Revision: Dec. 14, 2011, midnight
HB 1410 – AS INTRODUCED
2012 SESSION
08/09
HOUSE BILL 1410
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 removing duties of the attorney general for securities regulations and 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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
12-2745
08/09
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twelve
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, III-IV-b to read as follows:
III. “Broker-dealer” means any person engaged in the business of effecting transactions in securities for the account of others or for his own account. “Broker-dealer” does not include:
(a) An agent;
(b) An issuer;
(c) [A bank, savings institution or trust company;
(d)] A person who has no place of business in this state if he effects transactions in this state exclusively with or through:
(1) The issuers of the securities involved in the transactions,
(2) Other broker-dealers, or
(3) 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, or to broker-dealers, whether the purchaser is acting for itself or in some fiduciary capacity;
[(e)] (d) A designated matching service; or
[(f)] (e) Other persons not within the intent of this paragraph whom the secretary of state by rule or order designates.
IV. [“Attorney general” means the attorney general or delegatee.
IV-a.](a) “Branch office” means:
(1) With regard to an investment adviser, any location other than the main office, identified by any means to broker-dealers or other investment advisers or to the public, customers, or clients as a location at which an investment adviser conducts an investment advisory business.
(2) With regard to a broker-dealer, any location where one or more agents, as defined in paragraph II, regularly conducts the business of effecting any transactions in, or inducing or attempting to induce the purchase or sale of, any security, or is held out as such, excluding:
(A) Any location that is established solely for customer service and/or back-office-type functions where no sales activities are conducted and that is not held out to the public as a branch office;
(B) Any location that is the agent’s primary residence; provided that:
(i) Only one agent, or multiple agents who reside at that location and are members of the same immediate family, conduct business at the location;
(ii) The location is not held out to the public as an office and the agent does not meet with customers at the location;
(iii) Neither customer funds nor securities are handled at that location;
(iv) The agent is assigned to a designated branch office, and such designated branch office is reflected on all business cards, stationery, advertisements, and other communications to the public by such agent;
(v) The agent’s correspondence and communications with the public are subject to the broker-dealer’s supervision;
(vi) Electronic communications, such as e-mail are made through the electronic system of the broker-dealer;
(vii) All orders for securities are entered through the designated branch office or an electronic system established by the broker-dealer that is reviewable at the branch office;
(viii) Written supervisory procedures pertaining to supervision of activities conducted at the residence are maintained by the broker-dealer; and
(ix) A list of the residence locations are maintained by the broker-dealer;
(C) Any location, other than a primary residence, that is used for securities business for less than 30 business days in any one calendar year, provided the broker-dealer complies with the provisions of [IV-a] subparagraph IV(a)(2)(B)(ii) through (viii);
(D) Any office of convenience, where associated persons occasionally and exclusively by appointment meet with customers, which is not held out to the public as an office;
(E) Any location that is used primarily to engage in non-securities activities and from which the agent effects no more than 25 securities transactions in any one calendar year; provided that any advertisement or sales literature identifying such location also sets forth the address and telephone number of the location from which the agent conducting business at the non-branch locations is directly supervised;
(F) The floor of a registered national securities exchange where a broker-dealer conducts a direct access business with public customers;
(G) A temporary location established in response to the implementation of a business continuity plan; or
(H) Any other location not within the intent of this paragraph as the secretary of state may determine.
(b) Notwithstanding the exclusions provided in subparagraph [IV-a] IV(a)(2), any location that is responsible for supervising the activities of agents of the broker dealer at one or more non-branch locations of the broker-dealer shall be a branch office.
(c) “Business day” as used in this paragraph shall not include any partial day provided that the agent or investment adviser representative spends at least 4 hours of such day at his or her designated branch office during the hours that such office is normally open for business.
IV-a. “Bureau” means the bureau of securities regulation within the department of state.
IV-b. “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-c. “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 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.
5 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:
6 Uniform Limited Offering Registration. Amend RSA 421-B:15-a to read as follows:
421-B:15-a Uniform Limited Offering Registration. The [attorney general] bureau shall adopt rules, pursuant to RSA 541-A, relative to adoption in this state of Form ULOR-C, the general registration form for corporations registering under state securities law securities that are exempt from registration with the Securities and Exchange Commission under Rule 504 of Regulation D.
7 Cease and Desist Orders; Injunctions; Receivers. Amend RSA 421-B:23, I(b)-II to read as follows:
(b) The [attorney general or] secretary of state or his or her designee may, with or without prior administrative action by the secretary of state, bring an action in the superior court to enjoin the acts or practices and to enforce compliance with this chapter or any rule or order under this chapter. Upon a proper showing, a permanent or temporary injunction, restraining order, or writ of mandamus shall be granted. In addition, the court may issue an order for other appropriate or ancillary relief, to include an asset freeze, accounting, writ of attachment, writ of general or specific execution, and an appointment of a receiver or conservator, that may be the administrator, for the defendant or the defendant’s assets. The court shall not require the [attorney general or] secretary of state to post a bond; and
(c) The [attorney general or] secretary of state or his or her designee may bring an action for injunctive relief and civil penalties for violations of any provision of this chapter. In any action brought by the [attorney general or] secretary of state or his or her designee, the civil penalties shall not exceed $5,000 for each violation in the case of knowing violations, or $2,500 for each violation in the case of negligent violations, and each of the acts specified shall constitute a separate violation. The action may be brought in the superior court of the county in which the defendant resides or has his or her principal place of business, or, with the consent of the parties or if the defendant is a nonresident and has no place of business within the state, in the superior court of Merrimack county.
II. In a proceeding in superior court under this section where the state prevails, the secretary of state [and the attorney general] shall be entitled to recover all costs and expenses of investigation, and the court shall include the costs in its final judgment.
8 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.
9 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.
10 Rulemaking Authority; Authority to Issue Orders and Statements; Forms. Amend RSA 421-B:28 to read as follows:
421-B:28 Rulemaking Authority; Forms; Orders.
I. The secretary of state may adopt rules pursuant to RSA 541-A relative to:
(a) Registration statements;
(b) Applications; and
(c) Reports[;].
[(d) Definitions of terms consistent with this chapter, whether or not they are used in the chapter;
(e) Classification of securities, persons and matters within the jurisdiction of the secretary of state and different requirements for different classes; and
(f) Any other matter reasonably necessary to carry out the provisions of this title.]
II.(a) The secretary of state may adopt rules, orders, or interpretive releases relative to:
(1) Definitions or interpretations of terms consistent with this chapter, whether or not they are used in the chapter; and
(2) Classifications of securities, persons, and matters within the jurisdiction of this chapter and different requirements for different categories of securities or persons.
(b) When exercising the authority granted in subparagraph (a) the secretary of state shall not be bound by RSA 541-A.
III. The secretary of state may prepare, alter or withdraw such forms as are necessary to comply with the provisions of this title.
[III.] IV. The [attorney general] secretary of state may issue, amend or rescind such orders as are reasonably necessary to carry out the provisions of this chapter.
[IV.] V. All actions undertaken by the secretary of state pursuant to this section shall be taken only when the secretary of state finds such action necessary or appropriate to the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of this title. In adopting rules, preparing forms, setting standards, and reviewing offerings, the secretary of state may cooperate with the securities administrators of other states, self regulatory organizations, and the Securities and Exchange Commission in order to implement the policy of this chapter in an efficient and effective manner and to achieve maximum uniformity in the form and content of registration statements, applications, reports, and requirements for issuers, broker-dealers, and investment advisors, where practicable.
[V.] VI. The secretary of state may use a standard form widely used in the industry, including forms promulgated by the Securities and Exchange Commission, provided such forms are incorporated by reference in rules adopted by the secretary of state pursuant to RSA 541-A.
11 Repeal. RSA 421-B:17, II(d), relative to an exemption for non-issuer sale of notes or bonds sold to a single purchaser at a single sale.
12 Effective Date. This act shall take effect January 1, 2013.