3. The broker-dealer shall ensure ensures that the networking and brokerage affiliate arrangement clearly outlines the duties and responsibilities of all parties. For purposes of this paragraph, “networking arrangement" and “brokerage affiliate arrangement" mean a contractual or other arrangement between a broker-dealer and a financial institution pursuant to which the broker-dealer conducts securities services on the premises of a financial institution where retail deposits are taken.
(c) (intro.) At or prior to the time that a customer's securities brokerage account is opened by a broker-dealer on the premises of a financial institution where retail deposits are taken, the broker-dealer shall comply with does all of the following.:
1. (intro.) Disclose Discloses to the customer, orally and in writing, all of the following information about the securities products purchased or sold in a transaction with the broker-dealer:
2. Make Makes reasonable efforts to obtain from each customer during the account-opening process, a written acknowledgment of the disclosures required by subd. 1. (d) If securities services include any written or oral representations concerning insurance coverage, other than FDIC or similar insurance coverage, then the broker-dealer provides clear and accurate, written or oral explanations of the coverage shall also be provided to the customers when the representations are first made.
(e) Recommendations Subject to sub. (8m) (c), recommendations by a broker-dealer concerning any non-deposit investment product with a name similar to that of the financial institution shall occur only pursuant to a sales program designed to minimize the risk of customer confusion.
(f) All confirmations and account statements shall indicate clearly that the broker-dealer services are provided by the broker-dealer.
(g) (intro.) Advertisements and sales literature that announce the location of a financial institution where broker-dealer services are provided by the broker-dealer, or that are distributed by the broker-dealer on the premises of a financial institution, shall disclose using the following language or using the shorter, logo format language in par. (h), the information in each sub. (8m) (a), all of the following subdivision paragraphs information about the securities products purchased or sold in a transaction with the broker-dealer: _Hlk171085002SECTION 76. DFI-Sec 4.05 (8) (h) and (i) are renumbered DFI-Sec 4.05 (8m) (a) and (b), and pars. (a) (intro.) and (b) (intro.), as renumbered, are amended to read: DFI-Sec 4.05 (8m) (a) (intro.) The following shorter, logo format disclosures may be used by a broker-dealer in advertisements and sales literature, including material published, or designed for use, in radio or television broadcasts, automated teller machine screens, billboards, signs, posters and brochures, to comply with the requirements of par. (g) sub. (8) (g), provided that the disclosures are displayed in a conspicuous manner: _Hlk168587107(b) (intro.) Provided that the omission of the disclosures required by par. (g) sub. (8) (g) would not cause the advertisement or sales literature to be misleading in light of the context in which the material is presented, the disclosures in par. (g) sub. (8) (g) shall not be not required with respect to messages contained in any of the following: SECTION 77. DFI-Sec 4.05 (8) (j), (k) (intro.), 1., and 2., and (L) are amended to read:
DFI-Sec 4.05 (8) (j) The broker-dealer shall promptly notify notifies the financial institution if any agent of the broker-dealer who is employed by the financial institution is terminated for cause by the broker-dealer.
(k) (intro.) The broker-dealer shall establish establishes written supervisory procedures and a system for applying the procedures. The procedures shall comply with sub. (2) and shall be designed to accomplish certain supervisory functions, including but not limited to the following: 1. Prevention and detection of violations of ch. 551, Stats., and any applicable rules and orders thereunder; . 2. Establishment of a system under which the broker-dealer approves prior to use copies of all advertising used by the financial institution relating to the securities services conducted on the premises of the financial institution for the purpose of ensuring compliance with ss. 551.501 and 551.504, Stats.; and . (L) Notify Notifies the division at the time of filing the notice of opening or change of address of a branch office as required in s. DFI-Sec 4.04 (7), that the office is located on the premises of a financial institution in this state, which notification shall include the identity of the institution. _Hlk198226382SECTION 78. DFI-Sec 4.05 (8m) (c) is created to read: 4.05 (8m) (c) With regard to the sales program described in sub. (8) (e), any marketing and advertising activities of the third-party broker-dealer shall comply initially and continuously with all of the following requirements:
1. The activities must be designed to ensure that the customer understands the difference between the broker-dealer and the financial institution and the difference between the securities offered by the broker-dealer and the depository products offered by the financial institution.
2. The broker-dealer may not market any security in a manner which suggests that it is insured by the Federal Deposit Insurance Corporation (“FDIC”) or National Credit Union Administration (“NCUA”) or guaranteed or endorsed by the financial institution.
3. All advertising for securities transactions or services must be conducted in the name of the third-party broker-dealer and the “doing business as” name for the broker-dealer and in accordance with FINRA advertising rules.
4. All marketing and advertising material is required to display the name of the third-party broker-dealer and must do so prominently in font size and color when compared to the doing business as name and the name of the financial institution.
SECTION 79. DFI-Sec 4.05 (9) (a) is renumbered DFI-Sec 4.05 (9), and, as renumbered, is amended to read:
DFI-Sec 4.05 (9) (a) Except as provided in par. (b), each Each registered broker-dealer engaged in a general securities business that ceases to do business at a principal or branch office located in Wisconsin shall mail to each Wisconsin customer with an account at the office at least 14 days before the cessation of business at the office a written notification that shall contain contains all the following information: _Hlk1686534471. (a) The date on which the office will cease to do business;, 2. (b) A description of the procedure a customer may follow to maintain the customer's account with the broker-dealer, transfer the account to another broker-dealer, or have securities and funds held by the broker-dealer delivered to the customer;,
3. (c) The name and telephone number of a person representing the broker-dealer who may be contacted without expense to the customer to answer questions regarding items in subd. 2.; and, 4. (d) Any additional information that is necessary under the circumstances to clarify the information prescribed in this paragraph.
SECTION 81. DFI-Sec 4.05 (10) and (11) (intro.) and (b) are amended to read:
DFI-Sec 4.05 (10) Each At the time of opening an account, each broker-dealer shall disclose in writing to customers at the time of opening an account, any custody fees, service fees, or maintenance fees that may be charged to the customer and the basis upon which the charges are determined. Customers shall receive written notice at least 45 days prior to the imposition of any new custody, service, maintenance, or similar fees, or any changes to existing fees of that nature.
(11) (intro.) No broker-dealer or agent, in connection with a telephone or electronic solicitation, shall may:
(b) Telephone any person in this state between the hours of 9:00 PM and 8:00 9:00 AM local time at the called person's location without that individual's prior consent.
_Hlk168668327 SECTION 82. DFI-Sec 4.06 (1) (intro.), (a), and (b) are amended to read: DFI-Sec 4.06 (1) (intro.) The following practices are deemed “dishonest or unethical business practices" or “taking unfair advantage of a customer" by a broker-dealer under s. 551.412 (4) (m), Stats., without limiting those terms to the practices specified herein in this subsection: (a) Causing any unreasonable delay in the transmitting of customer orders for execution, the delivery of securities purchased by any of its customers, the payment upon request of free credit balances reflecting completed transactions of any of its customers, or the transfer of a customer's account securities positions and balances to another broker-dealer; .
_Hlk168660370(b) Inducing trading in a customer's account which is excessive in size or frequency in view of the financial resources and character of the account; . _Hlk198288352SECTION 83. DFI-Sec 4.06 (1) (c) 1. is renumbered DFI-Sec 4.06 (1) (c), and, as renumbered, is amended to read: DFI-Sec 4.06 (1) (c) Recommending to a customer the purchase, sale, or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the customer on the basis of information furnished by the customer after reasonable inquiry concerning the customer's investment objectives, financial situation. and needs, and any other information known by the broker-dealer;. For purposes of making purchase recommendations to a customer with respect to direct participation program securities, the following investor financial income and net worth suitability standards do not preclude the use of any other information, including the criteria in this paragraph, to establish suitability or lack of suitability in specific instances:
1. The customer has an annual gross income of at least $70,000 and a net worth of at least $70,000 exclusive of the customer's principal residence and its furnishing and personal use automobiles.
2. The customer has a net worth of at least $250,000, exclusive of the customer's principal residence and its furnishings and personal use automobiles.
_Hlk168665024SECTION 85. DFI-Sec 4.06 (1) (d) to (u) are amended to read: _Hlk168998754DFI-Sec 4.06 (1) (d) Executing a transaction on behalf of a customer without authority to do so, except that use by a broker-dealer of a negative response letter in conformity with rule 2510(d)(2) of the financial industry regulatory authority 3260(D)(2) of the Financial Industry Regulatory Authority is not a violation of this rule;. (e) Executing a transaction for the account of a customer upon instructions from a 3rd party without first having obtained written 3rd party authorization from the customer;.
(f) 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 the execution of orders pursuant to rule 2510(d)(1) 3260(d) of the financial industry regulatory authority; Financial Industry Regulatory Authority.
(g) Extending, arranging for, or participating in arranging for credit to a customer in violation of the securities exchange act Securities Exchange Act of 1934 or the regulations of the federal reserve board;.
(h) Executing any transaction in a margin account without obtaining from its customer a written margin agreement not later than 15 calendar days after the initial transaction in the account;.
(i) Failing to segregate customers' free securities or securities in safe-keeping;.
(j) Hypothecating a customer's securities without having a lien thereon unless written consent of the customer is first obtained, except as permitted by rules of the U.S. securities and exchange commission; Securities and Exchange Commission.
(k) Charging its customer an unreasonable commission or service charge in any transaction executed as agent for the customer;.
(L) Entering into a transaction for its own account with a customer with an unreasonable mark-up or mark-down;.
(m) Entering into a transaction for its own account with a customer in which a commission is charged;.
(n) Entering into a transaction with or for a customer at a price not reasonably related to the current market price;.
(o) Executing orders for the a customer's purchase by a customer of securities not registered under s. 551.303 or 551.304, Stats., unless the securities are exempted under s. 551.201, Stats., or the transaction is exempted under s. 551.202, Stats. ; . (p) Representing itself as a financial or investment planner, consultant, or adviser, when the representation does not accurately describe the nature of the services offered, the qualifications of the person offering the services, and the method of compensation for the services;.
(q) Violating any rule of any securities exchange, self-regulatory organization, or national securities association of which it is a member with respect to any customer, transaction, or business in this state;.
(r) Failing to furnish to a customer purchasing securities in an offering, not later than the date of confirmation of the transaction, either a final prospectus or a preliminary prospectus and an additional document, which together include all information set forth in the final prospectus;.
(s) Introducing customer transactions on a “fully disclosed" basis to another broker-dealer that is not registered under ch. 551, Stats., unless the customer is a person described in s. 551.401 (2), Stats., or s. DFI-Sec 4.10;. (u) Failing to accurately describe or disclose in advertising or other materials used in connection with the promotion or transaction of securities business in this state, the identity of the broker-dealer or the issuer. For purposes of this paragraph, “other materials" includes, but is not limited to, business cards, business stationery and display signs.
_Hlk198288460SECTION 86. DFI-Sec 4.06 (2) (intro.), and (b) to (g) are amended to read: DFI-Sec 4.06 (2) (intro.) The following practices are deemed “dishonest or unethical business practices" or “taking unfair advantage of a customer" by an agent under s. 551.412 (4) (m), Stats., without limiting those terms to the practices specified in this subsection: (b) Acting Misappropriating money or securities, or acting as a custodian for money, securities, or an executed stock power of a customer; .
(c) Effecting any securities transaction not recorded on the regular books or records of the broker-dealer which the agent represents, unless the transaction is disclosed to, and authorized in writing by, the broker-dealer prior to execution of the transaction;.
(d) Effecting transactions in securities for an account operating under a fictitious name, unless disclosed to, and permitted in writing by, the broker-dealer or issuer which the agent represents;.
(e) Sharing directly or indirectly in profits or losses in the account of any customer without first obtaining written authorization of the customer and the broker-dealer which the agent represents;.
(f) Dividing or otherwise splitting commissions, profits, or other compensation receivable in connection with the purchase or sale of securities in this state with any person not also registered as an agent for the same broker-dealer, or for a broker-dealer under direct or indirect common control; and.
(g) Failing to accurately describe or disclose in advertising or other materials used in connection with the promotion or transaction of securities business in this state, the identity of an agent's employing broker-dealer or issuer or the nature of the agent's securities services offered. For purposes of this paragraph, “other materials" include, but are not limited to, business cards, business stationery and display signs.
DFI-Sec 4.06 (3) In addition to the conduct specified in subs. (1) and (2), engaging in other unlawful conduct including forgery, embezzlement, nondisclosure, incomplete disclosure or misstatement of material facts, or manipulative or deceptive practices, may also be grounds for denial, suspension, or revocation, of registration.
DFI-Sec 4.09 (3) The division may deny an application or suspend or revoke the registration of a broker-dealer or agent, if the applicant or registrant is not of good business repute or conducts business in violation of such rules and regulations prescribed by the division to protect investors, customers, or prospective customers.
_Hlk198288924SECTION 89. DFI-Sec 4.10 (1) (intro.) is amended to read: DFI-Sec 4.10 (1) (intro.) For purposes of ss. 551.401 (2) (h) and 551.402 (2) (i), Stats., a broker-dealer or agent is exempt from the registration requirement if the broker-dealer's or agent's only transactions effected in this state are with any of the following: SECTION 90. DFI-Sec 4.11 is created to read:
DFI-Sec 4.11 Registration exemption for certain merger and acquisition brokers.
(1) Definitions. In this section:
(a) "Business combination related shell company" means a shell company that is formed by an entity that is not a shell company for one of the following purposes:
1. Solely for the purpose of changing the corporate domicile of that entity solely within the United States.
2. Solely for the purpose of completing a business combination transaction, as that term is defined in 17 CFR 230.165 (f), among one or more entities other than the company itself, none of which is a shell company. (b) "Control" means the power to direct the management or policies of a company, directly or indirectly, whether through ownership of securities, by contract, or otherwise, subject to sub. (2) (b).
(c) "Eligible privately held company" means a privately held company that meets all of the following conditions:
1. The company does not have any class of securities registered, or required to be registered, with the Securities and Exchange Commission under 15 U.S.C. 78l, or with respect to which the company files, or is required to file, periodic information, documents, and reports under 15 U.S.C. 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 as determined in accordance with the historical financial accounting records of the company:
a. The earnings of the company before interest, taxes, depreciation, and amortization are less than $25,000,000.
b. The gross revenues of the company are less than $250,000,000.
(d) "Merger and acquisition broker", subject to sub. (3), means a broker, and any person associated with a broker, engaged in the business of effecting securities transactions solely in connection with the transfer of ownership of an eligible privately held company, regardless of whether the broker acts on behalf of a seller or buyer, through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the eligible privately held company.
