Guam § 46102 - Advisory Activities.

§ 46102. Advisory Activities.

(a) It is unlawful for any person who receives any consideration from

another person primarily for advising the other person as to the value of

securities or their purchase or sale, whether through the issuance of analyses

or reports or otherwise,

(1) to employ any device, scheme, or artifice to defraud the other

person, or

(2) to engage in any act, practice, or course of business which

operates, or would operate, as a fraud or deceit upon the other

person.

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(b) It is unlawful for any investment adviser to enter into, extend, or

renew any investment advisory contract unless it provides in writing

(1) that the 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;

(2) that no assignment of the contract may be made by the investment

adviser without the consent of the other party to the contract; and

(3) 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.

Clause (1) does not prohibit an investment advisory contract which

provides for compensation based upon the total value of a fund average over

a definite period, or as of definite dates or taken as of a definite date.

Assignment, as used in clause (2), includes any direct or indirect transfer or

hypothecation of an investment advisory contract by the assignor or of a

controlling block of the assignor’s outstanding voting securities by a

security holder of the assignor; but, if the investment adviser is a

partnership, no assignment of an investment advisory contract is considered

to result from the death or withdrawal of a minority of the members of the

investment adviser, having only a minority interest in the business of the

investment adviser, or from the admission to the investment adviser of one

or more members who, after admission, will be only a minority of the

members, and will have only a minority interest in the business.

(c) It is unlawful for any investment adviser to take or have custody of

any securities or funds of any client if

(1) the Administrator by rule prohibits custody; or

(2) in the absence of rule, the investment adviser fails to notify

the Administrator that he has or may have custody.