CHAPTER 245
HB 716-FN – FINAL VERSION
04Jan2006… 0045h
04/20/06 1716s
11May2006… 2241eba
2006 SESSION
06/03
HOUSE BILL 716-FN
This bill:
I. Expands the definition of “issuer-dealer.”
II. Defines fraudulent or deceptive devices in sales or purchases of securities.
III. Expands unlawful activities to include manipulative, deceptive, or other devices.
IV. Makes changes to the requirements for securities licensing.
V. Establishes additional licensing requirements for issuer-dealers.
VI. Requires investment adviser licensees to keep files of complaints and litigation for the secretary of state to inspect.
VII. Requires examination of an issuer-dealer’s accounts within 4 years of licensing.
VIII. Clarifies the exemption for isolated sales of securities from regulation.
IX. Establishes general standards of conduct in securities offerings.
X. Permits the secretary of state to appoint deputy directors.
XI. Clarifies the authority and jurisdiction of the secretary of state over securities regulation.
XII. Clarifies when an offer to buy or sell is made.
XIII. Changes fees for securities licenses and filings.
XIV. Adds a penalty for late notice filings.
XV. Makes the secretary of state a member of the deferred compensation commission, replacing the director of the office of securities regulation.
This bill is a request of the secretary of state.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
04Jan2006… 0045h
04/20/06 1716s
11May2006… 2241eba
05-0690
06/03
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Six
AN ACT relative to securities regulation.
Be it Enacted by the Senate and House of Representatives in General Court convened:
245:1 “Issuer-Dealer” Expanded. RSA 421-B:2, XIII-a is repealed and reenacted to read as follows:
XIII-a. “Issuer-dealer” means any person including, but not limited to, a corporation, partnership, limited liability company, association, joint stock company, trust where the interests of the beneficiaries are evidenced by a security, unincorporated organization, government, political subdivision of a government, or any other entity, organized in this state or having its principal office in this state, and issuing its own securities for sale directly to any member of the general public who is not a general partner, executive officer, manager, or director of the issuer.
245:2 Sales and Purchases; Fraudulent or Deceptive Device. Amend RSA 421-B:3 to read as follows:
421-B:3 Sales and Purchases.
I. It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly:
[I.] (a) To employ any device, scheme, or artifice to defraud;
[II.] (b) To 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
[III.] (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
II. For purposes of this section, a fraudulent or deceptive device or contrivance shall include, but shall not be limited to:
(a) Representing in the offer or sale of securities, in writing or orally, that there is a guarantee against risk or loss.
(b) Inducing excessive trading in a customer’s account, or inducing trading beyond that customer’s known financial resources.
(c) Effecting transactions in the account of a customer without his or her knowledge or maintaining discretionary accounts without written authorization.
245:3 Unlawful Activities. Amend RSA 421-B:5, I and II to read as follows:
I. Effecting any transaction in a security which involves no change in the beneficial ownership thereof, or entering any order or orders for the purchase or sale of any security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale or purchase of the security, have been or will be entered by or for the same or affiliated persons, for the purpose of creating a false or misleading appearance of active trading in the security or a false or misleading appearance with respect to the market for the security[;].
II. Effecting, alone or with one or more other persons, a series of transactions in any security creating actual or apparent active trading in the security or raising or depressing the price of the security, for the purpose of inducing the purchase or sale of the security by others[; or ].
245:4 New Paragraphs; Unlawful Activities Expanded. Amend RSA 421-B:5 by inserting after paragraph III the following new paragraphs:
IV. Any act of any broker-dealer designed to effect with or for any customer’s account, in respect to which such broker-dealer or his or her agent or employee is vested with any discretionary power, any transaction for the purchase or sale of a security unless:
(a) Immediately after effecting such transaction such broker-dealer makes a record of such transaction, which record includes:
(1) The name of such customer.
(2) The name, amount, and price of the security.
(3) The date and time when such transaction took place.
(b) Such broker-dealer sends each month to each customer, in whose account such broker-dealer exercises any discretionary authority, an itemized statement showing the funds and securities in the custody or possession of the broker-dealer at the end of such period, and all debits, credits, and transactions in such client’s account during such period.
V. Using information in violation of Rule 10b-5 of the Securities Exchange Act of 1934 about an issuer, learned from the issuer’s officers, directors, or key employees, which is not generally available to the public and which would significantly affect the market price of the issuer’s securities for personal benefit, directly or indirectly, in the offer, sale, or purchase of the issuer’s securities, as a basis for making a recommendation regarding a security.
VI. Creating an atmosphere of false supply or demand in a market for publicly traded securities or engaging in market manipulations.
VII. Creating unreasonable delays in delivering securities.
VIII. Representing that securities will be listed on a national exchange or that application for listing will be made, without any basis in fact for such representation.
IX. Selling or soliciting the purchase of one security from a market in publicly traded securities conditioned upon the customer’s agreement to purchase another security.
245:5 Licensing Requirements; Securities in or From This State. Amend RSA 421-B:6, I-a and I-b to read as follows:
I-a. In connection with an offering of securities made pursuant to section 18(b)(4)(D) of the Securities Act of 1933 that requires only a notice filing in this state pursuant to RSA 421-B:11, I-a(e), a completed application for licensure as an issuer-dealer, an agent of an issuer-dealer and for an agent of the issuer, or authorization without licensure for an officer or director [pursuant to] described in RSA 421-B:2, II(e), shall be filed with the secretary of state no later than 15 days after the first sale of securities in or from this state, and the license or authorization will become effective without further action or review by the secretary of state. Provided that the application is complete and accompanied by the appropriate fees, the effective date of the license or authorization shall for all purposes be the date of first sale.
I-b. The issuer-dealer applications referred to in paragraph I-a shall set forth and be limited to the name of the issuer, the state of the issuer’s formation, a description of the securities sold, the date of first sale of such securities in or from this state, the name or names of the representative or representatives of the issuer who are engaged in the sale of the securities, and confirmation that no agent has been convicted of a felony. The applications need only be signed by that person or those persons who are authorized to do so by the issuer’s board of directors or other governing body. At the same time, the issuer shall submit a consent to service of process pursuant to RSA 421-B:30, VII, and shall pay the fees required by RSA 421-B:31. Each application shall be on a form prescribed by the secretary of state, consistent with the provisions of this section.
245:6 New Paragraph; Issuer-Dealer License. Amend RSA 421-B:6 by inserting after paragraph II the following new paragraph:
II-a. No person shall be issued an issuer-dealer license unless at least one person engaged in offering securities for sale on behalf of the issuer-dealer is licensed as an issuer-dealer agent.
245:7 Licensing. Amend RSA 421-B:6, V(c) to read as follows:
(c) Each broker-dealer branch office within this state shall be supervised by [an on-site] a manager who is located in a New Hampshire office of the broker-dealer and who shall have qualified as a principal by passing either the National Association of Securities Dealers Series 8 (now 9 and 10) examination(s) or a principal’s examination applicable to the licensee’s business conducted at that location. Administration of examinations shall be conducted by the National Association of Securities Dealers. Each broker-dealer branch office within this state that is not supervised by an on-site manager who shall have qualified as a principal shall disclose in any telephone directory listing, business card, or letterhead the address and telephone number of the New Hampshire office of the broker-dealer from which individuals conducting business from such location are directly supervised.
245:8 Licensing Procedure; Supervisor. Amend RSA 421-B:7, I to read as follows:
I.(a) A broker-dealer, issuer-dealer, agent, or investment adviser may obtain an initial or renewal license by filing with the secretary of state or his or her designee an application together with the fees required by RSA 421-B:31 and a consent to service of process pursuant to RSA 421-B:30, VII, and paying any reasonable costs charged by the designee for processing such filings. The consent to service of process for investment adviser applicants shall consist of the appropriate execution page of the Form ADV. The application shall be on a form prescribed by the secretary of state and shall contain whatever information the secretary of state requires concerning such matters as, but not limited to, the applicant’s form and place of organization; the applicant’s proposed method of doing business; the qualifications and business history of the applicant; in the case of a broker-dealer, issuer-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, issuer-dealer, or investment adviser; and, in the case of an investment adviser, Form ADV, specimens of investment adviser contracts, and the qualifications and business history of any employee; 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 the applicant’s financial condition and history. The secretary of state may by rule or order require an applicant for initial license to publish an announcement of the application in one or more specified newspapers published in this state. If no denial order is in effect and no proceeding is pending under RSA 421-B:10, licensing becomes effective at noon of the thirtieth day after an application is filed. The secretary of state 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 filing of any amendment.
(b)(1) No person shall be issued a broker-dealer license unless one person occupying a supervisory position has successfully passed a principal examination appropriate for the business conducted by the broker-dealer and has actively engaged in the securities business as a licensed principal in a similar supervisory capacity for a minimum of 3 of the preceding 5 years.
(2) No person shall be issued a broker-dealer license if any control person of such person was an officer, supervisor, or owner of 10 percent or more of the securities of any firm liquidated under the Securities Investor Protection Act of 1970.
245:9 Licensing; Additional Documents. Amend RSA 421-B:7, I-a(c) to read as follows:
(c)(1) Any documents or fees required to be filed with the secretary of state that are not permitted to be filed with or cannot be accepted by IARD shall be filed directly with the secretary of state. The application shall not be complete until all documents and fees required by this chapter and rules adopted thereunder have been submitted through the IARD, where possible, or submitted to and received directly by the secretary of state.
(2) The following documents shall be required to be filed directly with the secretary of state:
(A) A financial statement which shall be audited, or, in the instance where no audited financial statement is in existence, certified by the appropriate person as presenting fairly in all material respects, the financial condition of the firm.
(B) A copy of the applicant’s articles of incorporation, if a corporation, or other business formation documents, if the applicant is any other form of business entity.
(C) Until IARD provides for the filing of the second part of Form ADV, currently designated Part II, the second part of Form ADV.
245:10 New Paragraphs; Licensing; Issuer-Dealer. Amend RSA 421-B:7 by inserting after paragraph VII the following new paragraphs:
VIII. Except for applicants subject to issuer-dealer licensing under RSA 421-B:6, I-a and I-b:
(a) Applications for an issuer-dealer’s license in New Hampshire may be obtained from and shall be filed at the office of the secretary of state.
(b) Each applicant for a license under this paragraph shall make application on the appropriate state of New Hampshire form and shall supply the following information:
(1) Name, address, and telephone number.
(2) Date and place of incorporation or organization, and type of organization.
(3) Principals, officers, directors, or managing agents.
(4) References or letters of recommendation.
(5) General business plan.
(6) Type and amount of securities to be sold.
(7) Signature of the general partner, or in the case of a corporation, the person or persons so authorized by corporate resolution.
(c) In addition, each applicant shall submit a requisition for license of issuer-dealers agents on the appropriate form and shall supply the following information:
(1) Name of corporation.
(2) Name and address of all persons being appointed as issuer-dealer agents.
(3) Signature of principal.
(d) Each applicant shall submit to the department of safety with the requisite fees a completed criminal records release authorization form, signed by the applicant under penalty of perjury, notarized, and releasing criminal record information to the secretary of state.
(e) In addition to the forms required by subparagraphs (b), (c), and (d), the application for an issuer-dealer’s license shall consist of:
(1) The articles of incorporation and by-laws of the issuer-dealer or the partnership agreement, certified by the appropriate person as complete current copies of the same.
(2) A financial statement which shall be audited or, if no audited financial statement is in existence, certified by the appropriate person as a complete, accurate pro forma financial statement.
(3) Copies of all circulars, prospectuses, or memoranda of the issue.
(4) The appropriate fee pursuant to RSA 421-B:31.
(f) Each applicant for licensure as an issuer-dealer shall appoint the secretary of state and his or her successors in office as its agent to receive service of all legal process issued against it in any civil action or proceeding in this state, and shall agree that process so served shall be valid and binding upon said applicant. The appointment shall be irrevocable. It shall bind said applicant and any successor in interest as to the assets or liabilities of said applicant, and it shall remain in effect as long as there are outstanding in this state any obligations or liability, or the potential for obligations or liability, resulting from the activities creating the need for the license.
(g) The secretary of state shall issue an issuer-dealer license to the applicant if the following criteria have been met:
(1) Timely filing of an application with the secretary of state complete in all respects.
(2) Demonstration by the applicant of complete fulfillment of the requirements of RSA 421-B.
(h) If an application for an original issuer-dealer license in the state of New Hampshire fails to meet the requirements of RSA 421-B, the secretary of state shall deliver to the applicant a written denial of the application, specifying the requirement which the applicant failed to meet and how the applicant is deficient. The notice of denial shall be issued according to procedures set forth in this chapter.
IX.(a) Except for applicants subject to issuer-dealer licensing under RSA 421-B:6, I-a and I-b, applications for license as an issuer-dealer agent may be obtained and shall be filed at the office of the secretary of state.
(b) Each applicant for a license under this paragraph shall provide a personal statement of agent on the appropriate state of New Hampshire form and shall supply the following:
(1) Name, address, and date of birth.
(2) Past and present occupations.
(3) Name and address or employer, whether or not a member of the firm, and names of other firm partners.
(4) Information regarding securities experience, employment, and licenses held, applied for, or denied.
(5) A consent to service of process appointing the secretary of state as agent for service of process.
(6) Signature of applicant.
(c) The secretary of state shall issue an issuer-dealer agent’s license to the applicant if the following criteria have been met:
(1) Timely filing of an application with the secretary of state complete in all respects.
(2) Demonstration by the applicant of complete fulfillment of the requirements of this chapter.
(d) If an application for an original issuer-dealer agent’s license in the state of New Hampshire fails to meet the requirements of RSA 421-B, the secretary of state shall deliver to the applicant a written denial of the application, specifying the requirement which the applicant failed to meet and how the applicant is deficient. The notice of denial shall be issued according to procedures set forth in this chapter.
X. Except for applicants subject to issuer-dealer licensing under RSA 421-B:6, I-a and I-b:
(a) Application for renewal of an issuer-dealer license shall be made by December 31 of each year to the secretary of state and shall include the fee prescribed by RSA 421-B:31.
(b) Applications for renewal of an issuer-dealer agent’s license in New Hampshire shall be made by December 31 of each year to the secretary of state and shall include the fee prescribed by RSA 421-B:31.
(c) The secretary of state shall notify the applicant in writing as to how the renewal application is deficient. The applicant may then correct the deficiency or file with the secretary of state a written request for a hearing.
(d) The secretary of state shall issue a renewal issuer-dealer or issuer-dealer agent’s license to the applicant if the following criteria have been met:
(1) Timely filing of an application with the secretary of state complete in all respects; and
(2) Demonstration by the applicant of complete fulfillment of the requirements of this chapter.
(e) The secretary of state may, at his or her discretion, issue duplicate or replacement issuer-dealer or issuer-dealer agent’s licenses upon:
(1) A written request therefor signed by the applicant.
(2) Proof that good cause exists for the issuance of the duplicate or replacement license.
XI.(a) The suspension of an issuer-dealer’s or issuer-dealer agent’s license shall temporarily withdraw the authority to conduct an issuer-dealer’s or issuer-dealer agent’s business in New Hampshire until the time specified in the order of suspension. The authority to conduct an issuer-dealer’s or issuer-dealer agent’s business in New Hampshire shall be recovered only by complying with all of the requirements of this section regarding the renewal of an issuer-dealer’s or issuer-dealer agent’s license and the payment of any penalties assessed in connection with the cause for suspension.
(b)(1) Any person holding an issuer-dealer’s or issuer-dealer agent’s license may voluntarily return that license to the secretary of state. The return of such license shall be accompanied by the licensee’s signed, written statement as to why the license is being voluntarily returned to the secretary of state. The voluntary surrender of an issuer-dealer’s or issuer-dealer agent’s license shall serve to withdraw the authority for the issuer-dealer or issuer-dealer agent to conduct an issuer-dealer’s or issuer-dealer agent’s business in New Hampshire.
(2) Voluntary return of an issuer-dealer’s or issuer-dealer agent’s license shall not be permitted if there exists, at the time the license is presented to the secretary of state, any cause for involuntary revocation or suspension of the license, unless the licensee presenting the license shall state in writing that the voluntary return of the license is in lieu of proceedings relating to the involuntary revocation or suspension of the license to do business as an issuer-dealer or issuer-dealer agent in New Hampshire.
(c) Except as authorized by statute, an issuer-dealer’s or issuer-dealer agent’s license shall not be revoked or suspended except in accordance with procedures set forth in this chapter.
(d) Any issuer-dealer or issuer-dealer agent whose license has been revoked or suspended shall, within 5 days after the date of the order of revocation or suspension, return the license to the secretary of state.
245:11 New Subparagraphs; Records Required; Complaints; Litigation. Amend RSA 421-B:8, XII(c) by inserting after subparagraph (16) the following new subparagraphs:
(17) A separate file on all written complaints of customers and action taken by the investment adviser, if any, or a separate record of such complaints and a clear reference to the files containing the correspondence connected with such complaints as maintained in such office. A “complaint” shall be deemed to mean any written statement of a customer or any person acting on behalf of a customer alleging a grievance involving the activities of those persons under the control of the investment adviser in connection with the solicitation or execution of any transaction or the disposition of securities or funds of that customer.
(18) A litigation file open to inspection by the secretary of state documenting any criminal or civil actions filed in any state or federal court against the investment adviser’s branch office or against any of its personnel with respect to a securities transaction and the disposition of any such litigation.
245:12 Post-Licensing Provisions; Examinations; Issuer-Dealers Changed. Amend the introductory paragraph of RSA 421-B:9, I to read as follows:
I. For the purpose of determining the financial condition, fulfillment of its contractual obligations, and compliance with the law, whenever the secretary of state shall deem it expedient, the secretary of state shall examine, either in person or by some examiner duly authorized, the affairs, transactions, accounts, records, documents, and assets of each licensed broker-dealer, investment adviser, or issuer-dealer as to any matter relevant to the financial affairs or obligations of the broker-dealer, investment adviser, or issuer-dealer or any other fact relative to its business methods, management, and [its] dealings with clients, as often and to the extent deemed advisable. Except as otherwise provided, the secretary of state shall examine each domestic broker-dealer[,] and investment adviser[, or issuer-dealer] at least once every 4 years [and], domestic branches of broker-dealers at least once every 6 years, and each issuer-dealer at least once within 4 years of issuance of the issuer-dealer’s license. Examination of an alien broker-dealer, investment adviser, or issuer-dealer shall be limited to its broker-dealer, investment adviser, or issuer-dealer transactions, assets, trust deposits, and affairs in the United States except as otherwise required by the secretary of state.
245:13 Registration Requirement and Notice Filing of Securities; Securities and Exchange Commission Filing Deleted. Amend RSA 421-B:11, I-b(d) to read as follows:
(d) Qualification for any of the notice filing provisions of RSA 421-B:11, I-a is predicated upon compliance with federal law, and associated regulations, cited in each provision[, including but not limited to the timely filing of Form D with the Securities and Exchange Commission].
245:14 Provisions Applicable to Registration Generally; Reports to Shareholders and Others. Amend RSA 421-B:15, II-a to read as follows:
II-a.(a) Issuers of securities registered under this chapter shall provide quarterly financial reports within 60 days of the end of each quarter to their shareholders, partners, and members. Such quarterly reports need not be independently audited.
(b) The requirements of subparagraph (a) shall not apply to issuers of securities required to file reports pursuant to section 13 or section 15 of the federal Securities Exchange Act of 1934.
245:15 Exemptions; Isolated Sales. RSA 421-B:17, II(a) is repealed and reenacted to read as follows:
(a)(1) Any non-issuer transactions, whether or not effected by or through a broker-dealer resulting in the completion of 5 or fewer sales of securities of a single issuer by the same non-issuer within any period of 12 consecutive months. The secretary of state, on a case-by-case basis, may by rule or order, retroactively or prospectively, increase the number of persons to whom sales may be made under this exemption.
(2) Any sale of securities by an issuer, if:
(A) The number of purchasers of securities of the issuer, in all jurisdictions combined, does not in consequence of the sale, exceed 10 in number during any 12 consecutive months and 25 in number during the issuer’s existence.
(B) The securities sold in reliance on this subparagraph have not been offered to the public by any form of general solicitation or general advertisement.
(C) A commission or remuneration is not paid or given, directly or indirectly, to a person other than a broker-dealer registered under this chapter or an agent registered under this chapter for soliciting a prospective purchaser.
(D) Except for sales of securities registered under the Securities Act of 1933 or exempted by section 3(b) of that act, the seller reasonably believes that all buyers are purchasing for investment.
(3) For purposes of subparagraph (2):
(A) “General solicitation” and “general advertisement” includes, but is not limited to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. General solicitation and general advertisement shall not include communications and disclosure material specifically directed to persons with whom the seller or its representatives had a substantial and pre-existing relationship.
(B) The computation of the number of sales that may be made under this exemption shall include sales made under RSA 421-B:17,II(k), but shall not include sales made under any other exemption provided for in RSA 421-B:17 or sales made pursuant to 17 C.F.R. section 230.506
(C) The secretary of state, on a case-by-case basis, may by rule or order increase the number of persons to whom sales may be made under this exemption.
245:16 Exemptions; Unadvertised Securities. RSA 421-B:17, II(k) is repealed and reenacted to read as follows:
(k) Any offer or sale of securities, including offers and sales pursuant to preorganization subscriptions for the securities of an issuer to be formed, by a corporation, limited partnership, registered limited liability partnership, or limited liability company if after giving effect to the sale, the aggregate number of holders of all of the issuer’s securities, all of whom shall have purchased for investment, does not exceed 10, exclusive of persons designated in subparagraph (g), provided that no commission or other remuneration has been paid and neither the issuer nor any person acting on its behalf offers or sells the securities by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. All sales pursuant to this subparagraph must be consummated within 60 days after the date of incorporation or formation of the issuer. The secretary of state may by rule or order increase the number of persons to whom sales may be made under this exemption.
245:17 Exemptions; Certain Securities Sold in Compliance with Federal Law. RSA 421-B:17, II(r) is repealed and reenacted to read as follows:
(r)(1) Any offer or sale of securities offered or sold in compliance with 17 C.F.R. sections 230.501-230.503 and 230.505, which satisfies the following further conditions and limitations:
(A) No commission, fee, or other remuneration shall be paid or given, directly or indirectly, to any person for soliciting any prospective purchaser in this state unless such person is appropriately registered as a broker-dealer or agent of a broker-dealer in this state.
(B) The issuer shall file with the secretary of state no later than 10 days prior to the receipt of consideration or the delivery of a subscription agreement by an investor in this state which results from an offer being made in reliance upon this exemption:
(i) A notice on Securities and Exchange Commission Form D (17 C.F.R. section 239.500).
(ii) All information furnished by the issuer to the offeree.
(iii) A consent to service of process pursuant to RSA 421-B:30.
(iv) A filing fee in the amount set forth at RSA 421-B:31, I(h).
(v) The federal Form D at such other times and in the form required under 17 C.F.R. section 230.503 to be filed with the Securities and Exchange Commission.
(C) In all sales to persons who are not “accredited investors,” as defined by 17 C.F.R. section 230.501(a), in this state, the following conditions shall be satisfied or the issuer and any person acting on its behalf shall believe and have reasonable grounds to believe, after making reasonable inquiry and obtaining written representations from the investor, that the following conditions have been satisfied:
(i) The investment is suitable for the purchaser upon the basis of the facts, if any, disclosed by the purchaser as to the purchaser’s other security holdings, financial situation, and needs. For the purpose of this condition only, it may be presumed that if the investment does not exceed 10 percent of the investor’s net worth exclusive of home, home furnishings, and automobiles it is suitable; or
(ii) The purchaser, either alone or with his or her purchaser representative has such knowledge and experience in financial and business matters that he or she is or they are capable of evaluating the merits and risks of the prospective investment.
(D) In those instances where sales are made to persons who are not “accredited investors” as defined by 17 C.F.R. section 230.501(a), where offering documents do not meet the disclosure requirements of 17 C.F.R. section 230.502(b), the secretary of state shall require additional disclosure or impose additional conditions to insure said disclosure requirements are met.
(E) The exemption authorized by this subparagraph shall be known and may be cited as the “uniform limited offering exemption.”
(2) No exemption under this subparagraph shall be available for transactions involving the securities of any issuer if any part of RSA 421-B:17-a, I applies to any of the parties.
245:18 New Section; Securities Offerings; General Standards of Conduct. Amend RSA 421-B by inserting after section 17 the following new section:
421-B:17-a Registered Securities Offerings and Filings for Exemption from Registration; General Standards of Conduct and Disclosure. The following standards shall apply to all registered offerings of securities and to any exempt offerings which require a filing with the secretary of state other than the filing of the notice described in RSA 421-B:11, I-a(e), except as provided by RSA 421-B:6, I-b:
I. Additional disclosures shall be made in offering documents or registration statements, or an application for registration or a filing for exemption from the registration requirement shall be denied, or further conditions for an exemption or registration shall be imposed, if any of the persons, other than persons licensed in this state, issuing or offering securities in this state:
(a) Has filed a registration statement which is the subject of a currently effective registration stop order entered pursuant to any state’s securities law within 5 years prior to the instant securities offering in this state.
(b) Has been convicted within 5 years prior to making the instant offer of a security in this state of:
(1) Any felony or misdemeanor in connection with the offer, purchase, or sale of any security.
(2) Any felony involving fraud or deceit, including but not limited to:
(A) Forgery.
(B) Embezzlement.
(C) Obtaining money under false pretenses.
(D) Larceny.
(E) Conspiracy to defraud.
(c) Is currently subject to a material administrative enforcement order or judgment entered by a state’s securities administrator within 5 years prior to offering securities in this state or is subject to any state’s administrative enforcement order or judgment in which fraud or deceit, including, but not limited to, making untrue statements of material facts and omitting to state material facts, was found and the order or judgment was entered within 5 years prior to offering securities in this state.
(d) Is subject to a material administrative enforcement order or judgment which prohibits, denies, or revokes the use of any exemption from registration in connection with the offer, purchase, or sale of securities.
(e) Is currently subject to any order, judgment, or decree of any court of competent jurisdiction temporarily, preliminarily, or permanently restraining or enjoining such party from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of any false filing with the state entered within 5 years prior to offering securities in this state.
II. Offering documents filed with the secretary of state shall be delivered to prospective investors at least 48 hours before investors commit to the investment, provided that the secretary of state, for good cause shown, shall suspend this requirement by order.
III. In addition to the disclosures required pursuant to RSA 421-B, additional disclosures shall be included in any offering document for a registered offering of securities pursuant to the policies and guidelines promulgated by the North American Securities Administrators Association (NASAA) for the benefit of investors to provide full and fair disclosure of a particular investment opportunity to investors. In addition, such offerings shall be subject to any further standards, including suitability standards, promulgated by NASAA for such offerings.
245:19 Administration; Position Changed; Authority. Amend RSA 421-B:21, I to read as follows:
I. This chapter shall be administered by the secretary of state who may appoint a deputy[, a] secretary of state or designee[, or a] who shall serve as director and who [shall] may be a classified or an unclassified employee whose salary shall be that of or comparable to that of a deputy secretary of state, to administer the provisions of this chapter. The secretary of state may also appoint deputy directors who shall perform such duties as may be assigned by the secretary of state, deputy secretary of state, or designee, or director, to administer the provisions of this chapter. The secretary of state shall, to the greatest extent practical, physically and substantively consolidate the activities and functions related to corporations, limited partnerships, and other business organizations and entities administered by the department of state with the activities and functions related to the registration of securities.
245:20 New Paragraph; Secretary of State; Authority. Amend RSA 421-B:21 by inserting after paragraph I the following new paragraph:
I-a. Notwithstanding any other provision of law, the secretary of state shall have exclusive authority and jurisdiction:
(a) To register securities.
(b)(1) To license the following:
(A) Broker-dealers.
(B) Investment advisers.
(C) Issuer-dealers.
(D) Agents.
(E) Investment adviser representatives.
(2) The exclusive authority and jurisdiction to issue licenses pursuant to RSA 421-B:21, I-a(b) shall not be read to limit the authority of the department of insurance to license sellers of products where licensure is required both by RSA 421-B and Title XXXVII.
(c) Pursuant to RSA 421-B:28, III, together with the attorney general, to issue, amend, or rescind such orders as are reasonably necessary to carry out the provisions of this chapter.
(d) To bring administrative actions to enforce the securities law.
(e) To investigate and impose penalties for violations of the securities laws, including but not limited to:
(1) Revoking, suspending, or denying licenses and registrations.
(2) Fines.
(3) Rescission, restitution, or disgorgement.
(f) Together with the attorney general, to bring actions pursuant to RSA 421-B:23, I(b) and (c).
(g) To investigate conduct that would be an unfair or deceptive act or practice under RSA 358-A and that is subject to the jurisdiction of the director of securities regulation pursuant to RSA 358-A:3, I.
245:21 New Paragraph; Offer to Sell or Buy not Made. Amend RSA 421-B:30 by inserting after paragraph V the following new paragraph:
V-a.(a)(1) Broker-dealers, investment advisers, broker-dealer agents, and investment adviser representatives who use the Internet to distribute information on available products and services through certain communications made on the Internet directed generally to anyone having access to the Internet, and transmitted through postings on bulletin boards, displays on “home pages,” or similar methods referred to as “Internet communications,” shall not be deemed to be making an offer to buy or sell in this state for purposes of RSA 421-B:3; RSA 421-B:6, I; RSA 421-B:20; and RSA 421-B:25 based solely on that fact if the following conditions are observed:
(A) The Internet communication contains a legend in which it is clearly stated that:
(i) The broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative in question may only transact business in this state if first licensed, excluded, or exempted from state broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative licensing requirements, as may be.
(ii) Follow-up, individualized responses to persons in this state by such broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative that involve either the effecting of or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, as may be, will not be made absent compliance with state broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative licensing requirements, or an applicable exemption or exclusion.
(B) The Internet communication contains a mechanism, including and without limitation, technical “firewalls” or other implemented policies and procedures, designed reasonably to ensure that prior to any subsequent, direct communication with prospective customers or clients in this state, said broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative is first licensed in this state or qualifies for an exemption or exclusion from such requirement. Nothing in this paragraph shall be construed to relieve a state licensed broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative from any applicable securities registration requirement in this state.
(C) The Internet communication does not involve either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, as may be, in this state over the Internet, but is limited to the dissemination of general information on products and services.
(D) In the case of a broker-dealer agent or investment adviser representative:
(i) The affiliation with the broker-dealer or investment adviser of the broker-dealer agent or investment adviser representative is prominently disclosed within the Internet communication.
(ii) The broker-dealer or investment adviser with whom the broker-dealer agent or investment adviser representative is associated retains responsibility for reviewing and approving the content of any Internet communication by a broker-dealer agent or investment adviser representative.
(iii) The broker-dealer or investment adviser with whom the broker-dealer agent or investment adviser representative is associated first authorizes the distribution of information on the particular products and services through the Internet communication.
(iv) In disseminating information through the Internet communication, the broker-dealer agent or investment adviser representative acts within the scope of the authority granted by the broker-dealer or investment adviser.
(2) Subparagraph (a) of this paragraph extends to state broker-dealer, investment adviser, broker-dealer agent, and investment adviser representative registration requirements only, and does not excuse compliance with applicable securities registration, antifraud, or related provisions.
(3) Nothing in this subparagraph shall be construed to affect the activities of any broker-dealer, investment adviser, broker-dealer agent, and investment adviser representative engaged in business in this state that is not subject to the jurisdiction of the secretary of state as a result of the National Securities Markets Improvements Act of 1996, as amended.
(b)(1) An offer of securities by means of the Internet is not subject to the registration and exemption requirements of RSA 421-B:11 where the following conditions apply:
(A) The Internet offer indicates, directly or indirectly, that the securities are not being offered to the residents of this state.
(B) An offer is not otherwise specifically directed to any person in this state by, or on behalf of, the issuer of securities.
(2) Sales of securities that are the subject of an Internet offer are allowed in this state where the following conditions apply:
(A) No sales of the securities shall be made in any state until the offering has been registered and declared effective and the final prospectus or Form U-7 has been delivered to the investor prior to such sale.
(B) The sales are exempt from registration.
245:22 Fees. RSA 421-B:31, I and II are repealed and reenacted to read as follows:
I. Initial fees and fees for amendments shall be as follows:
(a) Broker-dealer’s and investment adviser’s fees
(1) Broker-dealer’s initial license fee $250
(2) Investment adviser’s initial license fee $200
(3) Non-refundable broker-dealer’s and investment adviser’s
application fee $50
(4) Amended dealer’s license fee $100
(5) Non-refundable fee for a federal covered adviser’s initial
notice filing $250
(6) Notice filing amendment fee for a name change of a
federal covered adviser $100
(b) Agent’s fees
(1) Agent’s initial license fee $100
(2) Non-refundable agent’s license application fee $30
(3) Amended agent’s license fee $25
(c) Issuer-dealer’s fees
(1) Issuer-dealer agent’s initial license fee $50
(2) Non-refundable issuer-dealer agent’s application fee $25
(3) Issuer-dealer initial license fee $50
(d) Non-refundable registration fee for offers and sales of each class
of open end mutual funds required to register under RSA 421-B:11, I-b $1,000
(e) Registration fee prior to offers or sales of securities in
this state 2/10 of one percent of
the offering value of the
securities offered in the
registration statement,
provided said fee shall
not be more than $1,050,
plus a $200 non-refundable
examination fee
(f) Fee prior to offers and sales of securities in initial public
offerings in this state under RSA 421-B:17, I(f)(1)(i) $1,000
(g) Non-refundable fee prior to offers or sales of:
(1) Securities under RSA 421-B:17, II(r)
(2) Covered securities of other investment companies under
section 18(b)(2) of the Securities Act of 1933
(3) Non-issuer transactions under section 18(b)(4)(A) of the
Securities Act of 1933--a one-time filing fee $500
(h) Non-refundable fee submitted no later than 15 days after the
first sale for an initial and annual renewal notice filing fee for sales of covered securities
under section 18(b)(4)(D) of the Securities Act of 1933 $500
(i) A copying and printing charge may be assessed per page for
each document
(j) Non-refundable initial notice filing fee prior to offers or sales
of each class of an open end mutual fund under section 18(b)(2) of the
Securities Act of 1933 $1,000
(k) Initial notice filing fee prior to offers or sales of covered
securities under sections18(b)(4)(C) and 18(b)(3) of the
Securities Act of 1933 2/10 of one percent of
the offering value of the
securities offered in the
registration statement,
provided said fee shall
not be more than $1,050,
plus a $200 non-refundable
initial notice fee
II. Renewal fees shall be as follows:
(a) Broker-dealer’s license renewal fee $250
(b) Investment adviser’s license renewal fee $200
(c) Annual notice filing fee for a federal covered adviser $200
(d) Agent’s license renewal fee $100
(e) Issuer-dealer license renewal fee $50
(f) Issuer-dealer agent’s license renewal fee $50
(g) Annual notice filing fee for offers or sales of covered
securities under sections 18(b)(4)(C) and 18(b)(3) of the Securities
Act of 1933 2/10 of one percent of
the offering value of the
securities offered in the
registration statement,
provided said fee shall
not be more than $1,050
(h) Annual non-refundable notice filing fee for offers and sales
of each class of an issuer of open end mutual funds which are covered
securities under section 18(b)(2) of the Securities Act of 1933, due on or before
May 1 of each year $1,000
(i) Annual non-refundable registration fee for each class
of an issuer of open end mutual funds, due on or before May 1
of each year, if required to register under RSA 421-B:11, I-b $1,000
(j) Annual registration fee for securities offered in this state,
due one year from the effective date of registration, and each year
thereafter 2/10 of one percent of
the offering value of the
securities offered in the
registration statement,
provided said fee shall
not be more than $1,050
245:23 Penalty for Late Notice Filing. Amend RSA 421-B:31, IV to read as follows:
IV.(a) Any person who offers or sells securities in New Hampshire under (1) RSA 421-B:12, 13, or 14, where less than the maximum filing fee has been paid in this state, (2) RSA 421-B:17, II(r) [or (h)], (3) a notice filing under section 18(b)(4)(D) of the Securities Act of 1933, or (4) a notice filing under section 18(b) of the Securities Act of 1933 where less than the maximum filing fee has been paid in this state shall file a sales report with the secretary of state. Such reports shall be filed one year from (1) the effective date of the registration or exemption or (2) the date the notice filing under section 18(b) of the Securities Act of 1933 was made with the secretary of state, and a final sales report shall be filed within 60 days of the termination of the offering. The sales report shall indicate the termination date, the total number and amount of sales in this state, and the total number and amount of sales in all jurisdictions. Any person who (1) fails to file a sales report or (2) fails to submit annual audited financial statements to the secretary of state under RSA 421-B:15, II-a shall pay a penalty of $25 for each day of delinquency; provided, however, that the secretary of state may, for good cause shown, abate all or a portion of said delinquency penalty. The provisions of this paragraph shall not apply to federal covered securities pursuant to section 18(b)(2) of the Securities Act of 1933.
(b) Any person who fails to timely file the notice required pursuant to RSA 421-B:11, I-a(e) shall pay a penalty of $500 if the notice filing is delinquent by no more than 90 days or a penalty of $1,000 if the notice filing is delinquent by more than 90 days; provided, however, that if the filing is delinquent by more than one year, the person failing to timely file the required notice may be subject to the provisions of RSA 421-B:23, RSA 421-B:24, RSA 421-B:25, and RSA 421-B:26 for such failure.
245:24 Deputy Directors; Current Employees. The deputy directors authorized by RSA 421-B:21, I shall be current employees of the bureau of securities regulation who shall retain their status as classified employees.
245:25 Public Employees Deferred Compensation Plan; Commission; Membership Changed. Amend RSA 101-B:2, I(e) to read as follows:
(e) The [director of the office of securities regulation, department of] secretary of state, or designee;
245:26 Provisions Applicable to Registration Generally; Mutual Funds; Reference Corrected. Amend RSA 421-B:15, XIV to read as follows:
XIV. All mutual funds doing business in this state offering multiple classes of shares shall register each class individually, and pay the fee set forth in RSA 421-B:31, I[(e)] (d). All mutual funds doing business in this state offering securities through a combined prospectus shall register each portfolio and each class thereof contained in the combined prospectus and pay the fees set forth in RSA 421-B:31, I, unless it can be shown that such securities are specifically exempted from registration under this chapter.
245:27 Registration Requirement and Notice Filing of Securities; Reference Changed. Amend RSA 421-B:11, I-a(b)(4) to read as follows:
(4) The fee required in RSA 421-B:31, I(k) and RSA 421-B:31, II[(f)] (g).
245:28 Registration Requirement and Notice Filing of Securities; Reference Changed. Amend RSA 421-B:11, I-a(d)(5) to read as follows:
(5) The fee required in RSA 421-B:31, I(k) and 421-B:31, II[(f)] (g).
245:29 Repeal. The following are repealed:
I. RSA 421-B:7, IV, relative to the posting of bonds by licensed broker-dealers and investment advisers.
II. RSA 421-B:17, II(h), relative to sales of securities by an issuer to 5 or fewer persons.
245:30 Effective Date. This act shall take effect July 1, 2006.
Approved: June 5, 2006
Effective: July 1, 2006