                                 CODE OF VIRGINIA

UNLAWFUL ADVICE (§ 13.1-503)

A. It shall be unlawful for any person who receives directly or indirectly any
consideration from another person primarily for advising such 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 such other person,

   2. To engage in any transaction, practice, or course of business which
   operates or would operate as a fraud or deceit upon such other person,

   3. Acting as principal for his own account, knowingly to sell any security to
   or purchase any security from a client, or acting as broker for a person other
   than such client, knowingly to effect any sale or purchase of any security for
   the account of such client, without disclosing to such client in writing
   before the completion of such transaction the capacity in which he is acting
   and obtaining the consent of the client to such transaction. The prohibitions
   of this subdivision shall not apply to any transaction with a customer of a
   broker-dealer if such broker-dealer is not acting as an investment advisor in
   relation to such transaction, or

   4. To engage in dishonest or unethical practices as the Commission may define
   by rule.

B. In the solicitation of advisory clients, it shall be unlawful for any person
to make any untrue statement of a material fact, or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.

C. Except as may be permitted by rule or order of the Commission, it shall be
unlawful for any investment advisor to enter into, extend, or renew any
investment advisory contract unless it provides in writing:

   1. That the investment advisor 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 advisor
   without the consent of the other party to the contract; and

   3. That the investment advisor, 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.

D. Subdivision 1 of subsection C of this section shall not prohibit an
investment advisory contract which provides for compensation based upon the
total value of a fund averaged over a definite period, or as of definite dates
or taken as of a definite date.

E. &#8220;Assignment&#8221; as used in subdivision 2 of subsection C of this
section includes any direct or indirect transfer or hypothecation of an
investment advisory contract by the assignor or of a controlling block of the
assignor&#8217;s outstanding voting securities by a security holder of the
assignor. If the investment advisory is a partnership, no assignment of an
investment advisory contract is considered to result from the death of
withdrawal of a minority of the members of the investment advisor having only a
minority interest in the business of the investment advisor, or from the
admission to the investment advisor 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.

F. The Commission may by rule or order adopt exemptions from subdivision 3 of
subsection A and subdivisions 1, 2 and 3 of subsection C of this section where
such exemptions are consistent with the public interest and within the purposes
fairly intended by the policy and provisions of this chapter.

HISTORY: 1956, c. 428; 1987, c. 678.