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CHAPTER 50REGULATION OF SECURITIES OFFERINGS AND THOSE WHO ENGAGEIN THE SECURITIES BUSINESS[Appeared as Ch 17, 1973 IDR][Prior to 10/22/86, Insurance Department[510]]DIVISION IDEFINITIONS AND ADMINISTRATION191—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:Registered, or required to be registered, pursuant to the Securities Exchange Act of 1934 (15 U.S.C. Section 781); or For which the company files, or is required to file, periodic information, documents, and reports pursuant to the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(d)). 2. In the fiscal year ending immediately before the fiscal year in which the services of the merger and acquisition broker are initially engaged with respect to the securities transaction, the company meets either or both of the following conditions (determined in accordance with the historical financial accounting records of the company):The earnings of the company before interest, taxes, depreciation, and amortization are less than $25 million. The gross revenues of the company are less than $250 million. (3) "Merger and acquisition broker" means any broker-dealer and any person that is associated with a broker-dealer: 1. That is engaged in the business of effecting securities transactions solely in connection with the transfer of ownership of an eligible privately held company; andThat is thus engaged regardless of whether that broker-dealer acts on behalf of a seller or buyer; and That is thus engaged through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the eligible privately held company; and 2. That meets both of the following conditions:The broker-dealer reasonably believes that, upon consummation of the transaction, any person acquiring securities or assets of the eligible privately held company, acting alone or in concert, will control and, directly or indirectly, will be active in the management of the eligible privately held company or the business conducted with the assets of the eligible privately held company; and If any person offered securities in exchange for securities or assets of the eligible privately held company, such person will, prior to becoming legally bound to consummate the transaction, receive or have reasonable access to both of the following:o The most recent fiscal year-end financial statements of the issuer of the securities as customarily prepared by its management in the normal course of operations; and o If the financial statements of the issuer are audited, reviewed or compiled, all of the following:♦ Any related statement by the independent accountant;♦ A balance sheet dated not more than 120 days before the date of the exchange offer;♦ Information pertaining to the management, business, and results of operations for the period covered by the foregoing financial statements; and♦ Any material loss contingencies of the issuer. (4) "Public shell company" means a company that, at the time of a transaction with an eligible privately held company, meets all three of the following conditions: 1. Has any class of securities registered, or required to be registered, with the SEC pursuant to the Securities Exchange Act of 1934 (15 U.S.C. Section 781), or with respect to which the company files, or is required to file, periodic information, documents, and reports pursuant to the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)). 2. Has no or nominal operations. 3. Has assets consisting of one of the following:No or nominal assets. Cash and cash equivalents. Any amount of cash and cash equivalents and nominal other assets. b. Merger and acquisition broker exemption from registration requirements. (1) Exemption. Except as provided in subparagraphs 50.10(10)“b”(2) and (3), a merger and acquisition broker is exempt from the broker-dealer registration requirements and procedures of Iowa Code sections 502.401 and 502.406. (2) Activities not exempt. A merger and acquisition broker is not exempt from the broker-dealer registration requirements of Iowa Code sections 502.401 and 502.406 if the merger and acquisition broker does any of the following: 1. Directly or indirectly, in connection with the transfer of ownership of an eligible privately held company, receives, holds, transmits, or has custody of the funds or securities to be exchanged by the parties to the transaction. 2. Engages on behalf of an issuer in a public offering of any class of securities that is registered, or is required to be registered, with the SEC under the Securities Exchange Act of 1934 (15 U.S.C. Section 781) or with respect to which the issuer files, or is required to file, periodic information, documents, and reports under the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(d)). 3. Engages on behalf of any party in a transaction involving a public shell company. (3) Disqualifications. A merger and acquisition broker is not exempt from registration under this subrule if the merger and acquisition broker is subject to any of the following: 1. Suspension or revocation of registration under the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(b)(4)); 2. A statutory disqualification described in the Securities Exchange Act of 1934 (15 U.S.C. Section 78c(a)(39)); 3. A disqualification under the rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. Section 77d note)); or 4. A final order described in the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(b)(4)(H)). (4) Rule of construction. Nothing in this subrule shall be construed to limit any other authority of the administrator to exempt any person, or any class of persons, from Iowa Code chapter 502 or from any provision of this chapter. c. Inflation adjustment. On July 1, 2023, and every five years thereafter, each dollar amount in 50.10(10)“a”(2)“2” shall be adjusted by the following calculation, and the dollar amount determined under the calculation shall be rounded to the nearest multiple of $100,000: (1) Dividing the annual value of the Employment Cost Index for Wages and Salaries, Private Industry Workers (or any successor index), as published by the Bureau of Labor Statistics, for the calendar year preceding the calendar year in which the adjustment is being made by the annual value of such index (or successor index) for the calendar year ending December 31, 2017; and (2) Multiplying the dollar amount in 50.10(10)“a”(2)“2” by the quotient obtained under subparagraph 50.10(10)“c”(1), above.This rule is intended to implement Iowa Code section 502.411(2).Related ARC(s): 9169B, 3741C191—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.Related ARC(s): 9169B191—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 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.Related ARC(s): 9169B, 1076C, 3741C191—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).Related ARC(s): 9169B191—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.”Related ARC(s): 9169B, 1076C191—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).Related ARC(s): 9169B191—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.Related ARC(s): 9169B191—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.Related ARC(s): 9169B191—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 Reserved.191—50.24 Reserved.191—50.25 Reserved.191—50.26 Reserved.191—50.27 Reserved.191—50.28 Reserved.191—50.29 Reserved.DIVISION IIIREGISTRATION OF INVESTMENT ADVISERS,INVESTMENT ADVISER REPRESENTATIVES,AND FEDERAL COVERED INVESTMENT ADVISERS191—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.”Related ARC(s): 9169B191—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.Related ARC(s): 1076C191—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.Related ARC(s): 9169B191—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 either: a. A passing score on the Series 65 examination. b. Passing scores on both the Series 7 examination and the Series 66 examination and, if the application is received by the administrator on or after October 1, 2018, FINRA’s Securities Industry Essentials Exam. 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).Related ARC(s): 9169B, 3741C191—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.Related ARC(s): 1076C191—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:Association with an entity regulated by such commission, authority, agency, or officer; Engaging in the business of securities, insurance or banking; or Engaging in savings association or credit union activities; or 2. Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct, including making untrue statements of material facts or omitting to state material facts, entered within ten years before such offer or sale; (4) Is subject to an order of the SEC entered pursuant to the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(b) or 78o-4(c)) or the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-3(e) or (f)) that, at the time of such offer or sale: 1. Suspends or revokes such person’s registration as a broker, dealer, municipal securities dealer or investment adviser; 2. Places limitations on the activities, functions or operations of such person; or 3. Bars such person from being associated with any entity or from participating in the offering of any penny stock; (5) Is subject to any order of the SEC entered within five years before such offer or sale that, at the time of such offer or sale, orders the person to cease and desist from committing or causing a violation or future violations of: 1. Any scienter-based, antifraud provision of the federal securities laws, including without limitation the Securities Act of 1933 (15 U.S.C. Section 77q(a)(1)); the Securities Exchange Act of 1934 (15 U.S.C. Section 78j(b) and 17 CFR 240.10b-5); the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(c)(1)); the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-6(1)); or any other rule or regulation thereunder; or 2. Section 5 of the Securities Act of 1933 (15 U.S.C. 77e); (6) Is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade; (7) Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the SEC that, within five years before such offer or sale, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is, at the time of such offer or sale, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; (8) Is subject to a United States Postal Service false representation order entered within five years before such offer or sale, or is, at the time of such offer or sale, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations; (9) Has filed a registration statement which is subject to a final stop order entered under any state’s securities law within five years before such offer or sale; or (10) Is currently subject to any final state administrative enforcement order or judgment entered by a state’s securities administrator within five years prior to such offer or sale. b. Paragraph 50.90(4)“a” shall not apply under either of the following circumstances: (1) Upon a showing of good cause and without prejudice to any other action by the commissioner, if the commissioner determines that it is not necessary under the circumstances that the exemption be denied; or (2) If the issuer establishes that it did not know and, in the exercise of reasonable care, could not have known that a disqualification existed under this subrule. An issuer will not be able to establish that it has exercised reasonable care unless it has made, in light of the circumstances, factual inquiry into whether any disqualifications exist. The nature and scope of the factual inquiry will vary based on the facts and circumstances concerning, among other things, the issuer and the other offering participants. c. Events relating to any affiliated issuer that occurred before the affiliation arose will be not considered disqualifying if the affiliated entity is not: (1) In control of the issuer; or (2) Under common control with the issuer by a third party that was in control of the affiliated entity at the time of such events. 50.90(5) Filing requirements for issuers. a. An issuer may declare an offering exempt for a maximum of 12 months and rely on this intrastate sales exemption if the issuer submits at the administrator’s website, and receives approval from the administrator, at least 30 days prior to the offer of any security in reliance upon Iowa Code section 502.202(24), all of the following: (1) A properly completed Iowa Crowdfunding Notice Filing Form (available at the administrator’s website). (2) The issuer’s articles of incorporation or other charter documents pursuant to which the issuer is organized. (3) The issuer’s bylaws or operating agreement and all amendments thereto. (4) A copy of any resolutions setting forth terms and provisions of the securities being issued. (5) The issuer’s financial statements as of the end of the issuer’s most recent fiscal year, prepared in accordance with generally accepted accounting principles. If the date of the most recent fiscal year end is more than 90 days prior to the date of the filing, the issuer must also submit an unaudited balance sheet and unaudited statement of income or operations, both prepared in accordance with generally accepted accounting principles for the issuer’s most recent fiscal year. (6) A copy of any agreements between the issuer and any intermediary. (7) A copy of any subscription agreement for the purchase of securities in the offering. (8) A copy of the escrow agreement between the issuer and an escrow agent for the deposit of offering proceeds. (9) A specimen or copy of the security to be offered, including required legends, if the issuer will issue physical certificates. (10) A copy of all advertising and other materials directed to or to be furnished to investors in the offering. (11) A copy of all disclosure documents directed to or to be furnished to investors in the offering. (12) Any other information reasonably requested by the commissioner. (13) A filing fee of $100. b. If an issuer will make offers and sales of an offering after the exempt offering period declared by the issuer on the Iowa Crowdfunding Notice Filing Form, the issuer must renew the offering exemption by submitting at the administrator’s website, and receiving approval of the administrator, at least 30 days prior to the expiration of the original exempt offering period, all of the following: (1) A report of sales as of the most recent practical date that includes the following information: 1. The time period in which the offering was open. 2. The number of shares or units sold in the offering. 3. The number of investors that purchased shares or units in the offering. 4. The dollar amount sold in the offering. (2) A copy of the issuer’s updated Iowa Crowdfunding Notice Filing Form. (3) The issuer’s financial statements as of the end of the issuer’s most recent fiscal year, prepared in accordance with generally accepted accounting principles. If the end date of the most recent fiscal year is more than 90 days prior to the date of renewal, the issuer also shall submit an unaudited balance sheet and an unaudited statement of income or operations, both prepared in accordance with generally accepted accounting principles for the issuer’s most recent fiscal quarter. (4) A renewal filing fee of $100. c. Upon completion of an offering made in reliance upon this rule, an issuer shall file at the administrator’s website, and receive the administrator’s approval of, a final sales report that includes all of the following information: (1) The time period in which the offering was open. (2) The number of shares or units sold in the offering. (3) The number of investors that purchased shares or units in the offering. (4) The total dollar amount sold in the offering. 50.90(6) Minimum offering amount. The issuer shall establish a minimum offering amount that is sufficient, together with other sources of financing, to implement the business plan of the issuer, as disclosed in the submitted offering information. 50.90(7) Escrow agreement. The issuer must enter into an escrow agreement with an independent escrow agent to hold funds in an escrow account, and the escrow agreement shall include all of the following terms: a. All offering proceeds shall be maintained in an account controlled by the escrow agent. b. All offering proceeds will be released to the issuer only when the aggregate capital raised from all purchasers that have signed commitments to invest is equal to or greater than the minimum offering amount disclosed in the offering materials submitted to the administrator with the issuer’s filing of paragraph 50.90(5)“a.” c. If the proceeds do not meet the minimum offering amount disclosed in the offering materials within one year of the earlier of the commencement of the offering or the first posting of the offering on the Internet, the issuer shall return all funds to investors. d. None of the following shall have any claim to the escrowed proceeds: (1) A creditor of an escrow agent. (2) An affiliate of an escrow agent. (3) A creditor of the issuer. (4) An affiliate of the issuer. (5) A creditor of an intermediary engaged by the issuer. (6) An affiliate of an intermediary engaged by the issuer. e. The escrow agent agrees to maintain its independence from the issuer, any intermediary or Iowa crowdfunding portal assisting with the offering, and the officers, directors, managing members, and affiliates of the issuer or any Iowa crowdfunding portal assisting with the offering. f. The commissioner may inspect the records of the impound account maintained by the escrow agent at any reasonable time at the location of the records and copy any record. g. The escrow agreement must be signed by an officer of the issuer and an authorized representative of the escrow agent. h. The escrow agent may not be affiliated with the issuer, any Iowa crowdfunding portal assisting with the offering, or any officers, director, managing member, or affiliate of the issuer or any intermediary assisting with the offering. i. If the minimum offering amount is not received by the end of the offering period, the proceeds shall be returned to the purchasers within 30 days. j. 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 minimum offering amount are received. 50.90(8) Disclosure requirements for issuers. 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 requirements of rule 191—50.90(502) and the antifraud provisions of Iowa Code chapter 502. The issuer is required to provide full and fair disclosure to investors of all material facts relating to the issuer and the securities being offered. If eligible, the issuer may use Form U-7, which may be obtained from the NASAA website at www.nasaa.org. b. Among other risk disclosures, the issuer must provide the substance of all of the following disclosures to all prospective purchasers and investors: (1) There is no ready market for the sale of the securities acquired in this offering. It may be difficult or impossible for an investor to sell or otherwise dispose of this investment. An investor may be required to hold and bear the financial risks of this investment indefinitely. (2) No federal or state securities commission or regulatory authority has confirmed the accuracy or determined the adequacy of the disclosures provided. (3) In making an investment decision, investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. (4) 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. 50.90(9) Books and records. An issuer that has filed under this rule must keep and maintain written or electronic records relating to offers and sales of securities made in reliance upon this rule for at least six years following termination of the offering. These records are subject to such reasonable audits or inspections by the administrator or a representative of the administrator as the administrator considers necessary or appropriate in the public interest and for the protection of investors. An audit or inspection may be made at any time and without prior notice. The administrator may copy, and remove for audit or inspection copies of, all records the administrator reasonably considers necessary or appropriate to conduct the audit or inspection. 50.90(10) Iowa crowdfunding portal registration. a. To register as an Iowa crowdfunding portal, a person shall submit to the administrator at the administrator’s website all of the following: (1) A completed Iowa Crowdfunding Portal Registration Form, available on the administrator’s website, including all required schedules and supplemental information. (2) A completed Form U-4, available on the administrator’s website, for each agent as defined in Iowa Code section 502.102(2). (3) Any other information requested by the administrator to determine the financial responsibility, business reputation, or qualifications of the Iowa crowdfunding portal. (4) The registration fee of $100. b. The person must receive approval of the submission and registration by the administrator before the person may operate as an Iowa crowdfunding portal. c. Registration expires at the close of the calendar year in which a registration was issued, but the registration may be renewed for the succeeding year by submission to the administrator at the administrator’s website of both a $100 registration fee and a written request for renewal, including any material changes to the information submitted in the prior registration submission. 50.90(11) Duties of an Iowa crowdfunding intermediary. a. Maintenance of intermediary website. An Iowa crowdfunding intermediary shall create and maintain the intermediary website and make information and services available on or through the intermediary website in compliance with this rule. b. Background and regulatory checks. Prior to offering securities to residents of Iowa, the intermediary shall conduct a reasonable investigation of the background and history of each issuer whose securities are offered on the intermediary website and of each issuer’s control persons. “Control persons” for the purpose of this subrule means the issuer’s officers; directors; or 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 intermediary shall deny an issuer access to the intermediary website if there is a reasonable basis to believe that one or more of the following are true: (1) The issuer or any of its control persons is subject to disqualification under subrule 50.90(3). (2) The issuer has engaged in, the issuer 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. (3) The intermediary cannot adequately or effectively assess the risk of fraud by the issuer or by the issuer’s potential offering. c. Purchaser screening. Before a security is sold through the intermediary, the intermediary shall ensure that the purchaser does all of the following: (1) Reviews the information provided in the offering documents. (2) Provides to the intermediary an affirmative representation from the purchaser acknowledging receipt of the disclosure statement provided to the purchaser by the issuer pursuant to subrule 50.90(8). (3) Provides to the intermediary an affirmative representation that the purchaser is an Iowa resident. d. Information about the issuer and the offering. The intermediary shall make available on the intermediary website information about the issuer and the offering. The information shall include all of the following: (1) A copy of the disclosure statement required by subrule 50.90(8). (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 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 any outstanding securities of the company, the amount of the offering, and the percentage of ownership of the company represented by the offered securities. e. Intermediary website forum. The intermediary shall maintain a forum on the intermediary website. The forum shall be available to all potential purchasers as well as to the administrator. The intermediary website shall contain a disclaimer that reflects that access to securities offered on the intermediary website is limited to Iowa residents and that sales of the securities appearing on the intermediary website 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 additional information which the crowdfunding issuer possesses or can acquire without unreasonable effort or expense necessary to verify the accuracy of or to clarify the information provided on the intermediary website. The intermediary may adopt reasonable rules and procedures for the website forum, including registration and authentication requirements. f. Enforcement of limits. The intermediary shall take reasonable measures to ensure that no purchaser exceeds the limits set forth in Iowa Code section 502.202(24)“c” and “d.” g. Administrator access. The intermediary shall provide the administrator purchaser-level access at all times to the intermediary website, pursuant to Iowa Code section 502.202(24)“g”(8). 50.90(12) Prohibited conduct for intermediaries. An intermediary and individuals of the intermediary’s management: a. Shall not have ownership or other financial interest greater than 20 percent in the crowdfunding issuer. b. Shall not hold, manage, possess, or otherwise handle purchaser funds. Proceeds are to be held in escrow until the minimum impound amount has been met. 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 intermediary website. 50.90(13) Commissions, fees or other remuneration. Commissions, fees or other remuneration for soliciting any prospective purchaser in connection with the offering shall only be paid to intermediaries or any other persons who are appropriately registered or licensed with the commissioner. 50.90(14) Advertising and communications. a. Advertising. The crowdfunding issuer shall not advertise the specific details of the offering, except for notices which direct potential purchasers to the intermediary website. Notwithstanding the foregoing, the issuer may distribute a notice that the issuer is conducting an offering of securities, the name of the intermediary through which the offering is being conducted, and a link directing the potential investor to the intermediary. The notice shall contain a disclaimer that the sale of the security is limited to persons who are Iowa residents. b. Communications. All communications between the issuer and potential purchasers taking place pursuant to Iowa Code section 502.202(24) shall occur through the intermediary website of the intermediary. During the time the securities are being offered on the intermediary website, the intermediary shall, pursuant to paragraphs 50.90(11)“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 intermediary website. (1) An issuer shall respond within ten days to requests for information made by potential purchasers or by the administrator through the intermediary website. (2) If such additional information is material and not previously included on the intermediary website, the crowdfunding issuer and the Iowa crowdfunding portal shall immediately amend the information contained on the intermediary website. 50.90(15) 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(16) Resale 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 147A(e) (17 CFR 230.147A(e)), including that, for a period of six months from the date of last sale by the issuer of the securities in the offering, resale by any person shall be made only to Iowa residents.This rule is intended to implement Iowa Code section 502.202.Related ARC(s): 3741C191—50.91(502) Notice filing requirement for federal crowdfunding offerings. This rule applies to offerings made under 17 CFR Section 227, federal Regulation Crowdfunding, General Rules and Regulations, and Sections 4(a)(6) and 18(b)(4)(C) of the Securities Act of 1933 (referred to collectively as “federal Regulation Crowdfunding”). 50.91(1) Initial filing. a. An issuer that offers and sells securities in this state in an offering that is exempt under federal Regulation Crowdfunding and that either (1) has its principal place of business in this state or (2) sells 50 percent or greater of the aggregate amount of the offering to residents of this state shall file with the administrator the following related to that exempt offering: (1) A completed Uniform Notice of Federal Crowdfunding Offering form (Form U-CF, accessible through www.nasaa.org/industry-resources/uniform-forms/) or copies of all documents the issuer filed with the Securities and Exchange Commission related to that exempt offering; (2) If the issuer is not filing on the Uniform Notice of Federal Crowdfunding Offering form, a completed consent to service of process form (Form U2, accessible through www.nasaa.org/industry-resources/uniform-forms/); and (3) A filing fee of $100. b. If the issuer has its principal place of business in this state, the filing required under paragraph 50.91(1)“a” shall be filed with the administrator when the issuer makes its Initial Form C filing with the SEC under the federal Regulation Crowdfunding concerning the offering with the SEC. If the issuer does not have its principal place of business in this state but residents of this state have purchased 50 percent or greater of the aggregate amount of the offering, the filing required under paragraph 50.91(1)“a” shall be filed when the issuer becomes aware that such purchases have met this threshold and in no event later than 30 days from the date of completion of the offering. c. The initial notice filing is effective for 12 months from the date of the filing with the administrator. 50.91(2) Renewal. For each additional 12-month period in which the same offering described in paragraph 50.91(1)“a” is continued, an issuer conducting an offering under federal Regulation Crowdfunding may renew its notice filing by filing with the administrator the following on or before the expiration of the notice filing: a. A completed Uniform Notice of Federal Crowdfunding Offering form (Form U-CF, accessible through www.nasaa.org/industry-resources/uniform-forms/), marked “renewal,” or a cover letter or other document requesting renewal; and b. A renewal filing fee of $100.This rule is intended to implement Iowa Code section 502.202.Related ARC(s): 3391C191—50.92(502) Notice filing requirement for Regulation A – Tier 2 offerings. This rule applies to an issuer offering and selling securities in this state in an offering exempt under Tier 2 of 17 CFR Section 230.251 et seq.(“federal Regulation A”) and Sections 18(b)(3) and 18(b)(4) of the Securities Act of 1933: 50.92(1) Initial filing. a. An issuer planning to offer and sell securities in this state in an offering exempt under Tier 2 of federal Regulation A shall submit the following to the administrator at least 21 calendar days prior to the initial sale in this state: (1) Either a completed Uniform Notice Filing of Regulation A – Tier 2 Offering form (accessible through www.nasaa.org/industry-resources/uniform-forms/) or copies of all documents the issuer filed with the Securities and Exchange Commission related to that Tier 2 offering; (2) If the issuer is not filing on the Uniform Notice Filing of Regulation A – Tier 2 Offering form, a completed consent to service of process form (Form U2, accessible through www.nasaa.org/industry-resources/uniform-forms/); and (3) A filing fee of $400. b. The initial filing is effective for 12 months from the date of the filing with the administrator. 50.92(2) Renewal. For each additional 12-month period in which the same offering described in paragraph 50.92(1)“a” is continued, an issuer conducting a Tier 2 offering under federal Regulation A may renew its notice filing by filing with the administrator the following on or before the expiration of the notice filing: a. One of the following: the Uniform Notice Filing of Regulation A – Tier 2 Offering form (accessible through www.nasaa.org/industry-resources/uniform-forms/), a notice filing form marked “renewal,” or a cover letter or other document requesting renewal; and b. A renewal filing fee of $400.This rule is intended to implement Iowa Code section 502.303.Related ARC(s): 3391C191—50.93 Reserved.191—50.94 Reserved.191—50.95 Reserved.191—50.96 Reserved.191—50.97 Reserved.191—50.98 Reserved.191—50.99 Reserved.DIVISION VIIFRAUD AND OTHER PROHIBITED CONDUCT191—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 Reserved.191—50.105 Reserved.191—50.106 Reserved.191—50.107 Reserved.191—50.108 Reserved.191—50.109 Reserved.DIVISION VIIIVIATICAL SETTLEMENT INVESTMENT CONTRACTS191—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.Related ARC(s): 9169B191—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 ANYVIATICAL SETTLEMENT INVESTMENT CONTRACT.The disclosure must include, at a minimum, the following information:
"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:
- 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.
- “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.
- “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
- 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).Related ARC(s): 9169B, 1076C, 2175C191—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 Iowa insurance 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 (das.iowa.gov/state-accounting/sae-policies-procedures-manual) and the DAS form Travel Section Policy and Procedures (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).Related ARC(s): 1076C, 2175C, 2872C191—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 administrator’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).Related ARC(s): 2872C191—50.4 Reserved.191—50.5 Reserved.191—50.6 Reserved.191—50.7 Reserved.191—50.8 Reserved.191—50.9 Reserved.DIVISION IIREGISTRATION OF BROKER-DEALERS AND AGENTS191—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. 50.10(10) Registration exemption for merger and acquisition brokers. a. Definitions. For purposes of rule 191—50.10(502), in addition to the definitions set forth in rule 191—50.1(502), the following definitions apply: (1) "Control" means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract or otherwise. There is a presumption of control for any person who meets at least one of the following conditions: 1. Is a director, general partner, member, or manager of a limited liability company, or officer exercising executive responsibility (or similar status or functions). 2. Has the right to vote 20 percent or more of a class of voting securities or the power to sell or direct the sale of 20 percent or more of a class of voting securities. 3. In the case of a partnership or limited liability company, has the right to receive upon dissolution, or has contributed, 20 percent or more of the capital. (2) "Eligible privately held company" means a company that meets both of the following conditions: 1. The company does not have any class of securities:- Providing investment advice and having direct contact with clients in this state; or
- Exercising discretion over assets of clients in this state, even if no direct contact is involved;
"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:- By means of publicly distributed written materials or publicly made oral statements;
- By means of written materials or oral statements not purporting to meet the objectives or needs of specific individuals or accounts;
- Through the issuance of statistical information containing no expressions of opinion as to the investment merits of a particular security; or
- Any combination of the foregoing services.
- “Publicly distributed written materials” means written materials which are distributed to 35 or more persons who pay for those materials.
- “Publicly made oral statements” means oral statements made simultaneously to 35 or more persons who pay for access to those statements.
- 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
- 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.
- The date of such resignation, dismissal, removal, or other termination, and the name, address, and contact information of the independent CPA; and
- An explanation of any problems relating to examination scope or procedure that contributed to such resignation, dismissal, removal, or other termination.
- 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;
- 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
- 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.
- Acquired from the issuer in a transaction or chain of transactions not involving any public offering;
- Uncertificated and ownership thereof is recorded only on the books of the issuer or its transfer agent in the name of the client; and
- Transferable only with prior consent of the issuer or holders of the outstanding securities of the issuer.
- 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
- 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
- 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;
- 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
- 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;
- The date of such resignation, dismissal, removal, or other termination, and the name, address, and contact information of the independent CPA; and
- An explanation of any problems relating to audit scope or procedure that contributed to such resignation, dismissal, removal, or other termination;
- Directly or indirectly has the right to vote 25 percent or more of a class of the corporation’s voting securities; or
- Has the power to sell or direct the sale of 25 percent or more of a class of the corporation’s voting securities;
- Directly or indirectly has the right to vote 25 percent or more of a class of the interests of the limited liability company;
- Has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the limited liability company; or
- Is an elected manager of the limited liability company; or
- 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”;
- 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
- 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.
- 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
- 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.
- 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
- Transactions in securities which are direct obligations of the United States.
- A legible, true, and complete copy of the record in the medium and format in which it is stored;
- A legible, true, and complete printout of the record; and
- Means to access, view, and print the records; and
- Any person in a relationship of control with the investment adviser;
- Any person affiliated with a controlling person; and
- Any person affiliated with an affiliated person.
"3(c)(1) fund" means a qualifying private fund that is eligible for the exclusion from the definition of an investment company under the Investment Company Act of 1940 (15 U.S.C. Section 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 SEC Rule 262 of 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.Related ARC(s): 1076C, 3741C191—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:- The realized capital losses of securities over the period; and
- If the unrealized capital appreciation of the securities over the period is included, the unrealized capital depreciation of the securities over the period; and
- One-tenth of one percent of any class of outstanding securities of the investment adviser or a controlling person of the investment adviser; or
- Five percent of the total assets of the person seeking to act as the client’s independent agent; or
- 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
- When the ownership of any such property is material to the registration, a signed opinion of legal counsel regarding ownership of any property.
"Offering documents" means documents that include, but are not limited to, the registration statement, prospectus, applicable agreements, charter, bylaws, opinion of counsel and other opinions, specimen, indenture, consent to service of process and associated resolution, sales materials, subscription agreement, and applicable exhibits.
"Sales materials" means materials that include only those materials to be used in connection with the solicitation of purchasers of the securities approved as sales literature or other related materials by the SEC, FINRA, and the states, as applicable.
"Security breach" means the unauthorized accessing, acquisition, or disclosure of any data that compromises the security or confidentiality of confidential personal information maintained by the person or business; provided, however, that for this purpose a “security breach” shall relate only to a system, technology, or process that is used in connection with or is introduced into a securities offering in order to implement the use of electronic offering documents or electronic signatures.
b. Use of electronic offering documents and subscription agreements. (1) An issuer of securities or agent acting on behalf of the issuer may deliver offering documents over the Internet or by other electronic means, or in machine-readable format, provided all of the following requirements are met:- Each offering document:
- Is prepared, updated, and delivered in a manner consistent and in compliance with state and federal securities laws;
- Satisfies the formatting requirements applicable to printed documents, such as font size and typeface, and is identical in content to the printed version (other than electronic instructions or procedures as may be displayed and nonsubstantive updates to daily net asset value which can be updated more efficiently in the electronic version);
- Is delivered as a single, integrated document or file; when delivering multiple offering documents, the documents must be delivered together as a single package or list;
- Where the offering documents include a hyperlink to external documents or content, provides notice to investors or prospective investors that the document or content being accessed by the hyperlink is provided by an external source; and
- Is delivered in an electronic format that intrinsically enables the recipient to store, retrieve, and print the documents;
- The issuer or agent acting on behalf of the issuer:
- Obtains informed consent from the investor or prospective investor to receive offering documents electronically;
- Ensures that the investor or prospective investor receives timely, adequate, and direct notice when an electronic offering document has been delivered;
- Employs safeguards to ensure that delivery of offering documents occurred at or before the time required by law in relation to the time of sale; and
- Maintains evidence of delivery by keeping records of its electronic delivery of offering documents and makes those records available on demand by the securities administrator.
- Before completion of any subscription agreement, the issuer or agent acting on behalf of the issuer shall review with the prospective investor all appropriate documentation related to the prospective investment including documents and instructions on how to complete the subscription agreement;
- Mechanisms shall be established to ensure a prospective investor reviews all required disclosures and scrolls through the document in its entirety prior to initialing or signing; and
- Unless otherwise allowed by the securities administrator, a single subscription agreement shall be used to subscribe a prospective investor in no more than one offering.
- In the event of discovery of a security breach at any time in any jurisdiction, the issuer or its agents, as appropriate, shall take prompt action to do all of the following:
- Identify and locate the breach.
- Secure the affected information.
- Suspend the use of the particular device or technology that has been compromised until information security has been restored.
- Provide notice of the security breach to any investor whose confidential personal information has been improperly accessed in connection with the security breach and to the securities administrator of each state in which an affected investor resides.
- Compliance with subparagraph 50.66(22)“b”(3) after the discovery of a security breach or any other breach of personal information shall not substitute or in any way affect other requirements or obligations, including notification, imposed on an issuer or its agents pursuant to applicable laws, regulations, or standards.
- The process by which electronic signatures are obtained:
- Shall be implemented in compliance with the Electronic Signatures in Global and National Commerce Act and the Uniform Electronic Transactions Act, and, where applicable, shall include required federal disclosures;
- Shall include an appropriate level of security and assurances of accuracy;
- Shall employ an authentication process to establish signer credentials;
- Shall employ security features that protect signed records from alteration; and
- Shall provide that either the issuer or agent acting on behalf of the issuer retain, in compliance with applicable laws and regulations, electronically signed documents;
- An investor or prospective investor shall expressly opt in to the electronic signature initiative, and participation may be terminated at any time; and
- Investment opportunities shall not be conditioned on participation in the electronic signature initiative.
- 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
- 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.”
- 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;
- The confirmation of any sale made by or for the account of the person;
- The payment pursuant to any such sale; or
- The delivery of the security pursuant to any such sale.
- The Internet offer states, directly or indirectly, that the securities are not being offered to state residents; and
- The Internet offer is not specifically directed to any person in Iowa by, or on behalf of, the issuer of the securities; and
- 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).
- A public advertisement is used to promote the sale of securities for which such exemption is claimed; or
- The offering is part of a registered offering under the Securities Act of 1933.
- 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;
- 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;
- 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;
- 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;
- 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;
- 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;
- 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;
- 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;
- 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;
- 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;
- 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;
- 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;
- 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;
- 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;
- That the investor will receive no returns (i.e., dividends and interest) until the viator dies; and
- 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.