HB292 (2011) Detail

Relative to securities regulation.


23Feb2011… 0196h





AN ACT relative to securities regulation.

SPONSORS: Rep. Gidge, Hills 24

COMMITTEE: Commerce and Consumer Affairs


This bill makes various changes to securities regulation laws, including increasing criminal penalties.

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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

23Feb2011… 0196h




In the Year of Our Lord Two Thousand Eleven

AN ACT relative to securities regulation.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Definitions. Amend the introductory paragraph of RSA 421-B:2 to read as follows:

421-B:2 Definitions. When used in this chapter, unless the context of the section within which the term is used otherwise requires:

2 Definitions. Amend RSA 421-B:2, IV-b to read as follows:

IV-b. “Bureau” means the bureau of securities regulation within the department of state.

IV-c. “Common enterprise” means an enterprise in which the fortunes of the investor are interwoven with those of either the person offering the investment, a third party, or other investors.

[IV-b.] IV-d. “Complaint” means a written statement submitted within a reasonable time following the incident complained of by a person, association, partnership, corporation, state agency (including the staff of the department) or by any other legal entity that sets forth specific allegations and requests administrative action by the department.

3 New Paragraph; Definitions. Amend RSA 421-B:2 by inserting after paragraph IX-b the following new paragraph:

IX-c. “Investment contract” means an investment in a common enterprise with the expectation of profits to be derived primarily from the efforts of a person other than the investor.

4 Definitions. Amend RSA 421-B:2, XX(a) to read as follows:

XX.(a) “Security” means the investment of money or money’s worth including goods furnished and/or services performed in the risk capital of a venture with the expectation of some benefit to the investor where the investor has no direct control over the investment or policy decisions of the venture. “Security” shall include any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit sharing agreement; membership interest in a limited liability company; partnership interest in a registered limited liability partnership; partnership interest in a limited partnership; collateral trust certificate; preorganization certificate or subscription; transferable shares; investment contract; investment metal contract or investment gem contract; voting trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas or mining right, title or lease or in payments out of production under such a right, 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 for some other specified period.

5 New Paragraph; Definitions. Amend RSA 421-B:2 by inserting after paragraph XXII the following new paragraph:

XXIII. “Willful” or “willfully,” especially in connection with RSA 421-B:24, but not limited thereto, means an intentional act or omission to perform an act in that the person was aware of what he or she was doing or failing to do. However, evil motive, scienter, intent to violate this title, or knowledge that this title was being violated is not required.

6 Sales and Purchases. The introductory paragraph of RSA 421-B:3, II is repealed and reenacted to read as follows:

II. For purposes of paragraph I(c), to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, shall include but not be limited to:

7 Criminal Penalty. Amend RSA 421-B:24 to read as follows:

421-B:24 Criminal Penalty.

I. Any person who willfully, as defined in RSA 421-B:2, XXIII, violates any provisions of RSA 421-B:3, 421-B:3-a, 421-B:4, 421-B:5 or fails to comply with an order from the secretary of state to cease and desist or for an injunction issued pursuant to RSA 421-B:23, or who fails to comply with an order to pay a fine, penalty, rescission, restitution, or disgorgement greater than $10,000 pursuant to RSA 421-B:10, 421-B:23, or 421-B:26, or who violates RSA 421-B:19 knowing that the statement was false or misleading in any material respect, shall be guilty of a class B felony. Each of the acts specified shall constitute a separate offense and a prosecution or conviction for any one of such offenses shall not bar prosecution or conviction for any other offense.

II. Any person who willfully violates RSA 421-B:6, 421-B:11 or 421-B:20 shall be guilty of a [class A misdemeanor if a natural person, and guilty of a] class B felony [if any other person]. Each of the acts specified shall constitute a separate offense and a prosecution or conviction for any one of such offenses shall not bar prosecution or conviction for any other offense. [For any subsequent offense, any person shall be guilty of a class B felony.]

III. [Repealed.]

IV. Nothing in this chapter limits the power of the state to punish any person for any conduct which constitutes a crime by statute.

V. The crimes established in paragraphs I and II of this section are public welfare offenses.

8 Hearing Procedures. Amend RSA 421-B:26-a, XXI-XXVIII to read as follows:

XXI. Within a reasonable time after the hearing, the presiding officer shall issue a written decision stating the action to be taken by the department and may set forth findings of fact, conclusions of law, and disposition. All decisions shall be reached upon the basis of a preponderance of the evidence. [The decision of the presiding officer shall be construed as the decision of the secretary of state.]

XXII. Any party to whom notice has been forwarded pursuant to and in accordance with these rules who fails to appear shall have a default judgment rendered against him.

XXIII.(a) Within 30 days after a final decision or disposition of a motion for reconsideration by the presiding officer:

(1) Any party, including the bureau staff, may file an appeal of the presiding officer’s decision to the secretary of state; or

(2) Upon his or her own motion, the secretary of state may elect to review a presiding officer’s decision.

(b) In either case, the procedure for such proceeding shall be the same as in paragraph XXVI.

(c) The secretary of state may elect to conduct the proceeding de novo, on the record, with or without allowing the parties to supplement the record. In the latter case, the procedure shall be the same as that provided for in paragraph XVII.

(d) At the conclusion of the proceedings, by written decision, the secretary of state may accept or reject the presiding officer’s decision, in whole or in part, substitute his or her own findings of fact and conclusions of law, or return the case to the original presiding officer, or to a substitute presiding officer, for action consistent with the secretary’s instruction.

XXIV. The presiding officer may take judicial notice.

[XXIV.] XXV. Where the interests of justice will be better served without prejudice to the substantial rights of any party, a presiding officer may sever one case from another or may consolidate 2 or more cases, preserving to all parties the right of appeal from the single or several decisions rendered.

[XXV.] XXVI. Once a hearing notice has been issued commencing an adjudicatory proceeding, no party shall communicate with the presiding officer or the secretary of state concerning the merits of the case except upon notice to all parties nor shall any party cause another person to make such communications.

[XXVI.] XXVII. Within 30 days after [a] the presiding officer’s final decision, any party including the bureau’s staff, may but is not required to file a motion for reconsideration which shall serve as a petition for rehearing under RSA 541. No distinctions shall be made between the terms “reconsideration” and “rehearing.” A motion for reconsideration shall:

[(1)] (a) Identify each error of law, error of reasoning, or erroneous conclusion contained in the final order which the moving party wishes the [secretary of state] presiding officer to reconsider.

[(2)] (b) Concisely state the correct factual finding, correct reasoning, and correct conclusion being advocated.

[(3)] (c) Include any memorandum of law the petitioner wishes to submit.

[XXVII.] XXVIII. Within 30 days after a final decision, the presiding officer may reconsider, revise or reverse any final action on the presiding officer’s own motion. If reconsideration is based upon the existing record, prior notice shall not be given to the parties. If the presiding officer believes further information or argument should be considered, the parties shall be provided with an appropriate notice and opportunity to be heard before any revision is made in the previous action.

[XXVIII. The filing of a motion for reconsideration shall not operate as a stay of any order or decision, but a motion for stay may be combined with a motion for reconsideration.]

XXIX. During the process outlined in this section, any preliminary order, such as a summary cease and desist order, shall remain in full force and effect. Further, during the process of reconsideration or appeal, any order or decision shall not be stayed. However, the presiding officer or the secretary before whom the case is may consider a motion for stay.

9 Effective Date. This act shall take effect January 1, 2012.



Revised 02/14/11


AN ACT relative to securities regulation.


      The Judicial Branch, Judicial Council, Department of Corrections, and the New Hampshire Association of Counties state this bill may increase state and county expenditures by an indeterminable amount in FY 2012 and each fiscal year thereafter. There will be no fiscal impact on state, county, and local revenues, or local expenditures.


      The Judicial Branch states this bill will amend various sections of RSA chapter 421-B, related to securities regulation. The Branch states this bill adds criminal penalties for violations of RSA 421:B-3-a and increases all criminal penalties for a natural person under chapter 421-B from a class A misdemeanor to a class B felony. The Branch states the average cost of a class A misdemeanor charge in the district courts will be $60.03 in FY 2012 and $60.88 in FY 2013 and the average cost for a routine felony case in superior court will be $394.13 in FY 2012 and $399.33 in FY 2013. The difference in costs to the Judicial Branch between processing a routine felony case in superior court and a class A misdemeanor in district court will be $334.10 ($394.13 – $60.03) in FY 2012 and $338.45 ($399.33 - $60.88) in FY 2013. The Branch states it has no information on which to estimate how many new felonies will be brought as a result to the change in RSA 421:B-3-a or how many charges would be effected by the change from class A misdemeanor to class B felony, but states all such charges will result to increased costs to the Branch.

    The Judicial Council states this bill may result in an indeterminable increase in general fund expenditures. The Council states this bill increases the criminal penalty in RSA 421-B:24 from misdemeanor to a class B felony. The Council states this potentially increases indigent defense representation costs from $275 (misdemeanor) to $756.25 (felony), a difference of $481.25. If an assigned counsel attorney is used the fee is $60 per hour with a cap of $1,400 for a misdemeanor charge. The Council also states additional costs could be incurred if an appeal is filed. The public defender, contract attorney and assigned counsel rates for Supreme Court appeals is $2,000 per case, with many assigned counsel attorneys seeking permission to exceed the fee cap. Requests to exceed the fee cap are seldom granted. Expenditures would also increase if services other than counsel are requested and approved by the court during the defense of a case or during an appeal. Finally, the Council states it cannot determine if this bill would increase the number of cases where a party is eligible for indigent defense, but it believes it will be minimal impact as those persons engaged in the securities regulation are less likely than the average citizen to be eligible for indigent defense representation.

      The Department of Corrections states the average annual cost of incarcerating an individual in the general prison population for the fiscal year ending June 30, 2010 was $32,492 and the average cost to supervise an offender by the division of field services for the fiscal year ending June 30, 2010 was $659. The Department states this bill may increase expenditures by an indeterminable amount, but is unable to predict the number of individuals that might be impacted.

      The New Hampshire Association of Counties states the average annual cost of incarcerating an individual in a county correctional facility is approximately $35,000. The Association states this bill’s fiscal impact cannot be determined as it cannot predict how many individuals may be incarcerated under this bill.

      The Department of State states this bill makes definitional changes and eliminates the Attorney General’s authority to make certain actions giving sole authority to the Bureau of Securities. The Department states none of the changes in this bill will result in a fiscal impact on state revenues or expenditures.

    The Department of Justice states this bill would make various changes to securities regulation laws including removing the authority from the Attorney General to bring an action to superior court to seek an injunction or otherwise to enforce compliance with the securities act or obtain civil penalties for violation of the securities act. The Department does not anticipate any fiscal impact as a result of this bill.