H. B. 2304
(By Mr. Speaker (Mr. Chambers) and Delegate Burk)
(By Request of the Executive)
[Introduced March 1, 1993; referred to the
Committee on Finance.]
A BILL to amend and reenact section two hundred two, article two;
section three hundred five, article three; sections four
hundred six, four hundred twelve and four hundred thirteen,
article four, all of chapter thirty-two of the code of West
Virginia, one thousand nine hundred thirty-one, as amended,
relating to the increase of fees and addition of new fees
for the securities division; giving the commissioner fining
authority; and setting up a special revenue account to
operate the securities division.
Be it enacted by the Legislature of West Virginia:
That section two hundred two, article two; section three
hundred five, article three; sections four hundred six, four
hundred twelve and four hundred thirteen, article four, all of
chapter thirty-two of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, be amended and reenacted to
read as follows:
ARTICLE 2. REGISTRATION OF BROKER-DEALERS, AGENTS AND
INVESTMENT
ADVISERS.
§32-2-202. Registration procedure.
(a) A broker-dealer, agent or investment adviser may obtain
an initial or renewal registration by filing with the
commissioner an application together with a consent to service
of process pursuant to subsection (g), section four hundred
fourteen, article four of this chapter. The application shall
contain whatever information the commissioner by rule requires
concerning such matters as (1) the applicant's firm and place of
organization; (2) the applicant's proposed method of doing
business; (3) the qualifications and business history of the
applicant; in the case of a broker-dealer or investment adviser,
the qualifications and business history of any partner, officer
or director, any person occupying a similar status or performing
similar functions, or any person directly or indirectly
controlling the broker-dealer or investment adviser; and, in the
case of an investment adviser, the qualifications and business
history of any employee; (4) any injunction or administrative
order or conviction of a misdemeanor involving a security or any
aspect of the securities business and any conviction of a felony;
and (5) the applicant's financial condition and history. The
commissioner may by rule or order require an applicant for
initial registration to publish an announcement of the
application as a Class I legal advertisement in compliance with
the provisions of article three, chapter fifty-nine of this code,
and the publication area or areas for such publication shall bespecified by the commissioner. If no denial order is in effect
and no proceeding is pending under section two hundred four of
this article, registration becomes effective at noon of the
thirtieth day after an application is filed. The commissioner
may by rule or order specify an earlier effective date, and he
may by order defer the effective date until noon of the thirtieth
day after the filing of any amendment. Registration of a broker-
dealer automatically constitutes registration of any agent who is
a partner, officer or director, or a person occupying a similar
status or performing similar functions, as designated by the
broker-dealer in writing to the commissioner and approved in
writing by the commissioner.
(b) Every applicant for initial or renewal registration
shall pay a filing fee of
one two hundred fifty dollars in the
case of a broker-dealer
and agent of issuer, thirty fifty-five
dollars in the case of an agent,
and one hundred
seventy dollars
in the case of an investment adviser,
and fifty dollars for each
investment advisor representative. When application is denied or
withdrawn, the commissioner shall retain all of the fee.
(c) A registered broker-dealer or investment adviser may
file an application for registration of a successor, whether or
not the successor is then in existence, for the unexpired portion
of the year. A filing fee of twenty dollars shall be paid.
(d) The commissioner may by rule require a minimum capital
for registered broker-dealers and investment advisers.
(e) The commissioner may by rule require registered broker-dealers, agents and investment advisers to post surety bonds in
amounts up to ten thousand dollars, and may determine their
conditions. Any appropriate deposit of cash or securities shall
be accepted in lieu of any bond so required. No bond may be
required of any registrant whose net capital, which may be
defined by rule, exceeds twenty-five thousand dollars. Every
bond shall provide for suit thereon by any person who has a cause
of action under section four hundred ten, article four of this
chapter and, if the commissioner by rule or order requires, by
any person who has a cause of action not arising under this
chapter. Every bond shall provide that no suit may be maintained
to enforce any liability on the bond unless brought within two
years after the sale or other act upon which it is based.
(f) Every applicant, whether registered under this chapter
or not, shall pay a fifty dollar fee for each name or address
change.
(g) Every broker-dealer and investment advisor registered
under this chapter shall pay an annual fifty dollar fee for each
branch office located in West Virginia.
ARTICLE 3. REGISTRATION OF SECURITIES.
§32-3-305. Provisions applicable to registration generally.
(a) A registration statement may be filed by the issuer, any
other person on whose behalf the offering is to be made, or a
registered broker-dealer.
(b) Every person filing a registration statement shall pay
a filing fee of one twentieth of one percent of the maximumaggregate offering price at which the registered securities are
to be offered in this state, but the fee shall in no case be less
than fifty dollars or more than fifteen hundred dollars. When a
registration statement is withdrawn before the effective date or
a preeffective stop order is entered under section 306, the
commissioner shall retain all of the fee.
A registration
statement filed under this chapter registering investment company
shares shall cover only one class, series or portfolio of
investment company shares.
(c) Every registration statement shall specify (1) the
amount of securities to be offered in this state; (2) the states
in which a registration statement or similar document in
connection with the offering has been or is to be filed; and (3)
any adverse order, judgment or decree entered in connection with
the offering by the regulatory authorities in each state or by
any court or the securities and exchange commission.
(d) Any document filed under this chapter or a predecessor
act within five years preceding the filing of a registration
statement may be incorporated by reference in the registration
statement to the extent that the document is currently accurate.
(e) The commissioner may by rule or otherwise permit the
omission of any item of information or document from any
registration statement.
(f) In the case of a nonissuer distribution, information may
not be required under section 304 or 305(j) unless it is known to
the person filing the registration statement or to the persons onwhose behalf the distribution is to be made, or can be furnished
by them without unreasonable effort or expense.
(g) The commissioner may by rule or order require as a
condition of registration by qualification or coordination (1)
that any security issued within the past three years or to be
issued to a promoter for a consideration substantially different
from the public offering price, or to any person for a
consideration other than cash, be deposited in escrow; and (2)
that the proceeds from the sale of the registered security in
this state be impounded until the issuer receives a specified
amount from the sale of the security either in this state or
elsewhere. The commissioner may by rule or order determine the
conditions of any escrow or impounding required hereunder, but he
may not reject a depository solely because of location in another
state.
(h) The commissioner may by rule or order require as a
condition of registration that any security registered by
qualification or coordination be sold only on a specified form of
subscription or sale contract, and that a signed or conformed
copy of each contract be filed with the commissioner or preserved
for any period up to three years specified in the rule or order.
(i) Every registration statement is effective for one year
from its effective date, or any longer period during which the
security is being offered or distributed in a nonexempted
transaction by or for the account of the issuer or other person
on whose behalf the offering is being made or by any underwriteror broker-dealer who is still offering part of an unsold
allotment or subscription taken by him as a participant in the
distribution, except during the time a stop order is in effect
under section 306. All outstanding securities of the same class
as a registered security are considered to be registered for the
purpose of any nonissuer transaction (1) so long as the
registration statement is effective and (2) between the thirtieth
day after the entry of any stop order suspending or revoking the
effectiveness of the registration statement under section 306 (if
the registration statement did not relate in whole or in part to
a nonissuer distribution) and one year from the effective date of
the registration statement. A registration statement may not be
withdrawn for one year from its effective date if any securities
of the same class are outstanding. A registration statement may
be withdrawn otherwise only in the discretion of the
commissioner.
(j) So long as a registration statement is effective, the
commissioner may by rule or order require the person who filed
the registration statement to file reports, not more often than
quarterly, to keep reasonably current the information contained
in the registration statement and to disclose the progress of the
offering.
(k) A registration statement relating to a security issued
by a face amount certificate company or a redeemable security
issued by an open-end management company or unit investment
trust, as those terms are defined in the Investment Company Actof 1940, may be amended after its effective date so as to
increase the securities specified as proposed to be offered.
Such an amendment becomes effective when the commissioner so
orders. Every person filing such an amendment shall pay a filing
fee, calculated in the manner specified in subsection (b), with
respect to the additional securities proposed to be offered.
(l) Every person changing the name or address of a
securities registration shall pay a fifty dollar fee for such
change.
(m) Every person amending a registration statement or
offering a document without increasing the dollar amount
registered shall pay a twenty-five dollar fee per each amended
statement or document.
ARTICLE 4. GENERAL PROVISIONS.
§32-4-406. Administration of chapter; operating fund for
securities department.
(a) This chapter shall be administered by the auditor of
this state, and he is hereby designated, and shall be, the
commissioner of securities of this state. He shall have power
and authority to appoint or employ such assistants as are
necessary for the administration of this chapter.
(b)
All fees herein provided for shall be collected by the
commissioner and shall be deposited in the state treasury and
credited to the general revenue fund, and the commissioner shall
keep a record of the receipts and expenditures incurred in
carrying out the provisions of this chapter The auditor shallset up a special operating fund for the securities division in
his office. He shall pay into such fund twenty percent of all
fees collected as provided for in this chapter, not to exceed
four hundred thousand dollars. If, at the end of any fiscal
year, the balance in such operating fund exceeds one hundred
fifty thousand dollars, the excess shall be withdrawn from the
special fund and deposited in the general revenue fund:
Provided, That no part of any fine shall be deposited in such
special fund.
The special operating fund shall be used by the auditor to
fund the operation of the securities division located in his
office.
(c) It is unlawful for the commissioner or any of his
officers or employees to use for personal benefit any information
which is filed with or obtained by the commissioner and which is
not made public. No provision of this chapter authorizes the
commissioner or any of his officers or employees to disclose any
such information except among themselves or when necessary or
appropriate in a proceeding or investigation under this chapter.
No provision of the chapter either creates or derogates from any
privilege which exists at common law or otherwise when
documentary or other evidence is sought under a subpoena directed
to the commissioner or any of his officers or employees.
§32-4-412. Rules, forms, orders and hearings.
(a) The commissioner may from time to time make, amend and
rescind such rules, forms and orders as are necessary to carryout the provisions of this chapter, including rules and forms
governing registration statements, applications and reports, and
defining any terms, whether or not used in this chapter, insofar
as the definitions are not inconsistent with the provisions of
this chapter. For the purpose of rules and forms, the
commissioner may classify securities, persons and matters within
his jurisdiction, and prescribe different requirements for
different classes.
Orders by the commissioner may provide for fines, assessment
of costs and restitution to investors as the commissioner
determines to be in the public interest. The commissioner shall,
upon notice and hearing as set forth in this chapter, have the
right to fine any person who violates any provision of this
chapter in an amount not to exceed ten thousand dollars for each
and every violation of this chapter, plus costs of investigation
and prosecution.
(b) No rule, form, or order may be made, amended or
rescinded unless the commissioner finds that the action is
necessary or appropriate in the public interest or for the
protection of investors and consistent with the purposes fairly
intended by the policy and provisions of this chapter. In
prescribing rules and forms the commissioner may cooperate with
the securities administrators of the other states and the
securities and exchange commission with a view to effectuating
the policy of this statute to achieve maximum uniformity in the
form and content of registration statements, applications andreports wherever practicable.
(c) The commissioner may by rule or order prescribe (1) the
form and content of financial statements required under this
chapter, (2) the circumstances under which consolidated financial
statements shall be filed, and (3) whether any required financial
statements shall be certified by independent or certified public
accountants. All financial statements shall be prepared in
accordance with the generally accepted accounting practices.
(d) All rules and forms of the commissioner shall be
published.
(e) No provision of this chapter imposing any liability
applies to any act done or omitted in good faith in conformity
with any rule, form or order of the commissioner, notwithstanding
that the rule, form or order may later be amended or rescinded or
be determined by judicial or other authority to be invalid for
any reason.
(f) Every hearing in an administrative proceeding shall be
public.
§32-4-413. Administrative files and opinions.
(a) A document is filed when it is received by the
commissioner.
(b) The commissioner shall keep a register of all
applications for registration and registration statements which
are or have ever been effective under this chapter and all
denial, suspension or revocation orders which have been entered
under this chapter. The register shall be open for publicinspection.
(c) The information contained in or filed with any
registration statement, application or report may be made
available to the public under such rules as the commissioner
prescribes.
(d) Upon request and at such reasonable charges as he
prescribes, the commissioner shall furnish to any person
photostatic or other copies (certified under his seal of office
if requested) of any entry in the register or any document which
is a matter of public record. In any proceeding or prosecution
under this chapter, any copy so certified is prima facie evidence
of the contents of the entry or document certified.
(e) The commissioner in his discretion may honor requests
from interested persons for interpretative opinions; copies of
which opinions shall be filed in a special file maintained for
that purpose and shall be public records available for public
inspection.
and at such reasonable charges as he prescribes A
one hundred dollar fee shall be charged for each interpretative
opinion.
NOTE: The purpose of this bill is to increase registration
fees for broker-dealers, agents, investment advisors and agents
of issuer. It also provides for several new fees to be collected
from persons issuing securities, and gives the commissioner
fining authority. The bill allows the auditor to set up a
special revenue fund to operate the securities division and to
adequately protect West Virginia investors.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new languagethat would be added.