Get documents about "April 18, 2009 Meeting Book - Part 1
Document Sample
AMERICAN BAR ASSOCIATION
SECTION OF BUSINESS LAW
COMMITTEE ON STATE REGULATION OF SECURITIES
MEETING IN CONJUNCTION WITH SPRING MEETING OF
AMERICAN BAR ASSOCIATION SECTION OF BUSINESS LAW
Vancouver, B.C., Canada
April 18,2009
INDEX
I. 2009 Midwinter Report to Council: Committee on State Regulation of Securities
(Alan M. Parness, Cadwalader, Wickersham & Taft LLP, Chair)
(Attachment #1)
II. Subcommittee and Liaison Reports
A. Report of the Subcommittee on Broker-Dealers and Investment Advisers
(Martin R. Miller, Willkie Farr & Gallagher LLP, and David M. Katz, Sidley
Austin LLP, Co-Chairs)
B. Report of the Subcommittee on Direct Participation, Commodities and Hybrid
Securities
(Benjamin L. Nager, Sidley Austin LLP, Chair)
(Attachment #2)
C. Report of the Subcommittee on Employee Plan and Other Exempt Securities
(Michele A. Kulerman, Hogan & Hartson L.L.P., and Peter Danias, Kaye Scholer
LLP, Co-Chairs)
(Attachment #3)
D. Report of the Subcommittee on Enforcement
(R. Michael Underwood, Fowler White Boggs, Chair, and Richard Slavin,
Cohen and Wolf, P.C., Vice-Chair)
E. Report of the Subcommittee on International Securities
(Kenneth G. Ottenbreit, Stikeman Elliott LLP, and Guy P. Lander, Carter Ledyard
Milburn LLP, Co-Chairs)
F. Subcommittee on Liaisons to Securities Administrators (Reports from various
state liaisons)
(Donald A. Rett and Shane B. Hansen, Warner Norcross & Judd LLP, Co-Chairs)
(Attachment #4)
USActive 13821352.1
G. Report of the Subcommittee on NSMIA and Limited Offering Exemptions
(Mike Liles, Jr., Karr Tuttle Campbell, and Martin A. Hewitt, Lowenstein Sandier
PC, Co-Chairs)
(Attachment #5)
H. Report of the Subcommittee on The Uniform Securities Act (2002)
(Philip Feigin, Rothgerber Johnson & Lyons LLP, and Lynn Naefach, Wachovia
Securities, Co-Chairs)
(Attachment #6)
I. Report of the Liaison on Arbitration
(David N. Jonson, K&L Gates LLP)
J. Report of the Liaison to the Committee on Diversity of the ABA Section of
Business Law
(Delia P. Richardson, Carter Ledyard & Milburn LLP)
K. Report of the Liaison to the Committee on Meetings of the ABA Section of
Business Law
(Deborah Schwager Froling, Arent Fox LLP)
L. Report of the Liaison to the Committee on Pro Bono of the ABA Section of
Business Law
(Judy F. Zybach)
M. Report of the Liaison to NASAA Broker-Dealer Section
(Melanie A. Jenkins, Citigroup Global Markets, Inc.)
N. Report of the Liaison to NASAA Corporation Finance Section
(Deborah Schwager Froling, Arent Fox LLP)
O. Report of the Liaison to NASAA Enforcement Trends Project Group
(Andrew Kandel, Cerberus Capital Management, L.P.)
P. Report of the Liaison to NASAA Investment Adviser Section and to the
Subcommittee on Investment Companies and Investment Advisers of the ABA
Section of Business Law Committee on Federal Regulation of Securities
(Tamara K. Salmon, Investment Company Institute)
Q. Report of the Liaison to NASAA Ombudsman
(F. Lee Liebolt, Jr.)
(Attachment #7)
R. Report of the Liaison on Regulation D Electronic Filing Issues
(Gary M. Emmanuel, Reitler Brown & Rosenblatt LLC)
(Attachment #8)
USActive 13821352.1 -2-
S. Report of the Liaison on TICs and Other Real Estate Related Securities Issues
(Deborah Schwager Froling, Arent Fox LLP)
(Attachment #9)
T. Report of the Liaison on Variable Annuity Issues
(Peter J. Anderson, Sutherland Asbill & Brennan LLP)
III. Future Committee Meeting Dates:
Hyatt Regency Hotel, Chicago, Illinois
In conjunction with the ABA Annual Meeting, July 30 - August 3, 2009
Sheraton Hotel, Denver, Colorado
In conjunction with the Annual Meeting of the North American Securities Administrators
Association, September 13 - 16, 2009
Adams Mark Hotel, Denver, Colorado
In conjunction with the ABA Section of Business Law Spring Meeting, April 22 - 24,
2010
San Francisco, California
In conjunction with the ABA Annual Meeting, August 6 - 9, 2010
Honolulu, Hawaii
In conjunction with the Annual Meeting of the North American Securities Administrators
Association, September 2010
USActive 13821352.1 -3-
ATTACHMENT 1
2009 Midwinter Report to Council: Committee on State Regulation of Securities
(Alan M. Parness, Cadwalader, Wickersham & Tan LLP, Chair)
USActive 13821352.1
ATTACHMENT 1
2009 Midwinter Report to Council: Committee on State Regulation of Securities
(Alan M. Parness, Cadwalader, Wickersham & Taft LLP, Chair)
USActive 13821352.1
If you are having problems filing your report, please contact Frank Hilhs
2009 ABA Section of Business Law Midwinter Committee Report to Council:
COMMITTEE ON STATE REGULATION OF
SECURITIES
Leadership > , ": '•
Chair
Alan M Parness
Cadwalader Wickersham & Taft LLP
1 World Financial Center
New York, NY 10281-1003
Phone:(212)504-6342
Fax:(212)504-6666
Email: alan.parness@cwt.com
Term End Date: 08/15/2011
Vice-Chair
Michele Audrey Kulerman
Hogan & Hartson LLP
555 Thirteenth St NW
Washington, DC 20004-1109
Phone: (202) 637-5743
Fax:(202)637-5910
Email: makulerman@hhlaw.com
Term End Date: 08/15/2011
Membership
State Regulation of Securities 490 (Membership as of 10/1/08)
444 (Membership as of 10/1/07)
2008 2007
Membership Membership
Subcommittees: (as of 10/1/08) (as of 10/1/07}
Direct Participation/ Commodities and Other Hybrid 34
Securities
Broker-Dealers and Investment Advisors 124 92
CLE and Publications 51 43
Member of the Board of Editors of The Business Lawyer 1 [n/a]
Employee Plan and Other Exempt Securities 64 55
Enforcement 60 48
International Securities 52 36
NSMIA and Limited Offering Exemptions 88 80
USActive 14392303.3 -1 -
Liaisons to States 36 26
The Uniform Securities Act (2002) 47 38
Publications 2 [n/a]
Country of Origin:
U.S. 474 431
International 16 12
Diversity
Race:
2008 2007
Diversity Diversity
(as of 10/1/08) (as of 10/1/07)
Asian 6 5
Black/African American 8 11
Hispanic 7 2
Native American 0 0
Other 2 1
Unknown 273 240
White/Caucasian 194 184
Gender:
Female 132 115
Male 355 327
Unknown 3 1
1. Committee Mission Statement:
Does your committee's mission statement accurately reflect the scope of the committee's work
and the reasons why someone should join your committee? If not, please suggest revisions.
(NOTE: Revisions to your committee's mission statement with not automatically reflect on your
committee's homepage, pending review by Officers and Council.)
Current Mission Statement:
Principal Committee objectives are: monitor and comment on changes in state regulatory policy,
including proposed rules, regulations and policy statements of individual state regulators and
uniform policies and guidelines proposed by the North American Securities Administrators
Association (NASAA); respond to and comment on SEC proposals that impact state securities
regulation, including the SEC's Small Business Initiatives, working with the Committee on Federal
Regulation of Securities, the Middle Market and Small Business Committee and other Section
Committees and Task Forces, as appropriate; disseminate timely information to Committee
members on changes in state securities laws, Canadian provincial securities laws, and federal
securities laws to the extent they impact state law, and developments in civil, criminal and
administrative enforcement proceedings under state securities laws. The enactment of the
National Securities Markets Improvement Act of 1996, which preempted and modified some
aspects of state securities regulation, has increased areas of interaction between federal and
state securities law.
USActive 14392303.3 .2 -
PLEASE UPDATE YOUR COMMITTEE'S MISSION STATEMENT:
Principal Committee objectives are: monitor and comment on changes in state regulatory
policy, including proposed rules, regulations and policy statements of individual state
regulators, uniform policies and guidelines proposed by the North American Securities
Administrators Association (NASAA), and rules proposed by FINRA; respond to and
comment on SEC proposals that impact state securities regulation, working with the
Federal Regulation of Securities and Middle Market and Small Business Committees,
and other Section Committees and Task Forces, as appropriate; disseminate timely
information to Committee members on changes in state securities laws, Canadian
provincial securities laws, and federal securities laws to the extent they impact state law,
and developments in civil, criminal and administrative enforcement proceedings under
state securities laws. The enactment of the National Securities Markets Improvement Act
of 1996, which preempted and modified some aspects of state securities regulation, has
increased areas of interaction between federal and state securities law, and has led to
major changes in state laws, rules and policies relating to "covered securities" as defined
in that Act, which the Committee has actively monitored.
1 a. Long-Term Strategic Plan: OBJECTIVES
Please describe your long-term objectives for your committee and what you see as the major
steps that are being taken or that need to be taken to achieve these objectives. How do the
committee's long-term objectives support or complement the long-term goals of the Section?
For these purposes long-term should be understood to be at least three-years.
Continue active role in commenting on SEC, state and FINRA proposals, sponsoring or
co-sponsoring programs at ABA meetings, holding Committee luncheons at private firms
throughout the year that are open to Committee members and other interested persons,
and ongoing liaisons with various committees of NASAA.
1b. Long-Term Strategic Plan:
LEADERSHIP
MEMBERSHIP: What are your plans for membership recruitment and retention? How do
you plan to enhance membership outreach (communication with and delivery of services
to your members)?
USActive 14392303.3 -3-
We actively use our Committee iistserv to distribute rule proposals and other materials
not readily available from other sources, and our programs at ABA meetings, as well as
our Committee and Subcommittee meetings, attract interest. We have also been holding
periodic luncheons in New York, with guest speakers from NASAA and individual states.
We have arranged for teleconference access to our meetings and luncheons whenever
possible. Our newsletter, "The Blue Sky Bugle," is widely read and appreciated as a
valuable source of information. On the social side, we have arranged dinners for
Committee members in conjunction with recent ABA meetings.
DIVERSITY: What are your plans to increase membership and active involvement by
lawyers of color, young lawyers, women, and lawyers with disabilities in your committee
and its activities this year?
We believe we have a good representation of women lawyers, including among the
Committee leaders, and there is an increase in involvement of lawyers of color and young
lawyers. However, the "Blue Sky" area is somewhat of a specialized area of practice,
and attorneys engaged or interested in this practice tend to be affiliated with larger law
firms. Accordingly, while our new liaison to the Section's Diversity Committee will be
asked to concentrate on finding ways to recruit more lawyers of color and lawyers with
disabilities to join our Committee, as a practical matter, we see this as a difficult task.
COLLABORATION: What are your plans for collaboration with other committees, the
ABA and entities outside the Section and ABA (for example, industry associations)?
We regularly work with the Federal Regulation and Middle Market and Small Business
Committees on comment letters and programs at ABA meetings. We have also
collaborated or had contact with the Investment Company Institute, NASDAQ, SIFMA
and other organizations in connection with our monitoring and commenting on rule
proposals.
LEADERSHIP AND COMMITTEE STRUCTURE: What structural changes, if any, are
you planning to help achieve your objectives? What if any leadership development or
transition efforts do you have planned for the leadership of your subcommittees, working
groups and task forces?
USActive 14392303.3 .4.
We have made some minor changes to our leadership and Committee structure, and will
continue to do so as necessary in response to developments in the regulatory areas
monitored by us.
2a. Short-Term Strategic Plan:
Looking at your long-term plan, what specific actions have you taken or will you take this year to
advance the long-term objectives described above including those in the four specific categories
of membership, diversity, collaboration and leadership and committee structure?
Since August, we have submitted comment letters on three state rule proposals, and are
in the process of submitting a comment letter and rulemaking proposal to the SEC in a
joint project with the Federal Regulation of Securities Committee. We have two programs
scheduled for the April 2009 Business Law Section meeting. We hope that publicizing
these activities will assist in garnering new members and diversifying our membership.
We will evaluate the efforts of our Committee leadership and make changes as
necessary.
DIPLOMA?s '-' "•• -• '' '••>• , " " • ' ' " ' . . " '
If you have a Business Law Advisor, Fellow, Ambassador or Diplomat assigned to your
committee, do you plan to involve him/her in any of those short-term strategic plan initiatives?
N/A
3, Leadership Feedback;. Of FiceR/$f AFP SUPPORT • '.', -., '.' ' .
What feedback do you have for the Section? Are there ways in which the Section Officers and/or
staff could better support the activities of your committee?
USActive 14392303.3 .5 -
Section Officers and staff have been most supportive of our activities. Particular kudos to
Sue Daly and Frank Hillis for their efforts.
LIAISONS
Is there anything regarding your committee's programs and publications, or the programs and
publication process itself that you would like to bring to the attention of the Section officers and
staff? The leadership is particularly interested in knowing whether your committee is considering
programming or publications that address ethical issues in transactional work or any
programming or other activities that address cross border issues?
One of our planned programs for the April 2009 Meeting covers cross-border transactions
but does not currently address any ethical issues raised in such transactions.
» COMMITTEE ADM|NISTRATIVEJJAISONS - click on names to update.
Delia P Richardson
Deborah Froling
Not Assigned
Judith Zybach
Not Assigned
» COMMITTEE PUBLICATIONS
USActive 14392303.3
-6-
[n/a]
• Blue Sky Bugle; August 2008
ADDITIONAL COMMENTS REGARDING PUBLICATIONS:
Blue Sky Bugle is published three times a year.
» COMMITTEE PROGRAMS & MEETINGS
• Annual Meeting Program: Securities Arbitration - Practitioners' Perspectives on the
System; Attendance: 23
• Annual Meeting Program: Federal, State and Industry Initiatives on Hedge Funds
and Their Regulation; Attendance: 48
[n/a]
[n/a]
-j *
[n/a]
[n/a]
ADDITIONAL COMMENTS REGARDING PROGRAMS AND MEETINGS:
USActive 14392303.3
-7-
5, Is there anything else you'd like to share with the Officers?
TO SUBMIT YOUR REPORT:
1. "Save" this document (as a Word .doc) to your desktop or local harddrive. If you co-
chair a committee with another person, please send them an email with the saved
document for review.
2. Attach your completed report to an email addressed to Frank Hillis
(hillisf@staff.abanet.org).
3. Frank will send an email acknowledging receipt of your report.
4. Frank will post the report online.
5. If you have any questions at any point during the report process, feel free to contact
Frank via email (hillisf@staff.abanet.org) or phone (312-988-5691).
USActive 14392303.3 -8-
ATTACHMENT 2
Report of the Subcommittee on Direct Participation, Commodities and Hybrid Securities
(Benjamin L. Nager, Sidley Austin LLP, Chair)
USActive 13821352.1
X"~^ S I D L E Y A U S T I N LLP
SlDLEY
MEMORANDUM
TO: Alan M. Parness, Chair
State Regulation of Securities Committee
American Bar Association Section of Business Law
FROM: Benjamin L. Nager, Chair
Direct Participation, Commodities and Hybrid Securities Subcommittee
RE: Report for April 2009 ABA Section of Business Law Spring Meeting
DATE: March 18, 2009
The following is my report as the Chair of the Direct Participation, Commodities
and Hybrid Securities Subcommittee of the State Regulation of Securities Committee of the
ABA Section of Business Law, for the Committee's meeting in conjunction with the ABA
Section of Business Law's Spring Meeting in Vancouver, British Columbia, scheduled for April
18,2009.
The last meeting I attended of the Committee was at the NASAA Annual Meeting
in Las Vegas, Nevada on September 15, 2008.
NASAA Developments
Since June 21, 2002, 32 states and the District of Columbia have been
participating in NASAA's "Coordinated Review of Direct Participation Programs" ("CR-DPP"),
which may be reviewed at NASAA Reports f^f 11,021-11,023, or downloaded from
www.coordinatedreview.org. CR-DPP only covers initial public offerings subject to NASAA's
Equipment Leasing, Mortgage Pool, Oil & Gas, Omnibus, Real Estate, and Real Estate
Investment Trust guidelines (as reflected in the foregoing website, certain states do not
participate in CR-DPP for all types of programs covered thereby), and is administered by the
Texas State Securities Board. It is believed that there have been only a limited number of CR-
DPP filings since its inception.
Commodity Pools
NASAA's Statement of Policy on Registration of Commodity Pool Programs, as
last amended effective September 16, 2006 and May 7, 2007 (the "Commodity Pool
Guidelines"), is reprinted at NASAA Reports ]f1f 1201-1207. In particular, the 2007 amendment
increased the minimum investor suitability standards in Section III.A.I of the Commodity Pool
Guidelines from $45,000 "net worth" and $45,000 annual gross income, or $150,000 "net
worth," to $70,000 "net worth" and $70,000 annual gross income, or $250,000 "net worth." It
SIDLEY AUSTIN LLP
has been my recent experience that most states have now adopted these new suitability standards,
even for existing commodity pools, and require compliance with such new suitability standards
upon initial registration or renewal therein. In addition, Kentucky has been requiring compliance
with a $85,000/$85,000/$300,000 suitability standard.
According to the chart under "Commodities Regulation" at 1 Blue Sky L. Rep.
(CCH) ^f 6351, Alabama, Alaska, Arizona, Florida, Indiana, Iowa, Kansas, Kentucky, Maine,
Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New
Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, Wisconsin, and
Wyoming have formally or informally adopted the Commodity Pool Guidelines by rule or as a
matter of policy. Of course, in practice, not all of the foregoing states actually apply all or any
part of the Commodity Pool Guidelines in reviewing filings, while other states not listed may
apply them from time to time, notwithstanding the lack of formal rulemaking or prior notice.
State Commodity Laws
According to the chart under "Commodities Regulation" at 1 Blue Sky L. Rep.
(CCH) ][ 6351, 19 states (Arizona, California, Colorado, Georgia, Idaho, Indiana, Iowa,
Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Carolina, North Dakota,
Oregon, South Carolina, Utah, and Washington) have adopted versions of the Model State
Commodity Code, which is reprinted at NASAA Reports fflf 4401-4448 (the "Model Code"). In
addition, according to the same chart, 27 jurisdictions (Alaska, Arizona, California, Delaware,
Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Minnesota,-Montana,
New Hampshire, New Mexico, New York, Oklahoma, Oregon, Rhode Island, South Dakota,
Utah, Vermont, the U.S. Virgin Islands, Washington, and Wisconsin) have encompassed various
types of commodities and commodity contracts within the scope of their Blue Sky laws
(although certain of these provisions may have been preempted by the federal Commodity
Exchange Act).
Asset-Backed Securities
According to the chart at 1 Blue Sky L. Rep. (CCH) ^ 6211, Arizona, Iowa,
Kansas, Missouri, Nebraska. Nevada, New Mexico, Ohio, Pennsylvania, South Dakota, Texas,
and Washington are the only states which adopted the NASAA Statement of Policy for
Registration of Asset-Backed Securities, which is reprinted at NASAA Reports fflf 501-509 (the
"ABS Policy"), by published rule or policy statement.
For those of you not familiar with the Secondary Mortgage Market Enhancement
Act of 1984, as amended ("SMMEA"), Section 106(c) of that statute preempted all Blue Sky
laws by deeming "mortgage related securities" (as defined in Section 3(a)(41) of the Securities
Exchange Act of 1934, as amended) as being exempt from state registration to the same extent as
obligations issued or guaranteed by the United States or any agency or instrumentality thereof.
While states were given seven years (i.e., through October 3, 1991) to override this preemption,
only 10 states (Arizona, Arkansas, Indiana, Louisiana, Maryland, Minnesota, New Mexico,
/""^l 51 PLEV A U S T I N LLP
SlDLEY
Oklahoma, South Dakota, and Utah) took such action, although Arizona and Maryland have
exempted "mortgage related securities" from registration by statute and rule, respectively, while
Indiana, Minnesota and South Dakota repealed their overrides, effective July 1, 2008, August 1,
2007 and July 1, 2004, respectively.
Other NASAA DPP Guidelines
The chart at 1 Blue Sky L. Rep. (CCH) t 6211 purports to show what states
adopted NASAA's guidelines for all types of direct participation programs (the text of the
various guidelines may be found in the "Statements of Policy" section of NASAA Reports). Of
course, as noted above with regard to the Commodity Pool Guidelines, how and to what extent
any state applies such guidelines in reviewing filings thereunder is subject to many variables.
Note that on September 26, 2006, the Direct Participation Programs Policy
Project Group of NASAA's Corporation Finance Section (the "Project Group") requested public
comments by November 27. 2006 on a proposal to amend the investor suitability standards in all
NASAA DPP Guidelines and Statements of Policy. As proposed: (1) an investor's "net worth"
would exclude "any and all retirement or pension plan accounts or benefits"; (2) a
"diversification standard" would be added, limiting an investor's aggregate investments in the
particular DPP issuer, its "affiliates," and "other investments with a similar investment
objective," to 10% of the investor's "net worth"; and (3) the minimum investor suitability
standard would be increased to (a) $70,000 annual gross income and $70,000 "net worth," or (b)
$250,000 "net worth," from the current minimum of (a) $45,000 annual gross income and
$45,000 "net worth." or (b) $150,000 "net worth." The Committee submitted a comment letter
dated November 22, 2006 to the members of the Project Group, principally objecting to points
(1) and (2) of the proposal. According to a March 6, 2007 notice, on March 1, 2007, NASAA's
Board of Directors approved only the changes in point (3) of the proposal. I have recently been
advised that the Project Group, which is now chaired by Susan Baker-Toth of the Arizona
Corporation Commission, is still considering the two other proposed changes, in light of over 90
comment letters submitted.
Effect of NSMIA and SEC Developments
Since commodity pools, asset-backed securities, and other direct participation
programs are generally not "covered securities" (unless privately placed in accordance with Rule
506 of SEC Regulation D ("Regulation D") under the Securities Act of 1933, as amended (the
"1933 Act")), they are not affected by NSMIA and remain subject to full "merit review" where
applicable.
On August 3, 2007, the SEC issued Release No. 33-8828, reprinted at 72 Fed.
Reg. 45116 (Aug. 10, 2007), including, among proposed amendments to Regulation D, a
proposed amendment to Rule 146 under the 1933 Act. As proposed, Rule 146 would define the
term "qualified purchaser" for purposes of the "covered securities" category in 1933 Act §
18(b)(3) to mean any "large accredited investor" within the meaning of Rule 501(k) of
Regulation D, but solely for offers and sales effected in accordance with Rule 507, which Rules
f-^ SIDLEY AUSTINLLP
SlDLEY
are proposed in the same Release (see 72 Fed. Reg. at 45141, 45143-45). No action has been
taken by the SEC on these rule proposals as of yet. John W. White, who concluded his term as
Director of the SEC's Division of Corporation Finance last December, stated in his comments at
the ABA Section of Business Law's Fall Meeting in November that he had hoped to take action
on this proposal prior to the end of 2008 but that this was now a job for his successor. This
Release and the numerous comment letters submitted to the SEC may be viewed on the SEC's
website at http://www.sec.gov/rules/proposed/proposedarchive/proposed2007.shtml.
While in theory the SEC could have defined "qualified purchaser" for purposes of
1933 Act § 18(b)(3) to permit public or private offers and sales restricted to such persons, the
proposal contemplates an exempt offering (under authority of 1933 Act § 28) where (1) all
purchasers are or are reasonably believed to be "large accredited investors"; (2) only certain
specified types of "limited announcements" about the offering may be made; and (3) additional
information may only be provided to prospective purchasers who are reasonably believed to be
"large accredited investors." When and if these proposals are adopted, it is expected that many
states will require some form of "notice filing" for these offerings, to the extent permitted under
1933 Act § 18(c)(2).
FINRA Developments
As reflected in SEC Release No. 34-57199 (Jan. 25, 2008). as reprinted at 73 Fed.
Reg. 5885 (Jan. 31, 2008), FINRA has amended its proposed revisions of NASD Rule 2810,
governing public offerings of direct participation programs (and, as proposed, real estate
investment trusts). The amendments went effective on August 6, 2008. Among other changes,
the revisions codified in Rule 2810 the policy change announced in NASD Notice to Members
04-50 (July 2004), and in SEC Release No. 34-50335 (Sept. 9, 2004), reprinted at 69 Fed. Reg.
55855 (Sept. 16, 2004), whereby so-called "trail commissions" paid to member firm personnel in
connection with commodity pool offerings are considered underwriting compensation subject to
the limits under Rule 2810. This policy change has been effective for new registrations filed
with the NASD/FINRA since October 12, 2004, and has greatly curtailed new public offerings of
commodity pools. In addition, the amendments applied Rule 2810 to certain unlisted real estate
investment trusts.
If there are any questions relating to the foregoing report, please feel free to
contact me at 212-839-8755 or by e-mail at bnager@sidley.com.
B.L.N.
NYl 68937Wv.l
ATTACHMENT 3
Report of the Subcommittee on Employee Plan and Other Exempt Securities
(Michele A. Kulerman, Hogan & Hartson L.L.P., and Peter Danias, Kaye Scholer LLP,
Co-Chairs)
USActive 13821352.1
Hogan & Hartson LIP
HOGAN & Columbia Square
HARTSON 555 Thirteenth Street, NW
Washington, DC 20004
+1.202.637.5600 Tel
+1.202.637.5910 Fax
www.hhlaw.com
Michele A. Kulerman
Counsel
(202) 637-5743
makulerman@hhlaw.com
M E M O R A N D U M
April 8, 2009
TO: Alan Parness, Esq.
Chair of the Committee on State Regulation of Securities
Cadwalader, Wickersham and Taft, LLP
One World Financial Center
New York, N.Y. 10281
FROM: Peter G. Danias, Esq. / Kaye Scholer LLP
Michele A. Kulerman, Esq. / Hogan & Hartson LLP
RE: Report of the Subcommittee on Employee Benefit Plans and Other Exempt
Transactions
We are pleased to submit this report as Co-Chairs of the Subcommittee on Employee Benefit Plans and
Other Exempt Transactions (the "Subcommittee"). The Subcommittee met as part of the State Regulation
of Securities Committee of the American Bar Association (the "ABA Committee"), which was held at the
NASAA Annual Conference in Las Vegas, Nevada in October 2008 (the "2008 Annual Conference").
The Subcommittee's next scheduled meeting will be at the upcoming NASAA Annual Conference in
October 2009, where we plan to report any news, initiatives or other issues being addressed by members
of the Subcommittee.
A primary focus of the Subcommittee remains geared toward the adoption of a more uniform employee
benefit plan exemption that incorporates the attributes of Federal Rule 701. In addition, the
Subcommittee {hopes to continue} to encourage active member participation in conducting timely surveys
on current topics that affect our blue sky practices. Due to the economic climate and the uncertainty in
the securities markets during the last quarter, the Subcommittee was relatively inactive since the 2008
Annual Conference.
Rule 701 Developments: Topics discussed at the 2008 Annual Conference included:
*J» Lobbying efforts by Ellen Lieberman and others in encouraging state-wide adoption of a uniform
employee plan exemption which incorporates the attibutes of federal Rule 701.
*J* Louisiana and North Dakota adoption of an employee plan exemption that is more similar to
federal Rule 701.
HOGAN & HARTSON LL p.
<* Presentation by Michele Kulerman at the Ombudsman meeting, chaired by Don Saxon, then
Commissioner of the Florida Office of Financial Regulation, encouraging NASAA to adopt an
employee plan exemption that incorporates the provisions of Rule 701.
<« An updated survey setting forth each state's exemption for a Rule 701 coordinating exemption is
in the process of being prepared.
Developments in Other Exempt Transactions:
»J» Gerry Laporte, Chief of the Office of Small Business Policy, Division of Corporation Finance,
gave a brief presentation on the status of the upcoming transition period for filing a Temporary
Form D and the mandatory date for filing the electronic Form D through the SEC EDGAR
system, effective March 16, 2009.
«J* We have had some discussion on moving forward with a state survey of the various secondary
trading exemptions with the assistance of Carmen Gaspero.
»J« Other topics addressed as potential areas for surveys included: (i) direct participation plans and
rights offerings, where the exemption for existing security holders is not available because either
(A) the distribution/issuance of securities is not pro rata or (B) the transaction is not an exchange
for outstanding securities; (ii) variable annuities as securities; and (iii) issuances of securities by
public utility companies and public utility holding companies.
•t* Attachment to this Report is a list of the states adopting the USA (2002), noting those states with
a hybrid Rule 701 exemption.
Very truly yours,
/s/
Peter G. Danias
/s/
Michele A. Kulerman
Attachments
BEIJING BRUSSELS BUDAPEST LONDON MOSCOW PARIS
PRAGUE TOKYO WARSAW
BALTIMORE, MD BOULDER, CO COLORADO SPRINGS, CO
DENVER, CO IRVINE, CA LOS ANGELES, CA McLEAN, VA
NEW YORK, NY
Affiliated Office
Attachment
The attached survey reports on the adoption of USA 2002 by a number of states, and in particular, the adoption of Section
202(21) of USA 2002 verbatim.
STATE • • ' . ; " • ; -."-•' AB^IfTlH) ySA;200f and EFISCTiVE • •
' , " ' '"**' '' " ; ' ;
"•-'/?•, . * "° ,*" - "V , "'
: ;:;
GEORGIA Effective July 1,2009
HAWAII Effective July 1,2008
IDAHO Effective September 1, 2004
INDIANA Effective July 1,2008
IOWA Effective January 1, 2005
KANSAS Effective July 1,2005
MAINE Effective December 31, 2005
MICHIGAN October 1,2009
MINNESOTA Effective August 1,2007
MISSISSIPPI Effective January 1, 2010
MISSOURI Effective September 1, 2003
NORTH DAKOTA Effective July 1, 2005 - HYBRID VERSION
OKLAHOMA Effective July 1,2004
SOUTH CAROLINA Effective January 1 , 2006
SOUTH DAKOTA Effective July 1,2004
TENNESSEE Effective January 1, 2005 - HYBRID VERSION
US VIRGIN ISLANDS Effective February 12, 2006
UTAH Effective July 1, 2006 - HYBRID VERSION
VERMONT Effective July 1,2006
WISCONSIN Effective January 1, 2009
STATE . ' - USA r2002> ADOPTION STATUS IN 2008 . •
; ':- x.,-:
ALABAMA Legislation stalled
CALIFORNIA Unaware of any pending legislation under review
DELAWARE Unaware of any pending legislation under review
DISTRICT OF COLUMBIA Legislation still in review
NEBRASKA Unaware of any pending legislation under review
OHIO Unaware of any pending legislation under review
WASHINGTON 2008 Introduction - pending
WEST VIRGINIA Legislation pending
ATTACHMENT 4
Subcommittee on Liaisons to Securities Administrators
(Reports from various state liaisons)
(Donald A. Rett and Shane B. Hansen, Warner Norcross & Judd LLP, Co-Chairs)
USActive 13821352.1
ABA Business Law Section
Committee on State Regulation of Securities
Subcommittee of Liaisons to the States
State and Canadian Liaison Roster and Reports
Covering the following jurisdictions: AL, AK, AZ, CA, CO, CT, FL, HI, IL, IN,
KS, KY, ME, MD, MA, MI, MS, MO, MT, NH, NJ, NM, NY, NC, OK,
PA, RI, SC, SD, VT, WA, WI, WY, DC, and CANADA
No reports for: AR, DE, GA, ID, IA, LA, MN, NE, NV,
ND, OH, OR, TN, TX, UT, VA, WV, PR, VI
March 31, 2009
Co-Chair: Mr. Donald A. Rett Co-Chair: Mr. Shane B. Hansen
Law Office of Donald Rett Warner Norcross & Judd LLP
1660 Metropolitan Circle 111 Lyon Street, N.W., # 900
Tallahassee, Florida 32308 Grand Rapids, Michigan 49503
E-Mail - don@donrett. com E-mail - shansen@wnj .com
(850) 298-4454 (Work) (616) 752-2145 (Work)
Report Report
LIAISONS Page LIAISONS Page
AL Ms. Carolyn L. Duncan 8 AZ Mr. Dee Riddell Harris 17
Cabaniss Johnston, et al. Arizona Angels Venture Group, Inc.
2001 Park PIN, Ste700 ASU SkySong
Birmingham, AL 35203-2744 1475 North Scottsdale Road, Suite 200
E-Mail - cld@cabaniss.com Scottsdale, AZ 85257-3538
(205) 716-5255 (Work) E-Mail - dharris@arizona-angels.org
(205) 716-5389 (Fax) (602) 617-7833 (Cell)
(602) 840-4078 (Home)
AK Mr. Julius J. Brecht 13 (602) 840-6824 (Home Fax)
Wohlforth, Johnson, Brecht,
Cartledge & Brooking AR Mr. C. Douglas Buford Jr. N/R
900 West 5th Avenue - Suite 600 Mitchell Williams Law-Little Rock Office
Anchorage, AK 99501-2044 425 West Capitol Avenue, Suite 1800
E-Mail - jbrecht@akatty. com Little Rock, AR 72201-3525
(907) 276-6401 (Work) E-Mail - dbuford@mwsgw. com
(907) 276-5093 (Fax) (501) 688-8866 (Work)
Committee on State Regulation of Securities Page 1
Subcommittee on Liaisons to the States and Provinces
Report Report
LIAISONS Page LIAISONS Page
CA Mr. Keith Paul Bishop 20 GA J. Steven Parker 48
Allen Matkins Leek Gamble Mallory Page Perry, LLC
& Natsis LLP 1040 Crown Pointe Parkway, Suite 1050
1900 Main Street, 5th Floor Atlanta, GA 30338
Irvine, CA 92614-7321 E-Mail - jsparker@pageperry.com
E-Mail - kbishop@allenmatkins.com (770) 673-0047 (Work)
(949) 851-5428 (Work) (770) 673-0120 (Fax)
(949) 553-8354 (Fax)
HI Mr. David J. Reber 49
CO/MT/WY Mr. Robert J. Ahrenholz 32 Goodsill Anderson Quinn & Stifel
Kutak Rock LLP 1099 Alakea Street, Suite 1800
1801 California Street, Suite 3100 Honolulu, HI 96813
Denver, CO 80202 E-Mail - dreber@goodsill.com
E-Mail - robert. ahrenho lz@kutakrock. com (808)547-5611 (Work)
(303) 297-2400 (Work) (808) 395-7994 (Home)
(303) 292-7799 (Fax) (808) 441-1225 (Fax)
CT Mr. Richard Slavin 37 ID Mr. Jeffrey W. Pusch N/R
Cohen and Wolf, P.C. Fisher Pusch & Alderman, LLP
320 Post Road West U.S. Bank Building
Westport, CT 06880 101 South Capitol Boulevard, Suite 500
E-Mail - Rslavin@cohenandwolf.com Boise, ID 83702
(203) 341-5310 (Work) E-Mail - jwpusch@fpa-law.com
(203)341-5311 (Fax) (208) 331-1000 (Work)
(203) 556-8959 (Cell) (208) 331-2400 (Fax)
DE Mr. Andrew M. Johnston N/R IL John S. Monical 55
Morris Nichols, et al. Lawrence, Kamin, Saunders
Wilmington, DE 19899-1347 & Uhlenhop, LLC
E-Mail - ajohnston@mnat.com 300 South Wacker Drive, Suite 500
(302) 351-9202 (Work) Chicago, IL 60606
(302) 658-3989 (Fax) E-mail - jmonical@lksu.com
(312) 372-1947 (Work)
FL Mr. Donald A. Rett 45 (312) 372-2389 (Fax)
Law Office of Donald Rett (312) 371-5579 (Cell)
1660 Metropolitan Circle
Tallahassee, FL 32308
E-Mail - drett@donrett. com
(850) 298-4454 (Work)
(904) 894-0700 (Home)
(850) 298-4494 (Fax)
Committee on State Regulation of Securities Page 2
Subcommittee on Liaisons to the States and Provinces
Report Report
LIAISONS Page LIAISONS Page
IN Mr. Stephen W. Sutherlin 61 LA Mr. Carl C. Hanemann 111
Stewart & Irwin Jones, Walker, Waechter, Poitevent,
251 East Ohio Street, Suite 1100 Carrere & Denegre, L.L.P.
Indianapolis, IN 46204 Place St. Charles
E-Mail - S Sutherlin@silegal. com 201 St. Charles Avenue, 51st Floor
(317) 639-5454 (Work) New Orleans, LA 70170-5100
(317) 396-9541 (Direct Dial) E-Mail - chanemann@joneswalker. com
(317) 733-8084 (Home) (504) 582-8156 (Work)
(317) 632-1319 (Fax) (504) 861-3992 (Home)
(317) 696-2254 (Cell) (504) 582-8012 (Fax)
IA Ms. Katherine G. Manghillis 65 ME Christine A. Bruenn 112
Schottenstein Zox & Dunn Co., LPA Bingham McCutchen LLP
Arena District 85 Exchange Street, 3rd Floor
250 West Street Portland, Maine 04101-5045
Columbus, OH 43215-2538 E-Mail — christ ine. bruenn@bingham. com
E-Mail -kmanghillis @szd. com (207) 780-8288 (Work)
(614) 462-1087 (Work) (207) 780-8298 (Fax)
(614) 462-5135 (Fax)
MD Mr. Wm. David Chalk 117
KS/MO Mr. William M. Schutte 66 DLA Piper LLP (US)
Polsinelli Shugart PC 6225 Smith Avenue
700 W. 47th Street, Suite 1000 Baltimore, MD 21209-3600
Kansas City, MO 64112 E-Mail - david.chalk@dlapiper.com
E-Mail - wschutte@polsinelli.com (410) 580-4120 (Work)
(816) 753-1000 (Work) (410) 580-3120 (Fax)
(816) 753-1536 (Fax) (410) 499-9555 (Cell)
(816) 914-3704 (Cell)
MA Mr. Michael M. Jurasic 122
KY Mr. Manning G. Warren III 71 Ropes & Gray
University of Louisville One International Place
Louis D. Brandeis School of Law Boston, MA 02110-2624
2301 South Third Street E-mail - michael.jurasic@ropesgray.com
Louisville, KY 40292 (617) 951-7754 (Work)
E-Mail - mgw333@gmail.com (617) 235-0698 (Fax)
(502) 852-7265 (Work) (617) 710-0619 (Cell)
(502) 852-0862 (Fax)
MI Mr. Shane B. Hansen 126
Warner Norcross & Judd LLP
111 Lyon Street, N.W., Suite 900
Grand Rapids, MI 49503-2487
E-mail - shansen@wnj.com
(616) 752-2145 (Work)
(616) 942-7063 (Home)
(616) 752-2500 (Fax)
Committee on State Regulation of Securities Page 3
Subcommittee on Liaisons to the States and Provinces
Report Report
LIAISONS Page LIAISONS Page
MN (See IOWA) 134 NJ Mr. Peter D. Hutcheon 154
Norris, McLaughlin & Marcus, P.A.
MS Mr. Daniel G. Hise 135 721 Route 202-206
Butler, Snow, O'Mara, Stevens Post Office Box 5933
& Cannada, PLLC Somerville, NJ 08876-5933
Post Office Box 22567 E-Mail - pdhutcheon@nmmlaw.com
Jackson, MS 39225-2567 (908) 252-4216 (Work)
E-Mail - dan.hise@butlersnow.com (908) 356-4766 (Home)
(601)985-5711 (Work) (908) 722-0755 (Fax)
(601) 355-1742 (Home)
(601) 985-4500 (Fax) NM Ms. Jean C. Moore 185
Sutin Thayer & Browne
MO (SEE KANSAS) 140 Two Park Square, Suite 1000
Albuquerque, NM 87110
MT (SEE COLORADO) 144 Mailing Address: P.O. Box 1945
Albuquerque, NM 87103
NE [Vacant] N/R E-Mail - jcm@sutinfirm.com
(505) 883-3447 (Work)
(505) 855-9576 (Fax)
NV Mr. Ken Creighton N/R
9295 Prototype Drive NY Mr. F. Lee Liebolt, Jr. 189
Reno, NV 89511 420 Lexington Avenue, Suite 2620
E-Mail - ken.creighton@igt.com New York, NY 10170
(775) 448-0119 (Work) E-Mail - lliebolt@aol.com
(775) 825-1844 (Home) (212) 286-1384 (Work)
(775) 448-0120 (Fax) (212) 369-8067 (Home)
(212) 286-1389 (Fax)
NH Mr. Richard A. Samuels 150
McLane, Graf, Raulerson NC Mr. David N. Jonson 194
& Middleton P.A. K&L Gates LLP
900 Elm Street 3450 Lassiter at North Hills Avenue
Post Office Box 326 Suite 300 (27609)
Manchester, NH 03105-0326 Post Office Box 17047
E-Mail - rsamuels@mclane.com Raleigh, NC 27619-7047
(603) 628-1470 (Work) E-Mail - djonson@kennedycovington.com
(603) 228-8636 (Home) (919) 743-7308 (Work)
(603) 625-5650 (Fax) (919) 639-0598 (Home)
(603) 496-7610 (Cell) (919) 516-2008 (Fax)
(919) 749-2762 (Cell)
Committee on State Regulation of Securities Page 4
Subcommittee on Liaisons to the States and Provinces
Report
LIAISONS LIAISONS Page
ND Mr. Craig A. Boeckel N/R PA G. Philip Rutledge 206
Pagel Weikum Law Form Bybel Rutledge LLP
1715 Burnt Boat Drive, Madison Suite 1017 Mumma Road, Suite 302
Bismarck, ND 58503 Lemoyne, Pennsylvania 17043
E-Mail - cboeckel@pagelweikum.com E-Mail - rutledge@bvbebntledge.com
(701) 250-1369 (Work) (717) 731-1700 (Work)
(701) 250-1368 (Fax) (717) 731-8205 (Fax)
(717) 503-1928 (Cell)
OH Mr. Edward D. McDevitt N/R
Bowles Rice McDavid Graff RI Mr. John F. Corrigan 211
& Love LLP John F. Corrigan PC
60 Quarrier Street 90 Elm Street, Suite 2000
Charleston, WV 25301 Providence, RI 02903-4647
Post Office Box 1386 E-Mail - jfc@johnfcorriganlaw.com
Charleston, WV 25325-1386 (401) 276-8350 (Work)
E-Mail - emcdevitt@bowlesrice.com (401) 885-1025 (Home)
(304)347-1711 (Work) (401) 633-6145 (Fax)
(304) 343-3058 (Fax) (401) 219-1400 (Cell)
OK Mr. C. Raymond Patton, Jr. 201 SC Mr. F. Daniel Bell III 215
Conner & Winters K&L Gates LLP
A Professional Corporation 4350 Lassiter at North Hills Ave., Ste 300
4000 One Williams Center Raleigh, NC 27609
Tulsa, OK 74172-0148 E-Mail - dbell@klgates.com
E-Mail - rpatton@cwlaw.com (919) 743-7335 (Work)
(918) 586-8523 (Work) (919) 872-7886 (Home)
(918) 299-5838 (Home) (919) 516-2035 (Fax)
(918) 586-8623 (Fax)
(918) 629-2436 (Cell) SD Mr. Charles D. Gullickson 219
Davenport, Evans, Hurwitz
OR Mr. Jacob ("Jake") Heth 205 & Smith, L.L.P.
Davis Wright Tremaine LLP 206 West 14th Street
1300 SW Fifth Avenue - Suite 2300 Post Office Box 1030
Portland, OR 97201 Sioux Falls, SD 57101-1030
E-Mail - jacobheth@dwt.com E-Mail - cgullickson@dehs. com
(503) 778-5396 (Work) (605) 357-1270 (Work)
(503) 778-5299 (Fax) (605) 331-3880 (Home)
(605) 335-3639 (Fax)
Committee on State Regulation of Securities Page5
Subcommittee on Liaisons to the States and Provinces
Report Report
LIAISONS 'age LIAISONS Page
TN Ms. E. Marlee Mitchell N/R VA Mr. Thomas G. Voekler N/R
Waller Lansden Dortch Hirschler Fleischer
& Davis, PLLC The Edgeworth Building
Nashville City Center 2100 East Gary Street
Suite 2100, 511 Union Street Richmond, VA 23223-7078
Nashville, TN 37219-1760 Post Office Box 500
E-Mail - mmitchell@wallerlaw.com Richmond, VA 23218-0500
(615) 244-6380 (Work) E-mail - tvoekler@hf-law.com
(615) 298-2514 (Home) (804) 771-9599 (Work)
(615) 244-6804 (Fax) (804) 241-3529 (Cell)
(804) 644-0957 (Fax)
TX Mr. Daniel R. Waller 225
Secore & Waller LLP WA Mr. John L. Mericle 232
12221 Merit Drive, Suite 1100 Harris, Mericle & Wakayama
Dallas, TX 75251-2227 999 Third Avenue, Suite 3210
E-Mail - dan@secorewaller.com Seattle, WA 98104
(972) 776-0200 (Work) E-Mail - jbmericle@comcast.net
(972) 392-2452 (Home) (425) 742-3985 (Work)
(972) 776-0240 (Fax) (425) 724-4676 (Fax)
(206) 601-9993 (Cell)
UT Mr. Erik A. Christiansen N/R
Parsons Behle & Latimer WV Mr. Edward D. McDevitt N/R
201 South Main Street, Suite 1800 Bowles Rice McDavid Graff
Salt Lake City, UT 84111 & Love, PLLC
E-Mail - echristiansen@parsonsbehle.com 600 Quarrier Street
(800) 293-9669 (Toll Free) Charleston, WV 25314
(801) 532-1234 (Work) E-Mail - emcdevitt@bowlesrice. com
(801)536-6111 (Fax) (304)347-1711 (Work)
(304) 345-4188 (Home)
VT Mr. William (Chip) A. Mason 227 (304) 343-3058 (Fax)
Gravel and Shea
76 St. Paul Street, 7th Floor WI Mr. Terry Nelson 242
Post Office Box 369 Foley & Lardner
Burlington, VT 05402-0369 150 East Oilman
E-Mail - cmason@gravelshea.com Post Office Box 1497
(802) 658-0220 (Work) Madison, WI 53701
(802) 658-1456 (Fax) E-Mail - tnelson@foleylaw.com
(608) 258-4232 (Work)
(608) 836-8855 (Home)
(608) 258-4258 (Fax)
WY SEE COLORADO 245
Committee on State Regulation of Securities Page 6
Subcommittee on Liaisons to the States and Provinces
Report Report
LIAISONS Page LIAISONS Page
DC Ms. Michele A. Kulerman 249
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004-1109
E-Mail - makulerman@hhlaw.com
(202) 637-5743 (Work)
(301) 279-6772 (Home)
(202) 637-5910 (Fax)
PR [Vacant] N/R
USVIMr. Tom Bolt N/R
Tom Bolt & Associates PC
Corporate Place
5600 Royal Dane Mall
St. Thomas, VI 00802-6410
E-Mail - tbolt@vilaw.com
(340) 774-2944 (Work)
(340) 776-1639 (Fax)
CAN Mr. Paul G. Findlay 259
Borden Ladner Gervais LLP
Scotia Plaza, Suite 4400
40 King Street West
Toronto, Ontario M5H 3Y4
Canada
E-Mail - pfindlay@blgcanada.com
(416) 367-6191 (Work)
(416) 484-9862 (Home)
(416) 361-7083 (Fax)
Committee on State Regulation of Securities Page 7
Subcommittee on Liaisons to the States and Provinces
ALABAMA
ALABAMA
STATE LIAISON REPORT
(As of March 16, 2009)
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: Carolyn L. Duncan
Cabaniss, Johnston, Gardner, Dumas & O'Neal LLP
2001 Park Place North, Suite 700
Birmingham, Alabama 35203
Email: cld@cabaniss.com
Telephone: (205) 716-5255 (direct)
Fax: (205)716-5389
Website: www.cabaniss.com
Securities Administrator: Hon. Joseph P. Borg, Director
Alabama Securities Commission
770 Washington Ave, Suite 570
Montgomery, AL 36130-4700
Main Telephone: (800) 222-1253 or (334) 242-2984
Main Fax: (334) 242-0240 or (334) 353-4690
Website: www.asc.state.al.us
Statute Title/Citation: Alabama Securities Act
Full cite: Code of Alabama (1975) § 8-6-1, et seq.
Short cite: Ala. Code
Internet Access: http://www.asc.state.al.us/statutes.htm
and
http://www.legislature.state.al.us/CodeofAlabama/1975/coatoc.htm
Rules Name/Citation: Rules of the Alabama Securities Commission,
Alabama Administrative Code, Chapter 830 (Rules 830-X-l et
seq.}
Internet Access: http://www.alabamaadministrativecode.state.al.us/docs/sec/index.html
and
http://www.asc.state.al.us/statutes.htm (see, however, cautionary
note below)
Committee on State Regulation of Securities Page 8
Subcommittee on Liaisons to the States and Provinces
ALABAMA
Highlights of Material Developments
None to report.
Securities Statutory Developments
The Alabama Securities Commission again this year is seeking piecemeal legislation to
increase filing fees, criminal penalties and civil fines, plus a few technical changes intended to
conform the Alabama statutes to NSMIA. Identical bills have been reported out of committee in
both legislative chambers. If adopted, the bills would increase all filing fees by ten to twenty
percent (Rule 506 filings would increase from $250 to $300). Criminal penalties would be
increased from Class C felonies to Class B felonies (two to twenty year prison terms and fines up
to $10,000 plus twice the amount of any criminal gain) for:
Willful violations of the strict liability provisions (registration requirements for
broker-dealers, agents, investment advisers and investment adviser
representatives, and securities registration requirements); and
Violations of the anti-fraud provisions.
Applicable State Statute of Limitations Periods
Criminal Enforcement Proceedings: Five years after the alleged violation. Ala. Code §
8-6-18(a).
Civil Actions: For registration violations, two years from the date of sale. For all other
actions for relief, the earlier of two years from discovery of the violation or when discovery
should have been made in the exercise of reasonable care. Ala. Code § 8-6-19(f).
Applicable State Statutory Interest Rate
Six percent from the date of payment, Ala. Code § 8-6-19(b)(l) and (2) for investment
adviser registration violations or investment adviser fraud, respectively, and §8-6-19(a) for all
other acts in violation of the Act.
Securities Rules Developments
Use of Senior-Specific Certifications and Professional Designations. New Rule 830-X-
3-.28 was adopted effective November 4, 2008. The use of any senior-specific certification or
professional designations by any person in connection with the offer, purchase or sale of
securities or the provision of advice relating to securities is prohibited, unless the professional
designation or certification is actually earned and awarded according to accepted educational and
training criteria. There is a rebuttable presumption that a designating or certifying organization
is qualified for purposes of the rule if the organization has been accredited by any of several
listed accrediting organizations or others later designated as such by the Director. The burden of
Committee on State Regulation of Securities Page 9
Subcommittee on Liaisons to the States and Provinces
ALABAMA
proof in any proceeding under the rule is upon the person claiming any such certification or
designation.
Caution: At the date of this report, the Commission's website still indicated that this rule
and two others long since adopted are proposed for adoption, and they are not yet included in the
body of the Rules on the Commission's website. The rules were adopted as proposed, so the text
shown in the proposals is accurate. We have brought this to the staffs attention, and expect it
will be corrected shortly. In the meantime, we advise checking all Rules on the State's primary
website for the Administrative Code:
http://www.alabamaadministrativecode.state.al.us/docs/sec/index.html
Administrator's Staffing Changes
Edwin Reed has assumed the position and responsibilities of General Counsel effective
January 1, 2009. Ed has served with the Commission in several capacities since 1993 and
assumes his new role from J. Randall McNeill who is maintaining the position of Deputy
Director
Ed began his tenure with the Commission as a securities analyst and was appointed
securities registration manager in 1997, serving in that capacity until he was appointed associate
counsel in 2002. He handled legal issues associated with the registration/exemption of
securities, brokers, agents, investment advisers, investment adviser representatives and was also
responsible for the overall management of the Commission's registration division. He has served
on several NASAA committees and assisted with the development of uniform state rules, testing
for regulating investment advisers and assisted with the development of comprehensive training
program for the examination and auditing of investment advisers nationwide.
Randy McNeill continues as Deputy Director and chief prosecutor. He will also assist
Director Joe Borg with additional administrative responsibilities in the overall operation of the
Commission, in addition to managing an ever increasing enforcement work load.
Administrative Orders and Announcements
Nothing to report.
Committee on State Regulation of Securities Page 10
Subcommittee on Liaisons to the States and Provinces
ALABAMA
FORM D FILING PRACTICES SUPPLEMENT
Form D Filings and Related Issues
Liaison note: Except as otherwise indicated, the responses below were provided by the
Alabama Securities Commission staff. The Commission has not to date published a statement or
guidelines on the new Form D filings, and the staff was pleased for this opportunity to advise the
practicing bar of its current practice. The staff advises that it is supportive of the NASAA
initiative to develop a uniform and/or one-stop state filing procedure, and expects to actively
participate in the project. Commission staff is glad to respond to questions or requests for
assistance.
* Does your administrator accept the new Form D? Is it optional or mandatory, until when?
Effective March 16, 2009, new Form D is mandatory.
* Until what date will your administrator accept the Temporary Form D or old Form D?
Effective March 16, 2009, Temporary Form D and old Form D are no longer being
accepted.
* Will your administrator accept copies of an "as-filed" new Form D with the SEC or is a
separate, manually signed copy required?
Separate, manually signed copy is required.
Liaison note: upon being informed that there are still numerous technical glitches and
difficulties in the SEC filing process, Commission staff indicated they are willing to work
with issuers' counsel in such situations.
* As applicable, may an issuer simultaneously check claims of exemption under Rules 504,
505 and 506 under Regulation D?
Yes
* Must issuers still file a copy of the state Appendix from the old Form D?
No
* If no Appendix is required, must the filing letter give the amount sold in the state?
No
* Must the filing letter give the date of first sale in the state?
No
Committee on State Regulation of Securities Page 11
Subcommittee on Liaisons to the States and Provinces
ALABAMA
* Must issuers file a separate Form U-2?
No
* Can one Form D filing be used for multiple securities issued by different issuers in the
same offering (e.g., debt of a parent company with guarantees by multiple subsidiaries)?
Yes
* What events trigger the filing clock (e.g., receipt of signed subscription or cash, etc) ?
Signed subscription (agreement to purchase).
* What is the state's enforcement position on failure to file or late filings?
This is evolving with time. We typically issue a C&D, with follow up on anti-fraud
issues. We have found that 506 is being used, on an ever increasing basis, for fraudulent
purposes. In such cases, we exercise whatever enforcement powers are deemed apprgprjats in
light of the circumstances.
* Are annual renewal filings required and, if so, what is required (new fee, new U-2?)? If
not, must a copy of the electronic Form D be filed when it is renewed with the SEC? Must
amendments also be filed?
No
* Are there any unusual policies or procedures followed by the administrator's staff?
No
Committee on State Regulation of Securities Page 12
Subcommittee on Liaisons to the States and Provinces
ALASKA
ALASKA
STATE LIAISON REPORT
(As of 2/26/09)
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: Julius J. Brecht
Wohlforth Johnson Brecht Cartledge & Brooking
900 West 5th Avenue, Suite 600
Anchorage, AK 99501
Email: jbrecht@akatty.com
Telephone: 907.276.6401
Cell phone:
Fax: 907.276.9053
Website: www. akattv. co m
Securities Administrator: Lorie Hovanec
Alaska Division of Banking and Securities
150 3rd Street, Suite 217, Juneau, AK 99801
PO Box 110807, Juneau, AK 99811-0807
Main Telephone: (907) 465.2521
Main Fax: (907)465.1230
Website: http://www.dced.state.ak.us/bsc/
Statute's Title/Citation: Alaska Securities Act-- AS 45.55
Internet Access: http://www.legis.state.ak.us/cgi-
bin/folioisa.dlVstattx08/query=*/doc/lt20073l?
Rule's Name/Citation: Alaska Securities Regulations- 3AAC08.005-08.950
Internet Access: http://www.commerce.state.ak.us/bsc/regs.htrn
Highlights of Material Developments
The Division continues to consider USA 2002 and has various enforcement actions in
progress.
Committee on State Regulation of Securities Page 13
Subcommittee on Liaisons to the States and Provinces
ALASKA
Securities Statutory Developments
The Division has continued interest in and is considering seeking repeal of ASA and
replacement of it with USA 2002. The Division has contacted the Securities Law Section of the
American Bar Association (Lynn Naefach and Philip Feigin, co-chairs) in this regard.
Applicable State Statute of Limitations Periods
The ASA statute of limitations period is three years after the sale or two years after the
person bringing the action discovered or should have discovered the facts on which the action is
based, whichever is later. AS 45.55.930(f).
Applicable State Statutory Interest Rate
The rate imposed in the context of rescission matters is 8% per year as specified at AS
45.55.930(a).
Other Notable Statutory Developments
None.
Securities Rules Developments
The Division is reviewing the 15-day notice requirement under Regulation D.
Administrator's Staffing Changes
The Division recently gained two new examiners, bring the total complement to four
securities examiners, three business regulation examiners and one investigator.
Administrative Orders and Announcements
None.
Administrative Enforcement Proceedings (Note: enforcement matters are separately reported
by the Subcommittee on Enforcement, contact Mike Underwood, Subcommittee Chair, at
Michael. Underwood&fowlerwhite.com: do not report these matters here.)
Securities-related Case Law Developments
An ANCSA proxy solicitation complaint is scheduled for argument in Superior Court
shortly.
Committee on State Regulation of Securities Page 14
Subcommittee on Liaisons to the States and Provinces
ALASKA
Other Noteworthy Practice Developments
None.
FORM D FILING PRACTICES SUPPLEMENT
Form D Filings and Related Issues
* Does your jurisdiction accept the new Form D? Is it optional or mandatory, until when?
At present, Division will accept old or new form in paper format only, but it is in the
process of establishing procedures for acceptance of the form electronically. The issue of
continued acceptance of paper format will likely be addressed at that point.
* Until what date will your jurisdiction accept the Temporary Form D or old Form D?
Until the Division adopts the above referenced procedures.
* As applicable, may an issuer simultaneously check claims of exemption under Rules 504,
505 and 506 under Regulation D?
No.
* Must issuers still file a copy of the state Appendix from the old Form D?
Yes, the Division still follows procedures requiring filing of the full "old" Form D.
* If no Appendix is required, must the filing letter give the amount sold in the state?
N/A
* Must the filing letter give the date of first sale in the state?
N/A
* Must issuers file a separate Form U-2?
Under present Division procedures, yes.
* Can multiple offerings by the same issuer be covered in one Form D?
No.
* Can one Form D filing be used for multiple affiliated issuers?
This matter is considered on a case-by-case basis.
Committee on State Regulation of Securities Page 15
Subcommittee on Liaisons to the States and Provinces
ALASKA
* What events trigger the filing clock (e.g., receipt of signed subscription or cash, etc)?
15 days from confirmation of sale, e.g., acceptance of subscription.
* What is the state's enforcement position on failure to file or late filings?
The Division has this matter is under review.
* Are annual renewal filings required and, if so, what is required (new fee, new U-2?)? If
not, must a copy of the electronic Form D be filed when it is renewed with the SEC? Must
amendments also be filed?
The Division's present procedures include a required filing fee of $600 for a notice filing
lasting one year. At the end of that year, should the issuer wish to continue the offering in
Alaska and under Regulation D, the issuer must file a new notice and pay a new filing fee of
$600. In filing the initial notice, the issuer has the opportunity to pay $1,100 for a two year
notice filing. A new Form U-2 is not required for the extension of the notice to the second year.
At present, the ASA and Alaska Securities Regulations are silent as to whether an issuer is
required to file an amendment to Form D with the Division. This matter is under review by the
Division.
* Are there any unusual policies or procedures?
N/A
Committee on State Regulation of Securities Page 16
Subcommittee on Liaisons to the States and Provinces
ARIZONA
ARIZONA
STATE LIAISON REPORT
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: Mr. Dee Riddell Harris
Arizona Angels Venture Group, Inc.
ASU SkySong
1475 North Scottsdale Road, Suite 200
Scottsdale, AZ 85257-3538
Email: www.dharris(g),arizona-angels.org
Telephone: (602) 840-4078
Cellphone: (602)617-7833
Fax: (602) 840-6824
Website:
Securities Administrator: Matthew J. Neubert - Director
Securities Division, Arizona Corporations Commission
1300 W. Washington St. 3rd Floor
Phoenix, AZ 85007
Main Telephone: (602) 542-4242 or (866) 837-4399
Main Fax: (602) 594-7470
Website: http://www.azcc.gov/divisions/securities/
Statute's Title/Citation: Securities Act of Arizona
Investment Management Act of Arizona
Internet Access: http://www.azcc.gov/divisions/securities/statutes_and_rules.asp
Rule's Name/Citation: Title 14. Public Service Corporations; Corporations and
Associations; Securities Regulation
Chapter 4. Corporation Commission, Securities
Chapter 6. Corporation Commission, Investment Management
Internet Access: http://www.azsos.gov/public_services/Title_14/14-04.htm
http://www.azsos.gov/public_services/Title_14/14-06.htm
The Arizona Corporation Commission had previously adopted the NASAA Guidelines as
its rules in Rule R14-4-116. In Arizona it is not possible to incorporate future changes to rules by
Committee on State Regulation of Securities Page 17
Subcommittee on Liaisons to the States and Provinces
ARIZONA
reference. Accordingly, many recent amendments to NASAA guidelines were not part of
Arizona's Rules.
Effective October 21, 2008, Rule Rl4-4-116 was amended to incorporate various
amendments to various Guidelines. Specifically incorporated were 2007 amendments to the
following NASAA Guidelines: Asset-Backed Securities, Mortgage Program Guidelines,
Commodity Pool Programs Guidelines, Equipment Program Guidelines, Oil and Gas Programs,
the Statement of Policy Regarding Real Estate Investment Trusts, Real Estate Programs
Guidelines, and the Omnibus Guidelines (to revise suitability standards to reflect inflation.
On February 19, 2009, the Commission sanctioned multiple individuals and their
affiliated companies whose securities defrauded over $7.89 million from investors, ordered that
amount in restitutions, and ordered that a total of $485,000 of administrative penalties be paid.
The cases involved selling away, misrepresentation, depositing investor funds in the account of a
broker, manufacturing fictitious client account statements, sale of unregistered promissory notes,
using brokers' own post office boxes as addresses for customers, and sale of unregistered
securities.
An interesting case, and possibly one that suggests a novel, but unlikely way, to offer
securities is Arizona Corporation Commission v. West Mining and Innovations, Inc.
In a Temporary Cease and Desist Order dated March 13, 2009, the Commission alleged
that Respondent posted an announcement on Craig's List that it was seeking a $50,000
investment to be repaid in gold to be derived from mining claims that Respondent did not own.
Committee on State Regulation of Securities Page 18
Subcommittee on Liaisons to the States and Provinces
ARKANSAS
ARKANSAS
STATE LIAISON REPORT
No report.
Committee on State Regulation of Securities Page 19
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
CALIFORNIA
STATE LIAISON REPORT
(As of March 31, 2009)
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: Keith Paul Bishop
Allen Matkins Leek Gamble Mallory & Natsis LLP
1900 Main Street, 5th Floor
Irvine, California 92614-7321
Email: kbishop@allenmatkins.com
Telephone: (945)851-5428
Cell phone:
Fax: (945)553-8354
Website: www.allenmatkins.com
Securities Administrator: Preston DuFauchard, Commissioner of Corporations
Department of Corporations
1515 K Street, Suite 200, Sacramento, CA 95814-4052
Main Telephone: (916) 445-7205
Main Fax:
Website: http://www.corp.ca.gov
Statute's Title/Citation: Corporate Securities Law of 1968; Cal. Corp. Code § 25000, et
seq.
Internet Access: http://www.leginfo.ca.gov
Rule's Name/Citation: California Code of Regulations 10 CCR § 250.9, et seq., and
1 OCCR§ 260.00, et seq.
Internet Access: http://www.oal.ca.gov
Highlights of Material Developments:
On October 22, 2008, Commissioner issued 119-C to clarify broker-dealer licensure
requirements in light of People v. Cole, 156 Cal. App. 4th 452 (2007). For a discussion of
People v. Cole, see Keith Paul Bishop, A Shot Not Heard—The Court of Appeal Holds that an
Issuer's Directors and Officers Must Be Licensed as Securities Broker-Dealers, California
Business Law News, Issue #3 (2008). On March 9, 2009, the Corporations Committee of the
Committee on State Regulation of Securities Page 20
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
Business Law Section of the California State Bar submitted a letter to the Department requesting
rulemaking to clarify further the status of persons associated with the issues.
See description of Release 120-C relating to electronic Form D implementation below.
Securities Statutory Developments
AB 2149 (Berg); Chapter 476, Statutes of 2008 added Section 25243.5 to the California
Corporations Code. According to the Department of Corporations, this statute "prohibits a
broker-dealer and an investment adviser, or its respective agent or representative, from using a
senior specific professional designation in the offer or sale of securities or in providing securities
advice, that implies the securities firm or professional has special certification or training in
advising or servicing senior citizens or retirees, in such a way as to mislead any person."
Applicable State Statute of Limitations Periods
Anti-Fraud Provisions of the Corporate Securities Laws (Corporations Code Section
25506).
For proceedings commencing on or after January 1, 2005, an action must be brought
before the expiration of five years after the act or transaction constituting the violation or the
expiration of two years after discovery by the plaintiff of the facts constituting the violation,
whichever first expires, if the action is to enforce liability created under the following sections of
the Corporations Code:
• Section 25500 (violation of Section 25400 (unlawful acts or misrepresentations to
induce purchase or sale of securities or to manipulate price));
• Section 25501 (violation of Section 25401 (sale or purchase of securities by means of
written or oral communications containing false statements or omissions)); and
• Section 25502 (violation of Section 25402 (purchase or sale of securities by a person
who has access to material, non-public information)).
The above limitations also apply to actions maintained to enforce liability under Section 25504
(control person liability) and Section 25504.1 (liability of persons who materially assist) insofar
as the actions relate to the sections above.
Liability of Professionals (Corporations Code Section 25506.1).
An action to enforce any liability under Section 25504.2 (liability of accountants,
engineers, appraisers, etc.) must be brought within one year after discovery of the facts
constituting the violation, or after such discovery should have been made by the exercise of
reasonable diligence. In no event may such action be brought more than three years after the act
or transaction constituting the violation.
Committee on State Regulation of Securities Page 21
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
Unqualified Offers and Sales (Corporations Code Section 25507).
An action to enforce liability under Section 25503 (generally failure to qualify the offer
or sale or violation of a condition of qualification), or Section 25504 or Section 25504.1 insofar
as the liability relates to Section 25503, must be brought before the expiration of two years after
the violation or the expiration of one year after the discovery by the plaintiff of the facts
constituting the violation, whichever shall first expire. Note that this period may be shortened if
a written repurchase offer is made in accordance with Section 25503.
Other causes of action (such as common law fraud, breach of contract, misrepresentation,
etc.) may have different limitations periods.
Applicable State Statutory Interest Rate
Corporations Code Sections 25501 (rescission for violations of Section 25401 (false
statements)), 25502 (damages for violations of Section 25402 (trading on the basis of inside
information)); and 25503 (recovery of consideration or damages for failures to qualify or
violations of qualification conditions) each provide for recovery of interest at the "legal rate" of
interest.
Other Notable Statutory Developments
AB 161 (Adams) has been introduced in the Legislature. This bill, which is sponsored
the Business Law Section of the California State Bar would amend Sections 601 and 1501 of the
Corporations Code. The bill is intended to clarify that California corporations may "household"
shareholder meeting notices and annual reports. This bill would also affect foreign corporations
that have their principal executive offices in California or that customarily hold meetings of its
board in California.
AB 33 (Nava) has been introduced in the Legislature. This bill would declare the intent
of the Legislature to do the following: (1) abolish the Department of Corporations (DOC), the
Department of Financial Institutions (DPI), the Department of Real Estate (DRE), and the Office
of Real Estate Appraisers (OREA), (2) create a new Department of Financial Services (DPS), (3)
designate the chief officer of DPS as the Commissioner of Financial Services, (4) arrange for the
consolidation and transfer of various operations and procedures of those departments and that
office to DPS, and (5) require DPS to regulate those persons, entities, and transactions subject to
regulation by, or subject to the jurisdiction of, DOC, DPI, DRE, and OREA.
Securities Rules Developments
Adopted Regulations
No regulations have been adopted since last report.
Committee on State Regulation of Securities Page 22
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
Proposed Amendments, Adoptions and Repeals
Regulatory Clean-up: The Commissioner has proposed amendments to the following
regulations: 260.004, 260.017.1, 260.101, 260.102.14, 260.165, 260.210, 260.211, 260.230.1,
260.231 A, 260.236, 260.236.1, 260.237.2, 260.240, and 260.241.3; and to repeal the following
regulations: Sections 260.103.3 and 260.237.1. The Commissioner is proposing these changes to
update and correct these regulations. The comment period for this rulemaking ends on April 27,
2009.
Regulatory Clean-Up (Part 2): The Commissioner has proposed to make technical and
clarifying amendments to Sections 260.102.8(b), 260.103.6, 260.105.15, 260.113,
260.140.8(b)(4), 260.140.42(e), 260.140.71.2, 260.140.114.1(c), 260.15l(a), 260.236(c)(3)(C),
260.608, 1457(d), 1950.122.1, 2020(c) and 2030; to amend the Note after Subchapter 6 of the
California Finance Lenders Law; and to repeal Sections 250.50 and 250.51 of Title 10 of the
California Code of Regulations under the Corporate Securities Law of 1968, California Finance
Lenders Law, California Residential Mortgage Lending Act, and California Deferred Deposit
Transaction Law. The period within which to comment on this proposed regulatory action ends
on June 15,2009
Stock Exchange Name Changes: The Commissioner has proposed amendments to
Sections 260.101.2, 260.103.4, 260.105.7, 260.105.17, 260.105.33, 260.105.34, 260.217,
260.230, 260.241.4, and 260.242; repeal Sections 260.105.37 and 260.204.11. These changes
were proposed to reflect changes in the names and functions of various exchanges. The
comment period for these regulations expired on November 24, 2008.
Investment Advisers: The Commissioner has proposed amendments to the following
regulations: Sections 260.231, 260.235, 260.237.2, 260.238 & 260.241.3. The Commissioner is
also proposing to repeal Section 260.231.1 and to adopt Sections 260.235.5, 260.238.1,
260.238.2, 260.238.3 & 260.238.4. According to the Commissioner, these changes are being
proposed "to increase uniformity with investment adviser regulation in other states, as well as
with recently adopted and long-standing Securities and Exchange Commission (SEC) rules and
interpretations". The comment period (which had been extended) ended on February 1, 2008.
Administrator's Staffing Changes
Karen Clopton, the Department's former General Counsel, has been appointed Chief
Administrative Law Judge at the California Public Utilities Commission. Robert Van Der
Volgen, Deputy Commissioner of the Securities Regulation Division, is the Acting General
Counsel.
Administrative Orders and Announcements
On March 25, 2009, he California Corporations Commissioner issued Release 120-C to
provide clarity regarding the filing requirements for securities issuers filing Form D with the
Department, in light of the Securities and Exchange Commission's (SEC) revisions to the form
and requirement that the form be electronically filed with the SEC.
Committee on State Regulation of Securities Page 23
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
See discussion of Commissioner's Release 119-C above.
Administrative Enforcement Proceedings
See report of Subcommittee on Enforcement.
Securities-related Case Law Developments
Donell v. Kowell, 533 F.3d 762 (9th Cir. 2008)
The case addresses the liability of a good faith investor in a Ponzi scheme. The 9th
Circuit upheld liability under the Uniform Fraudulent Transfer Act as adopted by California.
Liability was based on a positive netting of the amounts paid by the Ponzi scheme to the investor
against the initial investment. The court then applied the applicable statute of limitations to
determine the actual liability. The investor advanced several legal theories for why he shouldn't
be liable, but all were rejected on appeal.
Madden v. Cowen & Co., Case No. 07-15900 (9th Cir. Feb. 11, 2009)
This case involved a lawsuit filed in California state court by 63 shareholders against an
investment banking firm. The suit alleged that the investment banking firm misled the plaintiffs
in connection with the sale of their shares in a closely held California corporation (St. Joseph) to
a publicly traded Delaware corporation (FPA Medical Management) that went bankrupt shortly
after the sale. The plaintiffs' suit was removed to federal court pursuant to the Securities
Litigation Uniform Standards Act of 1998. The federal district court denied the plaintiffs'
motion to remand the case back to state court and granted the defendant's motion to dismiss. On
appeal, the 9th Circuit concluded that the suit fell within the so-called "Delaware Carve-Out" that
preserves certain actions based on the statutory or common law of the state in which the issuer is
incorporated if certain conditions are met. 15 U.S.C. Sec. 77p(d). In this case, the issuer of the
shares sold by the plaintiffs, St. Joseph, had been incorporated in California. Thus, it is
somewhat ironic that the Delaware Carve-Out was applied to a California corporation. The
defendant argued that the Delaware Carve-Out applied only to the acquiring company (in this
case, FPA, a Delaware corporation) because it was the issuer of the covered security. The 9th
Circuit rejected this argument finding that the issuer in the Delaware Carve-out refers to the
corporation that is the issuer of the securities described in the carve-out and was not limited to
the issuer of a "covered security". The 9th Circuit also addressed the defendant's argument that it
did not act on behalf of the issuer because it was not an officer, director or employee of the issuer
(referring to the Private Securities Litigation Reform Act of 1995) which defines the phrase
"person acting on behalf of an issuer". The 9th Circuit rejected this argument as well.
Baines v. Moores, Cal. Ct. Appeal Case No. D052533 (March 20, 2009)
Court of Appeal assumes, but does not decide, that suspicious stock sales may raise an
inference of scienter under California law. The appellate decision also addressed several other
pleading issues under the Corporate Securities Law of 1968.
Committee on State Regulation of Securities Page 24
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
Other Noteworthy Practice Developments
Due to the California budget crisis, employees of the Department will be on furlough on
the first and third Fridays of each month through June 30, 2009. See Executive Order S-16-08
(available at http://www.gov.ca.gov/executive-order/] 13107).
FORM D FILING PRACTICES SUPPLEMENT
Below are the questions with my analysis (KPB) followed by the Department of Corporation's
answers (DOC).
Form D Filings and Related Issues
* Does your jurisdiction accept the new Form D? Is it optional or mandatory, until when?
KPB: In the case of a Form D filed pursuant to Corporations Code Section 25102. l(d),
the statute requires that the issuer file "the completed Form D (17 C.F.R. 239.500) filed
with the Securities and Exchange Commission . ..". (emphasis added). Because the
Corporations Code requires the Form D filed with the SEC and the SEC mandates
electronic filing, it appears that the new Form D must be accepted for filing and earlier
forms should not be accepted after 3/16 (other than those sent for filing prior to 3/16).
After filing the Form D electronically with the SEC, an issuer could switch to EDGAR to
retrieve the filed form and print it out for filing with the Department.
I think that the same process should obtain in the case of a Form D filed pursuant to Rule
260.102.14 (which permits the issuer to file the Form D filed with the SEC pursuant to
either Section 4(6) of the Securities Act of 1933 or Regulation D). Rule 260.102.14
prescribes the form that is required for notice under either Corporations Code Section
25102(f) and Rule 260.103.
DOC: While we anticipate that after 3/16 we will primarily be receiving copies of
electronic Form D, we will continue to accept whatever document was filed with the
SEC, in case, for example, the SEC filing occurred before 3/16.
* Until what date will your jurisdiction accept the Temporary Form D or old Form D?
KPB: For the reasons set forth above, it appears that only the new Form D should be
filed with the Department (except for paper Form Ds sent prior to 3/16).
DOC: While we anticipate that after 3/16 we will primarily be receiving copies of
electronic Form D, we will continue to accept whatever document was filed with the
SEC. We have not yet determined a date that we will no longer accept Temporary Form
D.
Committee on State Regulation of Securities Page 25
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
* As applicable, may an issuer simultaneously check claims of exemption under Rules 504,
505 and 506 under Regulation D?
KPB: It is possible that an offering meets more than one of the three exemptions in
Regulation D (Rules 504, 505, and 506). In those cases, it is appropriate for an issuer to
check one or more boxes on the Form D in the SEC filing. Because Corporations Code
Section 25102.1(d) requires, and Rule 260.102.14 permits, filing with the Department of
the Form D filed with the SEC, the Department should accept a Form D claiming
multiple exemptions. However, if the issuer indicates that the filing is being made
pursuant to Corporations Code Section 25102.1, the Department should not accept the
Form D if the Rule 506 exemption is not claimed.
DOC: If Rule 506 is checked, we will consider the filing a Section 25102.l(d) filing.
Otherwise, we will consider the filing a Section 25102(f) filing.
* Must issuers still file a copy of the state Appendix from the old Form D?
KPB: As stated above, the statute and rule refer to the Form D as filed with the SEC.
Therefore, the Department should not require filing of the state Appendix.
DOC: Not required.
* If no Appendix is required, must the filing letter give the amount sold in the state?
KPB: Neither Corporations Code Section 25102.1(d) nor Rule 260.102.14 include this
requirement. Note Rule 260.102.14(a) requires a letter indicating that the filing is made
pursuant to Corporations Code Section 25102(f). (This instruction should be modified to
say that the filing is made pursuant to either Corporations Code Section 25102(f) or Rule
260.103.)
DOC: Not required with Form D.
* Must the filing letter give the date of first sale in the state?
KPB: Neither Corporations Code Section 25102. l(d) nor Rule 260.102.14 include this
requirement.
DOC: No.
* Must issuers file a separate Form U-2?
KPB: Corporations Code Section 25102. l(d) and Rule 260.102.14(a) require a consent
to service of process under Rule 260.165. That rule currently requires either the Uniform
Consent to Service of Process (U-2) or the consent to service of process set forth in the
rule. The new Form D includes a consent to service of process. However, filing this
Committee on State Regulation of Securities Page 26
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
consent to service of process does not appear to satisfy either Section 25102. l(d) or Rule
260.102.14(a) since Rule 260.165 does not mention Form D. The Department should
consider amending Rule 260.165 to permit the consent to service of process set forth in
the new Form D.
DOC: No.
* Can multiple offerings by the same issuer be covered in one Form D?
KPB: Unless the multiple offerings were integrated, the Department should require
separate filings.
DOC: No.
* Can one Form D filing be used for multiple affiliated issuers?
KPB: The SEC Staff has said that "A single Form D may be used for an offering made
in reliance on Regulation D that involves multiple issuers, assuming the offers and sales
by the issuers are part of the same Regulation D offering as provided in Rule 502(aJ. For
example, in a master fund offering conducted through feeder funds created for the sole
purpose of investing their proceeds in the master fund, where all of the offers and sales of
the funds are part of the same offering under Rule 502(a), the aggregate offers and sales
of the Regulation D offering should be reflected on a single Form D. Offers and sales that
are not part of the same Regulation D offering must be reflected in a separate Form D
filing." Compliance and Disclosure Interpretations - Securities Act Forms (Question
130.01). I don't see why the Department could not adopt a consistent interpretation.
DOC: Yes, if filed with the SEC in this manner.
* What events trigger the filing clock (e.g., receipt of signed subscription or cash, etc)?
KPB: Under Corporations Code Section 25102. l(d)(l) and Rule 260.102.14(b), a Form
D must be filed within 15 days of the first sale in California. Rule 503 and 17 C.F.R. §
239.500(a)(l) require that the Form D be filed with the SEC "no later than 15 calendar
days after the first sale of securities in the offering." While both California and the
federal rules refer to 15 days, the starting point may be different. For example, if the first
sale in a Rule 506 offering is effected on January 1 in Nevada, that sale would start the
clock for SEC purposes. If the first sale is not made in California until August 1, then the
clock would not start until August 1 for purposes of Section 25102. l(d)(l) or Rule
260.102.14(b). Note that discrepancies may also arise with respect to option transactions
where a sale of the underlying security could occur in California before a federal first sale
has occurred. See SEC Compliance and Disclosure Interpretations - Securities Act Rules
(Question 257.06) ("When Regulation D is used in connection with a stock option plan,
the Form D should be filed not later than 15 days after the first option exercise.").
Committee on State Regulation of Securities Page 27
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
DOC: In addition, "sale" is defined in Section 25017.
* What is the state's enforcement position on failure to file or late filings?
KPB: Under Corporations Code Section 25102(f), a late filing will result in payment of
the fee applicable to qualification rather than the notice fee (which is higher). Section
25102(f) provides that failure to file the notice does not result in loss of the exemption.
Rule 260.103 provides that a transaction conducted under the rule by reason of
Corporations Code Section 25102(f) requires a filing. It is unclear whether the failure to
file would vitiate the exemption. The Department should clarify that failure to file or a
late filing would not vitiate the exemption in Rule 260.103.
Corporations Code Section 25102.1(d) provides that a transaction is not subject to
Corporations Code Sections 25110, 25120 or 25130 if, among other things, a notice is
filed. Corporations Code Section 25532(a) provides that the Commissioner may issue a
desist and refrain order if the sale of a security is subject to Corporations Code Section
25102.1 and the security is being (or has been) offered and sold without first meeting the
requirements of that section. In Commissioner's Release 109-C (revised), the
Commissioner has stated: "Late filings will be considered filed if accompanied by the
filing fee, but shall not constitute an acknowledgment by the Department that the issuer
has met the requirements of federal law or the CSL." The SEC Staff has recently issued a
Compliance and Disclosure Interpretation - Securities Act Rules (Question 257.08)
stating: '"Covered security' status under Section 18 of the Securities Act is not
conditioned upon the filing of a notice of exempt offering with the SEC or a state
securities regulator." (emphasis added)
DOC: We preserve the right to bring an action for failure to comply with the notice-filing
requirements of the law. However, absent fraud or failure to meet the exemption or
exclusion requirements, we would generally not focus enforcement efforts in this area.
* Are annual renewal filings required and, if so, what is required (new fee, new U-2?)? If
not, must a copy of the electronic Form D be filed when it is renewed with the SEC? Must
amendments also be filed?
KPB: In Commissioner's Release 109-C (revised), the Commissioner has stated that
amendments do NOT need to be filed.
DOC: Not required.
* Are there any unusual policies or procedures?
KPB: Consent to service of process is required if the issuer even though the issuer was
organized as a California limited liability company or limited partnership. See
Corporations Code Section 25165. (referring only to corporations).
DOC: We are accepting the consent to service of process on the electronic Form D.
Committee on State Regulation of Securities Page 28
Subcommittee on Liaisons to the States and Provinces
State Of California
Business, Transportation And Housing Agency
DEPARTMENT OF CORPORATIONS
California's Investment and Financing Authority
www corp.ca.gov
Arnold Schwarzenegger Preston DuFauchard
Governor California Corporations Commissioner
DATE: March 24, 2009 RELEASE No. 120-C
New Filing Requirements for Regulation D Offerings
In 2008, the Securities and Exchange Commission (SEC) adopted revisions to Regulation
D and Form D, designed to simplify and restructure information requirements and to enable
electronic filing of Form D. 1 See Securities Act Release No. 33-8891 (Feb. 6, 2008),
available at http://www.sec.gov/ruleg/final/2QQ8/33-8891.pdf. The revised Form D was
filed electronically with the SEC on a voluntary basis from September 15, 2008, through
March 15,2009.
BEGINNING MARCH 16, 2009, THE SEC REQUIRES ALL FORM D FILINGS TO BE
MADE ELECTRONICALLY.
Filing Requirements in California
To claim an exclusion or exemption from securities qualification under California law, a
Form D filing must be submitted to the California Corporations Commissioner no later
than 15 days after the date of the first sale in this state. The Corporations
Commissioner accepts Form D filings in two ways:
1. For an issuer filing a notice of a Rule 506 offering under California Corporations
Code Section 25102.1(d), an issuer must submit:
a. A copy of the version of Form D filed with and accepted by the SEC;
b. A filing fee of $300, pursuant to Section 25608.1(c) of the California
Corporations Code; and
Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an
exemption. Regulation D (or Reg D) contains three rules providing exemptions from the registration requirements, allowing
some smaller companies to offer and sell their securities without having to register the securities with the SEC. In California,
companies offering or selling securities in reliance on Rule 506 of Regulation D must file a "Form D" upon the first sale of
securities in this state, and companies relying on the exemption under Corporations Code Section 25102(f) may file a paper
copy of "Form D" rather than filing an electronic notice through the Department of Corporations' website.
CALIFORNIA
RELEASE NO. 120-C Page 2
c. A consent to service of process or Form U-2 if a Temporary Form D was
filed with the SEC prior to March 1S, 2009 |a consent to service of
process or Form U-2 is not required if an electronic Form D was filed
with the SEC).
2. To file a notice of exemption under California Corporations Code Section
251 Q2(f) by filing a copy of Form D (rather than electronically filing a notice with
the Department of Corporations), an issuer must submit:
a. A copy of the version of Form D filed with and accepted by the SEC;
b. The appropriate filing fee, as determined based on the value of securities
proposed to be sold, pursuant to Section 25608 (c) of the California
Corporations Code;
c. A consent to service of process or Form U-2 if Temporaiy Form D was
filed with the SEC prior to March 13, 2009 (a consent to service of
process or Form U-2 is not required if an electronic Form D is filed
with the SEC); and
d. A cover letter specifying that the Form D filling is pursuant to section
25102<fj.
All filings submitted by mail should be addressed to:
California Department of Corporations
151 5 K Street, Suite 2QO
Sacramento, California 35614
Annual
California does not require the Wing of amendments or annual renewals,
An issuer fling elecfronicaJty with the SEC should allow adequate time to obtain an
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) access code from the SEC
prior to riling with that agency, in order to meet the mm requirement In California within
1 5 days of a sate h this state. An EDGAR access code may be obtained by following
the instructions at ftH|^'//www fllefmanag ement edgafflltitg aec gav For more
information on filing With the SEC, Consult tie SgC'g Guidance art Farm P FHIng
S«Mi atenRurnr^ps Ari Rf>i^sf- ^n, a^S^I fPrtF)* (Pub. 6, MOB).
An electronic signature on a copy of electronic Form D is acceptable m California
Committee on State Regulation of Securities Page 30
Subcommittee on Liaisons to the States and Provinces
CALIFORNIA
RELEASE NO. 12Q-C Page 3
Questions
Questions regarding Form D filing requirements in California may be directed to the
Department of Carpa rations' toll free number at 1 (BBS) ASK-CORP (1 (fl66) 275-2677).
Preston DuFaucharcl
California Corporations Commissioner
By.
Colleen E, Monahan
Deputy Commissioner
Office of Legislation and Policy
Committee on State Regulation of Securities Page 31
Subcommittee on Liaisons to the States and Provinces
COLORADO
COLORADO
STATE LIAISON REPORT
(As of March 5, 2009)
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: Robert J. Ahrenholz, Esq.
Kutak Rock LLP
1801 California Street, Suite 3100
Denver, CO 80202
Email: robert. ahrenho lz@kutakrock. com
Telephone: 303-297-2400
Cell phone:
Fax: 303-292-7799
Website: kutakrock.com
Securities Administrator: Fred J. Joseph, Colorado Securities Commissioner
Department of Regulatory Agencies, Division of Securities
1560 Broadway, Suite 900
Denver, CO 80202
Main Telephone: 303-894-2320
Main Fax: 303-861-2126
Website: http://www.dora.state.co.us/securities
Statute's Title/Citation: Colorado Securities Act, COLO. REV. STAT. § 11-51-101 through 908
Internet Access: http://www.dora.state.co.us/securities/pdfforms/forms/statute2007.pdf
Rule's Name/Citation: Colorado Division of Securities Rules, 3 COLO.CODE REGS. § 704-1,
Rules 51-1 through 51.9.2
Internet Access: http://www.dora.state.co.us/pdf forms/Forms/Rules%202007.pdf
Highlights of Material Developments
The Colorado Division of Securities is a unit of the Colorado Department of Regulatory
Agencies. Its mission is to protect investors and maintain public confidence in the securities
markets while avoiding unreasonable burdens on participants in the capital markets. In this
capacity, the Colorado Division of Securities is responsible for the administration and
enforcement of the Colorado Securities Act, the Colorado Community Code, the Colorado
Municipal Bond Supervision Act, the Local Government Investment Pool Trust Fund
Committee on State Regulation of Securities Page 32
Subcommittee on Liaisons to the States and Provinces
COLORADO
Administration and Enforcement Act and the rules and regulations promulgated thereunder. The
Colorado Division of Securities licenses and regulates stockbrokers and investment advisors and
the securities they offer, sell and advise about in the State of Colorado. For additional
information, visit the Colorado Division of Securities' Website at www. dora.state.co.us.1
On April 30, 1998, Governor Romer signed into law House Bill 98-1244, a bill for the
regulation of investment advisory activities. Under the law, the Colorado Securities
Commissioner and Securities Division will license and regulate state-based investment advisers
and investment adviser representatives who work in Colorado, effective January 1, 1999.
An ^Investment Advised ("IA") is a person (such as company) who, for a fee, provides
advice to customers about investing in securities. An "Investment Adviser Representative
("IAR") is an individual who works for an IA and provides investment advisory services to
customers.
The "Colorado Investment Advisor" law was enacted in the context of the federal
National Securities Markets Improvement Act of 1996 ("NSMIA") under which Congress split
regulatory responsibility for investment advisers between the SEC and state securities regulators.
Investment Advisor firms with more than $25 million in assets under management ("Federal
Covered Advisers" or "FCAs") are regulated exclusively by the SEC. Colorado regulates IA
firms ("state lAs") located in Colorado with assets under that threshold. Investment adviser
representatives ("lARs"), individuals with a place of business in Colorado who work for FCAs
or state Investment Advisers in providing investment advice to customers, need a Colorado IAR
license.
To be licensed in Colorado, the filing of Investment Adviser and Investment Adviser
Representative License applications and fees is required. Investment Adviser Representative
license applicants are required to take and pass a minimum competency examination or provide
proof of alternate qualifications. Annual fees will be required each year. Licensees are subject
to inspection, dishonest and unethical business practice rules, customer disclosure requirements
and anti-fraud provisions.
A Federal Covered Adviser with a place of business in Colorado, or who employs or
otherwise engages an individual with a place of business in this state to act as an Investment
Adviser Representative, is required to make a notice filing.2
Securities Statutory Developments
The First Regular Session of the Sixty-seventh General Assembly convened on January
7, 2009 and is scheduled to adjourn on May 6, 2009.
1
The information contained in the foregoing paragraph was obtained at http://www.dora.state.co.us/securities/ (last visited
March 11, 2009).
2
The information from the foregoing paragraphs dealing with investment advisors was obtained at
http://www.dora.state.co.us/securities/ialaw.htm (last visited March 11, 2009).
Committee on State Regulation of Securities Page 33
Subcommittee on Liaisons to the States and Provinces
COLORADO
Since the August 2008 update, there have not been any material changes to the securities
statutes.
Applicable State Statute of Limitations Periods C.R.S. 13-80-102(i)
The applicable statute of limitations is two (2) years.
Applicable State Statutory Interest Rate COLO. STAT. ANN. § 5-12-102 (i)(b)
Interest is at the rate of eight per cent (8%) per annum compounded annually.
Other Notable Statutory Developments
There have not been any new statutory developments since the August 2008 update.
Securities Rules Developments
On December 1, 2008, the following rules became effective:
• 3CCR§704-1
• Rule 51-3.5 Notice of Intention to Sell In Reliance on Investment Company Exemption
under Section ll-51-307(l)(k), C.R.S.
• Rule 51.3.7 Notification of Exemption under Section 1 l-51-308(l)(p), C.R.S., for Certain
Securities or Transactions Exempt from Registration under the 33 Act.
• Rule 51-4.7 Unfair and Dishonest Dealings (H)(l) Relates to the use of a senior specific
certification or designation in connection with the offer or sale or purchase of securities,
or the provision of advice, analyses or reports relating to securities.
• Rule 51-4.8(IA) Dishonest and Unethical Conduct (V)(l) Relates to the use of a senior
specific certification or designation in connection with the offer, sale or purchase of
securities, or the provision of advice, analyses or reports relating to securities.
Administrator's Staffing Changes
There have not been any staffing changes since the August 2008 report.
Administrative Orders and Announcements
Since the August 2008 report, there have been no material administrative orders and
announcements.
Administrative Enforcement Proceedings (Note: enforcement matters are separately reported
by the Subcommittee on Enforcement, contact Mike Underwood, Subcommittee Chair, at
Michael. Underwood(q)fowlerwhite.com; do not report these matters here.)
Committee on State Regulation of Securities Page 34
Subcommittee on Liaisons to the States and Provinces
COLORADO
Securities-related Case Law Developments
There have not been any court decisions addressing novel questions of law since the
August 2008 report.
Other Noteworthy Practice Developments
There have not been any material developments since the August 2008 update.
FORM D FILING PRACTICES SUPPLEMENT
Form D Filings and Related Issues
* Does your jurisdiction accept the new Form D? Is it optional or mandatory, until when?
As of March 16, 2009 Colorado will require all filers to submit their forms electronically
on EDGAR. The state will send an e-mail after submission with a notification of the filing
status.
* Until what date will your jurisdiction accept the Temporary Form D or old Form D?
Both forms will be accepted up until March 16, 2009.
* As applicable, may an issuer simultaneously check claims of exemption under Rules 504,
505 and 506 under Regulation D?
No, it is not applicable because each rule has a different requirement. Colorado allows
for only one choice per form.
* Must issuers still file a copy of the state Appendix from the old Form D?
No, Colorado never adopted that requirement.
* If no Appendix is required, must the filing letter give the amount sold in the state?
No. Colorado accepts whatever appears on the new form, which does not include an
Appendix.
+ Must the filing letter give the date of first sale in the state?
No, Colorado does not have that requirement.
* Must issuers file a separate Form U-2?
No, as it is built in to the electronic Form D, which is sufficient for Colorado.
Committee on State Regulation of Securities Page 35
Subcommittee on Liaisons to the States and Provinces
COLORADO
* Can multiple offerings by the same issuer be covered in one Form D?
Colorado accepts what the SEC accepts on Form D.
* Can one Form D filing be used for multiple affiliated issuers?
Yes, Rule 51.3.7 adopted changes to allowing it to mirror the SEC's ruling.
* What events trigger the filing clock (e.g., receipt of signed subscription or cash, etc) ?
The filing clock is triggered when the sale is made, when the money is paid.
* What is the state's enforcement position on failure to file or late filings?
Colorado does not have the authority to impose fines. The state takes the SEC position, in
that if a filer qualifies for an exemption, Colorado will accept it. If a filer is extremely late,
Colorado will ask for a letter of explanation.
* Are annual renewal filings required and, if so, what is required (new fee, new U-2?)? If
not, must a copy of the electronic Form D be filed when it is renewed with the SEC? Must
amendments also be filed?
Colorado will accept what the SEC accepts. If a filing is made at the SEC, Colorado will
receive a copy as well. There is only one fee. Amendments do not have to be filed.
* Are there any unusual policies or procedures?
There are no unusual policies or procedures at this time.
Committee on State Regulation of Securities Page 36
Subcommittee on Liaisons to the States and Provinces
CONNECTICUT
CONNECTICUT
STATE LIAISON REPORT
As of March 31, 2009
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: Richard Slavin, Liaison
Cohen and Wolf, P.C.
320 Post Rd. West
Westport, Connecticut 06880
Email: RS lavin(g),cohenandwo If. com
Telephone: 203-341-5310
Cell phone: 203-556-8959
Fax: 203-341-5311
State Administrator: Howard Pitkin
Banking Commissioner
Ralph Lambiase
Director
Securities and Business Investments Division
Connecticut Banking Department
260 Constitution Plaza
Hartford, CT 06103
Main Telephone: 860-240-8299
Main Fax:
Internet: http://www. .ct. gov/dob
Short Title/Citation: Connecticut Uniform Securities Act, Sections 36b-3 to 36b-33 of
the Connecticut General Statutes
Rules Name/Citation: Regulations of Connecticut State Agencies, Section 36b-31-2 to
36b-31-31f
Highlights of Material Developments
None to report.
Securities Statutory Developments (Proposed Legislation)
The following bills have been raised:
Committee on State Regulation of Securities Page 37
Subcommittee on Liaisons to the States and Provinces
CONNECTICUT
Raised Bill No.953:
This bill would apparently amend the Connecticut Uniform Securities Act and add
definitions of "hedge fund", "institutional investor", "investment assets", "investor", "major
litigation", "manager" and "material" to the statute. The essential requirements of this bill are
the following:
1. On or after January 1, 2011, no hedge fund shall consist of individual investors
who, individually or jointly with a spouse, have less than two million five
hundred thousand dollars in investment assets or institutional investors that have
less than five million dollars in assets.
2. A hedge fund manager must disclose to each investor or prospective investor in a
hedge fund, not later than thirty days before any investment in the fund, any
financial interests or other interests the manager may have that conflict with or
laree likely to impair the manager's duties and responsibilities to investors.
3. The manager must disclose in writing to each investor in a hedge fund any
material change in investment strategy and philosophy of the fund and the
departure of any individual employed by such fund who exercises significant
control over the investment strategy or operation of the fund, the existence of side
letters provided to investors, and any major litigation involving the fund or
governmental investigation of the fund.
4. On January 1, 2010 and annually thereafter, the manager shall disclose in wiring
to each investor the fee schedule to be paid by the hedge fund including but not
limited to management fees, brokerage fees, and trading fees and a financial
statement indicating the investor's capital balance that has been audited by an
independent auditing firm.
5. The Banking commissioner may adopt regulations.
Neither this bill nor the Attorney General's bill, which tracks most of this language, give
the Attorney General enforcement powers and the bill seems to continue to vest jurisdiction over
hedge funds in the Banking Commissioner, who is the securities regulator in Connecticut.
The hedge fund definition includes any investment company as defined in Section 3 (a)
(1) of the Investment Company Act of 11940, located in this state (A) that claims an exemption
under 3(c) (1) or Section 3(c) (7) of the Investment Company Act of 1940 whose offering of
securities is exempt under the private offering safe harbor criteria in Rule 506 of Regulation D of
the Securities Act and that meets any of the criteria established by the Banking commissioner in
regulations. A hedge fund is located in Connecticut if it has an office in Connecticut where
employees regularly conduct business on behalf of the hedge fund.
If passed, I think the legislature would be taking the position that there is no preemption
as this legislation does not impose any regulation of a private offering under Rule 506 but simply
Committee on State Regulation of Securities Page 3 8
Subcommittee on Liaisons to the States and Provinces
CONNECTICUT
regulates the hedge fund which has raised money under Rule 506. given the definition of "hedge
fund" under this proposal no fund located in Connecticut could raise money anywhere from
individuals who have less than $2,500,000 in investment assets or form institutional investors
who have less than $5,000,000 in assets.
Clearly this legislation adopts some of the concepts of the proposed Regulation D which
have not yet been adopted by the SEC. it's a good question whether the legislation would
withstand a preemption challenge under Section 18. it certainly appears to be an issue in this
form.
The bill also defines "institutional investor". In Section 36b-21(b) (9) there is an
exemption for a sale to an "institutional buyer: which has not really been defined under the Act.
Arguably this definition would define an institutional buyer as, among other definitions, as a
"corporation or any other legal entity".
Raised Bill 6477
This bill creates a licensing requirement for a hedge fund or a "private capital fund" and
leaves the definitions and procedures for the Banking Commissioner.
Raised Bill No. 6480
This bill requires any hedge fund or private capital fund domiciled in Connecticut that
receives money from pension funds domiciled in Connecticut to disclose to each prospective
pension investor in those funds, upon request, financial information including but not limited to,
detailed portfolio information relative to the assets and liabilities of those funds.
What's going to happen?
Certainly no one knows yet but the popular notion is that Connecticut legislators want to
enact some kind of regulation of hedge funds. There is some sense that these kinds of regulatory
requkements can protect Connecticut citizens and pension funds from the Madoff schemes, from
Ameranth, or Bayou Fund type problems. On the other hand is the continuing realization that
Connecticut is probably the second or third largest domicile for hedge funds and that the tax
revenue and jobs, even at the current diminished levels, are not items that the legislature would
like to see moving across the border to New York.
More bill background
The legislation was introduced by some of the same legislators who have introduced
hedge fund legislation in prior years. While some of the provisions of these bills are different
from those efforts, there is some sense that they may die in committee. In prior years the
Attorney General has also submitted a bill which has not progressed beyond the beginning
stages. The Banking Department has not taken a position on any of the bills; however, the
Banking Commissioner may testify in the coming weeks. There is so some sense that
Connecticut should wait to see what Congress does. Under existing law the Attorney General
Committee on State Regulation of Securities Page 39
Subcommittee on Liaisons to the States and Provinces
CONNECTICUT
can only act to enforce the Connecticut Uniform Securities Act if the Banking Commissioner
makes a referral to him for civil action.
I spoke to Ralph Lambiase, the long-time Director of the Securities and Business
Investments Division of the Banking Department. While Ralph takes no position on the existing
bills, he does have ideas about potential hedge fund abuses. He advocates a requirement that
hedge funds employee third party administrators to account for the funds invested in hedge funds
and for fair valuations. No one should be surprised at Ralph's position as it basically is a
"follow-the-money" kind of solution to the problem. He would like to see the elimination of as
much potential for conflict of interest as possible on the part of hedge fund managers in any kind
of legislation in connection with hedge funds.
The Connecticut legislative session may last through May and into June. There is
certainly enough time to pass legislation, if there is truly a desire to make that happen. I have not
attached the Attorney General bill as it is quite similar to Raised Bill No. 953 which I had sent
around before.
Securities Rules Developments
None to report.
Administrative Orders and Announcements
None to report.
Administrative Enforcement Proceedings (See the current report to the Subcommittee on
Enforcement)
Securities-related Case Law Developments
None to report.
Other Statutory Developments
None to report.
Administrator's Staffing Changes
The Securities and Business Investments Division has had few changes over the past 20
years.
Most of the staff has worked at the Banking Department for at least that long. This year
Commissioner Howard Pitkin reorganized the Department's Legal Division and assigned
individual lawyers to each substantive Division. Now the Securities and Business Investments
Division have two attorneys who handle orders, participate in on-the-record testimony, and
prosecute administrative matters. Attorneys Jesse Silverman and Paul Bobruff now are part of
Committee on State Regulation of Securities Page 40
Subcommittee on Liaisons to the States and Provinces
CONNECTICUT
the Securities Division. Both have worked at the Banking Department for a number of years.
Mr. Silverman has handled securities matters throughout his tenure.
Other Noteworthy Practice Developments
None to report.
RULE 506 NOTICE FILINGS
Frequently Asked Questions (FAQs)
Instructions
The National Securities Markets Improvement Act of 1996 ("NSMIA") preempted state review
of offerings made under Rule 506 of Regulation D, but did not impact state antifraud or licensing
authority. Under Section 36b-21(e) of the Connecticut Uniform Securities Act, Rule 506 issuers
must make a notice filing within 15 days after the first sale in this state.
What to File
1. Nonrefundable $150 fee payable to "Treasurer, State of Connecticut"
2. Consent to Service of Process (Form U-2) naming the Banking Commissioner as agent for
service (see chart below)
3. New Form D or Temporary Form D (see chart below). Note: Only one New Form D or
Temporary Form D must be filed.
4. Completed Sales Agent/Broker-dealer Questionnaire or cover letter containing the same
information (see chart below)
Impact of SEC Release No. 33-8891
On February 6, 2008, the Securities and Exchange Commission issued Securities Act Release
No. 33-8891 (www.sec.gov/rules/final/2008/33-8891.pdf). The Release requires that Form D be
filed electronically through EDGAR effective March 15, 2009. A new version of Form D ("New
Form D") was created for this purpose. EDGAR is an online database accessible to anyone
having a computer with Internet access. From September 15, 2008 to March 15, 2009 (the
"Transition Period") Form D filers may elect to file Form D 1) in paper form using Temporary
Form D (which is similar to current Form D); 2) in paper form using New Form D; or 3)
electronically using New Form D.
To take advantage of the new technology, the Division is modifying its filing procedures for
Form D filers.
Committee on State Regulation of Securities Page 41
Subcommittee on Liaisons to the States and Provinces
CONNECTICUT
The changes affect filings made under Rules 504, 505 and 506 of Regulation D as well as those
under Section 4(6) of the Securities Act of 1933.
You will benefit the most if you electronically file with the SEC rather than continuing to file via
paper format.
We have summarized the changes below for Rule 506 filings.
httD://www.ct.gov/dob/cwp/view.asp?a=2255&q=299272&dobNAV GID=1662 - chart#chart
New Form D Filer (Electronic Filer) New Form D Filer (Paper Temporary (Old) Form D Filer
Filer) (Paper)
Timing Within 15 days after first sale in state Within 15 days after first sale Within 15 days after first sale
in state in state
$ 150 Fee Payable Remit to Division Remit to Division Remit to Division
to "Treasurer,
State of
Connecticut"
Consent to Service No separate filing No separate filing File Form U-2 with Division
of Process
FormD File New Form D with Division File New Form D with File Temporary Form D with
Division Division
Form D Appendix*Not required Not required Include
Signed Form D Typed signature accepted** Required Required
Sales No separate form if covered by New No separate form if covered Required
Agent/Broker- Form D by New Form D
Dealer
Questionnaire or
Equivalent
Form D Not required (viewable online) Required for material Required for material changes
Amendments changes
*In appropriate instances, the Commissioner reserves the right to request sales reports (see
Release No. 33-8891, n. 87; C.G.S. Section 36b-2l(e)).
**SEC authentication procedure relied upon for E-filers
Forms
(Forms are in PDF format unless indicated otherwise. PDF handling help .)
Committee on State Regulation of Securities Page 42
Subcommittee on Liaisons to the States and Provinces
CONNECTICUT
New Form D
(11 pages; file size 1.52 MB)
Temporary (Old) Form D
(9 pages; file size 48 KB)
Sales Agent/Broker-dealer Licensing Questionnaire
(1 page, file size 56 KB)
Form U-2 (Consent to Service of Process)
( 4 pages, file size 104 KB)
SEC Forms (external link)
Resources
Connecticut Statutes and Regulations
Securities Lawyer's Deskbook (Univ. of Cincinnati College of Law)
EDGAR (external link)
Small Business: A Guide to Raising Capital ( educational publication)
Committee on State Regulation of Securities Page 43
Subcommittee on Liaisons to the States and Provinces
DELAWARE
DELAWARE
STATE LIAISON REPORT
No report.
Committee on State Regulation of Securities Page 44
Subcommittee on Liaisons to the States and Provinces
FLORIDA
FLORIDA
STATE LIAISON REPORT
(As of March 31, 2009)
This reports on material developments affecting blue sky practitioners in this
state/province as of March 31, 2009..
Liaison: Donald A. Rett
Law Office of Donald A. Rett
1660 Metropolitan Circle
Tallahassee FL 32308
Email: don@donrett.com
Telephone: 850.298.4454
Cell phone: 850.566.0473
Fax: 850.298.4454
Securities Administrator: Michael Gross, Esq. Acting Director
Division of Securities
200 E. Gaines Street
Tallahassee FL 32399-0372
Main Telephone: 850.410.9805
Main Fax: 850.410.9748
Internet: http://www.flofr.com
http://www.fldfs.com
Statutes Title/Citation: Florida Securities and Investor Protection Act
Chapter 517, Florida Statutes
(Either web address, above, should get you there)
Rules Name/Citation: Chapter 69W, Florida Administrative Code
(Either web address, above, should get you there)
Highlights of Material Developments
Late in 2008, Don Saxon, Commissioner, resigned his position. Owen ("Alex") Hagar,
who had been the Deputy Commissioner, is now the Acting Commissioner. In December, 2008,
Division Director, Richard ("Ric") White resigned, and has been replaced by Acting Director,
Michael B. Gross, Esq.
Florida had approximately sixty people apply for the Commissioner's vacancy. While
the list of applicants has been severely trimmed, a Commissioner has not been appointed.
Committee on State Regulation of Securities Page 45
Subcommittee on Liaisons to the States ana1 Provinces
FLORIDA
Securities Statutory Developments
The Florida legislature is currently considering "...the most important securities
legislation to be considered in decades..."; what you will read below has substantial support in
the Executive and Legislative branches of FL government.
1. Loss of Securities Licensure for losing an Arbitration: The Bill, which is being
studied by the FL. House and Senate, as originally proposed, would authorize the
revocation, denial, restriction or suspension the license of any b-d, I/A, associated
person or branch office if the licensee "loses" an arbitration. Currently, this language
appears to have been amended-out from the House version.
2. Under the Senate version, PL's Office of Financial Regulation ("OFR") would be
entitled to immediately suspend the registration of any b/d, I/A, branch office or
associated person failing to provided the OFR "within thirty days after a written
request" ANY of the records required to be submitted by OFR regulations. The
House version is substantially identical.
3. Statutes of Limitations would become applicable to enforcement actions initiated by
Florida's OFR, although the periods vary from the House and Senate versions.
4. It is proposed that the Florida Attorney General's Office would become empowered
the AGO to sue for violations of PL's securities anti-fraud provisions, for injunctions,
restitution, civil penalties and other remedies, whenever the AGO's office had reason
to believe that any person was in violation of such anti-fraud provisions. Apparently,
the OFR is supposed to tender "approval" prior to action by the AGO.
The House provision is at CS/HB 484, while the Senate version is at SB 1126.
Applicable State Statute of Limitations Periods
See, section 95.031 and 95.1 l(4)(e), of the Florida Statutes. Generally speaking, it's two
years from "knew or should have known", with an "absolute" of five years from the date of the
violation.
Applicable State Statutory Interest Rate
The formula is found at section 55.03, Florida Statutes, and is currently (for 2009) set at
eight percent (8%) per annum. The Chief Financial Officer is mandated by law to re-set this
number on an annual basis; go to www.myfloridacfoh.ome; click onto "search by subject; select
the letter "i", which will take you to "interest rate, statutory.
Securities Rules Developments Florida's Rule amendment re: "misleading senior designations
(essentially mirroring the NASAA initiative) became effective 1/18/09.
Committee on State Regulation of Securities Page 46
Subcommittee on Liaisons to the States and Provinces
FLORIDA
Administrators Staffing Changes
(Mentioned Above)
Administrative Orders and Announcements
None noted
Administrative Enforcement Proceedings (See the current report to the Subcommittee on Enforcement)
Securities-related Case Law Developments
None reported at Florida Bar website.
Other Statutory Developments
Nothing to report—The current edition of "RUSA" has never been adopted in FL.
Administrator's Staffing Changes
(See above)
Other Noteworthy Practice Developments
Nothing to report
Form D Filing Practices Supplement
Florida does not require Form D filing(s).
Committee on State Regulation of Securities Page 47
Subcommittee on Liaisons to the States and Provinces
GEORGIA
GEORGIA
STATE LIAISON REPORT
No report.
Committee on State Regulation of Securities Page 48
Subcommittee on Liaisons to the States and Provinces
HAWAII
STATE LIAISON REPORT
(As of March 23, 2009)
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: David J. Reber
Goodsill Anderson Quinn & Stifel
A Limited Liability Law Partnership LLP
1099 Alakea Street, Suite 1800
Honolulu, Hawaii 96813
Email: dreber@goodsill. com
Telephone: (808)547-5611
Fax: (808)441-1225
Website: www. goodsill. com
Securities Administrator: Tung Chan, Commissioner of Securities
State of Hawaii Department of Commerce and Consumer Affairs
355 Merchant Street
Honolulu, Hawaii 96813
Main Telephone: (808) 586-2744
Main Fax: (808)
Website: http://hawaii.gov/dcca/areas/sec/
Statute's Title/Citation: Uniform Securities Act (2002), Hawaii Revised Statutes
(H.R.S. §485A 101 et. seq.)
Internet Access: http://hawaii.gov/dcca/areas/sec/
Click on "Hawaii Revised Statutes" in the left-hand column, 7th
link under Commissioner Tung Chan's picture; then, click on
"HRS Chapter 485A-Uniform Securities Act (effective 7/1/2008)"
Rule's Name/Citation: Hawaii Administrative Rules, Title 16, Chapter 39
Internet Access: http://hawaii.gov/dcca/areas/sec/
Click on "Hawaii Administrative Rules" in the left-hand column,
8th link under Commissioner Tung Chan's picture; then, click on
"HAR Chapter 39-Securities (effective
6/30/08)"http://www.capitol.hawaii.gov/hrscurrent/Volll_Ch0476-
0490/HRS0485A/
Committee on State Regulation of Securities Page 49
Subcommittee on Liaisons to the States
Highlights of Material Developments
Nothing additional to report.
Securities Statutory Developments
The Uniform Securities Act (2002) was adopted in 2006 but became effective on July 1,
2008. Before it became effective in 2008, there were amendments to the Act in the 2007
legislature to enhance the civil penalties for securities violations perpetrated against individuals
who are 62 years of age and older. We know of no amendments having been proposed in the
current 2009 legislative session.
Applicable State Statute of Limitations Periods [Please summarize and include citations.]
[§485A-508] Criminal penalties:
o prosecution of a felony under this chapter shall be commenced within five years
after the offense is committed; and
o If the period prescribed above has expired, prosecution for a felony under this
chapter may be commenced within two years after the discovery of the offense by
an aggrieved party who is not a party to the offense, but in no event more than
seven years after the offense is committed.
[§485A-509] Civil liability: (private rights of action)
o (j)(l) - Under subsection (b) for violation of section 485A-301, or under
subsection (d) or (e), unless the action is instituted within one year after the
violation occurred; or
o (j)(2) ~ Under subsection (b), other than for violation of section 485A-301, or
under subsection (c) or (f), unless the action is instituted within the earlier of two
years after the discovery of the facts constituting the violation or five years after
the violation.
[§485A-603] Civil enforcement: No statute of limitation specified within statute to bring
actions in a court of competent jurisdiction, therefore, no limitation of actions shall apply
to bar the State and its agencies. (See §657-1.5)
[§485A-604]: Administrative enforcement: No statute of limitation specified within statute
to bring administrative actions, therefore, no limitation of actions shall apply to bar the
State and its agencies. (See §657-1.5)
Applicable State Statutory Interest Rate [Please summarize and include citations. ]
"Legal rate" is 10%. H.R.S. §478-2.
Other Notable Statutory Developments
None.
Committee on State Regulation of Securities Page 50
Subcommittee on Liaisons to the States
Securities Rules Developments
The administrative rules under H.R.S. Chapter 485A (which are set forth in Title 16,
Chapter 39 of the Hawaii Administrative Rules) were adopted to be effective concurrently with
Chapter 485A in 2008 and have not been further amended.
Administrator's Staffing Changes
None reported.
Administrative Orders and Announcements
See attachment of orders issued by the Commissioner.
Administrative Enforcement Proceedings (Note: enforcement matters are separately reported
by the Subcommittee on Enforcement, contact Mike Underwood, Subcommittee Chair, at
Michael. Underwood(a)fowlenvhite.com; do not report these matters here.)
Securities-related Case Law Developments
Fong v. Oh, 116 Haw. 187, 172 P.3d 499 (2007) - In this case the Hawaii Supreme Court
reversed the Hawaii Intermediate Court of Appeals, which had concluded, based on the decision
in Hawaii Market Center. Inc.. 52 Haw 642, 485 P.2d 105 (1971), that a sale of all the stock of a
company did not entail the sale of a security. In reversing the decision of the Intermediate Court
of Appeals, the Hawaii Supreme Court noted that the Hawaii Market Center case adopted an
economic reality test in determining whether the contract involved in that case was an
"investment contract" within the meaning of the definition of a "security" and did purport to
have that analysis apply when determining whether the "stock" component of the definition of a
security was involved. The Court held that the stock sold in the Fong v. Oh case was a security
not only because it was labeled "stock" but also because it possessed some of the characteristics
typically associated with stock, and followed the U.S. Supreme Court's decision in Landreth
Timber Co. v. Landreth. 471 U.S. 681 (1985), in support of its analysis.
Other Noteworthy Practice Developments
None reported.
FORM D FILING PRACTICES SUPPLEMENT
Form D Filings and Related Issues
* Does your jurisdiction accept the new Form D? Is it optional or mandatory, until when?
Yes, Hawaii accepts the new Form D, but the filed copy must be manually signed. It is
mandatory as of March 16, 2009.
Committee on State Regulation of Securities Page 51
Subcommittee on Liaisons to the States
* Until what date will your jurisdiction accept the Temporary Form D or old Form D?
Until March 16, 2009.
* As applicable, may an issuer simultaneously check claims of exemption under Rules 504,
505 and 506 under Regulation D?
At this time, Hawaii does not accept simultaneous claims of exemption even if the SEC
form allows fliers to check all three claims. Hawaii law does not provide an exemption under
Rule 504.
* Must issuers still file a copy of the state Appendix from the old Form D?
No.
* If no Appendix is required, must the filing letter give the amount sold in the state?
No.
* Must the filing letter give the date of first sale in the state?
No, it is assumed filing is within 15 days of first sale in the State.
* Must issuers file a separate Form U-2?
No, consent is part of the new Form D.
* Can multiple offerings by the same issuer be covered in one Form D?
No.
* Can one Form D filing be used for multiple affiliated issuers?
No, unless filers are making a single offering.
* What events trigger the filing clock (e.g., receipt of signed subscription or cash, etc)?
The filing clock is triggered by the date of first sale, this date is the date the documents
have been signed and finalized, no money needs to exchange hands.
* What is the state's enforcement position on failure to file or late filings?
There is no late filing fee. However, if there is a failure to file or a late filing Hawaii
regulators may treat this as an enforcement matter.
Committee on State Regulation of Securities Page 52
Subcommittee on Liaisons to the States
* Are annual renewal filings required and, if so, what is required (new fee, new U-2?)? If
not, must a copy of the electronic Form D be filed when it is renewed with the SEC? Must
amendments also be filed?
Hawaii does not have a renewal filing requirement. Amendments should be filed
whenever they are filed with the SEC. There is no new fee and there is no requirement to file a
new U-2.
* Are there any unusual policies or procedures?
There do not appear to be any unusual policies or provisions.
The Hawaii Securities Commissioner's policies and procedures are generally to require
whatever is required by the SEC for Form D filings.
Committee on State Regulation of Securities Page 53
Subcommittee on Liaisons to the States
HAWAII
ORDERS ISSUED BY THE COMMISSIONER
JANUARY 2008 - PRESENT
DATE ISSUED TYPE OF ORDER RESPONDENTS
2008
No orders between 1/08-4/30/08
05/13/08 Consent Order A Nany On The Net, LLC
05/13/08 Consent Order Amy C. Hardison
05/13/08 Final Order RoyE., Stoker Jr.
07/03/08 Preliminary Cease & Desist Order JAIC Retirement Services, Inc.
08/22/08 Preliminary Cease & Desist Order Sheila Turner
08/28/08 American Oil & Gas Revenue,
Preliminary Cease & Desist Order Joint Venture #12
08/28/08 American Oil & Gas Revenue,
Preliminary Cease & Desist Order Joint Venture #12
9/19/2008 Consent Order Morgan Stanley & Co.
Larry Goto; Fianancial
10/10/2008 Management
Consent Order Services
A Nanny on the Net & Amy C.
10/10/2008
Consent Order Hardison
JAIC Retirement
10/23/2008 Final Order & Andrew O. Steger
12/8/2008 Consent Order Diversified Planning Concepts, Inc.
12/8/2008 Consent Order Oak Tree Securities, Inc.
2009
1/22/2009 Preliminary Cease & Desist Order Glenn A. Gates
2/9/2009 Preliminary Cease & Desist Order Jeffery Garman &Webznet, Inc.
Theodore Chinen; Teddy Tanaka;
2/12/2009 Teddy Tanaka Associates; &
Preliminary Cease & Desist Order Trinity National, LLC.
Marvin Cooper & Bilion Coupons,
2/17/2009
Preliminary Cease & Desist Order Inc.
2459774.2
Committee on State Regulation of Securities Page 54
Subcommittee on Liaisons to the States
IDAHO
IDAHO
STATE LIAISON REPORT
No report.
Committee on State Regulation of Securities Page 55
Subcommittee on Liaisons to the States
ILLINOIS
ILLINOIS
STATE LIAISON REPORT
(As of March 16, 2009)
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: John S. Monical
Lawrence, Kamin, Saunders & Uhlenhop, LLC
300 South Wacker Drive, Suite 500
Chicago, Illinois 60606
Email: jmonical@lksu.com
Telephone: (312)372-1947
Cellphone: (312)371-5579
Fax: (312)372-2389
Website: www.lksu.com
Securities Administrator: Tanya Solov, Director
Illinois Department of Securities
Springfield Office:
Jefferson Terrace
300 West Jefferson Street, Suite 300A
Springfield, IL 62702
Chicago Office:
69 West Washington Street
Suite 1220
Chicago, Illinois 60602
Main Telephone: (217) 782-2256 (Springfield)
(312) 793-3384 (Chicago)
Main Fax: (217) 782-8876 (Springfield)
(312) 793-1202 (Chicago)
Website: http://www.cyberdriveillinois.com/departments/securities/home.html
Statute's Title/Citation: Illinois Securities Law of 1953 (815 ILCS 5/1 et seq.) (hereinafter
the "ISL")
Internet Access: http://www. 11 ga.gov/legislation/ilcs/ilcs3.asp?ActID=2304&ChapAct=815
Rule's Name/Citation: Regulations Under Illinois Securities Law of 1953
(14 IL ADC 130.100 et seq.)
Internet Access: http://www.ilga.gov/commission/icar/admincode/014/01400130sections.html
Committee on State Regulation of Securities Page 56
Subcommittee on Liaisons to the States
ILLINOIS
Highlights of Material Developments
A rule proposed on January 23, 2009 would make it a violation to mislead any person by
use of a senior specific certification or designation that indicates or implies that the user has
special certification or training in advising or servicing senior citizens or retirees in securities
transactions.
Securities Statutory Developments
None.
Applicable State Statute of Limitations Periods
Civil Actions for misrepresentation: 815 ILCS §5/12(E) through §5/12(J) identify
violations based generally upon fraud, misstatement, or practices working a deceit upon
investors. Actions under these subsections are subject to a three-year (3-year) statute of
limitations and a five-year (5-year) statute of repose. The three-year limitations period begins to
run upon the earlier of (1) the date upon which the party bringing the action has actual
knowledge of the alleged violation of the Act or (2) the date upon which the party bringing the
action has notice of facts which, in the exercise of reasonable diligence would lead to actual
knowledge of the alleged violation of the Act. 815 ILCS §5/13(D).
Other Civil Actions: All other civil actions (those not based upon §§5/12(E)-(J)) are
subject to a three-year (3-year) statute of repose. 815 ILCS §5/13(D).
Common Law Civil Actions: The statute of limitations under the Illinois Securities Law
of 1953 apply not only to all actions brought under the Act, but also to all actions for relief "upon
or because of any of the matters for which relief is granted by" the Act. Courts interpret the
statute of limitations and repose as a bar on common law based upon the factual matters for
which relief could have been granted by the Act. E.g., Tregenza v. Lehman Brothers, Inc., 287
111. App. 3d 108, 678 N.E.2d 14 (1st Dist. 1997); Wilhelm v. A.G. Edwards, 2003 U.S.A. App.
LEXIS 4806 (7th Cir. 2003)
Notice of Rescission: The only private remedy set forth in the Illinois Securities Law of
1953 is rescission of the purchase by a purchaser. To elect rescission, a purchaser must provide
statutory notice to the person against whom rescission will be sought"within six months after the
purchaser shall have knowledge that the sale of the securities to him or her is voidable" 815
ILCS §5/13(B).
Administrative Actions: Administrative actions for relief under the Act must be brought
within the earlier of (i) 3 years from the date upon which the Secretary of State had notice of
facts which in the exercise of reasonable diligence would lead to actual knowledge of the alleged
violation of the Act, or (ii) 5 years from the date on which the alleged violation occurred. 815
ILCS §5/11(G).
Committee on State Regulation of Securities Page 57
Subcommittee on Liaisons to the States
ILLINOIS
Applicable State Statutory Interest Rate
Upon rescission, interest is recoverable "at the rate of interest or dividend stipulated in
the securities sold." If no rate is stipulated, then at the rate of 10% per annum. 815 ILCS
Other Notable Statutory Developments
None.
Securities Rules Developments
On January 23, 2009, the Illinois Department of Securities issued a Notice of Proposed
Amendments which adds a new Rule §130.855. The Proposed Rule makes it a violation to
mislead any person by use of a "senior specific certification or designation that . . . indicates or
implies that the user has special certification or training in advising or servicing senior citizens or
retirees" in securities transactions. The rule specifically prohibits certain types of designations,
such as self-conferred designations or designations from certifying organizations that are
engaged primarily in marketing or organizations that do not have reasonable standards for
determining, monitoring, and enforcing competency. Rule §130.855(b).
Administrator's Staffing Changes
None.
Administrative Orders and Announcements
None.
Administrative Enforcement Proceedings (Enforcement matters are separately reported by the Subcommittee
on Enforcement.)
Securities-Related Case Law Developments
Spenta Enterprises, Ltd. v. Coleman, 574 F.Supp.2d 851 (N.D. 111. 2008). This case came
before the Court on a Motion to Dismiss for lack of jurisdiction based upon a choice of forum
clause in a Stock Purchase Agreement that required any dispute to be litigated in a Court in Lake
County, Illinois. The Court stated that, because federal courts had exclusive jurisdictions over
claims arising from the Securities Exchange Act of 1934, 15 U.S.C. §78aa, enforcement of the
forum selection clause constituted a waiver of any Exchange Act claims. Notwithstanding, the
Court enforced the clause, holding that the Illinois Securities Act and common law remedies
were adequate substitutes to vindicate the Plaintiffs substantive rights. Id. at 857.
Other Noteworthy Practice Developments
None.
Committee on State Regulation of Securities Page 58
Subcommittee on Liaisons to the States
ILLINOIS
FORM D FILING PRACTICES SUPPLEMENT
Form D Filings and Related Issues
* Does your jurisdiction accept the new Form D? Is it optional or mandatory, until when?
Illinois accepts the new Form D. The new Form D is optional until March 15, 2009, at
which time it becomes mandatory.
* Until what date will your jurisdiction accept the Temporary Form D or old Form D?
Illinois will accept the Temporary Form D until March 15, 2009.
* As applicable, may an issuer simultaneously check claims of exemption under Rules 504,
505 and 506 under Regulation D?
Yes.
* Must issuers still file a copy of the state Appendix from the old Form D?
No.
* If no Appendix is required, must the filing letter give the amount sold in the state?
No.
* Must the filing letter give the date of first sale in the state?
No.
* Must issuers file a separate Form U-2?
No.
* Can multiple offerings by the same issuer be covered in one Form D?
An issuer must file a separate Form D for each offering.
* Can one Form D filing be used for multiple affiliated issuers?
Each issuer must file a separate Form D, regardless of whether they are affiliated.
Committee on State Regulation of Securities Page 59
Subcommittee on Liaisons to the States
ILLINOIS
* What events trigger the filing clock (e.g., receipt of signed subscription or cash, etc)?
Generally, receipt of a signed subscription agreement triggers the filing clock because
that is when the investor is locked in to making the investment.
* What is the state's enforcement position on failure to file or late filings?
Illinois has always had a robust enforcement division. Historically, however, an issuer's
failure to file and late filings have not received much enforcement attention, unless a claim of
that nature is related to a complaint from an investor in an offering of unregistered securities.
* Are annual renewal filings required and, if so, what is required (new fee, new U-2?)? If
not, must a copy of the electronic Form D be filed when it is renewed with the SEC? Must
amendments also be filed?
Annual renewal filings and copies of SEC renewals are not required. Amendments need
to be filed.
* Are there any unusual policies or procedures?
No.
Committee on State Regulation of Securities Page 60
Subcommittee on Liaisons to the States
INDIANA
INDIANA
STATE LIAISON REPORT
(As of March 23, 2009)
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: Stephen W. Sutherlin
Stewart & Irwin, P.C.
251 East Ohio Street, Suite 1100
Indianapolis, Indiana 46204
Email: ssutherlin@silegal.com
Telephone: (317)396-9541
Cell phone: (317)696-2254
Fax: (317)632-1319
Website: www.silegal.com
Securities Administrator: Todd Rokita
Indiana Secretary of State
201 Statehouse
Indianapolis, Indiana 46204
Telephone: 317-232-6531
Chris Naylor
Securities Commissioner
INDIANA SECURITIES DIVISION
302 West Washington Street
RoomE-111
Indianapolis, Indiana 46204
Main Telephone: 317-232-6681
Main Facsimile: 317-233-3675
Main Telephone: 317-232-6531
Main Fax: 317-233-3283
Website: http://www. in. gov/sos/securities/
Statute's Title/Citation: Business Corporation Securities
I.C. 23-2-1
Internet Access: http ://www. in. gov/legislative/ic/code/title23/arz/chl. html
Rule's Name/Citation: Title 710 - Rules for the new Indiana Uniform Securities Act that
took affect July 1, 2008 are still being drafted. The old ones may
be accessed through website.
Internet Access: httD://www.in.gov/legislative/iac/title710.html
Committee on State Regulation of Securities Page 61
Subcommittee on Liaisons to the States
INDIANA
Highlights of Material Developments
The current status of the new regulations is that drafting is still occurring. The notice to
amend the regulations has been filed, but the final draft and the possible adoption is probably at
least three months away.
If anyone wants a copy of the current draft, they can e-mail me and I will send it.
Securities Statutory Developments
HB 1460. A broker-dealer registered or required to be registered under this Act may not
be selected for completion of a compliance report in consecutive years, unless the Commissioner
has reason to believe that the broker-dealer has committed a violation of the Act.
The Commissioner may select for completion of a compliance report only a home or
branch office of a registered broker-dealer that:
(1) meets the definition of an office of supervisory jurisdiction; and
(2) has a registered principal located at the home or branch office.
HB 1626. Amends the Indiana Uniform Securities Act to provide that: (1) a registered
broker-dealer office that is selected to complete a compliance report shall file its report not later
than 45 days (stead of 90 days under current law) after being notified of its selection; (2) a
person who knowingly violates the Act while using or take advantage of a relationship based on
religious affiliation or worship commits a Class B felony; and (3) a person who commits a fraud
in connection with the offer, sale, or purchase of a security commits a Class B felony if the
person damaged by the fraud is at least 60 years of age.
Both HBs: 1460 and 1646 have passed one House and await action in the second House.
The HBs can be found at www.in.gov/apps/ISA/session/billwatch/billinfo.
Applicable State Statute of Limitations Periods [Please summarize and include citations.]
Civil Liability - 1C 23-19-5-9; Criminal Liability - 1C 23-19-5-8
Applicable State Statutory Interest Rate
Rescission offers require the return of a money, plus eight percent (8%) per annum. I.C.
§23-19-5-10.
Other Notable Statutory Developments
None
Securities Rules Developments
Regulations for new Uniform Act are still being drafted.
Committee on State Regulation of Securities Page 62
Subcommittee on Liaisons to the States
INDIANA
Administrator's Staffing Changes
No significant changes; however, for the best results in obtaining filing information,
contact Jeff Bush, 317-232-2741.
Administrative Orders and Announcements
No recent administrative orders or announcements.
Administrative Enforcement Proceedings (Note: enforcement matters are separately reported
by the Subcommittee on Enforcement, contact Mike Underwood, Subcommittee Chair, at
Michael. Underwood&fowlerwhite.com: do not report these matters here.}
Securities-related Case Law Developments
No recent Indiana Securities cases.
Other Noteworthy Practice Developments
None
FORM D FILING PRACTICES SUPPLEMENT
Form D Filings and Related Issues
* Does your jurisdiction accept the new Form D? Is it optional or mandatory, until when?
Accepts new Form D, and optional. No date set for dropping one of the forms.
* Until what date will your jurisdiction accept the Temporary Form D or old Form D?
There is no date set.
* As applicable, may an issuer simultaneously check claims of exemption under Rules 504,
505 and 506 under Regulation D?
There is no problem if you check all boxes.
* Must issuers still file a copy of the state Appendix from the old Form D?
The State Appendix must be filed.
* If no Appendix is required, must the filing letter give the amount sold in the state?
See above.
Committee on State Regulation of Securities Page 63
Subcommittee on Liaisons to the States
INDIANA
* Must the filing letter give the date of first sale in the state?
Do not need to, but preferred.
* Must issuers file a separate Form U-2?
Separate U-2 required.
* Can multiple offerings by the same issuer be covered in one Form D?
No, but be separate.
* Can one Form D filing be used for multiple affiliated issuers?
Yes
* What events trigger the filing clock (e.g., receipt of signed subscription or cash, etc)?
Cash or other consideration.
* What is the state's enforcement position on failure to file or late filings?
It is a violation, but penalty considered on a case-by-case basis.
* Are annual renewal filings required and, if so, what is required (new fee, new U-2?)? If
not, must a copy of the electronic Form D be filed when it is renewed with the SEC? Must
amendments also be filed?
Annual and renewal filing not required.
* Are there any unusual policies or procedures?
No fee for filing.
Committee on State Regulation of Securities Page 64
Subcommittee on Liaisons to the States
IOWA
IOWA
STATE LIAISON REPORT
No report.
Committee on State Regulation of Securities Page 65
Subcommittee on Liaisons to the States
KANSAS
KANSAS
STATE LIAISON REPORT
(As of March 13, 2009)
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: William M. Schutte
Polsinelli Shugart PC
700 W. 47* Street, Suite 1000
Kansas City, MO 64112
Email: wschutte@polsinelli.com
Telephone: 816-753-1000
Cell phone: 816-914-3704
Fax: 816-753-1536
Website: www.polsinelli.com
Securities Administrator: Securities Commissioner of Kansas
Office of the Kansas Securities Commissioner
618 South Kansas Avenue
Topeka, KS 66603-3804
Main Telephone: (785) 296-3307
Main Fax: (785) 296-6872
Website: http ://www. securities, state. ks. us
Statute's Title/Citation: Kansas Uniform Securities Act; KSA 17-12al01
Internet Access: http://www.securities.state.ks.us/statree.html
Rule's Name/Citation: Kansas Securities Regulations; K.A.R.
Internet Access: securities.state.ks.us/rules/Sec%20Regs%20-%2012-19-2008.pdf
Highlights of Material Developments
None.
Securities Statutory Developments
Kansas adopted the Uniform Securities Act of 2002 as drafted by the National
Conference of Commissioners on Uniform State Laws ("USA-2002") effective as of July 1,
2005. For the most part, this new act adopts USA-2002 substantially verbatim. There are,
however, several substantial departures from the Uniform Act language that require the attention
of securities issuers, broker-dealers and their counsel. These departures are discussed in an
earlier liaison report.
Committee on State Regulation of Securities Page 66
Subcommittee on Liaisons to the States
KANSAS
Applicable State Statute of Limitations Periods
For civil causes of action arising from the sale of non-exempt unregistered securities
(other than federal covered securities) or acting as an unregistered broker-dealer, agent,
investment adviser or investment adviser representative, action must be instituted within one
year after the action is instituted.
For civil causes of action arising from the all other violations of the Kansas Uniform
Securities Act, the action must be instituted within the earlier of two years after discovery of the
facts constituting the violations or five years after the violation.
For criminal prosecutions for any crime under the Act, the action must be commenced
within five years after the alleged violation, unless the victim is the Kansas Public Employee
Retirement System in which case the action must be commenced within 10 years after the
alleged violation.
Applicable State Statutory Interest Rate
Pursuant to KSA 17-12a509, civil judgments include interest from the date of the
violative act at the rate of interest applicable to judgments rendered by state courts pursuant to
the Kansas Code of Civil Procedure. This rate is adjusted on July 1 of each year and is equal to
an amount that is 4% above the then applicable federal discount rate. The Kansas Secretary of
State publishes notice of the interest rate in the Kansas Register each year.
Other Notable Statutory Developments
None.
Securities Rules Developments
None.
Administrator's Staffing Changes
None.
Administrative Orders and Announcements
None.
Administrative Enforcement Proceedings (Note: enforcement matters are separately reported
by the Subcommittee on Enforcement, contact Mike Underwood, Subcommittee Chair, at
Michael. Underwood&fowlerwhite.com; do not report these matters here.)
Securities-related Case Law Developments
None.
Committee on State Regulation of Securities Page 67
Subcommittee on Liaisons to the States
KANSAS
Other Noteworthy Practice Developments
None.
FORM D FILING PRACTICES SUPPLEMENT
Form D Filings and Related Issues
1. Does your jurisdiction accept the new Form D? Is it optional or mandatory, until
when?
Yes, during the transition period from September 15, 2009 through March 15, 2009, an
issuer may use either the Temporary Form D or a printed version of the new Form D that was
electronically filed with the SEC.3 On or after March 16, 2009, an issuer must file a printed
version of the new From D.4
2. Until what date will your jurisdiction accept the Temporary Form D or old Form D?
The Temporary Form D will be accepted until March 15, 2009.5 However, the staff
advises that for issuers not filing with the SEC and relying upon KAR 81-5-6 (ULOE) or KAR
81-5-13 (Accredited Investor exemption) for offerings in Kansas, the old Form D may still be
used.
3. As applicable, may an issuer simultaneously check claims of exemption under Rules
504, 505 and 506 under Regulation D?
Yes, but such a filing may prompt inquiry from the Commissioner seeking additional
information.
4. Must issuers still file a copy of the state Appendix from the old Form D?
The Appendix from the old Form D would not be required for an issuer using the new
FormD.
5. If no Appendix is required, must the filing letter give the amount sold in the state?
No.
6. Must the filing letter give the date of first sale in the state?
3
Regulation D Bulletin, Procedures for Compliance with State Filing Requirements for Regulation D Limited Offerings
Beginning September 15, 2008, available af http://www.securities.state.ks.us/register/Kansas%20Form
%20D%20Bulletin.pdf.
4
Regulation D Bulletin, Procedures for Compliance with State Filing Requirements for Regulation D Limited Offerings
Beginning March 16, 2009, available at http:// www.securities.state.ks.us/register/KansasFormDBulletin3-16-09.pdf
5
Regulation D Bulletin, Procedures for Compliance with State Filing Requirements for Regulation D Limited Offerings
Beginning September 15, 2008, available at http://www.securities.state.ks.us/register/Kansas%20Form
%20D%20Bulletin.pdf.
Committee on State Regulation of Securities Page 68
Subcommittee on Liaisons to the States
KANSAS
No.
7. Must issuers file a separate Form U-2?
No.
8. Can multiple offerings by the same issuer be covered in one Form D?
No.
9. Can one Form D filing be used for multiple affiliated issuers?
Yes, but such a filing may prompt inquiry from the Commissioner seeking additional
information.
10. What events trigger the filing clock (e.g., receipt of signed subscription or cash, etc) ?
The staff advises that in determining the "date of first sale" in Kansas for the purpose of
triggering the filing clock, the staff advises that issuers should interpret the date in a manner
similar to the meaning given the term by the SEC for the purposes of satisfying Rule 503.
11. What is the state's enforcement position on failure to file or late filings?
By rule, the Commissioner provides that if Form D for a Rule 506 offering is not filed
within 15 days after the first sale of the security in Kansas, the issuer must pay a late filing fee
equal to the greater of the following amounts, unless the Commissioner agrees to assess a lesser
fee for good cause shown:
a. $500, or
b. 1/10 of 1% of dollar value of securities sold to Kansas residents before the date on
which Form D is filed, not to exceed $5,000.6
In addition upon a finding by the Commissioner that there is a failure to comply with a
notice or fee requirement for a Form D notice filing with respect to a Rule 506 offering, the
Kansas Uniform Securities Act permits the Commissioner to issue a stop order suspending the
offer and sale of the securities in Kansas. If the deficiency is corrected, the stop order is void as
of the time of its issuance and no penalty may be imposed by the Commissioner other than a late
filing fee.7
12. Are annual renewal filings required and, if so, what is required (new fee, new U-2?)?
If not, must a copy of the electronic Form D be filed when it is renewed with the SEC? Must
amendments also be filed?
With respect to annual renewal filings, the staff advises that renewal filings are not
required if the same offering continues for over one year.
6
KAN. ADMIN. REGS. § 81-5-15(b)(2).
7
KAN. STAT. ANN. § 17-12a302(d)
Committee on State Regulation of Securities Page 69
Subcommittee on Liaisons to the States
KANSAS
With respect to amendments, the staff advises that issuers should amend previously filed
Kansas notice filings at the same time Form D amendments are filed with the SEC in accordance
with Rule 503. No filing fee is required for an amended filing.
13. Are there any unusual policies or procedures?
No.
Committee on State Regulation of Securities Page 70
Subcommittee on Liaisons to the States
KENTUCKY
KENTUCKY
STATE LIAISON REPORT
(As of March 31, 2009)
This report summarizes material developments affecting blue sky practitioners in this
jurisdiction as of the date indicated above.
Liaison: Professor Manning G. Warren III
Louis D. Brandeis School of Law
University of Louisville
2301 S. 3rd Street
Louisville, KY 40292
Email: mgw3 3 3 @gmail. com
Telephone: 502.852.7265
Fax: 502.852.0862
Securities Administrator: Vacant
Division of Securities
Department of Financial Institutions
Commonwealth of Kentucky
1025 Capital Center Drive, Suite 200
Frankfort, Kentucky 40601
Main Telephone: (502) 573.3390 or (800) 223.2579
Main Fax: (502)573.8787
Website: http://www.kfi.kv.gov
Statute's Title/Citation: Securities Act of Kentucky, K.R.S. Ch. 292
Internet Access: http://www.Ire.ky.gov
Rule's Name/Citation: 808 KAR Ch. 10
Internet Access: http ://www. Irc.ky. go v
Applicable State Statute of Limitations Periods
KRS 292.480(5): Three years from date violation was or should have been discovered.
Applicable State Statutory Interest Rate
KRS § 360.010: Eight percent (8%).
Committee on State Regulation of Securities Page 71
Subcommittee on Liaisons to the States
KENTUCKY
Securities Rules Developments
Effective Date, February 6, 2009:
808 KAR 10:440 Examples of Dishonest or Unethical Practices for Broker-Dealers and
Agents
808 KAR 10:450 Examples of Dishonest or Unethical Practices for Investment Advisers
and Investment Adviser Representatives
808 KAR 10:460 Request for Approval of Change in Control
808 KAR 10:042 Use of Senior Certifications and Designations
Administrator's Staffing Changes
Kyle Trimble, Enforcement Branch Manager, retired Dec. 2008.
Administrative Enforcement Proceedings
DPI vs. Young Oil Corporation, Anthony Young, et al:
The Franklin Circuit Court entered an order appointing a receiver, freezing assets and a
temporary restraining order on 12/29/08 based on the DFI's allegations that Respondents sold
securities in the form of partnership interests in oil and gas drilling programs amounting to at
least $9 million; the DPI further alleged the interests were unregistered and sold fraudulently.
DPI vs. Paul Kellogg:
Administrative Order permanently banning Kellogg from the securities industry entered
on 11/19/08. The DPI alleged Kellogg acted as an unregistered investment adviser by conducting
retirement seminars for seniors and advising clients to sell securities and exchange for equity
indexed annuities.
DPI vs. Brian Livingston andBWL Consulting:
Administrative Order to Cease and Desist entered on 9/29/08. DPI alleged Livingston, a
former registered representative of Ameriprise Financial Services, acted as an unregistered
investment adviser after his termination from Ameriprise for cause.
DPI vs. Dolomite Energy, LLC et al:
In a published opinion, the Kentucky Court of Appeals entered an order affirming the
decision of Franklin Circuit Court upholding a subpoena issued by the DPI to Dolomite. The
Committee on State Regulation of Securities Page 72
Subcommittee on Liaisons to the States
KENTUCKY
lower court held that the administrative subpoena served on Dolomite, a Kentucky company, was
valid whether or not the investors solicited by Dolomite were residents of Kentucky.
DPI vs. Jewell Robbins:
The Franklin Circuit Court entered an order on 7/16/08 holding Robbins in contempt for
violating two prior orders of the court prohibiting Robbins from participating in the sale of
securities. The Court ordered that Ms. Robbins serve 120 days in jail.
DPI vs. Prosper Marketplace Inc.:
Administrative Order suspending the effectiveness of the registration statement submitted
by Prosper to the DPI entered on 5/28/08.
FORM D FILING PRACTICES SUPPLEMENT
Form D Filings and Related Issues
* Does your administrator accept the new Form D? Is it optional or mandatory, until when?
Yes.
+ Until what date will your administrator accept the Temporary Form D or old Form D?
As per SEC practice.
* Will your administrator accept copies of an "as-filed" new Form D with the SEC or is a
separate, manually signed copy required?
As filed.
+ As applicable, may an issuer simultaneously check claims of exemption under Rules 504,
505 and 506 under Regulation D?
Yes.
* Must issuers still file a copy of the state Appendix from the old Form D?
No.
* If no Appendix is required, must the filing letter give the amount sold in the state?
No.
* Must the filing letter give the date of first sale in the state?
Committee on State Regulation of Securities Page 73
Subcommittee on Liaisons to the States
KENTUCKY
Yes.
* Must issuers file a separate Form U-2?
No.
* Can one Form D filing be used for multiple securities issued by different issuers in the
same offering (e.g., debt of a parent company with guarantees by multiple subsidiaries)?
No.
* What events trigger the filing clock (&g., receipt of signed subscription or cash, etc)?
Subscription or payment, whichever comes first.
* What is the state's enforcement position on failure to file or late filings?
Stop order on failure to file and late filings.
* Are annual renewal filings required and, if so, what is required (new fee, new U-2?)? If
not, must a copy of the electronic Form D be filed when it is renewed with the SEC? Must
amendments also be filed?
No.
+ Are there any unusual policies or procedures followed by the administrator's staff?
Filer should notify of termination of the offering.
Committee on State Regulation of Securities Page 74
Subcommittee on Liaisons to the States
KENTUCKY
l PUBLIC PROTECTION CABINET
2
3 DEPARTMENT? OF FINANCIAL INSTITUTIONS
4 DIVISION OF SECURITIES
5 {New Administrative Regulation)
fi 808 KAR 10:440. Examples of Dishonest or unethical practice far broker-dealers
7 and agents
8 RELATES TO: KRS292.330(13XA)7
9 STATUTORY AUTHORITY: KRS 292.350(12X«), 292.500(3)
10 NECESSITY, FUNCTION. AND CONFORMITY: KRS 292.500(3} auttiorizes the
1L commissioner of the Department of Financial Institutions to promulgate administrative
12 reg ulationa necessary to cany out the provisions of KRS Cha pter 292. KRS
13 292.33Q(13)(a}7 authorizes the ^|tim|ssioner of the Department Of FitWnfiifll Institutions
14 to take disciplinary act ran against the registration of a broker-dealer or agent if that
is person has engaged in a dishonest or unethical practice. KRS 292.330(12) authorizes
is the commissioner to prohibit unreasonable charges, profits, commissions, or other
IV compensation for broker-dealers and agents. This administrative regulation provides
18 examples of dishonest and unethical practices by broker-dealers and agents and
19 clarifies th e con sequences of engaging in such u nacceptabl s cond uct or practices.
20 Section 1. Broker-dealers shall observe high standards of commercial honor and
21 Just and equitable principles of trade in their dealings with customers and the conduct of
22 their business. Acts and practices such as the following are considered contrary to
23 such standards and may constitute grounds for denial suspension or revocation, or
34 such other action, including the Imposition of fines:
Committee on State Regulation of Securities Page 75
Subcommittee on Liaisons to the States
KENTUCKY
1 (1) Engaging in a pattern of unreasonable and unjustifiable delays in the delivery
2 of securities purchased by any of te customers o r in the payment of free credit balances
3 reflecting completed transactions of any of its customers.
4 (2) Felling or refusing to furnish a customer, upon reasonable request,
5 Information to which the customer is entitled, or to respond to a fcmrnal written demand
s or complaint by a customer.
i (3) Attempting to enforce a condition, stipulation or provision against a customer
a in Kentucky If the result would:
9 (a) Leave the customer wHhout the choice of a forum for dispute resolution in the
-D state of Kentucky; or
11 (b) Limit the timeliness of an action to a period teas than that established in KRS
12 292.480.
13 {4) Failing to segregate customers' securities held in safekeeping.
14 (5) Hypothecating a customer's securities without having a lien thereon unless
15 the broker-dealer secures from the customer 9 properly executed written consent
16 pro mptly after the Initial tra nsaction, except as permitted by rules of the Secu rides and
i? Exchange Commission.
10 (6) Charging unreasonable and inequitable fees far services performed.
1•? including miscellaneous services such as collection of monies due for principal.
20 dividends or transfer of securities, appraisals, safekeeping, or custody of securities and
2]. other services related to its securities business.
22 (7) Offering to buy from or sell to any person any security at B stated price
23 unless such broker-dealer is prepared to purchase or sell, as the case may be, at such
Committee on State Regulation of Securities Page 76
Subcommittee on Liaisons to the States
KENTUCKY
1 price and under such conditions as ana stated at the time of such offer.
2 (8J Representing that 0 Security is beiiY) offered to a customer "at the market* or
3 a price relevant to the market price unless such broker-dealer knows or has reasonable
4 g rounds to believe that a market for such a security exists other than that mad e, created
5 or controlled by such braker-doaler, or by any such person for whom he or she is acting
6 or with whom ha or she is associated in Such distribution, or any person controlled by,
7 controlling or under common control with such broker-dealer.
8 (9) Failing to disclose in writing that the broker-dealer is controlled by,
9 controlling, affiliated with or under common control with the issuer of any security the
10 existence of such control before entering into any binding contract with or-for a
11 customer for the purchase or sate of such security.
0.2 (10} Failing to make a bona fide public offering of all the securities allotted to the
12 broker-dealer lor di stri bution, whether acqui red directly as an underwriter or a sailing
14 group member or indirectly from an entity participating In the distribution as an
ib underwriter or selling group member.
as (11) Ind'Jcing -trading In a customer's account which Is excessive in size or
17 frequency in vie w of the financia I resources and character of the account.
1e \ 12) Switching, churning, overtrading or reloading of a security in a customer's
19 account for the purpose of accumulating or increasing a commission.
20 (13) Recommending to a customer ttis pu rchase, sate or exchange of any
21 security without reasonable grounds to believe that such transacts n or recommendatio n
22 is su itabl e for the customer based upon reasonably inqu iry concern ing the customer's
23 investment objectives, financial situation and needs, and any other relevant information
Committee on State Regulation of Securities Page 77
Subcommittee on Liaisons to the States
KENTUCKY
1 set forth In th eflnal prospectus.
2 (14) Failing to furnish to a customer purchasing securities in an offering, no later
3 than tie due date of confirmation of the transaction, either a to rma I prospectus or a
4 preliminary prospectus and an additional document, which together include all
5 information set forth In trte final prospectus.
6 {15) Participating in the solicitation or offer for sale of a security without ttie use
7 of an offering documents or prospectus (If required) or making a statement contrary to
e or inconsistent with disclosure contained in the offering document or prospectus.
9 (16) Making a false, misleading, deceptive or exaggerated representation or
10 p red iction in the solicitation or sale of a security, incl uding:
11 (a] That the security will be resold or repurchased;
12 (b) That th* security will be listed or traded on an exchange or established market;
13 (c) That the security will result in an assured, immediate or large increase In value,
14 future market price or retu rn on a n investment;
15 (d) That there is a guarantee against risk of loss; or
16 (s) Any statement with respect to an Issuer's financial condition, anticipated earnings,
17 potential growth or success not supportable by information In the offering document or
la prospectus.
19 (17) Enpaging or aiding in boiler room operations such as use of high pressure
23 tactics to promote a speculative offering or promotion of a security in an intensive
21 campaign in wHch the prospective purchaser is encouraged t make a hasty decision to
22 buy a security irrespective of the purchaser's investment needs, objectives or
23 underata ndi ng of the security being offered.
Committee on State Regulation of Securities Page 78
Subcommittee on Liaisons to the States
KENTUCKY
1 (18) Executing a transaction on behalf of a customer without authorization to do
2 so.
3 (19) Exercising any d Iscretlona ry power effecting a transaction fb r a cuatomer'e
•1 account without first obtaining written discretionary authority from the customer, unless
5 the discretionary power relates solely to the time or price for the executing of urdens.
$ (20) Executing any transaction in a margin account without securing from the
7 customer a properly executed written margin agreement promptly after the initial
a transaction in the account.
9 (21) Entering into a transaction with or for a cu starrier at a price not reasonably
i C related to Ihe current market price of the security o r receiving an unreasonable
11 commission or profit.
-2 (22) Effecting any transaction in, or inducing the purchase or sate of, any
13 security by means of any manipulative, deceptive or fraudulent device, practice, plan,
14 program, design or contrivance, vvfiich may include but not be limited to:
as (a) Effecting any transaction in a security which involves no change in the beneficial
16 ownership thereof:
i? (b) Entering an order or orders of substantially the same size, at substantially the same
IB time and substantially the same price, for the safe of any such security, has been or will
19 be entered by or for the same or different parties for the purpose of creating a false or
20 misleading appearance of active trading in the security oratalse or misleading
21 appearance with respect to the market Jar the security; provided, however, nothing in
22 th is su bsectton snal I pron ibit a broker-d ealer from entering bona fid e agan cy cross
23 tra nsactlon s for its customers;
Committee on State Regulation of Securities Page 79
Subcommittee on Liaisons to the States
KENTUCKY
1 (c) Effecting, atone or with one Of more other persons, a series of transactions in any
2 security creating actual or apparent active trading In the security or raising or
3 depressing <ha prlc» of such security, far the purpose of inducing the purchase or sale
4 of such security by others.
5 (23} G uaranfeeing a cu atomer again at lose in a ny securities acco unt of such
e customer carried by the broker-dealer or in any securities transaction effected by the
7 broker-dealer,
8 (24) Publishing or circulating, or causing the publication or circulation of, any
g notice, ci rcula r, advertisem ent, newapa per article, investment service or CD mmunlcatlon
10 of any kind which purports to report any transaction as a purchase or sale of any
11 security unless such broker-dealer reasonably believes that such transaction was a
12 bona fide purchase or sgle of such security; or which purports to quote the bid price or
13 asked price for any security, unless such broker-dealer reasonably believes that such
14 quotation represents a bona fide bid or offer.
-B (25) Using any advertising or conducting any sales practice In such a way as to
ie be decs ptive or misleading.
l? (26) Entering into an agreement for a concession, discount, commission or
IB allowance as consideration for a service in connection wfth the distribution or sale of a
19 security In Kentucky with a broke r-dea ler, agent i nvastrrwnt adviser or I nvestment
20 adviser representative who is not either
21 (a) Registered in Kentucky or
22 (b) Exempted from the registration requirements for conducting a securities business in
23 Kentucky.
Committee on State Regulation of Securities Page 80
Subcommittee on Liaisons to the States
KENTUCKY
1 {27) Lying to or otherwise misleading representatives of the Department of
2 Pi nancial Institub'a ns cond ucti ng art autho rized exa m (nation or investigation.
3 (28) Failing to make requested records available to or otherwise impeding a
4 representative of the Department of Financial Institutions conducting an authorized
5 examination or i nvestigat ion.
6 (29) Failing to respond in a timely manner to a written request from an
•i authorized representative of the Department of Financial Institutions for information, an
s explanation of p radices/procedure s, a respo nse to a cornplai nt filed with the
3 Department of Financial Institutions or a response to a written statement of findings
10 fro m an sxa m ination.
11 (30) Committing any act Involving a customar, a customer's account or any
12 business records which would constitute a criminal offense,
13 Section 2. Broker-dealer agents shall observe high standards of commercial
14 honor and just and equitable principles of trade In their dealings with customers. Acts
IB and practices, including but not limited to lha following, are considered contrary to such
16 standards a rid ma y constitute grounds for denial, suspension or revocation of
17 registration, or such olher action, including the imposition of fines;
is (1) Sharing directly or indirectly In profits or losses in the account of a customer
is without the written authorization of the customer and the broker-dealer which ma agent
20 represents.
21 (2) Establishing or maintaining an account containing fictitious information in
22 order to execute transactions which wo uld otherwise be p rohiwied.
23 (3) Effecting securities transactions not recorded on the regular books and
Committee on State Regulation of Securities Page 81
Subcommittee on Liaisons to the States
KENTUCKY
1 records of the broKfcr-deater which tine agent represents, unless the transactions ana
2 authorized in writing by such broker-dealer prior to execution of the transaction.
3 (4) Engaging in Lire practice of lending to or borrowing from a customer either
4 money or securities.
5 (5) Acting as custodian of a customer's money, securities or an executed stock
6 power.
7 (6) Engaging in conduct specified In Section 1 .subsections [11) through (30).
a Section 3. Issuer agents shall observe high standards of commercial honor and
9 just and equitable principles of trade in their dealings with customers, Acfe and
10 practices, Including but not limited ta the following, are considered contrary to such
LI standard s and may constitute g rounds for den ial, suspen slon or revocation of
12 registration, or such other action, including the imposition of fines:
13 (1) Engagi ng in conduct specif! ed In Section 1. subsections (2), < 13) (15). (16),
14 (17). (18). (25), (26), (27), (28), (29). or (30).
15 (2) Engaging in conduct specified In Seetion2,8ur>s«ctions (3) or (4).
16 Section 4, The commissioner may determine that an actMty not included in trie
iv examples identified Jn Sections 1 through 3 of this regulation constitutes a dishorns* or
x6 u nethical practice if the activity is similar to an en umerated activity.
Committee on State Regulation of Securities Page 82
Subcommittee on Liaisons to the States
KENTUCKY
Date Janres Sfrcxte, Director
Division erf Securities
Date Charles Vice, Commissioner
Department^ Financial Institutions
Data Robert Vance, Secretary
Public Protection Cabinet
Committee on State Regulation of Securities Page 83
Subcommittee on Liaisons to the States
KENTUCKY
REGULATORY IMPACT ANALYSIS
AftO TIERING STATEMENT
Administrative Regulation 803 KAK W:44Q
Contact Person; William B. Owstey
(1) Provide * brief summary of:
ftt) What this administrative regulation does: This administrative
regulation establishes ewnpfes of dishonest or unethical practices in
the securities business by brafar-daarfors, brotcer-dfUlers
representatives, and issuer agents,
(6) The necessity of this administrative regulation: The regulation sets
standards honest and ethical practices in the securities business by
broker-testers, broker-dealers representatives, and issuer agents and
replaces the former administrative regulation (906 KAft 10:040) on the
subject.
(c) How this administrative regulation conforms to the content of the
authorizing statutes: KRS 292.330{13)<a)7 authorizes the
commissioner of the Department of Financial Institutions to take
disciplinary action against the registration of a broker-dialer or agent
If (hat person has engaged In a dishonest or unethical practice. KRS
292.330(12) authorizes the commissioner to prohibit unreasonable
charges, profits, commissions, or other compensation for broker-
dealers and agents. This administrative regulMton provides examples
of dishonest and unethical practices by broker-dealers and agents and
clariffes the consequences of engaging In such unacceptable conduct
or practices.
(d) How this administrative regulation currently assists or will assist in
the effective administration of the statutes: Tha regulation clarifies
those practices which the commissioner considers to tie dishonest or
unethical in the securities business by Arotarefeatar* arm agents and
which would authorize the commissioner to *a*e disciplinary action.
(2) tf this is an amendment to an existing administrative regulation, provide a
brief summary off
fa) How the amendment will change this existing administrative
regulation: N/A.
(b) The necessity of the amendment to Ms regulation: WA
fc) How the amendment conforms to tire content of the authorizing
statute: N/A.
(d) How the amendment will assist in tha effective administration of the
statutes: N/A.
(3) List the type and number of individuals, businesses, organizations, or state
and local governments affected by this achrtMstfative regulation: All troker-
dealers, broker-dealer representatives and issuer agents seffing or offering
Committee on State Regulation of Securities Page 84
Subcommittee on Liaisons to the States
KENTUCKY
for safe securities in Kentucky.
(4) Provide an analysis of how the entities ickmtifad in question (3} will be
impacted by aftner the Implementation of this administrative regulation, If
new, or by the change, If It Is an amendment, including:
(a) List the actions tfwt wen of the regulated entitles identified in
question (3) wtfihan to comply with this administrative regulation or
amendment: Ala ngutated person or entity is Impacted. Brokvr-
tteslers and agmnta an alfe&fy regulated by the commissioner and
we subject to disciplinary action for dishonest or unethical practices
in their profession.
(b) In complying wtth this administrative regulation or amendment, how
much wilt U cost each oftft* mntiiivs identified in question (3): Nona.
(c) As a result of compliance, whet benefits will accrum to the entitles
Identified in question (3}: The regulated parsons and entities will
have a better understanding of what is considered to be a dishonest
or unethical practice in the securities business and of the
conseguwca* of engaging In such practizes.
(5) Provide an estimate of how much it will cost to implement this administrative
regulation:
(a) Initial/y: None
fa) On a continuing basts: None
(6) What is the source of the funding to be used for the implementation and
enforcement of ttiis administrative regulation; Fees generated cov*r the
cost of examfnationa and investigations.
(7) Provide an assessment of whether an Increase In fee? or funding will be
necessary to implement this administrative regulation, if new, or by the
chang* if ilia an amendment: None.
(8) State whether or not this administrative regulation establishes any fees or
directly or indiractiy increases any fees: This regulation does not
Impactfaea.
(9) TIERING: Is tiering applied? (Explain why tiering waa or was not used.)
Tiering is not applied.
Committee on State Regulation of Securities Page 85
Subcommittee on Liaisons to the States
KENTUCKY
FISCAL NOTE ON STATE OR LOCAL GOVERNMENT
Regulation No. 808 KAR 10:440 Contact Person : William B. Owslev
1. Does this administrative regulation relate to any program, service, or
requirements of a state or local government (including cities, counties, fire departments,
or school districts}?
No ___
If yes, complete questions 2-4.
2. What units, parts or divisions Off state or local government (including cities,
counties, fire departments, or school districts) will be Impacted by this administrative
regulation? The Kentucky Department of Financial Institutions, Division of Securities
will be Impacted by this administrative regulation.
3. Identify each state or federal statute or federal regulation that requires or
authorizes the action taken by the administrative regulation. The statutory authority for
this administrative regulation is found in KRS 292.330(1 2X<?) and KFS 292.500(3).
4. Estimate the effect of this administrative regulation on the expenditures and
revenues of a state or local government agency (including cities, counties, fire
departments, or school districts) for *e first full year the administrative regulation is to
be in effect. This administrative regulation will have no impact on expenditures or
revenues,
(a) How much revenue will this administrative regulation generate for the state or
local government (including cfties, counties, fire departments, or school districts) for the
first year? This administrative regulation will not generate revenue in the first year.
(b) How much revenue will this administrative regulation generate for the state or
local government (including cities, counties, fine departments, or school dtetrlcte} for
subsequent years? This administrative regulation will not generate revenue in
subsequent years.
{c) How much will It cost to administer this program for the first year? There will be
no additional cost as this administrative regulation simply defines unethical or dishonest
practices which broker-dealers and agents registered in Kentucky should avoid. These
broker-dealers and agents are already subject to periodic examination and investigation
by the Division of Securities.
(d) How much will it cost to administer this program for subsequent years? There
will also be no additional cost to administer this program in subsequent years.
Note: If specific dollar estimates cannot be detenmined, provide a brief narrative to
explain the fiscal impact of the administrative regulation.
Revenues <+/-): N/A
Committee on State Regulation of Securities Page 86
Subcommittee on Liaisons to the States
KENTUCKY
Expenditures (+/-); N/A
Other Explanation:
Committee on State Regulation of Securities Page 87
Subcommittee on Liaisons to the States
KENTUCKY
i PUBLIC PROTECTION CABINET
2
3 DEPARTMENT OF FINANCIAL INSTITUTIIONS
4 DIVISION OF SECURITIES
5 (New Adm Inistrative Regulation)
5 S08 KA R10:450. Examples of Di shonest o r u nethicsl practice for investment
'/ advisers and investment adviser representatives
8 RELATES TO: KRS 292.330(13Xa>7
<> STATUTORY AUTHORFTY: KRS 292.330(12Xe), 292.500{3j
JLO NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.600(3) authorizes the
11 co mrnissioner of the Department of Financial I institutions to promulgate admi nisfrative
12 regulations necessary to carry out the provisions of KRS Chapter 202. KRS
13 292.330(13 Ha)7 authorize* the commissioner of the Department of Financial Institutions
14 to la ke di sciplinary action against the rcg islratlon of 9 n investment advi ser or investment
15 adviser representative if that person has engaged in a di&hormt or unethical practice.
16 KRS 292.330(12Xe) authorizes the commissioner to pro hibit unreasons bis charges or
17 other compensation of in vestment advisers, This administrative regulation provides
is examples of dishonest and unethical practices by investment advisers and investment
is adviser representatives and clarifies the consequences of engaging in such
20 unacceptable conduct or practices.
21 Section 1. Definitions.
22 (1} "Investment adviser solicitor" means a person or person or entity that, directly or
23 indirectly, solicks a prospective client for, or refers a prospective client to an investment
24 adviser.
Committee on State Regulation of Securities Paee 88
Subcommittee on Liaisons to the States
KENTUCKY
1 {2) "Advertisement" shall includs any notice, circular, letter or other written
2 communication addressed to more than one person, or any notice or other
3 announcement In any electronic or paper pubiication, by radio or televlslon, or by any
4 other medium, that offere any pne of the following:
s (a) Any analysis, report or publication concerning securities.
5 (b) Any analysis, report of publication that is to be used in making any determination as
•? to when to buy or sell any security or whteh security to buy or sell.
B (c) Any graph, chart, formula or other device to be used in making any determination as
9 to when to buy a r sell any security, or wh ich security to buy or sel I.
10 (d) Any otfier advisory service with regard to securities.
11 Section 2, A person who Is an investment adviser or an investment adviser
12 representative is a fiduciary and has a duty to act primarily for ths benefit of its clients.
13 An Investment adviser o r i n vestment adviser representative s hall not engage, either
14 directly or Indirectly, in unethical or dishonest practices. Acts and practices such as the
is following are considered either a breach of fiduciary duty or a dishonest and unethical
1n practice, and may constitute grounds for denial, suspension or revocation of registration
i? as welI as the impoaItion of fines:
is (1J Recommending to a client to whom Investment advisory, management or consulting
is servi CBS a re provld ed the pu rchase, sa le or excha nge of any security without
2o reaso nab le grounds to bsiwve that the recommendation ia suitable for the client on fie
21 basis of information furnished by the client after reasonable Inquiry concerning the
22 client's investment objectives, fina noial situation and needs, an d a ny other irrformatton
23 known by the investment adviser.
Committee on State Regulation of Securities Page 89
Subcommittee on Liaisons to the States
KENTUCKY
1 (2) Exercising any dtecrationsry power in placing an order for the purchase or sals of
2 securities for a client without obtaining written discretionary authority from the client
3 within ten (1D) business days after the data of the first transaction placed pursuant to
4 oral discretionary authority, unless the discretionary power relates solely to the price at
5 which, or the lime when, an order involving a definite amount of a specified security
£ s hal I be executed, or both,
7 (3) Inducing trading in a client's account that is excessive in size or frequency in vtew of
B the financial resources, Investment objectives a nd character of the account in tig ht of
9 tha fact that an in vestment ad viser or investment adviser rap resentatwe in such
10 situations can directly benefit from the number of securities transactions effected in a
11 client's account.
12 (4) Placing an arderto purchase Of sell a security for the account of a client without
13 authority to do so,
14 (5} Placing an order to purchase or sali a security for the account of a client upon
is instruction of a third party vuithout first having obtained a written third-party trading
is authorization from the client
17 (6) Borrowing money or securities from a client unless the client \s a broker-dealer, an
18 affiliate of the investment adviser, or a financial Institution engaged in the business of
19 loaning funds.
20 (7) Loaning money to a cliant unless the investment advteer la s financial institution
21 engaged in the business of loaning funds or the client is an affiliate of the investment
22 adviser.
23 (3) Misrepresenting to any advisory client, or prospective advisory client, the
Committee on State Regulation of Securities Page 90
Subcommittee on Liaisons to the States
KENTUCKY
1 qualifications of the investment adviser or any employee of the investment adviser, or
2 misrepresenting the nature of the acMaory services being offered or fees to be charged
3 for such service, or to omit to state a material fact necessary to make the statements
4 made regarding qualifications, services or fees, in light of the circumstances under
5 which Ihey were mads, not misleading.
6 [9} Providing a report or recommendation to any advisory client prepared by someone
7 other ths n the adviser without disclosing that fact.
a (10) Charging a client en unreasonsble advisory fee in light of trie fee charged by other
9 I nvestment advise rs providlng simi lar services.
LD (11) Failing to disclose to clients in writing before any advice is rendered any material
11 conflict of Inters st relating to the advise r, or any of to employees which cou Id
12 reasonably be expected to impair the rendering of unbiased and abjective advice
13 including:
14 (a) Compensation arrangements connected with advisory services to clients which are
15 in addition to compensation from such clients for such services; and
i€ (b) The amount of any commissions to be received for executing transactions pursuant
17 to advice given,
is (12) Failing to disclose to clients in writing before any advice is rendered any material
19 fact with respect to the financial and disciplinary information required to be disclosed by
7.0 17 CFR275.20B(4)-4(SEC Rule200(4)41
Zi (13) Guaranteeing a client that a specific result will be achieved with advice which wilt
22 be rendered.
23 (14) Using any advertisement that does a ny of the following;
Committee on State Regulation of Securities Page 91
Subcommittee on Liaisons to the States
KENTUCKY
1 (a) Refers to any testimonial of any kind concerning any advice, analysis, report or
2 other service rendered by the adviser or representative,
3 (b) Refers to past specific recommendations of the adviser or representative that were
4 or would have been profitable, except that an adviser or representative may furnish or
5 offer to furnish a list of all recommendations made by said adviser or representative
6 within the immediately preceding period of not less than one year if the fiat atso includes
7 the following:
8 1. The name of each security recommended, the date and nature of each
9 recommendation, the market price at that time, the price at whfcn the recommendation
in was to be acted upon, and ttie mostrecentlyavailable market price of each such
11 security.
12 2. A lagsnd on the first page in prominent print or type that states that
13 recommendations made In *ie future may not be as profitable as the securities on the
14 list.
1s (c) Repre aents that 0 ny graph, cha rt, formula or other device being offered ca n in a nd of
16 itself be used to determ ine which securities to buy a r sel I, or when to b uy or sell them;
17 Of which represents, directly or indirectly, that any graph, chart, formula or oflier device
is being offered hill assist any person in making that person's own decisions without
is prominently disclosing m such advertisement the limitations thereof and the difficulties
2a with respect to its use.
21 (d) Represents that any report, analysis or other service will be furnished for free or
22 without charge, unless such report, analysis or other service actually is or will be
23 -furnished free and without any direct or Indirect condition or obligation.
Committee on State Regulation of Securities Page 92
Subcommittee on Liaisons to the States
KENTUCKY
1 (e) Represents that the Department of Financial Institutions has approved any
2 advertisement,
3 (f) Contains any untrue statement of a material fact, or that is otherwise false or
4 misleading.
s (15) Disclosing the identity, affairs or Investments of any client unless required by law
6 to do so, or unless consented to in writing by the client.
7 (16) Taking any action, directly or indirectly, with respect to those securities or funds in
8 which any client has any beneficial interest, where the investment adviser has custody
9 or posssssion of such securities or funds when the adviser's action is subject to and
LO does not compty with the provisions of KAR10:020 relating to such custody.
ii (17) Entering into, extending or renewing an advisory contract unless the contractfeIn
12 writing and discloses th a fol lowing:
13 (a) The nature of the advisory services to be provided:
14 (b) The tim e period that the oa ntract remains in effect;
15 (c) The advisory fee and the formula for computing the fee;
16 (d) The amount of the prepaid fee to be returned in the event of contract termination or
1? nonperformance;
is (e) Whether the contract grants discretionary power to the adviser and, if so, tfie lerma
ig of the discretionary power
20 (f) Whether the contract grants custody of client funds to the adviser and, If so. the
21 terms of the custody; and
22 (g) That the adviser shall not assign trie contract without the prior written consent of the
23 client.
Committee on State Regulation of Securities Page 93
Subcommittee on Liaisons to the States
KENTUCKY
1 (18} Including in an advisory contract any condition, stipulation or provision binding any
2 client to waive compliance with any provision of the Kentucky Securities Act (KRS
3 Chapter 292) or any regulations promulgated thereunder or of the I nvestrr ent Advisors
4 Act of 1940.
5 {19) Paying compensation, directly or indirectly, lo an Investment adviser solicitor
6 unless the investment adviser makes the payment In accordance with the requirements
7 Of 17 CFR 275.2fJ6(4)-3) (SEC Rule 206<4)-3).
a (20) Engaging in any act, practice or course of business which is fraudulent, deceptive
9 or manipulative contrary to the provisions of Section 2<X>{4) of the Investment Advisore
10 Act of 1940, whether or not tie investment adviser is registered or required to be
11 regi stared under Sect ion 203 of said Act.
12 (21} Falling to provide all material Information with reaped In any dealings with or
13 neco mmsndslions to a ny advisory cl lent i n violation of KRS 292.320.
14 (22) Committing any act involving a client, the client's assets or any business records
is wh leh would constitute e criming I offer se.
16 (23) Lyi ng to or otherwise misleading a representative of the Department of Fire ncfel
17 Institutions conducting an authorized examination or investigation.
19 (24) Failing lo make requested rerords ava II able to or otherwise I m pedlng a
-. Q representative of the Department of Financlal Institutions conducting an authorized
2o exami nation or i n vestigation.
21 (25) Failing to respond in a timely manner to a written request from an authorized
22 representative of the Department of Financial Institutions for information, an explanation
33 of practicesyprocadurea, a response to a complaint filed with tine Department or a
Committee on State Regulation of Securities Page 94
Subcommittee on Liaisons to the States
KENTUCKY
1 response to a written statement of findings from an examination.
2 Section 3. The provisions of this regulation apply to federally covered advisers
3 operating in Kentucky to the extent that the cond uct alleged is fraud ulent, deceptive o r
•} as otherwise permitted by tne National Securities Market Improvement Act of 1999
5 (Pub. L, No. 104-290) and the Investment Advisors Act of 1940 (15 U.S.C. Section 80b-
6 1 et seq.),
7 Section 4. The comm Issloner may determine that an activity not included In the
s examples identified in Section 2 of this regulation constitutes a dishonest or unethical
9 practice if the activity la similar to an enumerated activity.
10
11
1.3
Date James Strode, Dl rector
Division of Securities
Date Cha rles Vice, Conn mission er
Department of Financial Institutions
Date Robert Vance, Secretary
Public Protection Cabinet
Committee on State Regulation of Securities Page 95
Subcommittee on Liaisons to the States
KENTUCKY
PUBLIC HEARING AND PUBLIC COMMENT PERIOD: A public hearing on this
administrative regulation shall be held on October 23, 2003. at 10:00 a.m., 6DT, in the
Department of Financial Institutions, 1025 Capital Center Drive, Suite 200, Frankfort,
Kentucky, individuals interested In being heard at this hearing shall notify this agency In
writing by October 16, 2009 [five working days prter to the hearing) of their intent to
attend. If no notification of intent ta attend the hearing is received by that date, the
hearing may be canceled. The hearing is open to tfie public. Any person who wishes to
be heard will be given an opportunity to comment on the proposed administrative
regulation. A transcript of trie public hearing wfll not be made unless a written request
far a transcript is made. If you do not wish to be heard at the public hearing, you may
submit written comments on the proposed administrative regulation. Written comments
shall be accepted until October 30, 2004. Send written notification of intent lo be heard
at the public hearing or written comments on the proposed administrative regulation by
the above date to the contact person:
CONTACT PERSON: William Qwslsy, Counsel
Department of Financial Institutions
1025 Capital Center Drive, Suite 200
Frankfort, Kentucky 40801
Telephone: 502/573-3390 Ext, 236
Fax: 502/573-2133
Committee on State Regulation of Securities Page 96
Subcommittee on Liaisons to the States
KENTUCKY
REGULATORY IMPACT ANALYSIS
AND TIERING STATEMENT
Administrative Regulation 809 KAK 10:450
Contact Person: William B. Owsiey
(1) Provide a oriof summary ofi
(a) What this administrative regulation does: This administrative
regulation establishes examples of dishonest or unethical practices in
the securities business by Investment advisers and investment
advisor representatives.
(b) The necessity of this administrative regulation: The regulation sets
standards honest and ethical practices In the securities business by
investment advisers and investment adviser representatives and
replaces the former administrative regulation (808 KAR 10:040} on the
subject.
(c) How this administrative regulation conforms to the content of the
authorizing statutes: KRS 292.33fl(l3)(aJ7 authorizes the
commissioner of the Department of Financial Institutions to take
disciplinary action against the registration of en Investment adviser or
investment adviser representative if that person has engaged in a
dishonest or unethical practice. KRS 292.330(12) authorizes the
commissioner to prohibit unreasonable charges. profttE,
commissions, or other compensation for Investment advisers and
investment adviser repressrrtatives. This administrative regulation
provides examples of dishonest and unethical practices by Investment
advisers and investment adviser representatives and clarifies the
consequences of engaging in such unacceptable conduct or practices.
W How Otis administrative regulation currently assists or will assist In
the effective administration of th» statutes: Allows the inspector to
utilize the correct codes.
(2) ff this ia an amendment to an existing administrative regulation, provide a
brief summary of:
frj How the amendment wtft change this existing administrative
regulation: WA.
(b) The necessity of the amendment fo this regulation: N/A
(c.) How the amendment conforms to the content of the authorizing
statute: WA
til How the amendment wili aasfst In the effective administration of the
statutes: WA
(3) List the fype and number of individuals, businesses, organizations, or state
and iocat governments affected by this administrative regulation: Atl
Investment advisers and investment adviser representatives providing
Investment advisory services in the securities business in Kentucky.
Committee on State Regulation of Securities Page 97
Subcommittee on Liaisons to the States
KENTUCKY
(4) Provide an analysis of how the entities Identified in question (3) will be
impacted by either the implementation of this administrative regulation, if
new, or by the change, if it is an amendment, Including:
fa) List the actions that each of the regulated entitles Identified In
question (3) wilt have to comply with this administrative regulation or
amendment: No regulated person or entity ts Impacted, investment
advisers and Investment adviser representatives are already
regulated by the commissioner and are subject to disciplinary action
for dishonest or unethical practices In their profession.
(b) in complying with this administrative regulation or amendment, how
much will ft cost each of the entities Identified in question (3)t None.
(c) Aa a result of compliance, what benefits will accrue to the entitles
Identified in question (3): ): The regulated persons and entitles will
have a better understanding of what is considered to be a dishonest
or unethical practice in the securities business and of the
consequences of engaging in such practices.
(5) Provide an estimate of how much if wW cost to implement this administrative
regulation:
(a) Initially: None
fu) On * continuing baste: None
(6) What i* the source of the funding to b« und for the implementation and
enforcement of this administrative regulation: Fees generated cover the
cost of examinations and investigations,
(7) Provide an assessment of whether an increase In fee* or funding will b»
necessary to implement this administrative regulation, if new, or by the
change If it IB an amendment; None.
(8) State whether or not this administrative regulation establishes any fees or
directly or indirectly increase any fees: Fnis regulation does not
Impact fees.
(9) TIERING: IB tiering applied? (Explain why tiering was or was not used.)
Tiering is not applied.
Committee on State Regulation of Securities Page 98
Subcommittee on Liaisons to the States
KENTUCKY
l FISCAL NOTE ON STATE OR LOCAL GOVERNMENT
2
.3 Regulation No. SOB KAF{ ^0:445 Contact Parson; \fljlliam B. Owslev
4
5 1, Does this administrative regulation relate to any program, service, or
e requirements of a state or local government (including cities, counties, fire departments,
7 or school districts)?
8 Yes 2L M"
9 If yes, complate question s 2-4.
10
ii 2. What units, parts or divisions of state or local government (irtcludinp cities,
13. counties, fire departments, or school districts) will be Impacted by this administrative
13 regulation? The Kentucky Department or Financial Institutions, Division of Securities
14 will be impacted by thfe administrative regulation.
15
16 3. Identify each state or federal statute or federal regulation that requires or
17 authorizes the action taken by the administrative regulation. The statutory authority for
is this administrative regulation te found in KRS 292.33Q(12Xe) and KRS 292.500(3).
19
30 4. Estimate the effect of this administrative regulation on the expenditures and
21 revenues of s state or local government agency (including cities, counties, fire
22 departments, or school districts) for the first full year the administrative regulation Is to
23 be in effect. This administrative regulation will have no impact on expenditures or
24 revenues.
25
56 (a) How much revenue will thla administrative regulation generate for the stela or
27 local government (including cities, countis*. fire departments, or school districts) for the
29 first year? This administrative regulation will not generate revenue in the first year.
2S
10 (b) How much revenue will this administrative regulation generate for the state or
31 local government {Including cities, counties, fire departments, or school districts) for
32 subsequent years? This administrative regulation will not generate revenue in
33 subsequent years.
34
3D (c) Ho* much will ft cost to administer this prog ram tor the first year? There will be
36 no additional cost as this administrative regulation simply defines unethical or dishonest
37 practices which broker-dealers and agents registered in Kentucky should avoid. These
.38 investment advisers and investment adviser representatives are already regulated by
39 and subject to periodic examination and investigation by the Division of Securities.
40
41 (d) How much will It cost to administer this program for subsequent years? There
42 will also ba no additional cost to administer this program In subsequent years.
43
44 Note: If specific dollar estimates cannot be determined, provide a brief narrative to
4.5 explain the fiscal impact of the administrative regulation,
4$ Revenues (•+(-•)•. N/A
Committee on State Regulation of Securities Page 99
Subcommittee on Liaisons to the States
KENTUCKY
1 Expenditures [+/-): N/A
2 Other Explanation:
Committee on State Regulation of Securities Page 100
Subcommittee on Liaisons to the States
KENTUCKY
PILED WmHtRC
TIME; .anm
OCT-92508'
1 PUBLIC PRO'J KtTTJON CABINET
I Department of Financial Institutions
3 Division of Securities
5 808KAR ifr.MQ Request fbr Approval of Change in Control
6 KELATES TO; KRS 2S2.330(12Kf); 202.330(13X»)
7 STATUTORY AUTHORITY: KRS 292.530(12)(f)<
B NKI^SSITY, FUNCTION, A\D fJONTORMLTY. KRS
9 commiiiioiMr to prescribe rules for th* conduct of business by feroke^deol«a and investment
10 advwcrt KWS 252.3 3C(13X*) authorizes the ooimoissioncr to deny, suspend IK revoke1 the itegis-
I1 ttatioa of * brokcr-iiflftler or investment adviser if the rcsutrant <x any person, directly or indi-
12 rccrly ooruwUHng the registrant tin ciigagotl in certaiir iclivuit*. ThU reijulatlon requitesresU-
13 <rmb t,> H^mrt * nxiiMst for« chane* to the wntr»[ of «w rcgi'straat stub* the mTTMnissiotwr
H nuy review tbc hacVgmuoti of the acquiring person.
15 Section 1. Defijiitkmfl.
16 (1) "Contror mcui3 fte power, dlrtcdy ur indirertly, to (Urect die raatiogaBem. or policies of
IT aa entity, wfwjthcr through ownerahip of flenrritiw, liy ctmtocl. or cdierwisa.
11 (21 "Reportable went" means an event tfwt is required to be reported in Item* 11A- 11H of
19 die Form fill or Mem 11 of ifteFunn ADV.
i» Section 2. rreranrption of Control. A poison ij prennnwl to cwitrol an entity i'
Page 101
Committee on State Regulation of Securities
Subcommittee on Liaisons to the States
KENTUCKY
1 (1) is an uffictT, director, gaiaral pirtflw, ur managing member of the entity or is a, person o&w-
2 pyiftfi a aimiJai atatas or performing aimilm fractions;
J (2) lia* ihe right. dinwtlj' or indkeclLy, • to votm twenty-five (25? peccetit <ir more of the voting ae-
4 unities of the entity; or
s (3) is cntitkd to receive twenly-five (25) percent or more of iis prufit*.
6 Setliim 3. Racnwraneut for Appcoval of Chungs in Control, A registered bmlccr-dcalcr or in-
7 vestment adviser Khali submit A ix^uesl tor approval uf a change in (he oonftoi ol' the brakcr-
n dealer or inve&Uaeril aJviacr if ountrtil is to he aaqtored by any person who:
9 ( 1) is not curranll v regUlared in Kentucky HJ a broker-dealer or Lavastment adviiw; or
ID (2) has had s raporrabl* event in the previuus tw (1 0) ywus,
11 Section 4, Request for Approval circiian^e IIL Ctwlrttl.
11 (1) A registered bcolc«i-(jegiler or jiwestaettl advise requirnl ii> aubmil a request ibr approve] of
13 A change in wjnJ-rul ahull Ele a letter of request nlang wrffi at) flirieaicfj FdrtD BD CrPorm ADV
14 indiejtiTig the punpc^ed dung« in the-coEtml of thebroker-dealei or invesimcat sutvwr,
15 (2} A request for q>proviii shalj b* submitted an Icuf thirty day* prior to the proposed tJiange in
IS oorUroL
u (1) Th*followingmaterial is incorporated by wrar«nc«:
19 (a) Farm BD, issued May, 2002.
20 00 Form ADV, issued April 7, 2WXS.
:I (2) Uiisffucenalmuv be iu^eocd. uopJd «r obtained, subject to qjplicablc copyright law, at (he
22 Department of Financial Iirttitutftim, 1025 Capital Center Drive. Suite 200, Frmifort, Kentucky
33 4 Ofiftl , MnndBy thnowgb Friday. * a.m. to 5 p.m.
Committee on State Regulation of Securities Page 102
Subcommittee on Liaisons to the States
KENTUCKY
AUTHO«JZF|> SIGNATURES
Date
PUWk ftwet4ka Cabinet
ComraoiweaJlb of Kentnck
Date
Committee on State Regulation of Securities Page 103
Subcommittee on Liaisons to the States
KENTUCKY
PUBLIC HEAR WC ANUfUBUC COMMENT PERIOD; A public hearing on this
adudjiistrative regulation shall be heln on Wnv«uDbw II, 2008, at JtMJC juru, EOT, at the
Pepartrneuit of Financial tanicutiarn, 1025 Capitol Center Drive, Suite 2UQ, Frankfort, Kentucky.
Individuals interested in being heard at this bearing shall notify this agency in writing by
November 14, 2008 (five working day* prior ta 1h» hearing) trf th«Y intent *o attend. If no
notification of intent to attend the hearing is received by that date, the hewing runy be canceled.
Hie hawing " open to the public. Aity penao. who wishes fr> be hoird will be given un
Ofportroity to couuneol oo the ptopoacd admini$tt«tive regulation. A transcript of the public
hearing will out be mode unless a vmtlen request for o transcript 14 mmic. If ycvt do not wish to
be heard at die public bearing, jmi may auhmil written oonitieots on fbc proposed administrative
T^gBlaaon. Written onmmtinfs shall be aoocpted until December 1, 2008. Send written
notification of intcut to be heard it the public hearing or written cxmrungcite on the proposed
by Lbc aby vc date to the oootact penon:
CONTACT PERSON: Colleen Kecfc,
t>eputiMoit of Financial Itufitutioni
1 025 Capital Ceatw Dtivt, Suite 200
Frankfort, Kentucky 40fiOI
Telephony 5f^'573-33J)0 tat. 234
Fw: 502/573-2183
Committee on State Regulation of Securities Page 104
Subcommittee on Liaisons to the States
KENTUCKY
ocr-
PUBLIC PROTECTION CAHINfiT
Deportment of Financial Institutions
Division of Saairities
(New Administrative Regulation)
SflS KAR 10:042 Uw of Senior Certifications and Designations.
KKLATES TO: KRS 292.320(1X0), 2923KJ(2X&), 292.330(D)(ii)7 202.470: 7%.o30(l)(t)
STATUTORY AUTHORITY: KRS 292.330(12)(fj, 2S2.500(3)
NECEssrry, FUSION, AND OONFORMTIT: KRS 2*2.320pmbibio fraud at
in connection with the offer» sale, (IT purchase of a security o; the provisional investniwj i
10 KRS 252J30(L3Xa)7 authorize!! the commissioner to take legal action ugainrt ari applicant or
n ngtettsnt if the person haa engaged inrifahoDcctor unethical practices in the .securities hugeness,
U This ndrnirrtstrative tcguktion sea Ibdli pcuciices lhat «ra fraudulent nr deceptive ivithin the
m«tnin£ of KRS 292,320 or dishonest and unethical within the mc4nhs of tCRS
29Z.33D(13Xa)7.
J$ SiKtion I, Misleading Use of Certification o f Designation i$ FmhitiM. As set forth in
Sedkui 1 of this adnriimtnnve regu1idioTi: tha me ofn senior specific cettifiiMrtf.-,m or designation
that indicates or imoii«o that the wcr has sjKxaaf certification or training in idvining or servicing
senior uii^en* gi retinas shall be a irauduEeot, deceptive, dishonest, or unethical practice in tie
J* securities buaimas widiin die meaning of KRS 2«i. 320(1)(«), 292,32U(2Xti), or 25>i330(l3)(a)7,
it'used by «iy fMrann jn counertionwilh;
Committee on State Regulation of Securities Page 105
Subcommittee on Liaisons to the States
KENTUCKY
1 £1) Ihc offer, »\n, qr purchase of aecurUie*; or
2 (2) the provision of advice:
i (a) w U> the value of or the advisability of investing in, purchasing, or ndling securities, ei-
4 flier directly or indirectly at through publications or writings, or
l (b) by issuing or promulgating tmriyscs or reports relating to securities.
« Section 2, Prohibited Uses of a Certification or Designation. Tho prohibited w of a senior
i specific certification or professional Jiai^nBliuii in tbe sccurititB 'business shall indude ihv foi-
5 lowing:
? (1) use of a. certification or professional designation by a penkm who has not actually
10 Darned or it oltusnviae ineligible tn me mieh ocrtificatioa W <J«3igttat(QUi;
11 (?) us* of a Acuaexisteiu or setf-axnfmed ocrtifiwdkic <DT pryresBjon&l designation;
12 (3) use of a certiGcttion of pmfeswond designation tfist inclicatca or ilnpJies a level of
12 occupatiartat qualjficaHcais obtskusd thron^i atucotion. training, at experience that the person
14 using the certification or ptrrffcsalMa] designation dec* nob have; wd
i .^ (4} me of a certLQcafion or professional designation tlsat vrssi obteincd JTTOD a desigostii^
I ti nr ocrti fyittg orfRnlzatioD that:
17 (a) is pmrarily «o^agvd in tbe business of instruction LQ sales or maik«<ing;
15 (b) dees not have rrawrafilc stwdards or prroedure; for inuring the conipeteciixy of Us
i? dasien&ea or oertifkinta;
20 {c) does [tot have reasonable aLfindardti or prncedutes for monitoring imd disciplmmg iff
21 dc&igocca or ccrtiticants for impwper or unethical conduct; or
23 (d) does not bflvc rftwonablo coatimung eAwatioji reqninancmts for its deaigneea or cedj-
23 ficauU in onto to maintain the desagnaiion or oeiti fkate.
Committee on State Regulation of Securities Page 106
Subcommittee on Liaisons to the States
KENTUCKY
1 Section 3. Kefcattable Prwmnption lor Certificiitiona or Dtaifinutkum Issued by Accred-
2 iled Organization*. Snldy for purposes of Section 2<4X (here ia a rcbuttable presumption (hjl< a
J designating or cerlifyirtu wjsaoKatHra is not disqualified if the organization lisa hasij acravdlt«d
4 by:
J (1) The American "Miens! Standards Institute;
< (3) 1'Jic Nrttmal CommiBfiira £31 Certifying Agenciss; <xr
7 (3) an organization that is cm the United Stetn Depaitrncut of fidncatioa'S list ejidUod
g "Accrediting Agencies KecrtgrriTicd fhr Title TV Purposes" and ttic dwigtiatjon or ctodential it-
9 sued from thai organization does not primarily apply to sale* or maAetint;.
10 Section -1. Cctrtificaiicni and Dctignatiotis Indicating Special Training. lu deiennimng
1J wliedie? a COilibkialkjn of «vunlK. ur en atTOOym slauding fbr a oonsbickitiuil of worda, consb'tutcs
ti » wrtLfiwton or protosiwwl dwignsiwn indiostinj! cr waplymg 1b4 a person has special certtii-
13 cttljixi cir tnuniag in ail vising or servicing acnior dtizEtU ur retirees, Ikclcns (n be considered shall
14 include:
is (I) use of cine or more words such as "seniw," '^retirement,'1 "rider," or like wonk, c«m-
ifi bined with CUM or n»« words SIK* as "eBrtified." "registBCEd," "chartered," "adviser," "special-
17 ist," '^tuiillart," "plailGr.'' or Kks ^vonds, m the narae qf the ceriificatinn nr profissinnul des,ig-
IB ojirion; And
l S> (2) tiic manner in which those words arc wrabiiKul.
» Section 5, HebutUhk ?jfcwn)ptifm for Certain Job Titles.
1} (!) "Financial Scrvioss RcguJattiiy Afiency" mean* an agency that refiuldex bitifcer-
12 deaJera, invcxlmcnl idviscra, or iavestmtac cciupaiiiei as A efiacd ntuder the Javcstment Compajty
11 Act of 1940-
Committee on State Regulation of Securities Page 107
Subcommittee on Liaisons to the States
KENTUCKY
1 (2.) Fm- puTpiwM of this nsguJstiwi, H«re i s ft rcftuttsble prusDOiption that a certification or
2 professional designation Joes not include a job title within an ofgnniztnfon that is licensed urreji-
3 tetcnxi by a stitc or federal financial services repilatcry Bgcwy, if that job title:
4 (a) indicate? seniority or standing within Vb» organirati nn; nr
5 (b) spccifiea an individwal's. area cf specidizatico wHJiin the ncgauizEiticin,
6 Section 6, Nothing in this nj^ulatiDii $M1 limit Jte Doraiu&sioner'i ouihonty to enforce
7 existing prtn-isions of Igw.
Committee on State Regulation of Securities Page 108
Subcommittee on Liaisons to the States
KENTUCKY
AUTHORIZED SIGNATURES
Date
Daft
S
EUtment of UB Kud Ittitiluiiuus
Coramraiwcalilj of
Committee on State Regulation of Securities Page 109
Subcommittee on Liaisons to the States
KENTUCKY
PUBLIC HBAHINaAKDPUBUC COMMENT PERIOD: A ^ublic tearing on this
athniuwtrtfivc regulation dial! be held <m November 2), 2008, at 10:00 am.,' RJPT. at the
Departnieii! of Financial Institutions, 1025 Capital Gaoler Drive, Suite 200, Frankfbct, Kentucky.
Individuals interested m being heard at this hearing shall notify tins agency in wdtiug by
November 14, 2008 (five working days prkit la the Insuring) of fan iut«ut to max], If no
DDtiflcatiotL of hitenl to attend Hxs hearing is leceived by Hut dale, Ui« htffning may be canceled.
llw hearing is open to the public. Any pcteon who vfelns to be lieani will be givoi an
opportunity to cMnmeH on the proposed administrative tegulMiun. A trftnacn'pt of the public
hewing will not b« made unless a wriilea tv^wm (br a transcript w made. If von da not wjsK to
he heard at Hue public- hearing, ypu niaiy submit written comments on the proposed sdrniiiistnrtiw
Written comments shall bo ftuueptal until December 1, 2008, Send writlen
of inietit to be heard at the public houidg nr wTiiton coninlwta on
btwa date to (he contact petson:
tXWTACTPERSOK: Collfitn Kecfn, COIUUB!
Dananment »f S^naTicitl Institution*
1025 Capital Center Drive, Snice 200
FSranfcftrrt,K«ntuoky 40501
5 02/573-33 90 Exl. 234
Committee on State Regulation of Securities Page 110
Subcommittee on Liaisons to the States
Related docs
