New Hampshire Revised Statutes 421-B:5-501 – Fraud and Liabilities
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(a) General fraud. It is unlawful for a person, in connection with the offer, sale, or purchase of a security, directly or indirectly, to:
(1) employ a device, scheme, or artifice to defraud;
(2) make an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they were made, not misleading; or
(3) engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.
(b) Supplemental provisions.
(1) Suitability of recommendation; reasonable grounds required.
(A) In recommending to a customer the purchase, sale, or exchange of a security, a broker-dealer or broker-dealer agent must have reasonable grounds for believing that the recommendation is suitable for the customer upon the basis of the facts, if any, disclosed by the customer after reasonable inquiry as to the customer’s other security holdings and as to the customer’s financial situation and needs.
(B) Before the execution of a transaction recommended to a noninstitutional customer, other than transactions with customers where investments are limited to money market mutual funds, a broker-dealer, salesperson, investment adviser, or investment adviser representative shall make reasonable efforts to obtain information concerning:
(i) The customer’s financial status;
(ii) The customer’s tax status;
(iii) The customer’s investment objectives; and
(iv) Such other information used or considered to be reasonable by the broker-dealer, salesperson, investment adviser, or investment adviser representative in making recommendations to the customer.
(2) Guarantees and excessive trading practices. It shall constitute a device, scheme or artifice to defraud within the meaning of this section for any person to:
(A) Represent in the offer or sale of securities, either directly or by implication, in writing or orally, that there is a guarantee against risk or loss;
(B) Induce excessive trading in a customer’s account, or induce trading beyond that customer’s known financial resources; or
(C) Effect transactions in the account of a customer without his knowledge or maintain discretionary accounts without written authorization.
(3) Recordkeeping and customer statements. Any act of any broker-dealer designed to effect with or for any customer’s account, in respect to which such broker-dealer or his or her agent or employee is vested with any discretionary power, any transaction for the purchase or sale of a security shall constitute a “device, scheme or artifice to defraud” within the meaning of this section unless:
(A) immediately after effecting such transaction such broker-dealer make a record of such transaction, which record includes:
(i) the name of such customer;
(ii) the name, amount and price of the security; and
(iii) the date and time when such transaction took place; and
(B) the broker-dealer sends each month to each customer in whose account such broker-dealer exercises any discretionary authority, an itemized statement showing the funds and securities in the custody or possession of the broker-dealer at the end of such period, and all debits, credits, and transactions in such client’s account during such period.
(4) Deceptive representations and actions. Without implied limitation, the following shall be deemed schemes or artifices to defraud:
(A) creating an atmosphere of false supply or demand or engaging in market manipulations.
(B) creating unreasonable delays in delivering securities.
(C) representing that securities will be listed on a national exchange or that application for listing will be made, without any basis in fact for such representation.
(D) selling or soliciting the purchase of one security conditioned upon the customer’s agreement to purchase another security.
(1) employ a device, scheme, or artifice to defraud;
Terms Used In New Hampshire Revised Statutes 421-B:5-501
- Agent: means an individual, other than a broker-dealer, who represents a broker-dealer in effecting or attempting to effect purchases or sales of securities or represents an issuer in effecting or attempting to effect purchases or sales of the issuer's securities. See New Hampshire Revised Statutes 421-B:1-102
- Broker-dealer: means a person engaged in the business of effecting transactions in securities for the account of others or for the person's own account. See New Hampshire Revised Statutes 421-B:1-102
- following: when used by way of reference to any section of these laws, shall mean the section next preceding or following that in which such reference is made, unless some other is expressly designated. See New Hampshire Revised Statutes 21:13
- Fraud: Intentional deception resulting in injury to another.
- Investment adviser: means a person that, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities. See New Hampshire Revised Statutes 421-B:1-102
- Investment adviser representative: means an individual employed by or associated with an investment adviser or federal covered investment adviser and who makes any recommendations or otherwise gives investment advice regarding securities, manages accounts or portfolios of clients, determines which recommendation or advice regarding securities should be given, provides investment advice or holds herself or himself out as providing investment advice, receives compensation to solicit, offer, or negotiate for the sale of or for selling investment advice, or supervises employees who perform any of the foregoing. See New Hampshire Revised Statutes 421-B:1-102
- month: shall mean a calendar month, and the word "year" a calendar year, unless otherwise expressed; and the word "year" shall be equivalent to the expression "year of our Lord. See New Hampshire Revised Statutes 21:8
- Order: means an order issued pursuant to this chapter. See New Hampshire Revised Statutes 421-B:1-102
- Person: means an individual; corporation; business trust; estate; trust; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity. See New Hampshire Revised Statutes 421-B:1-102
- Sale: includes every contract of sale, contract to sell, or disposition of, a security or interest in a security for value, and "offer to sell" includes every attempt or offer to dispose of, or solicitation of an offer to purchase, a security or interest in a security for value. See New Hampshire Revised Statutes 421-B:1-102
- Security: means a note; stock; treasury stock; security future; bond; debenture; evidence of indebtedness; certificate of interest or participation in a profit-sharing agreement; membership interest in a limited liability company; partnership interest in a limited partnership; partnership interest in a registered limited liability partnership; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; investment metal contract or investment gem contract; voting trust certificate; certificate of deposit for a security; fractional undivided interest in oil, gas, or other mineral rights; put, call, straddle, option, or privilege on a security, certificate of deposit, or group or index of securities, including an interest therein or based on the value thereof; put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; or, in general, an interest or instrument commonly known as a "security"; or a certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. See New Hampshire Revised Statutes 421-B:1-102
- State: means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. See New Hampshire Revised Statutes 421-B:1-102
(2) make an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they were made, not misleading; or
(3) engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.
(b) Supplemental provisions.
(1) Suitability of recommendation; reasonable grounds required.
(A) In recommending to a customer the purchase, sale, or exchange of a security, a broker-dealer or broker-dealer agent must have reasonable grounds for believing that the recommendation is suitable for the customer upon the basis of the facts, if any, disclosed by the customer after reasonable inquiry as to the customer’s other security holdings and as to the customer’s financial situation and needs.
(B) Before the execution of a transaction recommended to a noninstitutional customer, other than transactions with customers where investments are limited to money market mutual funds, a broker-dealer, salesperson, investment adviser, or investment adviser representative shall make reasonable efforts to obtain information concerning:
(i) The customer’s financial status;
(ii) The customer’s tax status;
(iii) The customer’s investment objectives; and
(iv) Such other information used or considered to be reasonable by the broker-dealer, salesperson, investment adviser, or investment adviser representative in making recommendations to the customer.
(2) Guarantees and excessive trading practices. It shall constitute a device, scheme or artifice to defraud within the meaning of this section for any person to:
(A) Represent in the offer or sale of securities, either directly or by implication, in writing or orally, that there is a guarantee against risk or loss;
(B) Induce excessive trading in a customer’s account, or induce trading beyond that customer’s known financial resources; or
(C) Effect transactions in the account of a customer without his knowledge or maintain discretionary accounts without written authorization.
(3) Recordkeeping and customer statements. Any act of any broker-dealer designed to effect with or for any customer’s account, in respect to which such broker-dealer or his or her agent or employee is vested with any discretionary power, any transaction for the purchase or sale of a security shall constitute a “device, scheme or artifice to defraud” within the meaning of this section unless:
(A) immediately after effecting such transaction such broker-dealer make a record of such transaction, which record includes:
(i) the name of such customer;
(ii) the name, amount and price of the security; and
(iii) the date and time when such transaction took place; and
(B) the broker-dealer sends each month to each customer in whose account such broker-dealer exercises any discretionary authority, an itemized statement showing the funds and securities in the custody or possession of the broker-dealer at the end of such period, and all debits, credits, and transactions in such client’s account during such period.
(4) Deceptive representations and actions. Without implied limitation, the following shall be deemed schemes or artifices to defraud:
(A) creating an atmosphere of false supply or demand or engaging in market manipulations.
(B) creating unreasonable delays in delivering securities.
(C) representing that securities will be listed on a national exchange or that application for listing will be made, without any basis in fact for such representation.
(D) selling or soliciting the purchase of one security conditioned upon the customer’s agreement to purchase another security.