An investment advisor (i.e., financial planner, stock broker, banker with a securities license) in NJ is governed by New Jersey’s Uniform Securities Law of 1997, N.J.S.A. 49:3-47 to -89 (the Securities Law).- The advisor must enter into an investment advisory contract with a client by reducing that contract to writing and disclosing the contract’s material terms. J.S.A. 49:3-53(a); N.J.A.C. 13:47A-6.3(a)(57).
- This agreement cannot be a verbal contract to avoid the writing requirement.
- An investment advisor who fails to have a written investment contract is considered to be engaged in a “dishonest or unethical practice” under N.J.S.A. 49:3-53(a)(3). The Legislature has decreed that an investment advisor who has violated the writing requirement is barred from bringing “any legal proceeding for fees based on his/her contract.” J.S.A. 49:3-71(h).
N.J.A.C. 13:47A-6.3(a)(57).
The Act defines “investment advisory services” as “those services rendered by an ‘investment adviser’ as defined” in the statute. N.J.S.A. 49:3-49(g)(2)(ix). An “investment adviser,” in turn, is defined as “any person who, for direct or indirect compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, selling or holding securities.” N.J.S.A. 49:3-49(g)(1)(i).
Although the writing requirement is found in a regulation, it is also reinforced by statute: N.J.S.A. 49:3-71(h) declares that “[n]o person who has made or engaged in the performance of any contract in violation of any provision of this act or any rule or order hereunder . . . may base any suit on the contract.” (emphasis added).
It is thus clear that the Securities Law intends to forbid the enforcement of an investment advisory contract that has not been reduced to writing.
If you are looking for additional details on this topic or if you require advice about your situation, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Elder Abuse Attorney