate of return is not possible;
	2.	Whether, after purchasing the viatical settlement investment contract, the investor will be responsible for payment of premiums on the contract if the viator lives longer than projected and if the investor will be responsible for such premiums, the amount of the premium payment and any resulting negative effect on the investor’s return;
	3.	Whether any premium payments on the contract have been escrowed and, if so, the date upon which the escrowed funds will be depleted, who is responsible for payment of premiums after depletion of the funds, and, if applicable, the amount of the premiums;
	4.	Whether any premium payments on the contract have been waived, whether the investor will be responsible for payment of the premiums if the insurer who wrote the policy terminates the waiver after purchase, and, if applicable, the amount of the premiums;
	5.	Whether the investor is responsible for payment of premiums on the contract if the viator returns to health and, if applicable, the amount of the premiums;
	6.	Whether the investor is entitled to all or part of the investor’s investment under the contract if the viator’s underlying policy is later determined to be null and void;
	7.	Whether the insurance policy is a group policy and, if so, the special risks associated with group policies including, but not limited to, whether the investor is responsible for payment of additional premiums if the policies are sold or converted;
	8.	Whether the insurance policy is term insurance and, if so, the special risks associated with term insurance including, but not limited to, whether the investor is responsible for additional premium costs if the viator continues the term policy at the end of the current term;
	9.	Whether the investor will be the beneficiary or owner of the insurance policy and, if the investor is the beneficiary, the special risks associated with beneficiary status;
	10.	Whether the insurance policy is contestable and, if so, the special risks associated with contestability including, but not limited to, the risk that the investor will have no claim or only a partial claim to death benefits should the insurer cancel the policy within the contestability period;
	11.	Who is making the projection of the viator’s life expectancy, the information upon which the projection is based, and the relationship of the projection maker to the issuer;
	12.	Who is monitoring the viator’s condition, how often the monitoring is done, how the date of death is determined, and how and when this information will be transmitted to the investor;
	13.	Whether the insurer who wrote the viator’s underlying policy has any additional rights which could negatively affect or extinguish the investor’s rights under the viatical settlement investment contract, what these rights are, and under what conditions these rights are activated;
	14.	That a viatical settlement investment contract is not a liquid investment and that there is no established secondary market for resale of these products by the investor;
	15.	That the investor will receive no returns (i.e., dividends and interest) until the viator dies; and
	16.	That the investor may lose all benefits or receive substantially reduced benefits if the insurer goes out of business during the term of the viatical investment.
This rule is intended to implement Iowa Code sections 502.102, 502.201(9E) and 502.301.
191—50.112(502) Advertising of viatical settlement investment contracts.
	50.112(1) The issuer and agent shall file all viatical settlement investment contract advertisements with the administrator at least ten business days prior to the date of use or a shorter period as the administrator may permit. The administrator shall mark the advertisements with allowance for use or expressly disapprove them during this time frame. The advertisement shall not be used in Iowa until a copy thereof, marked with allowance for use, has been received from the administrator.
	50.112(2) Viatical settlement investment contract advertisements shall contain no more than the following:
	a. 	The name of the issuer;
	b. 	The address and telephone number of the issuer;
	c. 	A brief description of the security, including minimum purchase requirements and liquidity aspects;
	d. 	If a rate of return is advertised, it must be stated as the annual average rate of return, with a disclaimer that this is an annual average rate of return, that individual investor rates of return will vary based upon the viator’s projected and actual date of death, and that an annual rate of return on a viatical settlement investment contract cannot be guaranteed;
	e. 	The name, address and telephone number of the agent of the issuer authorized to sell the viatical settlement investment contracts;
	f. 	A statement that the advertisement is neither an offer to sell nor a solicitation of an offer to purchase and that any offer or solicitation may only be made by providing a disclosure document; and
	g. 	How a copy of the disclosure document may be obtained.
	50.112(3) Notwithstanding the provisions of rule 191—50.69(502), certain viatical settlement investment contract advertisements may be deemed false and misleading on their face by the administrator and are prohibited pursuant to Iowa Code sections 502.501 and 502.504. False and misleading viatical settlement investment contract advertisements include, but are not limited to, the following representations:
	a. 	“Fully secured,” “100% secured,” “fully insured,” “secure,” “safe,” “backed by rated insurance company(ies),” “backed by federal law,” “backed by state law,” or similar representations;
	b. 	“No risk,” “minimal risk,” “low risk,” “no speculation,” “no fluctuation,” or similar representations;
	c. 	“Qualified or approved for IRA, Roth IRA, 401K, SEP, 403B, Keogh plans, TSA, other retirement account rollovers,” “tax deferred,” or similar representations;
	d. 	“Guaranteed fixed return,” “guaranteed annual return,” “guaranteed principal,” “guaranteed earnings,” “guaranteed profits,” “guaranteed investment,” or similar representations;
	e. 	“No sales charges or fees” or similar representations;
	f. 	“High yield,” “superior return,” “excellent return,” “high return,” “quick profit,” or similar representations;
	g. 	“Perfect investment,” “proven investment,” or similar representations;
	h. 	Purported favorable representations or testimonials about the benefits of viaticals as an investment, taken out of context from newspapers, trade papers, journals, radio or television programs, or any other form of print or electronic media.
	50.112(4) For purposes of this rule, the term “advertisement” includes any written, electronic or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet, or similar communications media, including filmstrips, motion pictures, and videos, published in connection with the offer or sale of a viatical settlement investment contract.
This rule is intended to implement Iowa Code sections 502.102, 502.301, and 502.504.
191—50.113(502) Duty to disclose. Issuers and agents equally share an affirmative duty to disclose all relevant and material information to prospective investors in viatical settlement investment contracts. The required disclosure is the registration statement required by Iowa Code section 502.304 which has been reviewed and made effective by the administrator.
This rule is intended to implement Iowa Code sections 502.102 and 502.201(9E).
[Filed 8/1/63; amended 5/18/71, 7/3/75]
[Filed 1/13/76, Notice 11/17/75—published 1/26/76, effective 3/1/76]1
[Filed 8/30/76, Notice 7/26/76—published 9/8/76, effective 10/13/76]
[Filed 12/30/82, Notice 10/27/82—published 1/19/83, effective 2/24/83]
[Filed emergency 7/15/83—published 8/3/83, effective 7/15/83]
[Filed 8/27/85, Notice 7/17/85—published 9/25/85, effective 10/30/85]
[Editorially transferred from [510] to [191], IAC Supp. 10/22/86; see IAB 7/30/86]
[Filed 10/17/86, Notice 9/10/86—published 11/5/86, effective 12/10/86]◊
[Filed 9/18/87, Notice 8/12/87—published 10/7/87, effective 11/11/87]
[Filed 12/28/87, Notice 10/7/87—published 1/13/88, effective 2/17/88]
[Filed emergency 6/24/88—published 7/13/88, effective 7/1/88]
[Filed emergency 9/30/88—published 10/19/88, effective 11/1/88]
[Filed 12/22/88, Notice 11/16/88—published 1/11/89, effective 2/15/89]
[Filed 9/29/89, Notice 7/12/89—published 10/18/89, effective 11/22/89]
[Filed 12/21/90, Notice 6/27/90—published 1/9/91, effective 2/13/91]
[Filed emergency 6/21/91—published 7/10/91, effective 6/21/91]◊
[Filed 2/14/92, Notice 12/25/91—published 3/4/92, effective 4/8/92]
[Filed 2/28/92, Notice 12/11/91—published 3/18/92, effective 4/22/92]
[Filed 2/28/92, Notice 12/25/91—published 3/18/92, effective 4/22/92]
[Filed 10/23/92, Notice 9/16/92—published 11/11/92, effective 12/16/92]◊
[Filed 4/30/93, Notice 3/17/93—published 5/26/93, effective 6/30/93]
[Filed 7/2/93, Notice 4/14/93—published 7/21/93, effective 8/25/93]
[Filed 12/30/93, Notice 7/21/93—published 1/19/94, effective 2/28/94]
[Filed 9/16/94, Notice 8/3/94—published 10/12/94, effective 11/16/94]
[Filed without Notice 10/20/94—published 11/9/94, effective 12/14/94]
[Filed 3/24/95, Notice 2/15/95—published 4/12/95, effective 5/17/95]
[Filed 6/16/95, Notice 2/15/95—published 7/5/95, effective 8/9/95]
[Filed 2/22/96, Notice 1/17/96—published 3/13/96, effective 4/17/96]
[Filed 7/25/96, Notice 6/19/96—published 8/14/96, effective 9/18/96]
[Filed 10/31/96, Notice 9/25/96—published 11/20/96, effective 12/25/96]
[Filed 2/19/97, Notice 1/15/97—published 3/12/97, effective 4/16/97]
[Filed 5/2/97, Notice 3/26/97—published 5/21/97, effective 6/25/97]
[Filed 7/23/97, Notice 6/18/97—published 8/13/97, effective 9/17/97]
[Filed 1/23/98, Notice 12/17/97—published 2/11/98, effective 3/18/98]
[Filed 7/22/98, Notice 6/17/98—published 8/12/98, effective 9/16/98]
[Filed 10/30/98, Notice 9/23/98—published 11/18/98, effective 12/23/98]
[Filed 3/5/99, Notice 12/16/98—published 3/24/99, effective 4/28/99]
[Filed 4/16/99, Notice 12/16/98—published 5/5/99, effective 6/9/99]
[Filed 4/30/99, Notice 12/16/98—published 5/19/99, effective 6/23/00]
[Filed 11/24/99, Notice 9/22/99—published 12/15/99, effective 1/19/00]
[Filed 1/5/00, Notice 8/11/99—published 1/26/00, effective 3/1/00]
[Filed 5/24/01, Notice 4/4/01—published 6/13/01, effective 7/18/01]
[Filed 8/31/01, Notice 7/25/01—published 9/19/01, effective 11/1/01]
[Filed 8/2/02, Notice 6/26/02—published 8/21/02, effective 9/25/02]
[Filed 6/1/07, Notice 4/11/07—published 6/20/07, effective 7/25/07]
[Filed 11/29/07, Notice 10/10/07—published 12/19/07, effective 1/23/08]
[Filed 10/30/08, Notice 9/24/08—published 11/19/08, effective 12/24/08]
[Filed ARC 9169B (Notice ARC 9010B, IAB 8/11/10), IAB 10/20/10, effective 11/24/10]
[Filed ARC 1076C (Notice ARC 0716C, IAB 5/1/13), IAB 10/2/13, effective 11/6/13]
[Filed ARC 2175C (Notice ARC 2079C, IAB 8/5/15), IAB 9/30/15, effective 11/4/15]
[Filed ARC 2259C (Notice ARC 2172C, IAB 9/30/15), IAB 11/25/15, effective 1/1/16]
[Filed ARC 2731C (Notice ARC 2668C, IAB 8/3/16), IAB 9/28/16, effective 11/2/16]
◊	Two or more ARCs
1	Objection to rules 50.19 and 50.44, see IAC Supplement 3/8/76