MARVIN MANDEL, Governor

1973

OF BUSINESS WHICH OPERATES OR WOULD OPERATE AS A FRAUD OR
DECEIT ON THE OTHER PERSON.

(B)   EXTENSION OF AN INVESTMENT ADVISORY CONTRACT.

(1) IT IS UNLAWFUL FOR ANY INVESTMENT
ADVISOR TO ENTER INTO, EXTEND, OR RENEW ANY INVESTMENT
ADVISORY CONTRACT, UNLESS IT PROVIDES IN WRITING THAT:

(1)    THE INVESTMENT ADVISER SHALL NOT BE
COMPENSATED ON THE BASIS OF A SHARE OF CAPITAL GAINS ON
OR CAPITAL APPRECIATION OF THE FUNDS OR ANY PORTION OF
THE FUNDS OF THE CLIENT;

(II)     AN ASSIGNMENT OF THE CONTRACT MAY NOT
BE MADE BY THE INVESTMENT ADVISER WITHOUT THE CONSENT OF
THE OTHER PARTY TO THE CONTRACT; AND

(III)      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 TEE CHANGE.

(2)    PARAGRAPH (1) (I) OF THIS SUBSECTION DOES
NOT PROHIBIT AN INVESTMENT ADVISORY CONTRACT WHICH
PROVIDES FOR COMPENSATION BASED ON THE TOTAL VALUE OF A
FUND AVERAGED OVER A DEFINITE PERIOD OR AS OF DEFINITE
DATES OR TAKEN AS OF A DEFINITE DATE.

(3)     "ASSIGNMENT," AS USED IN PARAGRAPH
(1)(II) OF THIS SUBSECTION, INCLUDES ANY DIRECT OR
INDIRECT TRANSFER OF HYPOTHECATION OF AN INVESTMENT
ADVISORY CONTRACT BY THE ASSIGNOR OR OF CONTROLLING BLOCK
OF THE ASSIGNORS OUTSTANDING VOTING SECURITIES BY A
SECURITY HOLDER OF THE ASSIGNOR, BUT, IF THE INVESTMENT
ADVISOR IS A PARTNERSHIP, AN ASSIGNMENT OF AN INVESTMENT
ADVISORY CONTRACT IS NOT CONSIDERED TO RESULT FROM THE
DEATH OR WITHDRAWAL OF A MINORITY OF THE MEMBERS OF THE
INVESTMENT ADVISES 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)   TAKING OR HAVING CUSTODY OF ANY SECURITIES OR
FUNDS OF A CLIENT.

IT IS UNLAWFUL FOR ANY INVESTMENT ADVISER TO TAKE OR
HAVE CUSTODY OF ANY SECURITIES OR FUNDS OF ANY CLIENT IF:

(1) THE COMMISSIONER BY RULE PROHIBITS
CUSTODY; OR

(2)   IN THE ABSENCE OF RULE, THE INVESTMENT