(a) It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly, to:
(1) Employ any device, scheme, or artifice to defraud;
(2) Make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or
(3) Engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.
(b) It is unlawful for any person who receives, directly or indirectly, any consideration from another person 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,
(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,
(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 dealer if such dealer is not acting as an investment adviser in relation to such transaction; or
(4) to engage in dishonest or unethical practices as the commission may define by rule.
(c) In the solicitation of advisory clients, it is 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 are made, not misleading.
(d) Except as may be permitted by rule or order of the commission, 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 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.
(e) Subdivision (d)(1) does 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. “Assignment,” as used in subdivision (d)(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.
(f) It is unlawful for any investment adviser to take or have custody of any securities or funds of any client if,
(1) the commission by rule prohibits custody; or
(2) in the absence of rule, the investment adviser fails to notify the commission that he has or may have custody.
(g) The commission may by rule or order adopt exemptions from subdivision (b)(3) and subdivisions (d)(1), (d)(2) and (d)(3) where such exemptions are consistent with the public interest and within the purposes fairly intended by the policy and provisions of this act.
(Acts 1959, No. 542, p. 1318, §1; Acts 1990, No. 90-527, p. 772, §1.)
Notes of Decisions
Cited in
24
cases (
2 in the last 5 years), 1979–2025 · leading case:
Buffo v. State, 415 So. 2d 1158 (Ala. 1982).
Buffo v. State, 415 So. 2d 1158 (Ala. 1982).
· cites it 12× “Buffo, was tried on the charge of aiding and abetting securities fraud, directly or indirectly, in connection with the offer, sale, or purchase of surplus notes issued by Vanguard Security Life Insurance Company (Vanguard) and in violation of Code 1975, § 8-6-17. The jury found…”
Altrust Fin. Servs., Inc. v. Adams, 76 So. 3d 228 (Ala. 2011).
· cites it 4× “1977), as well as in this action, the Court of Criminal Appeals stated that Code 1975, § 8-6-17, is identical 'in all respects, other than the insertion of the word "offer,” and that which is necessary to a delineation between the area of sovereignty of Alabama and that of the…”
Irwin v. Zila, Inc., 168 F. Supp. 2d 1294 (M.D. Ala. 2001).
· cites it 7× “1 Ob-5; Ala.Code §§ 8-6-17, 8-6-19. 2 . It should be -noted that the high burden imposed upon defendants has been criticized on the ground that the bar unnecessarily has been set too high.”
Ex Parte Dill, Dill, Carr, Stonbraker & Hutchings, PC, 866 So. 2d 519 (Ala. 2003).
“Code 1975]; (2) that Holmes and Holmes-Gilford had failed to register as agent and dealer, respectively, in violation of § 8-6-3; and (3) that the defendants had made misrepresentations and omissions in information sent to the plaintiffs, in violation of § 8-6-17." 630 So.2d at…”
Walter Energy, Inc. v. Audley Capital Advisors LLP, 176 So. 3d 821 (Ala. 2015).
· cites it 8× “For this reason, the trial court dismissed Walter Energy’s Alabama Securities Act claim, stating: “[Section] 8-6-17 does not apply because Walter Energy has not alleged that the Audley defendants sold Walter Energy stock in Alabama, see § 8-6-12(a) stating that Article I of the…”
Weir v. United States, 716 F. Supp. 574 (N.D. Ala. 1989).
· cites it 2× “Many of the Alabama counts did involve charges of fraud allegedly committed by Weir during his sales of the “securities,” but the allegations in these counts, which track the language of Ala.Code § 8-6-17(2), a criminal statute which makes certain securities frauds a crime, are…”
Ford Motor Co. v. Sperau, 708 So. 2d 111 (Ala. 1997).
“Code 1975. The plaintiffs emphasize that Ford's Don Kitchens, the employee who prepared the revised forecast, testified that a sales and profit forecast is "used more or less as a prospectus for that dealership point.”
Banton v. Hackney, 557 So. 2d 807 (Ala. 1989).
“"The Alabama Securities Act, § 8-6-17, Alabama Code 1975, provides as follows: "`It is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly, to: "`(1) Employ any device, scheme or artifice to defraud; "`(2) Make any…”
Robbins v. PaineWebber Inc., 761 F. Supp. 773 (N.D. Ala. 1991).
· cites it 2× “Ala.Code § 8-6-17. In the face of such violation, the statute requires the award of attorneys’ fees and costs.”
Foster v. Jesup & Lamont Sec. Co., 759 F.2d 838 (11th Cir. 1985).
· cites it 6× “Foster’s other basis under state law for his Count II false communication claim is Ala.Code § 8-6-17. 24 The district court treated this section as affording a private right of action and concluded on the basis of an analogy to federal Rule 10b-5 actions that scienter must be…”
— Ala. Code § 8-6-17(1) — 1 case
— Ala. Code § 8-6-17(2) — 2 cases
Weir v. United States, 716 F. Supp. 574 (N.D. Ala. 1989).
“Many of the Alabama counts did involve charges of fraud allegedly committed by Weir during his sales of the “securities,” but the allegations in these counts, which track the language of Ala.Code § 8-6-17(2), a criminal statute which makes certain securities frauds a crime, are…”
— Ala. Code § 8-6-17(a) — 3 cases
Altrust Fin. Servs., Inc. v. Adams, 76 So. 3d 228 (Ala. 2011).
“1977), as well as in this action, the Court of Criminal Appeals stated that Code 1975, § 8-6-17, is identical 'in all respects, other than the insertion of the word "offer,” and that which is necessary to a delineation between the area of sovereignty of Alabama and that of the…”
Walter Energy, Inc. v. Audley Capital Advisors LLP, 176 So. 3d 821 (Ala. 2015).
“For this reason, the trial court dismissed Walter Energy’s Alabama Securities Act claim, stating: “[Section] 8-6-17 does not apply because Walter Energy has not alleged that the Audley defendants sold Walter Energy stock in Alabama, see § 8-6-12(a) stating that Article I of the…”
Irwin v. Zila, Inc., 168 F. Supp. 2d 1294 (M.D. Ala. 2001).
“1 Ob-5; Ala.Code §§ 8-6-17, 8-6-19. 2 . It should be -noted that the high burden imposed upon defendants has been criticized on the ground that the bar unnecessarily has been set too high.”
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