H. B. 2842
(By Delegates Givens, Hunt, Coleman,
Mahan, Amores, Trump and L. White)
[Introduced March 28, 1997; referred to the
Committee on the Judiciary.]
A BILL to amend and reenact sections two hundred one, two hundred
two, two hundred three, article two, chapter thirty-two of
the code of West Virginia, one thousand nine hundred thirty- one, as amended; to amend and reenact sections three hundred
one and three hundred five, article three of said chapter;
to further amend said article by adding thereto a new
section, designated section three hundred four-a; to amend
and reenact sections four hundred one, four hundred two,
four hundred five, four hundred six, four hundred nine, four
hundred thirteen and four hundred fourteen, article four of
said chapter; and to further amend said article by adding
thereto a new section, designated section four hundred
seven-a, all relating to revisions in security fraud
provisions.
Be it enacted by the Legislature of West Virginia:
That sections two hundred one, two hundred two, two hundred
three, article two, chapter thirty-two of the code of West
Virginia, one thousand nine hundred thirty-one, as amended, be
amended and reenacted; that sections three hundred one and three
hundred five, article three of said chapter, be amended and
reenacted; that said article be further amended by adding thereto
a new section, designated section three hundred four-a; that
sections four hundred one, four hundred two, four hundred five,
four hundred six, four hundred nine, four hundred thirteen and
four hundred fourteen, article four of said chapter be amended
and reenacted; and that said article be further amended by adding
thereto a new section, designated section four hundred seven-a,
all to read as follows:
ARTICLE 2. REGISTRATION OF BROKER-DEALERS, AGENTS AND INVESTMENT
ADVISERS.
§32-2-201. Registration requirement.
(a) It is unlawful for any person to transact business in
this state as a broker-dealer or agent unless he
or she is
registered under this chapter.
(b) It is unlawful for any broker-dealer or issuer to employ
an agent unless the agent is registered. The registration of an
agent is not effective during any period when he
or she is not
associated with a particular broker-dealer registered under this chapter or a particular issuer. When an agent begins or
terminates a connection with a broker-dealer or issuer, or begins
or terminates those activities which make him
or her an agent,
the agent as well as the broker-dealer or issuer shall promptly
notify the
commissioner.
(c) It is unlawful for any person to transact business in
this state as an investment adviser unless: (1) He
or she is so
registered under this chapter; (2) he
or she is registered as a
broker-dealer without the imposition of a condition under
subdivision (5), subsection (b), section two hundred four of this
article; or (3) his only clients in this state are investment
companies as defined in the Investment Company Act of 1940 or
insurance companies (3) he or she is a federal covered advisor
except that, until the tenth day of October, one thousand nine
hundred ninety-nine, a federal covered adviser for which a
nonpayment or underpayment of a fee has not been promptly
remedied following written notification to the adviser of such
nonpayment or underpayment shall not be a federal covered
adviser; or (4) he or she has no place of business in this state
and: (A) His or her only clients in this state are investment
companies as defined in the Investment Company Act of 1940, other
investment advisers, federal covered advisers, broker-dealers,
banks, trust companies, savings and loan associations, insurance
companies, employee benefit plans with assets of not less than one million dollars, and governmental agencies or
instrumentalities, whether acting for themselves or as trustees
with investment control, or other institutional investors as are
designated by rule or order of the commissioner; or (B) during
any period of twelve consecutive months he or she does not have
more than five clients who are residents of this state, other
than those specified in this subsection, whether or not he or she
or any of the clients who are residents of this state is then
present in the state.
(d) Every registration or notice filing expires one year
from its effective date unless renewed. The commissioner by rule
or order may prepare an initial schedule for registration
renewals of registrations or notice filings so that subsequent
renewals of registrations or notice filings effective on the
effective date of this chapter may be staggered by calendar
months. For this purpose the commissioner by rule may reduce the
registration or notice filing fee proportionately.
(e)
It is unlawful for any:
(i1i) Person required to be registered as an investment
adviser under this article to employ an investment adviser
representative unless the investment adviser representative is
registered under this article: Provided, That the registration
of an investment adviser representative is not effective during
any period when he or she is not employed by an investment adviser registered under this article; or (ii) federal covered
adviser to employ, supervise, or associate with an investment
adviser representative having a place of business located in this
state, unless such investment adviser representative is
registered under this article, or is exempt from registration.
When an investment adviser representative begins or terminates
employment with an investment adviser, the investment adviser or
the investment adviser representative shall promptly notify the
commissioner.
(f) Except with respect to advisers whose only clients are
those described in subdivision (4), subsection (c), section two
hundred one of this article, it is unlawful for any federal
covered adviser to conduct advisory business in this state unless
such person complies with the provisions of subsection (b),
section two hundred two of this article.
§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 matters such 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 and 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
the publication shall be specified 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 or she may by order defer the effective
date until noon of the thirtieth day after the filing of any
amendment to an application. 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.
Registration of an investment
adviser automatically constitutes registration of any investment
adviser representative who is a partner, officer, or director or
a person occupying a similar status or performing similar
functions as designated by the investment adviser in writing to
the commissioner and approved in writing by the commissioner.
(b) Except with respect to federal covered advisers whose
only clients are those described in subdivision (2), subsection
(c), section two hundred one of this article, a federal covered
adviser shall file with the commissioner, prior to acting as a
federal covered adviser in this state, such documents as have
been filed with the securities and exchange commissioner as the
commissioner, by rule or order, may require along with notice
filing fees.
(b) (c) Every applicant for initial or renewal registration
shall pay a filing fee of two hundred fifty dollars in the case
of a broker-dealer and the agent of an issuer, fifty-five dollars
in the case of an agent, one hundred seventy dollars in the case
of an investment adviser, and fifty dollars for each investment
advisor representative. When an application is denied or withdrawn, the commissioner shall retain all of the fee.
(1) Broker-dealers and agents of broker-dealers. Every
applicant for initial or renewal registration shall pay a
registration fee as required by the commissioner in the case of
a broker-dealer or agent.
(2) Investment advisers and investment adviser
representatives. Every applicant for initial or renewal
registration as an investment adviser or as an investment adviser
representative who is subject to registration under this article
shall pay a registration fee as required by the commissioner.
(3) Each agent, representative and associated person of a
broker-dealer or investment advisor when applying for an initial
license under section two hundred two of this article or changing
employers shall pay a compliance assessment of twenty-five
dollars. Each agent, representative and associated person, when
applying for a renewal license under section two hundred two of
this article, shall pay a compliance assessment of ten dollars.
(c) (d) 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 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.
(e) The commissioner may, by rule or order, require a
minimum capital for registered broker-dealers, subject to the
limitations of section fifteen of the Securities Exchange Act of
1934, and establish minimum financial requirements for investment
advisers, subject to the limitations of section 222 of the
Investment Advisers Act of 1940, which may include different
requirements for those investment advisers who maintain custody
of clients' funds or securities or who have discretionary
authority over same and those investment advisers who do not.
(f) The commissioner may, by rule or order, require
registered broker-dealers, agents and investment advisers who have custody of or discretionary authority over client funds or
securities, to post surety bonds in amounts as the commissioner
may prescribe, by rule or order, subject to the limitations of
section fifteen of the Securities Exchange Act of 1934 (for
broker-dealers) and section 222 of the Investment Advisers Act of
1940 (for investment advisers), up to twenty-five 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, or, in the case of an investment adviser,
whose minimum financial requirements, which may be defined by
rule, exceeds the amounts required by the commissioner. Every
bond shall provide for suit thereon by any person who has a cause
of action under section four hundred nine, 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 the
time limitations of subsection (f), section four hundred nine,
article four of this chapter.
(f) (g) Every applicant, whether registered under this
chapter or not, shall pay a fifty-dollar fee for each name or
address change.
(g) (h) 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.
§32-2-203. Post-registration provisions.
(a) Every registered broker-dealer and investment adviser
shall make and keep such accounts, correspondence, memoranda,
papers, books and other records as the commissioner by rule
prescribes. All records so required shall be preserved for three
years unless the commissioner by rule prescribes otherwise for
particular types of records.
(b) Every registered broker-dealer and investment adviser
shall file such financial reports as the commissioner by rule
prescribes.
(c) If the information contained in any document filed with
the commissioner is or becomes inaccurate or incomplete in any
material respect, the registrant shall promptly file a correcting
amendment unless notification of the correction has been given
under subsection (b), section two hundred one of this article.
(a) Every registered broker-dealer and investment adviser
shall make and keep such accounts, correspondence, memoranda,
papers, books and other records as the commissioner prescribes
by rule or order, except as provided by section fifteen of the
Securities Exchange Act of 1934 (in the case of a broker-dealer)
and section 222 of the Investment Advisers Act of 1940 (in the
case of an investment adviser). All records so required, with respect to an investment adviser, shall be preserved for three
years unless the commissioner prescribes by rule or order
otherwise for particular types of records.
(b) With respect to investment advisers, the commissioner
may require that certain information be furnished or disseminated
as necessary or appropriate in the public interest or for the
protection of investors and advisory clients. To the extent
determined by the commissioner, in his or her discretion,
information furnished to clients or prospective clients of an
investment adviser that would be in compliance with the
Investment Advisers Act of 1940 and the rules thereunder may be
used in whole or partial satisfaction of this requirement.
(c) Every registered broker-dealer and investment advisor
shall file such financial reports as the commissioner may
prescribe by rule or order, except as provided by section fifteen
of the Securities Exchange Act of 1934 (in the case of a broker- dealer) and section 222 of the Investment Advisers Act of 1940
(in the case of an investment adviser).
(d) If the information contained in any document filed with
the commissioner is or becomes inaccurate or incomplete in any
material respect, the registrant or federal covered adviser shall
promptly file a correcting amendment with the commissioner.
(d) (e) In addition to any other report required by the
commissioner, each registered broker-dealer with a physical office location within this state shall file an annual report, as
of the thirty-first day of December, and due on or before the
fifteenth day of February, including certain aggregate product
sales information. The report shall include the following, by
office location (regardless of whether such location constitutes
a branch): (i) The aggregate dollar amount of certificates of
deposits or other federally insured deposit products sold to
customers which are held by or accounted for by the broker-dealer
on behalf of its customers; and (ii) the aggregate dollar amount
of money market accounts or other accounts accessible by draft,
order or check which are held by or accounted for by the broker- dealer on behalf of its customers. The commissioner may
prescribe the form of such report and may promulgate rules to
implement the requirements of this section.
(e) (f) All the records referred to in subsection (a) of
this section are subject at any time or from time to time to such
reasonable periodic, special or other examinations by
representatives of the commissioner, within or without this
state, as the commissioner deems necessary or appropriate in the
public interest or for the protection of investors. For the
purpose of avoiding unnecessary duplication of examinations, the
commissioner, insofar as he or she deems it practicable in
administering this subsection, may cooperate with the securities
administrators of other states, the securities and exchange commission, and any national securities exchange or national
securities association registered under the Securities Exchange
Act of 1934.
ARTICLE 3. REGISTRATION OF SECURITIES.
§32-3-301. Registration requirement.
It is unlawful for any person to offer or sell any security
in this state unless: (1) It is registered under this chapter;
or (2) the security or transaction is exempted under section four
hundred two of this article; or (3) the security is a federal
covered security.
§32-3-304a. Federal covered securities.
(a) Securities for which a registration statement has been
filed with the securities and exchange commission under the
Securities Act of 1933 with respect to a federal covered security
under section 18(b)(2) of the Securities Act of 1933 may be
offered for sale or sold to residents of this state upon the
commissioner's receipt of: (1) A notice as prescribed by the
commissioner by rule or otherwise; (2) a copy of the issuer's
federal registration statement as filed with the securities and
exchange commissioner; and (3) payment of a fee as provided for
in subsections (a) and (b), section 306 of this article:
Provided, That up through the tenth day of October, one thousand
nine hundred ninety-nine, or such other date as may be legally permissible, a federal covered security for which a fee has not
been paid or promptly remedied following written notification
from the commissioner to the issuer of the nonpayment or
underpayment of such fees, as required by this article, shall not
be a federal covered security.
(b) The commissioner, by rule or otherwise, may require the
filing of any or all of the following documents with respect to
a federal covered security under section 18(b)(2) of the
Securities Act of 1933:
(1) Prior to the initial offer of such federal covered
security in this state, all documents that are part of a current
federal registration statement filed with the securities and
exchange commission under the Securities Act of 1933, together
with a consent to service of process signed by the issuer and
with a filing fee as prescribed under subsections (a) and (b),
section three hundred five of this article;
(2) After the initial offer of such federal covered security
in this state, all documents that are part of an amendment to a
current federal registration statement filed with the securities
and exchange commission under the Securities Act of 1933, which
shall be filed concurrently with the commissioner; and
(3) A report of the value of such federal covered securities
offered or sold in this state, together with, in the case where
securities sold in this state in excess of the aggregate amount of securities noticed under section three hundred five of this
article, a payment of an oversale assessment which shall be three
times an amount which equals the difference between the
registration fee that would have been payable under subsection
(b), section three hundred six of this article based upon the
total amount of securities sold in this state and the total
registration fees previously paid to the commissioner with
respect to such registration, but in no case, shall the oversale
assessment be less than three hundred fifty dollars or be more
than fifteen hundred dollars.
(c) With respect to any security that is a federal covered
security under section 18(b)(4)(D) of the Securities Act of 1933,
the commissioner, by rule or order, may require the issuer to
file a notice on SEC Form D and a consent to service of process
signed by the issuer no later than fifteen days after the first
sale of such federal covered security in this state, together
with a fee as established by rule by the commissioner.
(d) The commissioner, by rule or otherwise, may require the
filing of any document filed with the securities and exchange
commission under the Securities Act of 1933, with respect to a
federal covered security under section 18(b)(3) or (4) of the
Securities Act of 1933, together with a filing fee for such
document as appropriate under subsections (l) and (m), section
three hundred three of this article.
(e) The commissioner may issue a stop order suspending the
offer and sale of a federal covered security, except a federal
covered security under section 18(b)(1) of the Securities Act of
1933, if it finds that: (1) The order is in the public interest;
and (2) there is a failure to comply with any condition
established under this section.
(f) The commissioner, by rule or order, may waive any or all
of the provisions of this section.
§32-3-305. Provisions applicable to registration generally.
(a) A registration or notice filing statement may be filed
by the issuer, any other person on whose behalf the offering is
to be made, or a registered broker-dealer. A registration or
notice filing
statement filed under this chapter registering or
noticing
investment company shares shall cover only one class,
series or portfolio of investment company shares.
(b) Every person filing a registration or notice filing
statement shall pay a filing fee of one twentieth of one percent
of the maximum aggregate offering price at which the registered
or noticed
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 or notice filing
statement is withdrawn before the effective date or a
preeffective stop order is entered under section (306) of this article, the commissioner shall retain all of the fee.
(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 or notice filing
statement.
(f) In the case of a nonissuer distribution, information may
not be required under section 304 of this article or subsection
(j) of this section unless it is known to the person filing the
registration statement or to the persons on whose 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 under this
subsection, but he or she 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 underwriter
or broker-dealer who is still offering part of an unsold
allotment or subscription taken by him or her as a participant in
the distribution, except during the time a stop order is in effect under section three hundred six of this article. 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 three hundred six of this
article (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 Act of 1940, may be amended after its effective date so as to
increase the securities specified as proposed to be offered. The
amendment becomes effective when the commissioner so orders.
Every person filing an amendment shall pay a filing fee,
calculated in the manner specified in subsection (b) of this
section, 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 change.
(m) Every person amending a registration statement or
offering a document without increasing the dollar amount
registered shall pay a twenty-five fifty-dollar fee for each
amended statement or document.
ARTICLE 4. GENERAL PROVISIONS.
§32-4-401. Definitions.
When used in this chapter, unless the context otherwise
requires:
(a) "Commissioner" means the auditor of the state of West
Virginia.
(b) "Agent" means any individual other than a broker-dealer
who represents a broker-dealer or issuer in effecting or
attempting to effect purchases or sales of securities. "Agent"
does not include an individual who represents an issuer in: (1) Effecting transactions in a security exempted by subdivision (1),
(2), (3), (10) or (11) of section 402(a); (2) effecting
transactions exempted by section 402(b); (3) effecting
transactions in a covered security as described in section
18(b)(3) and section 18(b)(4)(d) of the Securities Act of 1933;
or (3) (4) effecting transactions with existing employees,
partners or directors of the issuer if no commission or other
remuneration is paid or given, directly or indirectly, for
soliciting any person in this state or a broker-dealer in
effecting transactions in this state limited to those
transactions described in section 15(h)(2) of the Securities
Exchange Act of 1934. A partner, officer or director of a
broker-dealer or issuer, or a person occupying a similar status
or performing similar functions, is an agent only if he or she
otherwise comes within this definition.
(c) "Broker-dealer" means any person engaged in the business
of effecting transactions in securities for the account of others
or for his or her own account. "Broker-dealer" does not include:
(1) An agent; (2) an issuer; (3) a bank, savings institution or
trust company; or (4) a person who has no place of business in
this state if: (A) He or she effects transactions in this state
exclusively with or through; (i) the issuers of the securities
involved in the transactions; (ii) other broker-dealers; or (iii) banks, savings institutions, trust companies, insurance
companies, investment companies as defined in the Investment
Company Act of 1940, pension or profit-sharing trusts, or other
financial institutions or institutional buyers, whether acting
for themselves or as trustees; or (B) during any period of twelve
consecutive months he or she does not direct more than fifteen
offers to sell or buy into this state in any manner to persons
other than those specified in clause (A), whether or not the
offeror or any of the offerees is then present in this state.
(d) "Fraud," "deceit" and "defraud" are not limited to
common-law deceit.
(e) "Guaranteed" means guaranteed as to payment of
principal, interest or dividends.
(f) "Federal covered adviser" means a person who is: (1)
Registered under section 203 of the Investment Advisers Act of
1940; or (2) is excluded from the definition of "investment
advisor" under section two hundred two-a (11) of the Investment
Advisers Act of 1940.
(f) (g) "Investment adviser" means any person who, for
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
or selling securities, or who, for compensation and as a part of
a regular business, issues or promulgates analyses or reports concerning securities. "Investment adviser" also includes
financial planners and other persons who, as an integral
component of other financially related services, provide the
foregoing investment advisory services to others for compensation
and as part of a business or who hold themselves out as providing
the foregoing investment advisory services to others for
compensation. "Investment adviser" does not include: (1) A
bank, savings institution or trust company; (2) a lawyer,
accountant, engineer or teacher whose performance of those
services is solely incidental to the practice of his or her
profession; (3) a broker-dealer whose performance of these
services is solely incidental to the conduct of his or her
business as a broker-dealer and who receives no special
compensation for them; (4) a publisher, employee or columnist of
any bona fide a newspaper, news magazine or business or financial
publication, of general, regular and paid circulation
or an
owner, operator, producer, or employee of a cable, radio, or
television network, station, or production facility if, in either
case, the financial or business news published or disseminated is
made available to the general public and the content does not
consist of rendering advice on the basis of the specific
investment situation of each client; (5) a person whose advice,
analyses or reports relate only to securities exempted by
subdivision (1), subsection (a), section four hundred two of this article; (6) a person who has no place of business in this state
if (A) his or her only clients in this state are other investment
advisers, broker-dealers, banks, savings institutions, trust
companies, insurance companies, investment companies as defined
in the Investment Company Act of 1940, pension or profit-sharing
trusts, or other financial institutions or institutional buyers,
whether acting for themselves or as trustees, or (B) during any
period of twelve consecutive months he or she does not direct
business communications into this state in any manner to more
than five clients other than those specified in clause (A),
whether or not he or she or any of the persons to whom the
communications are directed is then present in this state; (7) an
investment adviser representative; (8) a "federal covered
adviser";
or (7) (9) such other persons not within the intent of
this paragraph as the commissioner may by rule or order
designate.
(g) "Investment adviser representative" means any partner,
officer, director of, or a person occupying a similar status or
performing similar functions, or other individual, except
clerical or ministerial personnel, who is employed by or
associated with an investment adviser that is registered or
required to be registered under this chapter, or who has a place
of business located in this state and is employed by or
associated with a federal covered adviser; and including clerical or ministerial personnel, who does any of the following: (1)
Makes any recommendations or otherwise renders advice regarding
securities; (2) manages accounts or portfolios of clients; (3)
determines which recommendation or advice regarding securities
should be given; (4) solicits, offers or negotiates for the sale
of or sells investment advisory services; or (5) supervises
employees who perform any of the foregoing.
(g) (i) "Issuer" means any person who issues or proposes to
issue any security, except that (1) with respect to certificates
of deposit, voting-trust certificates or collateral-trust
certificates, or with respect to certificates of interest or
shares in an unincorporated investment trust not having a board
of directors or persons performing similar functions or of the
fixed, restricted management, or unit type, the term "issuer"
means the person or persons performing the acts and assuming the
duties of depositor or manager pursuant to the provisions of the
trust or other agreement or instrument under which the security
is issued; and (2) with respect to certificates of interest or
participation in oil, gas or mining titles or leases or in
payments out of production under such titles or leases, there is
not considered to be any "issuer."
(h) (j) "Nonissuer" means not, directly or indirectly, for
the benefit of the issuer.
(i) (k) "Person" means an individual, a corporation, a partnership, an association, a joint-stock company, a trust where
the interests of the beneficiaries are evidenced by a security,
an unincorporated organization, a government or a political
subdivision of a government.
(j) (l) "Sale" or "sell" includes every contract of sale of,
contract to sell, or disposition of, a security or interest in a
security for value.
(2) "Offer" or "offer to sell" includes every attempt or
offer to dispose of, or solicitation of an offer to buy, a
security or interest in a security for value.
(3) Any security given or delivered with, or as a bonus on
account of, any purchase of securities or any other thing is
considered to constitute part of the subject of the purchase and
to have been offered and sold for value.
(4) A purported gift of assessable stock is considered to
involve an offer and sale.
(5) Every sale or offer of a warrant or right to purchase or
subscribe to another security of the same or another issuer, as
well as every sale or offer of a security which gives the holder
a present or future right or privilege to convert into another
security of the same or another issuer, is considered to include
an offer of the other security.
(6) The terms defined in this subdivision do not include:
(A) Any bona fide pledge or loan; (B) any stock dividend, whether the corporation distributing the dividend is the issuer of the
stock or not, if nothing of value is given by stockholders for
the dividend other than the surrender of a right to a cash or
property dividend when each stockholder may elect to take the
dividend in cash or property or in stock; (C) any act incident to
a class vote by stockholders, pursuant to the certificate of
incorporation or the applicable corporation statute, on a merger,
consolidation, reclassification of securities or sale of
corporate assets in consideration of the issuance of securities
of another corporation; or (D) any act incident to a judicially
approved reorganization in which a security is issued in exchange
for one or more outstanding securities, claims or property
interests, or partly in such exchange and partly for cash.
(k) (m) "Securities Act of 1933," "Securities Exchange Act
of 1934," "Public Utility Holding Company Act of 1935," and
"Investment Company Act of 1940" mean the federal statutes of
those names as amended before the effective date of this chapter.
The National Securities Markets Improvement Act of 1996 ("NSMIA")
means the federal statute which makes certain amendments to the
Securities Act of 1933, Securities Exchange Act of 1934, and the
Investment Company Act of 1940.
(l) (n) "Security" means any note; stock; treasury stock;
bond; debenture; evidence of indebtedness; certificate of
interest or participation in any profit-sharing agreement; collateral-trust certificate; preorganization certificate or
subscription; transferable share; investment contract; voting- trust certificate; certificate of deposit for a security;
certificate of interest or participation in an oil, gas, or
mining title or lease or in payments out of production under such
a title or lease; or, in general, any interest or instrument
commonly known as a "security," or any certificate of interest or
participation in, temporary or interim certificate for, receipt
for, guarantee of, or warrant or right to subscribe to or
purchase, any of the foregoing. "Security" does not include any
insurance or endowment policy or annuity contract under which an
insurance company promises to pay money either in a lump sum or
periodically for life or some other specified period.
(o) "Federal covered security" means any security that is a
covered security under section 18(b) of the Securities Act of
1933 or rules promulgated thereunder.
(m) (p) "State" means any state, territory or possession of
the United States, the District of Columbia and Puerto Rico.
§32-4-402. Exemptions.
(a) The following securities are exempt from sections 301
and 403:
(1) Any security (including a revenue obligation) issued or
guaranteed by the United States, any state, any political subdivision of a state, or any agency or corporate or other
instrumentality of one or more of the foregoing; or any
certificate of deposit for any of the foregoing;
(2) Any security issued or guaranteed by Canada, any
Canadian province, any political subdivision of any such
province, any agency or corporate or other instrumentality of one
or more of the foregoing, or any other foreign government with
which the United States currently maintains diplomatic relations,
if the security is recognized as a valid obligation by the issuer
or guarantor;
(3) Any security issued by and representing an interest in
or a debt of, or guaranteed by, any bank organized under the laws
of the United States, or any bank, savings institution or trust
company organized and supervised under the laws of any state;
(4) Any security issued by and representing an interest in
or a debt of, or guaranteed by, any federal savings and loan
association, or any building and loan or similar association
organized under the laws of any state and authorized to do
business in this state;
(5) Any security issued by and representing an interest in
or a debt of, or guaranteed by, any insurance company organized
under the laws of any state and authorized to do business in this
state;
(6) Any security issued or guaranteed by any federal credit union or any credit union, industrial loan association or similar
association organized and supervised under the laws of this
state;
(7) Any security issued or guaranteed by any railroad, other
common carrier, public utility or holding company which is: (A)
Subject to the jurisdiction of the interstate commerce
commission; (B) a registered holding company under the Public
Utility Holding Company Act of 1935, or a subsidiary of such a
company within the meaning of that act; (C) regulated in respect
of its rates and charges by a governmental authority of the
United States or any state; or (D) regulated in respect of the
issuance or guarantee of the security by a governmental authority
of the United States, any state, Canada, or any Canadian
province;
(8) Any security listed or approved for listing upon notice
of issuance on the New York Stock Exchange, the American Stock
Exchange, or the Midwest Stock Exchange, any other stock exchange
approved by the commissioner, the National Association of
Securities Dealers Automated Quotation/National Market System
(NASDAQ/NMS), or any other market system approved by the
commissioner, any other security of the same issuer which is of
senior or substantially equal rank, any security called for by
subscription rights or warrants so listed or approved, or any
warrant or right to purchase or subscribe to any of the foregoing, except that the commissioner may adopt and promulgate
rules pursuant to chapter twenty-nine-a of this code which, after
notice to such exchange or market system and an opportunity to be
heard, remove any such exchange or market system from this
exemption if the commissioner finds that the listing requirements
or market surveillance of such exchange or market system are such
that the continued availability of such exemption for such
exchange or market system is not in the public interest and that
removal is necessary for the protection of investors;
(9) Any security issued by any person organized and operated
not for private profit but exclusively for religious,
educational, benevolent, charitable, fraternal, social, athletic
or reformatory purposes, or as a chamber of commerce or trade or
professional association, and no part of the net earnings of
which inures to the benefit of any person, private stockholder or
individual;
(10) Any commercial paper which arises out of a current
transaction or the proceeds of which have been or are to be used
for current transactions, and which evidences an obligation to
pay cash within twelve months of the date of issuance, exclusive
of days of grace, or any renewal of such paper which is likewise
limited, or any guarantee of such paper or of any such renewal;
(11) Any investment contract issued in connection with an
employees' stock purchase, savings, pension, profit-sharing or similar benefit plan if the commissioner is notified in writing
thirty days before the inception of the plan or, with respect to
plans which are in effect on the effective date of this chapter,
within sixty days thereafter (or within thirty days before they
are reopened if they are closed on the effective date of this
chapter); and
(12) Any security issued by an agricultural cooperative
association operating in this state and organized under article
four, chapter nineteen of this code, or by a foreign cooperative
association organized under the laws of another state and duly
qualified to transact business in this state; and
(13) Any "federal covered security" registered under section
18(b) of the Securities Act of 1933 or rules promulgated
thereunder.
(b) The following transactions are exempt from sections 301
and 403:
(1) Any isolated nonissuer transaction, whether effected
through a broker-dealer or not;
(2) Any nonissuer distribution of an outstanding security
if: (A) A recognized securities manual contains the names of the
issuer's officers and directors, a balance sheet of the issuer as
of a date within eighteen months, and a profit and loss statement
for either the fiscal year preceding that date or the most recent
year of operations; or (B) the security has a fixed maturity or a fixed interest or dividend provision and there has been no
default during the current fiscal year or within the three
preceding fiscal years, or during the existence of the issuer and
any predecessors if less than three years, in the payment of
principal, interest or dividends on the security;
(3) Any nonissuer transaction effected by or through a
registered broker-dealer pursuant to an unsolicited order or
offer to buy; but the commissioner may by rule require that the
customer acknowledge upon a specified form that the sale was
unsolicited, and that a signed copy of each such form be
preserved by the broker-dealer for a specified period;
(4) Any transaction between the issuer or other person on
whose behalf the offering is made and an underwriter, or among
underwriters;
(5) Any transaction in a bond or other evidence of
indebtedness secured by a real or chattel mortgage or deed of
trust, or by an agreement for the sale of real estate or
chattels, if the entire mortgage, deed of trust, or agreement,
together with all the bonds or other evidences of indebtedness
secured thereby, is offered and sold as a unit;
(6) Any transaction by an executor, administrator, sheriff,
marshal, constable, receiver, trustee in bankruptcy, guardian or
conservator, and any transaction constituting a judicial sale;
(7) Any transaction executed by a bona fide pledgee without any purpose of evading this chapter;
(8) Any offer or sale to a bank, savings institution, trust
company, insurance company, investment company as defined in the
Investment Company Act of 1940, pension or profit-sharing trust,
or other financial institution or institutional buyer, or to a
broker-dealer, whether the purchaser is acting for itself or in
some fiduciary capacity;
(9) Any transaction pursuant to an offer directed by the
offeror to not more than ten persons (other than those designated
in subdivision (8) above) in this state during any period of
twelve consecutive months, whether or not the offeror or any of
the offerees is then present in this state, if: (A) The seller
reasonably believes that all the buyers in this state (other than
those designated in subdivision (8) above) are purchasing for
investment; and (B) no commission or other remuneration is paid
or given, directly or indirectly, for soliciting any prospective
buyer in this state (other than those designated in subdivision
(8) above), but the commissioner may by rule or order, as to any
security or transaction or any type of security or transaction,
withdraw or further condition this exemption, or increase or
decrease the number of offerees permitted, or waive the
conditions in clauses (A) and (B) with or without the
substitution of a limitation on remuneration;
(10) Any offer or sale of a preorganization certificate or subscription if: (A) No commission or other remuneration is paid
or given, directly or indirectly, for soliciting any prospective
subscriber; (B) the number of subscribers does not exceed ten;
and (C) no payment is made by any subscriber;
(11) Any transaction pursuant to an offer to existing
security holders of the issuer, including persons who at the time
of the transaction are holders of convertible securities,
nontransferable warrants or transferable warrants exercisable
within not more than ninety days of their issuance, if: (A) No
commission or other remuneration (other than a standby
commission) is paid or given, directly or indirectly, for
soliciting any security holder in this state; or (B) the issuer
first files a notice specifying the terms of the offer and the
commissioner does not by order disallow the exemption within the
next five full business days;
(12) Any offer (but not a sale) of a security for which
registration statements have been filed under both this chapter
and the Securities Act of 1933 if no stop order or refusal order
is in effect and no public proceeding or examination looking
toward such an order is pending under either chapter.
(13) A security issued by an issuer registered as an
open-end management investment company or unit investment trust
under section (8) of the Investment Company Act of 1940 if:
(A) (i) The issuer is advised by an investment adviser that
it is a depository institution exempt from registration under the
Investment Company Act of 1940, or that is currently registered
as an investment adviser, and has been registered, or is
affiliated with an adviser that has been registered, as an
investment adviser under the Investment Advisers Act of 1940, for
at least three years next preceding an offer or sale of a
security claimed to be exempt under this paragraph; and the
adviser has acted, or is affiliated with an investment adviser
that has acted, as investment adviser to one or more registered
investment companies for at least three years next preceding an
offer or sale of a security claimed to be exempt under this
paragraph; or
(ii) The issuer has a sponsor that has at all times
throughout the three years before an offer or sale of a security
claimed to be exempt under this paragraph sponsored one or more
registered investment companies or unit investment trusts the
aggregate total assets of which have exceeded one hundred million
dollars.
(B) The division has received prior to any sale exempted
herein:
(i) A notice of intention to sell which has been executed by
the issuer which sets forth the name and address of the issuer
and the title of the securities to be offered in this state;
(ii) A filing fee equal to one twentieth of one percent of
the maximum aggregate offering price, but such fee shall not be
less than fifty nor greater than fifteen hundred dollars, for
open-end management companies; or
(iii) A filing fee equal to one twentieth of one percent of
the maximum aggregate offering price, but such fee shall not be
less than fifty nor greater than fifteen hundred dollars, for
unit investment trusts.
(C) A separate notice and fee shall be required for each
portfolio, series or class of an open-end management company.
(D) For the purpose of this subsection, an investment
adviser is affiliated with another investment adviser if it
controls, is controlled by or is under common control with the
other investment adviser.
(c) The commissioner may by order deny or revoke any
exemption specified in subdivision (9) or (11) of subsection (a)
or in subsection (b) of this section with respect to a specific
security or transaction. No such order may be entered without
appropriate prior notice to all interested parties, opportunity
for hearing, and written findings of fact and conclusions of law,
except that the commissioner may by order summarily deny or
revoke any of the specified exemptions pending final
determination of any proceeding under this subsection. Upon the
entry of a summary order, the commissioner shall promptly notify all interested parties that it has been entered and of the
reasons therefor and that within fifteen days of the receipt of
a written request the matter will be set down for hearing. If no
hearing is requested and none is ordered by the commissioner, the
order will remain in effect until it is modified or vacated by
the commissioner. If a hearing is requested or ordered, the
commissioner, after notice of and opportunity for hearing to all
interested persons, may modify or vacate the order or extend it
until final determination. No order under this subsection may
operate retroactively. No person may be considered to have
violated section 301 or 403 by reasons of any offer or sale
effected after the entry of an order under this subsection if he
or she sustains the burden of proof that he or she did not know,
and in the exercise of reasonable care could not have known, of
the order.
(d) In any proceeding under this chapter, the burden of
proving an exemption or an exception from a definition is upon
the person claiming it.
§32-4-405. Unlawful representations concerning registration or
exemption.
(a) Neither (1) the fact that a notice filing or an
application for registration under article two of this chapter or
a registration statement under article three of this chapter has been filed nor (2) the fact that a person or security is
effectively registered constitutes a finding by the commissioner
that any document filed under this chapter is true, complete and
not misleading. Neither any such fact nor the fact that an
exemption or exception is available for a security or a
transaction means that the commissioner has passed in any way
upon the merits or qualifications of, or recommended or given
approval to, any person, security or transaction.
(b) It is unlawful to make, or cause to be made, to any
prospective purchaser, customer or client any representation
inconsistent with subsection (a).
§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 or she is hereby designated, and shall be, the
commissioner of securities of this state. He or she has the
power and authority to appoint or employ such assistants as are
necessary for the administration of this chapter.
(b) The auditor shall set up a special operating fund for
the securities division in his or her office. The auditor shall
pay into the 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 the operating fund exceeds one hundred fifty thousand dollars,
the excess shall be withdrawn from the special fund and deposited
in the general revenue fund.
The special operating fund shall be used by the auditor to
fund the operation of the securities division located in his or
her office. The special operating fund shall be appropriated by
line item by the Legislature.
(c) Moneys payable for assessments established by section
four hundred eight of this article shall be collected by the
commissioner and deposited into the general revenue fund.
(c) (d) It is unlawful for the commissioner or any of his or
her 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 or her officers or
employees to disclose any 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 or her
officers or employees.
ARTICLE 4. GENERAL PROVISIONS.
§32-4-407a. Administrative assessments.
(a) A registrant, applicant for registration, issue or other
person upon whom the commissioner has conducted an examination,
audit, investigation or prosecution and who has been determined
by the commissioner to have violated this article or rule or
order of the commissioner under this article shall pay for all
the costs incurred in the conduct of such examination, audit,
investigation or prosecution. These costs shall include, but not
be limited to, the salaries and other compensation paid to
clerical, accounting, administrative, investigative, examiner and
legal personnel, the actual amount of expenses reasonably
incurred by such personnel and the commissioner in the conduct of
such examination, audit, investigation or prosecution, including
a pro rata portion of the commissioner's administrative expense.
(b) After giving notice and opportunity for a hearing, the
commissioner may issue an order accompanied by written findings
of fact and conclusions of law which imposes an administrative
assessment in an amount provided in paragraph (l) against a
broker-dealer, agent, investment adviser or associated person
registered under section three hundred one, article three of this
chapter, or an affiliate of the broker-dealer or investment
adviser where the commissioner finds that the person either
willfully has violated this act or a rule or order of the
commissioner under this act or has engaged in dishonest or
unethical practices in the securities business or has taken unfair advantage of a customer.
(1) The commissioner, in issuing an order under this
subsection may impose an administrative assessment of up to ten
thousand dollars for a single violation or of up to fifty
thousand dollars for multiple violations in a single proceeding
or a series of related proceedings. Each act or omission that
provides a basis for issuing an order under this subsection shall
constitute a separate violation.
(2) For purposes of determining the amount of administrative
assessment to be imposed in an order issued under this
subsection, the commissioner shall consider:
(i) The circumstances, nature, frequency, seriousness,
magnitude, persistence and willfulness of the conduct
constituting the violation;
(ii) The scope of the violation, including the number of
persons in and out of this state affected by the conduct
constituting the violation;
(iii) The amount of restitution or compensation that the
violator has made and the number of persons in this state to whom
the restitution or compensation has been made;
(iv) Past and concurrent conduct of the violator that has
given rise to any sanctions or judgment imposed by, or plea of
guilty or nolo contendere or settlement with, the commissioner or
any securities administrator of any other state or other country, any court of competent jurisdiction, the securities and exchange
commissioner, the commodity futures trading commission, any other
federal or state agency or any national securities association or
national securities exchange as defined in the Securities
Exchange Act of 1934 (48 Stat. 88a, 15 U.S. C. 78A et seq.);
(v) Any other factor that the commissioner finds 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 act.
(3) An administrative assessment imposed by an order issued
under this subsection is not mutually exclusive of any other
remedy available under this act.
(4) The commissioner shall not impose an administrative
assessment with respect to any public proceeding which was
instituted prior to the date of enactment of this section.
§32-4-409. Criminal penalties.
(a) Any person who willfully violates any provision of this
chapter, except section 404, or who willfully violates any rule
or order under this chapter, or who willfully violates section
404 knowing the statement made to be false or misleading in any
material respect, shall be guilty of a felony, and, upon
conviction thereof, shall be fined not more than five fifty
thousand dollars, or imprisoned in the penitentiary not less than
one nor more than three years, or both fined and imprisoned; but no person may be imprisoned for the violation of any rule or
order if he or she proves that he or she had no knowledge of the
rule or order. No indictment may be returned under this chapter
more than five years after the alleged violation.
(b) The commissioner may refer such evidence as is available
concerning violations of this chapter or of any rule or order
hereunder to the proper prosecuting attorney, who may, with or
without such a reference, institute the appropriate criminal
proceedings under this chapter.
(c) Nothing in this chapter limits the power of the state to
punish any person for any conduct which constitutes a crime by
statute or at common law.
§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 notice
filings and 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 public inspection.
(c) The information contained in or filed with any
registration statement, application or report may be made
available to the public under rules prescribed by the commissioner.
(d) Upon request and at such reasonable charges as he or she
prescribes, the commissioner shall furnish to any person
photostatic or other copies (certified under his or her 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 or her discretion may honor
requests from interested persons for interpretative opinions.
Copies of the opinions shall be filed in a special file
maintained for that purpose and shall be public records available
for public inspection. The commissioner shall charge a one
hundred-dollar fee for each interpretative opinion.
§32-4-414. Scope of the chapter and service of process.
(a) Sections 101, 201(a), 301, 405 and 410 apply to persons
who sell or offer to sell when (1) an offer to sell is made in
this state, or (2) an offer to buy is made and accepted in this
state.
(b) Sections 101, 201(a) and 405 apply to persons who buy or
offer to buy when (1) an offer to buy is made in this state, or
(2) an offer to sell is made and accepted in this state.
(c) For the purpose of this section, an offer to sell or to buy is made in this state, whether or not either party is then
present in this state, when the offer: (1) Originates from this
state; or (2) is directed by the offeror to this state and
received at the place to which it is directed (or at any post
office in this state in the case of a mailed offer).
(d) For the purpose of this section, an offer to buy or to
sell is accepted in this state when acceptance: (1) Is
communicated to the offeror in this state; and (2) has not
previously been communicated to the offeror, orally or in
writing, outside this state; and acceptance is communicated to
the offeror in this state, whether or not either party is then
present in this state, when the offeree directs it to the offeror
in this state reasonably believing the offeror to be in this
state and it is received at the place to which it is directed (or
at any post office in this state in the case of a mailed
acceptance).
(e) An offer to sell or to buy is not made in this state
when (1) the publisher circulates or there is circulated on his
or her behalf in this state any bona fide newspaper or other
publication of general, regular and paid circulation which is not
published in this state, or which is published in this state but
has had more than two thirds of its circulation outside this
state during the past twelve months, or (2) a radio or television
program originating outside this state is received in this state.
(f) Sections 102 and 201(c), as well as section 405 so far
as investment advisers are concerned, apply when any act
instrumental in effecting prohibited conduct is done in this
state, whether or not either party is then present in this state.
(g) Every person making a notice filing and every applicant
for registration under this chapter and every issuer which
proposes to offer a security in this state through any person
acting on an agency basis in the common-law sense shall file with
the commissioner, in such form as he or she by rule prescribes,
an irrevocable consent appointing the commissioner or his or her
successor in office to be his or her attorney to receive service
of any lawful process in any noncriminal suit, action or
proceeding against him or her or his or her successor, executor
or administrator which arises under this chapter or any rule or
order hereunder after the consent has been filed, with the same
force and validity as if served personally on the person filing
the consent. A person who has filed such a consent in connection
with a previous registration need not file another. Service may
be made by leaving a copy of the process in the office of the
commissioner, but it is not effective unless: (1) The plaintiff,
who may be the commissioner in a suit, action or proceeding
instituted by him, forthwith sends notice of the service and a
copy of the process by registered or certified mail to the
defendant or respondent at his or her last address on file with the commissioner; and (2) the plaintiff's affidavit of compliance
with this subsection is filed in the case on or before the return
day of the process, if any, or within such further time as the
court allows.
(h) When any person, including any nonresident of this
state, engages in conduct prohibited or made actionable by this
chapter or any rule or order hereunder, and he or she has not
filed a consent to service of process under subsection (g) of
this section and personal jurisdiction over him or her cannot
otherwise be obtained in this state, that conduct shall be
considered equivalent to his or her appointment of the
commissioner or his or her successor in office to be his or her
attorney to receive service of any lawful process in any
noncriminal suit, action or proceeding against him or her or his
or her successor, executor or administrator which grows out of
that conduct and which is brought under this chapter or any rule
or order hereunder, with the same force and validity as if served
on him or her personally. Service may be made by leaving a copy
of the process in the office of the commissioner, and it is not
effective unless (1) the plaintiff, who may be the commissioner
in a suit, action or proceeding instituted by him, forthwith
sends notice of the service and a copy of the process by
registered or certified mail to the defendant or respondent at
his or her last-known address or takes other steps which are reasonably calculated to give actual notice, and (2) the
plaintiff's affidavit of compliance with this subsection is filed
in the case on or before the return day of the process, if any,
or within such further time as the court allows.
(i) When process is served under this section, the court, or
the commissioner in a proceeding before him, shall order such
continuance as may be necessary to afford the defendant or
respondent reasonable opportunity to defend.
NOTE: The purpose of this bill is to update and extend
existing securities statutes. The bill permits financial
institutions to act in the capacity of broker-dealers, agents or
investment brokers. The bill also increases certain fees and
penalties.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
§32-3-304a and §32-4-407a are new; therefore, strike- throughs and underscoring have been omitted.
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