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First Substitute H.B. 248

Representative Jim Bird proposes the following substitute bill:


             1     
DIVISION OF SECURITIES AMENDMENTS

             2     
2013 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Jim Bird

             5     
Senate Sponsor: ____________

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Utah Uniform Securities Act and related provisions to move the
             10      Division of Securities into the Insurance Department.
             11      Highlighted Provisions:
             12          This bill:
             13          .    removes the Division of Securities as a division within the Department of
             14      Commerce;
             15          .    changes references to the Division of Securities being in the Department of
             16      Commerce to being in the Insurance Department;
             17          .    modifies the definition provision in the Utah Uniform Securities Act;
             18          .    establishes the Division of Securities within the Insurance Department;
             19          .    provides for the commissioner to appoint the director;
             20          .    provides for the employment of staff with the approval of the commissioner;
             21          .    requires the director to annually submit a budget and report to the commissioner;
             22          .    addresses agency review by the commissioner;
             23          .    addresses to whom members of the Security Commission submit certain
             24      disclosures;
             25          .    provides that the commissioner concur with the director's use of certain money;


             26          .    addresses review of final orders by the commissioner;
             27          .    provides for transition into the Insurance Department; and
             28          .    makes technical and conforming amendments.
             29      Money Appropriated in this Bill:
             30          None
             31      Other Special Clauses:
             32          This bill takes effect on July 1, 2013.
             33      Utah Code Sections Affected:
             34      AMENDS:
             35          13-1-2, as last amended by Laws of Utah 2010, Chapter 278
             36          51-7-3, as last amended by Laws of Utah 2011, Chapter 342
             37          61-1-13, as last amended by Laws of Utah 2011, Chapters 317, 319, and 354
             38          61-1-18, as last amended by Laws of Utah 2009, Chapter 351
             39          61-1-18.2, as last amended by Laws of Utah 2009, Chapter 351
             40          61-1-18.5, as last amended by Laws of Utah 2011, Chapter 319
             41          61-1-18.7, as last amended by Laws of Utah 2011, Chapter 318
             42          61-1-23, as last amended by Laws of Utah 2009, Chapter 351
             43      Uncodified Material Affected:
             44      ENACTS UNCODIFIED MATERIAL
             45     
             46      Be it enacted by the Legislature of the state of Utah:
             47          Section 1. Section 13-1-2 is amended to read:
             48           13-1-2. Creation and functions of department -- Divisions created -- Fees --
             49      Commerce Service Account.
             50          (1) (a) There is created the Department of Commerce.
             51          (b) The department shall execute and administer state laws regulating business
             52      activities and occupations affecting the public interest.
             53          (2) Within the department the following divisions are created:
             54          (a) the Division of Occupational and Professional Licensing;
             55          (b) the Division of Real Estate;
             56          [(c) the Division of Securities;]


             57          [(d)] (c) the Division of Public Utilities;
             58          [(e)] (d) the Division of Consumer Protection; and
             59          [(f)] (e) the Division of Corporations and Commercial Code.
             60          (3) (a) Unless otherwise provided by statute, the department may adopt a schedule of
             61      fees assessed for services provided by the department by following the procedures and
             62      requirements of Section 63J-1-504 .
             63          (b) The department shall submit each fee established in this manner to the Legislature
             64      for its approval as part of the department's annual appropriations request.
             65          (c) (i) There is created a restricted account within the General Fund known as the
             66      "Commerce Service Account."
             67          (ii) The restricted account created in Subsection (3)(c)(i) consists of fees collected by
             68      each division and by the department.
             69          (iii) At the end of each fiscal year, the director of the Division of Finance shall transfer
             70      into the General Fund any fee collections that are greater than the legislative appropriations
             71      from the Commerce Service Account for that year.
             72          (d) The department may not charge or collect a fee or expend money from the
             73      restricted account without approval by the Legislature.
             74          Section 2. Section 51-7-3 is amended to read:
             75           51-7-3. Definitions.
             76          As used in this chapter:
             77          (1) "Agent" means "agent" as defined in Section 61-1-13 .
             78          (2) "Certified dealer" means:
             79          (a) a primary reporting dealer recognized by the Federal Reserve Bank of New York
             80      who is certified by the director as having met the applicable criteria of council rule; or
             81          (b) a broker dealer who:
             82          (i) has and maintains an office and a resident registered principal in the state;
             83          (ii) meets the capital requirements established by council rules;
             84          (iii) meets the requirements for good standing established by council rule; and
             85          (iv) is certified by the director as meeting quality criteria established by council rule.
             86          (3) "Certified investment adviser" means a federal covered adviser, as defined in
             87      Section 61-1-13 , or an investment adviser, as defined in Section 61-1-13 , who is certified by


             88      the director as having met the applicable criteria of council rule.
             89          (4) "Commissioner" means the commissioner of financial institutions.
             90          (5) "Council" means the State Money Management Council created by Section
             91      51-7-16 .
             92          (6) "Director" means the director of the [Utah State] Division of Securities of the
             93      [Department of Commerce] Insurance Department.
             94          (7) (a) "Endowment funds" means gifts, devises, or bequests of property of any kind
             95      donated to a higher education institution from any source.
             96          (b) "Endowment funds" does not mean money used for the general operation of a
             97      higher education institution that is received by the higher education institution from:
             98          (i) state appropriations;
             99          (ii) federal contracts;
             100          (iii) federal grants;
             101          (iv) private research grants; and
             102          (v) tuition and fees collected from students.
             103          (8) "First tier commercial paper" means commercial paper rated by at least two
             104      nationally recognized statistical rating organizations in the highest short-term rating category.
             105          (9) "Funds functioning as endowments" means funds, regardless of source, whose
             106      corpus is intended to be held in perpetuity by formal institutional designation according to the
             107      institution's policy for designating those funds.
             108          (10) "GASB" or "Governmental Accounting Standards Board" means the
             109      Governmental Accounting Standards Board that is responsible for accounting standards used
             110      by public entities.
             111          (11) "Hard put" means an unconditional sell-back provision or a redemption provision
             112      applicable at issue to a note or bond, allowing holders to sell their holdings back to the issuer
             113      or to an equal or higher-rated third party provider at specific intervals and specific prices
             114      determined at the time of issuance.
             115          (12) "Higher education institution" means the institutions specified in Section
             116      53B-1-102 .
             117          (13) "Investment adviser representative" means "investment adviser representative" as
             118      defined in Section 61-1-13 .


             119          (14) (a) "Investment agreement" means any written agreement that has specifically
             120      negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate.
             121          (b) "Investment agreement" includes any agreement to supply investments on one or
             122      more future dates.
             123          (15) "Local government" means a county, municipality, school district, local district
             124      under Title 17B, Limited Purpose Local Government Entities - Local Districts, special service
             125      district under Title 17D, Chapter 1, Special Service District Act, or any other political
             126      subdivision of the state.
             127          (16) "Market value" means market value as defined in the Master Repurchase
             128      Agreement.
             129          (17) "Master Repurchase Agreement" means the current standard Master Repurchase
             130      Agreement approved by the Public Securities Association or by any successor organization.
             131          (18) "Maximum amount" means, with respect to qualified depositories, the total
             132      amount of:
             133          (a) deposits in excess of the federal deposit insurance limit; and
             134          (b) nonqualifying repurchase agreements.
             135          (19) "Money market mutual fund" means an open-end managed investment fund:
             136          (a) that complies with the diversification, quality, and maturity requirements of Rule
             137      2a-7 or any successor rule of the Securities and Exchange Commission applicable to money
             138      market mutual funds; and
             139          (b) that assesses no sales load on the purchase of shares and no contingent deferred
             140      sales charge or other similar charges, however designated.
             141          (20) "Nationally recognized statistical rating organization" means an organization that
             142      has been designated as a nationally recognized statistical rating organization by the Securities
             143      and Exchange Commission's Division of Market Regulation.
             144          (21) "Nonqualifying repurchase agreement" means a repurchase agreement evidencing
             145      indebtedness of a qualified depository arising from the transfer of obligations of the United
             146      States Treasury or other authorized investments to public treasurers that is:
             147          (a) evidenced by a safekeeping receipt issued by the qualified depository;
             148          (b) included in the depository's maximum amount of public funds; and
             149          (c) valued and maintained at market value plus an appropriate margin collateral


             150      requirement based upon the term of the agreement and the type of securities acquired.
             151          (22) "Operating funds" means current balances and other funds that are to be disbursed
             152      for operation of the state government or any of its boards, commissions, institutions,
             153      departments, divisions, agencies, or other similar instrumentalities, or any county, city, school
             154      district, political subdivision, or other public body.
             155          (23) "Permanent funds" means funds whose principal may not be expended, the
             156      earnings from which are to be used for purposes designated by law.
             157          (24) "Permitted depository" means any out-of-state financial institution that meets
             158      quality criteria established by rule of the council.
             159          (25) "Public funds" means money, funds, and accounts, regardless of the source from
             160      which the money, funds, and accounts are derived, that are owned, held, or administered by the
             161      state or any of its boards, commissions, institutions, departments, divisions, agencies, bureaus,
             162      laboratories, or other similar instrumentalities, or any county, city, school district, political
             163      subdivision, or other public body.
             164          (26) (a) "Public money" means "public funds."
             165          (b) "Public money," as used in Article VII, Sec. 15, Utah Constitution, means the same
             166      as "state funds."
             167          (27) "Public treasurer" includes the state treasurer and the official of any state board,
             168      commission, institution, department, division, agency, or other similar instrumentality, or of
             169      any county, city, school district, political subdivision, or other public body who has the
             170      responsibility for the safekeeping and investment of any public funds.
             171          (28) "Qualified depository" means a Utah depository institution or an out-of-state
             172      depository institution, as those terms are defined in Section 7-1-103 that is authorized to
             173      conduct business in this state under Section 7-1-702 or Title 7, Chapter 19, Acquisition of
             174      Failing Depository Institutions or Holding Companies, whose deposits are insured by an
             175      agency of the federal government and that has been certified by the commissioner of financial
             176      institutions as having met the requirements established under this chapter and the rules of the
             177      council to be eligible to receive deposits of public funds.
             178          (29) "Qualifying repurchase agreement" means a repurchase agreement evidencing
             179      indebtedness of a financial institution or government securities dealer acting as principal
             180      arising from the transfer of obligations of the United States Treasury or other authorized


             181      investments to public treasurers only if purchased securities are:
             182          (a) delivered to the public treasurer's safekeeping agent or custodian as contemplated
             183      by Section 7 of the Master Repurchase Agreement; and
             184          (b) valued and maintained at market value plus an appropriate margin collateral
             185      requirement based upon the term of the agreement and the type of securities acquired.
             186          (30) "Securities division" means Utah's Division of Securities created within the
             187      [Department of Commerce by Section 13-1-2 ] Insurance Department.
             188          (31) "State funds" means:
             189          (a) public money raised by operation of law for the support and operation of the state
             190      government; and
             191          (b) all other money, funds, and accounts, regardless of the source from which the
             192      money, funds, or accounts are derived, that are owned, held, or administered by the state or any
             193      of its boards, commissions, institutions, departments, divisions, agencies, bureaus, laboratories,
             194      or other similar instrumentalities.
             195          Section 3. Section 61-1-13 is amended to read:
             196           61-1-13. Definitions.
             197          (1) As used in this chapter:
             198          (a) "Affiliate" means a person that, directly or indirectly, through one or more
             199      intermediaries, controls or is controlled by, or is under common control with a person
             200      specified.
             201          (b) (i) "Agent" means an individual other than a broker-dealer who represents a
             202      broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.
             203          (ii) "Agent" does not include an individual who represents:
             204          (A) an issuer, who receives no commission or other remuneration, directly or
             205      indirectly, for effecting or attempting to effect purchases or sales of securities in this state, and
             206      who effects transactions:
             207          (I) in securities exempted by Subsection 61-1-14 (1)(a), (b), (c), or (g);
             208          (II) exempted by Subsection 61-1-14 (2);
             209          (III) in a covered security as described in Sections 18(b)(3) and 18(b)(4)(D) of the
             210      Securities Act of 1933; or
             211          (IV) with existing employees, partners, officers, or directors of the issuer; or


             212          (B) a broker-dealer in effecting transactions in this state limited to those transactions
             213      described in Section 15(h)(2) of the Securities Exchange Act of 1934.
             214          (iii) A partner, officer, or director of a broker-dealer or issuer, or a person occupying a
             215      similar status or performing similar functions, is an agent only if the partner, officer, director,
             216      or person otherwise comes within the definition of "agent."
             217          (iv) "Agent" does not include a person described in Subsection (3).
             218          (c) (i) "Broker-dealer" means a person engaged in the business of effecting transactions
             219      in securities for the account of others or for the person's own account.
             220          (ii) "Broker-dealer" does not include:
             221          (A) an agent;
             222          (B) an issuer;
             223          (C) a depository institution or trust company;
             224          (D) a person who has no place of business in this state if:
             225          (I) the person effects transactions in this state exclusively with or through:
             226          (Aa) the issuers of the securities involved in the transactions;
             227          (Bb) other broker-dealers;
             228          (Cc) a depository institution, whether acting for itself or as a trustee;
             229          (Dd) a trust company, whether acting for itself or as a trustee;
             230          (Ee) an insurance company, whether acting for itself or as a trustee;
             231          (Ff) an investment company, as defined in the Investment Company Act of 1940,
             232      whether acting for itself or as a trustee;
             233          (Gg) a pension or profit-sharing trust, whether acting for itself or as a trustee; or
             234          (Hh) another financial institution or institutional buyer, whether acting for itself or as a
             235      trustee; or
             236          (II) during any period of 12 consecutive months the person does not direct more than
             237      15 offers to sell or buy into this state in any manner to persons other than those specified in
             238      Subsection (1)(c)(ii)(D)(I), whether or not the offeror or an offeree is then present in this state;
             239          (E) a general partner who organizes and effects transactions in securities of three or
             240      fewer limited partnerships, of which the person is the general partner, in any period of 12
             241      consecutive months;
             242          (F) a person whose participation in transactions in securities is confined to those


             243      transactions made by or through a broker-dealer licensed in this state;
             244          (G) a person who is a principal broker or associate broker licensed in this state and
             245      who effects transactions in a bond or other evidence of indebtedness secured by a real or chattel
             246      mortgage or deed of trust, or by an agreement for the sale of real estate or chattels, if the entire
             247      mortgage, deed of trust, or agreement, together with all the bonds or other evidences of
             248      indebtedness secured thereby, is offered and sold as a unit;
             249          (H) a person effecting transactions in commodity contracts or commodity options;
             250          (I) a person described in Subsection (3); or
             251          (J) other persons as the division, by rule or order, may designate, consistent with the
             252      public interest and protection of investors, as not within the intent of this Subsection (1)(c).
             253          (d) "Buy" or "purchase" means a contract for purchase of, contract to buy, or
             254      acquisition of a security or interest in a security for value.
             255          (e) "Commission" means the Securities Commission created in Section 61-1-18.5 .
             256          (f) "Commissioner" means the insurance commissioner appointed under Section
             257      31A-2-102 .
             258          [(f)] (g) "Commodity" means, except as otherwise specified by the division by rule:
             259          (i) an agricultural, grain, or livestock product or byproduct, except real property or a
             260      timber, agricultural, or livestock product grown or raised on real property and offered or sold
             261      by the owner or lessee of the real property;
             262          (ii) a metal or mineral, including a precious metal, except a numismatic coin whose fair
             263      market value is at least 15% greater than the value of the metal it contains;
             264          (iii) a gem or gemstone, whether characterized as precious, semi-precious, or
             265      otherwise;
             266          (iv) a fuel, whether liquid, gaseous, or otherwise;
             267          (v) a foreign currency; and
             268          (vi) all other goods, articles, products, or items of any kind, except a work of art
             269      offered or sold by art dealers, at public auction or offered or sold through a private sale by the
             270      owner of the work.
             271          [(g)] (h) (i) "Commodity contract" means an account, agreement, or contract for the
             272      purchase or sale, primarily for speculation or investment purposes and not for use or
             273      consumption by the offeree or purchaser, of one or more commodities, whether for immediate


             274      or subsequent delivery or whether delivery is intended by the parties, and whether characterized
             275      as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures
             276      contract, installment or margin contract, leverage contract, or otherwise.
             277          (ii) A commodity contract offered or sold shall, in the absence of evidence to the
             278      contrary, be presumed to be offered or sold for speculation or investment purposes.
             279          (iii) (A) A commodity contract may not include a contract or agreement that requires,
             280      and under which the purchaser receives, within 28 calendar days from the payment in good
             281      funds any portion of the purchase price, physical delivery of the total amount of each
             282      commodity to be purchased under the contract or agreement.
             283          (B) A purchaser is not considered to have received physical delivery of the total
             284      amount of each commodity to be purchased under the contract or agreement when the
             285      commodity or commodities are held as collateral for a loan or are subject to a lien of any
             286      person when the loan or lien arises in connection with the purchase of each commodity or
             287      commodities.
             288          [(h)] (i) (i) "Commodity option" means an account, agreement, or contract giving a
             289      party to the option the right but not the obligation to purchase or sell one or more commodities
             290      or one or more commodity contracts, or both whether characterized as an option, privilege,
             291      indemnity, bid, offer, put, call, advance guaranty, decline guaranty, or otherwise.
             292          (ii) "Commodity option" does not include an option traded on a national securities
             293      exchange registered:
             294          (A) with the Securities and Exchange Commission; or
             295          (B) on a board of trade designated as a contract market by the Commodity Futures
             296      Trading Commission.
             297          [(i)] (j) "Depository institution" is as defined in Section 7-1-103 .
             298          [(j)] (k) "Director" means the director of the division appointed in accordance with
             299      Section 61-1-18 .
             300          [(k)] (l) "Division" means the Division of Securities established by Section 61-1-18 .
             301          [(l) "Executive director" means the executive director of the Department of
             302      Commerce.]
             303          (m) "Federal covered adviser" means a person who:
             304          (i) is registered under Section 203 of the Investment Advisers Act of 1940; or


             305          (ii) is excluded from the definition of "investment adviser" under Section 202(a)(11) of
             306      the Investment Advisers Act of 1940.
             307          (n) "Federal covered security" means a security that is a covered security under Section
             308      18(b) of the Securities Act of 1933 or rules or regulations promulgated under Section 18(b) of
             309      the Securities Act of 1933.
             310          (o) "Fraud," "deceit," and "defraud" are not limited to their common-law meanings.
             311          (p) "Guaranteed" means guaranteed as to payment of principal or interest as to debt
             312      securities, or dividends as to equity securities.
             313          (q) (i) "Investment adviser" means a person who:
             314          (A) for compensation, engages in the business of advising others, either directly or
             315      through publications or writings, as to the value of securities or as to the advisability of
             316      investing in, purchasing, or selling securities; or
             317          (B) for compensation and as a part of a regular business, issues or promulgates
             318      analyses or reports concerning securities.
             319          (ii) "Investment adviser" includes a financial planner or other person who:
             320          (A) as an integral component of other financially related services, provides the
             321      investment advisory services described in Subsection (1)(q)(i) to others for compensation and
             322      as part of a business; or
             323          (B) holds the person out as providing the investment advisory services described in
             324      Subsection (1)(q)(i) to others for compensation.
             325          (iii) "Investment adviser" does not include:
             326          (A) an investment adviser representative;
             327          (B) a depository institution or trust company;
             328          (C) a lawyer, accountant, engineer, or teacher whose performance of these services is
             329      solely incidental to the practice of the profession;
             330          (D) a broker-dealer or its agent whose performance of these services is solely
             331      incidental to the conduct of its business as a broker-dealer and who receives no special
             332      compensation for the services;
             333          (E) a publisher of a bona fide newspaper, news column, news letter, news magazine, or
             334      business or financial publication or service, of general, regular, and paid circulation, whether
             335      communicated in hard copy form, or by electronic means, or otherwise, that does not consist of


             336      the rendering of advice on the basis of the specific investment situation of each client;
             337          (F) a person who is a federal covered adviser;
             338          (G) a person described in Subsection (3); or
             339          (H) such other persons not within the intent of this Subsection (1)(q) as the division
             340      may by rule or order designate.
             341          (r) (i) "Investment adviser representative" means a partner, officer, director of, or a
             342      person occupying a similar status or performing similar functions, or other individual, except
             343      clerical or ministerial personnel, who:
             344          (A) (I) is employed by or associated with an investment adviser who is licensed or
             345      required to be licensed under this chapter; or
             346          (II) has a place of business located in this state and is employed by or associated with a
             347      federal covered adviser; and
             348          (B) does any of the following:
             349          (I) makes a recommendation or otherwise renders advice regarding securities;
             350          (II) manages accounts or portfolios of clients;
             351          (III) determines which recommendation or advice regarding securities should be given;
             352          (IV) solicits, offers, or negotiates for the sale of or sells investment advisory services;
             353      or
             354          (V) supervises employees who perform any of the acts described in this Subsection
             355      (1)(r)(i)(B).
             356          (ii) "Investment adviser representative" does not include a person described in
             357      Subsection (3).
             358          (s) "Investment contract" includes:
             359          (i) an investment in a common enterprise with the expectation of profit to be derived
             360      through the essential managerial efforts of someone other than the investor; or
             361          (ii) an investment by which:
             362          (A) an offeree furnishes initial value to an offerer;
             363          (B) a portion of the initial value is subjected to the risks of the enterprise;
             364          (C) the furnishing of the initial value is induced by the offerer's promises or
             365      representations that give rise to a reasonable understanding that a valuable benefit of some kind
             366      over and above the initial value will accrue to the offeree as a result of the operation of the


             367      enterprise; and
             368          (D) the offeree does not receive the right to exercise practical and actual control over
             369      the managerial decisions of the enterprise.
             370          (t) "Isolated transaction" means not more than a total of two transactions that occur
             371      anywhere during six consecutive months.
             372          (u) (i) "Issuer" means a person who issues or proposes to issue a security or has
             373      outstanding a security that it has issued.
             374          (ii) With respect to a preorganization certificate or subscription, "issuer" means the one
             375      or more promoters of the person to be organized.
             376          (iii) "Issuer" means the one or more persons performing the acts and assuming duties
             377      of a depositor or manager under the provisions of the trust or other agreement or instrument
             378      under which the security is issued with respect to:
             379          (A) interests in trusts, including collateral trust certificates, voting trust certificates, and
             380      certificates of deposit for securities; or
             381          (B) shares in an investment company without a board of directors.
             382          (iv) With respect to an equipment trust certificate, a conditional sales contract, or
             383      similar securities serving the same purpose, "issuer" means the person by whom the equipment
             384      or property is to be used.
             385          (v) With respect to interests in partnerships, general or limited, "issuer" means the
             386      partnership itself and not the general partner or partners.
             387          (vi) With respect to certificates of interest or participation in oil, gas, or mining titles or
             388      leases or in payment out of production under the titles or leases, "issuer" means the owner of
             389      the title or lease or right of production, whether whole or fractional, who creates fractional
             390      interests therein for the purpose of sale.
             391          (v) (i) "Life settlement interest" means the entire interest or a fractional interest in any
             392      of the following that is the subject of a life settlement:
             393          (A) a policy; or
             394          (B) the death benefit under a policy.
             395          (ii) "Life settlement interest" does not include the initial purchase from the owner by a
             396      life settlement provider.
             397          (w) "Nonissuer" means not directly or indirectly for the benefit of the issuer.


             398          (x) "Person" means:
             399          (i) an individual;
             400          (ii) a corporation;
             401          (iii) a partnership;
             402          (iv) a limited liability company;
             403          (v) an association;
             404          (vi) a joint-stock company;
             405          (vii) a joint venture;
             406          (viii) a trust where the interests of the beneficiaries are evidenced by a security;
             407          (ix) an unincorporated organization;
             408          (x) a government; or
             409          (xi) a political subdivision of a government.
             410          (y) "Precious metal" means the following, whether in coin, bullion, or other form:
             411          (i) silver;
             412          (ii) gold;
             413          (iii) platinum;
             414          (iv) palladium;
             415          (v) copper; and
             416          (vi) such other substances as the division may specify by rule.
             417          (z) "Promoter" means a person who, acting alone or in concert with one or more
             418      persons, takes initiative in founding or organizing the business or enterprise of a person.
             419          (aa) (i) Except as provided in Subsection (1)(aa)(ii), "record" means information that
             420      is:
             421          (A) inscribed in a tangible medium; or
             422          (B) (I) stored in an electronic or other medium; and
             423          (II) retrievable in perceivable form.
             424          (ii) This Subsection (1)(aa) does not apply when the context requires otherwise,
             425      including when "record" is used in the following phrases:
             426          (A) "of record";
             427          (B) "official record"; or
             428          (C) "public record."


             429          (bb) (i) "Sale" or "sell" includes a contract for sale of, contract to sell, or disposition of,
             430      a security or interest in a security for value.
             431          (ii) "Offer" or "offer to sell" includes an attempt or offer to dispose of, or solicitation of
             432      an offer to buy, a security or interest in a security for value.
             433          (iii) The following are examples of the definitions in Subsection (1)(bb)(i) or (ii):
             434          (A) a security given or delivered with or as a bonus on account of a purchase of a
             435      security or any other thing, is part of the subject of the purchase, and is offered and sold for
             436      value;
             437          (B) a purported gift of assessable stock is an offer or sale as is each assessment levied
             438      on the stock;
             439          (C) an offer or sale of a security that is convertible into, or entitles its holder to acquire
             440      or subscribe to another security of the same or another issuer is an offer or sale of that security,
             441      and also an offer of the other security, whether the right to convert or acquire is exercisable
             442      immediately or in the future;
             443          (D) a conversion or exchange of one security for another constitutes an offer or sale of
             444      the security received in a conversion or exchange, and the offer to buy or the purchase of the
             445      security converted or exchanged;
             446          (E) securities distributed as a dividend wherein the person receiving the dividend
             447      surrenders the right, or the alternative right, to receive a cash or property dividend is an offer or
             448      sale;
             449          (F) a dividend of a security of another issuer is an offer or sale; or
             450          (G) the issuance of a security under a merger, consolidation, reorganization,
             451      recapitalization, reclassification, or acquisition of assets constitutes the offer or sale of the
             452      security issued as well as the offer to buy or the purchase of a security surrendered in
             453      connection therewith, unless the sole purpose of the transaction is to change the issuer's
             454      domicile.
             455          (iv) The terms defined in Subsections (1)(bb)(i) and (ii) do not include:
             456          (A) a good faith gift;
             457          (B) a transfer by death;
             458          (C) a transfer by termination of a trust or of a beneficial interest in a trust;
             459          (D) a security dividend not within Subsection (1)(bb)(iii)(E) or (F); or


             460          (E) a securities split or reverse split.
             461          (cc) "Securities Act of 1933," "Securities Exchange Act of 1934," and "Investment
             462      Company Act of 1940" mean the federal statutes of those names as amended before or after the
             463      effective date of this chapter.
             464          (dd) "Securities Exchange Commission" means the United States Securities Exchange
             465      Commission created by the Securities Exchange Act of 1934.
             466          (ee) (i) "Security" means a:
             467          (A) note;
             468          (B) stock;
             469          (C) treasury stock;
             470          (D) bond;
             471          (E) debenture;
             472          (F) evidence of indebtedness;
             473          (G) certificate of interest or participation in a profit-sharing agreement;
             474          (H) collateral-trust certificate;
             475          (I) preorganization certificate or subscription;
             476          (J) transferable share;
             477          (K) investment contract;
             478          (L) burial certificate or burial contract;
             479          (M) voting-trust certificate;
             480          (N) certificate of deposit for a security;
             481          (O) certificate of interest or participation in an oil, gas, or mining title or lease or in
             482      payments out of production under such a title or lease;
             483          (P) commodity contract or commodity option;
             484          (Q) interest in a limited liability company;
             485          (R) life settlement interest; or
             486          (S) in general, an interest or instrument commonly known as a "security," or a
             487      certificate of interest or participation in, temporary or interim certificate for, receipt for,
             488      guarantee of, or warrant or right to subscribe to or purchase an item listed in Subsections
             489      (1)(ee)(i)(A) through (R).
             490          (ii) "Security" does not include:


             491          (A) an insurance or endowment policy or annuity contract under which an insurance
             492      company promises to pay money in a lump sum or periodically for life or some other specified
             493      period;
             494          (B) an interest in a limited liability company in which the limited liability company is
             495      formed as part of an estate plan where all of the members are related by blood or marriage, or
             496      the person claiming this exception can prove that all of the members are actively engaged in the
             497      management of the limited liability company; or
             498          (C) (I) a whole long-term estate in real property;
             499          (II) an undivided fractionalized long-term estate in real property that consists of 10 or
             500      fewer owners; or
             501          (III) an undivided fractionalized long-term estate in real property that consists of more
             502      than 10 owners if, when the real property estate is subject to a management agreement:
             503          (Aa) the management agreement permits a simple majority of owners of the real
             504      property estate to not renew or to terminate the management agreement at the earlier of the end
             505      of the management agreement's current term, or 180 days after the day on which the owners
             506      give notice of termination to the manager;
             507          (Bb) the management agreement prohibits, directly or indirectly, the lending of the
             508      proceeds earned from the real property estate or the use or pledge of its assets to a person or
             509      entity affiliated with or under common control of the manager; and
             510          (Cc) the management agreement complies with any other requirement imposed by rule
             511      by the Real Estate Commission under Section 61-2f-103 .
             512          (iii) For purposes of Subsection (1)(ee)(ii)(B), evidence that members vote or have the
             513      right to vote, or the right to information concerning the business and affairs of the limited
             514      liability company, or the right to participate in management, may not establish, without more,
             515      that all members are actively engaged in the management of the limited liability company.
             516          (ff) "State" means a state, territory, or possession of the United States, the District of
             517      Columbia, and Puerto Rico.
             518          (gg) (i) "Undivided fractionalized long-term estate" means an ownership interest in real
             519      property by two or more persons that is:
             520          (A) a tenancy in common; or
             521          (B) a fee estate.


             522          (ii) "Undivided fractionalized long-term estate" does not include a joint tenancy.
             523          (hh) "Undue influence" means that a person uses a relationship or position of authority,
             524      trust, or confidence:
             525          (i) that is unrelated to a relationship created:
             526          (A) in the ordinary course of making investments regulated under this chapter; or
             527          (B) by a licensee providing services under this chapter;
             528          (ii) that results in:
             529          (A) an investor perceiving the person as having heightened credibility, personal
             530      trustworthiness, or dependability; or
             531          (B) the person having special access to or control of an investor's financial resources,
             532      information, or circumstances; and
             533          (iii) to:
             534          (A) exploit the trust, dependence, or fear of the investor;
             535          (B) knowingly assist or cause another to exploit the trust, dependence, or fear of the
             536      investor; or
             537          (C) gain control deceptively over the decision making of the investor.
             538          (ii) "Vulnerable adult" means an individual whose age or mental or physical
             539      impairment substantially affects that individual's ability to:
             540          (i) manage the individual's resources; or
             541          (ii) comprehend the nature and consequences of making an investment decision.
             542          (jj) "Whole long-term estate" means a person owns or persons through joint tenancy
             543      own real property through a fee estate.
             544          (kk) "Working days" means 8 a.m. to 5 p.m., Monday through Friday, exclusive of
             545      legal holidays listed in Section 63G-1-301 .
             546          (2) A term not defined in this section shall have the meaning as established by division
             547      rule. The meaning of a term neither defined in this section nor by rule of the division shall be
             548      the meaning commonly accepted in the business community.
             549          (3) (a) This Subsection (3) applies to the offer or sale of a real property estate
             550      exempted from the definition of security under Subsection (1)(ee)(ii)(C).
             551          (b) A person who, directly or indirectly receives compensation in connection with the
             552      offer or sale as provided in this Subsection (3) of a real property estate is not an agent,


             553      broker-dealer, investment adviser, or investment adviser representative under this chapter if
             554      that person is licensed under Chapter 2f, Real Estate Licensing and Practices Act, as:
             555          (i) a principal broker;
             556          (ii) an associate broker; or
             557          (iii) a sales agent.
             558          Section 4. Section 61-1-18 is amended to read:
             559           61-1-18. Division of Securities established -- Director -- Investigators.
             560          (1) (a) There is established within the [Department of Commerce] Insurance
             561      Department a Division of Securities.
             562          (b) The division is under the direction and control of a director. The [executive
             563      director] commissioner shall appoint the director [with the governor's approval].
             564          (c) Subject to Section 61-1-18.5 , the division shall administer and enforce this chapter.
             565          (d) The director shall hold office at the pleasure of the governor.
             566          (2) The director, with the approval of the [executive director] commissioner, may
             567      employ the staff necessary to discharge the duties of the division or commission at salaries to
             568      be fixed by the director according to standards established by the Department of Human
             569      Resource Management.
             570          (3) An investigator employed pursuant to Subsection (2) who meets the training
             571      requirements of Subsection 53-13-105 (3) may be designated a special function officer, as
             572      defined in Section 53-13-105 , by the director, but is not eligible for retirement benefits under
             573      the Public Safety Employee's Retirement System.
             574          Section 5. Section 61-1-18.2 is amended to read:
             575           61-1-18.2. Budget -- Annual report.
             576          The director shall annually prepare and submit to the [executive director]
             577      commissioner:
             578          (1) a budget for the expenses of the division and commission for the administration and
             579      enforcement of this chapter for the next fiscal year; and
             580          (2) a report outlining the division's and commission's work for the preceding fiscal
             581      year.
             582          Section 6. Section 61-1-18.5 is amended to read:
             583           61-1-18.5. Securities Commission -- Transition.


             584          (1) (a) There is created a Securities Commission.
             585          (b) The division shall provide staffing to the commission.
             586          (2) (a) The commission shall:
             587          (i) formulate and make recommendations to the director regarding policy and
             588      budgetary matters;
             589          (ii) submit recommendations regarding registration requirements;
             590          (iii) formulate and make recommendations to the director regarding the establishment
             591      of reasonable fees;
             592          (iv) act in an advisory capacity to the director with respect to the exercise of the
             593      director's duties, powers, and responsibilities;
             594          (v) conduct an administrative hearing under this chapter that is not:
             595          (A) delegated by the commission to an administrative law judge or the division relating
             596      to a violation of this chapter; or
             597          (B) expressly delegated to the division under this chapter;
             598          (vi) except as provided in Subsection (2)(b), and consistent with Section 61-1-20 ,
             599      impose a sanction as provided in this chapter;
             600          (vii) review rules made by the division for purposes of concurrence in accordance with
             601      Section 61-1-24 ; and
             602          (viii) perform other duties as this chapter provides.
             603          (b) (i) The commission may delegate to the division the authority to impose a sanction
             604      under this chapter.
             605          (ii) If under Subsection (2)(b)(i) the commission delegates to the division the authority
             606      to impose a sanction, a person who is subject to the sanction may petition the commission for
             607      review of the sanction.
             608          (iii) A person who is sanctioned by the division in accordance with this Subsection
             609      (2)(b) may seek agency review by the [executive director] commissioner only after the
             610      commission reviews the division's action.
             611          (3) (a) The governor shall appoint five members to the commission with the consent of
             612      the Senate as follows:
             613          (i) two members from the securities brokerage community:
             614          (A) who are not from the same broker-dealer or affiliate; and


             615          (B) who have at least five years prior experience in securities matters;
             616          (ii) one member from the securities section of the Utah State Bar:
             617          (A) whose practice primarily involves:
             618          (I) corporate securities; or
             619          (II) representation of plaintiffs in securities cases;
             620          (B) who does not routinely represent clients involved in:
             621          (I) civil or administrative litigation with the division; or
             622          (II) criminal cases brought under this chapter; and
             623          (C) who has at least five years prior experience in securities matters;
             624          (iii) one member who is an officer or director of a business entity not subject to the
             625      reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934; and
             626          (iv) one member from the public at large who has no active participation in the
             627      securities business.
             628          (b) A member may not serve more than two consecutive terms.
             629          (4) (a) Except as required by Subsection (4)(b) and subject to Subsection (4)(c), as
             630      terms of current members expire, the governor shall appoint a new member or reappointed
             631      member to a four-year term.
             632          (b) Notwithstanding Subsection (4)(a), the governor shall, at the time of appointment
             633      or reappointment, adjust the length of terms to ensure that the terms of commission members
             634      are staggered so that approximately half of the commission is appointed every two years.
             635          (c) For purposes of making an appointment to the commission, the governor:
             636          (i) shall as of May 12, 2009:
             637          (A) appoint all five members of the commission; and
             638          (B) stagger the terms of the five members of the commission to comply with
             639      Subsection (4)(b); and
             640          (ii) may not consider the commission an extension of the previous Securities Advisory
             641      Board.
             642          (d) When a vacancy occurs in the membership for any reason, the governor shall
             643      appoint a replacement member for the unexpired term.
             644          (e) A member shall serve until the member's respective successor is appointed and
             645      qualified.


             646          (f) The commission shall annually select one member to serve as chair of the
             647      commission.
             648          (5) (a) The commission shall meet:
             649          (i) at least quarterly on a regular date to be fixed by the commission; and
             650          (ii) at such other times at the call of:
             651          (A) the director; or
             652          (B) any two members of the commission.
             653          (b) A majority of the commission shall constitute a quorum for the transaction of
             654      business.
             655          (c) An action of the commission requires a vote of a majority of members present.
             656          (6) A member of the commission shall, by sworn and written statement filed with the
             657      [Department of Commerce] Insurance Department and the lieutenant governor, disclose any
             658      position of employment or ownership interest that the member has with respect to an entity or
             659      business subject to the jurisdiction of the division or commission. This statement shall be filed
             660      upon appointment and must be appropriately amended whenever significant changes occur in
             661      matters covered by the statement.
             662          (7) A member may not receive compensation or benefits for the member's service, but
             663      may receive per diem and travel expenses in accordance with:
             664          (a) Section 63A-3-106 ;
             665          (b) Section 63A-3-107 ; and
             666          (c) rules made by the Division of Finance pursuant to Sections 63A-3-106 and
             667      63A-3-107 .
             668          (8) (a) A rule or form made by the division under this section that is in effect on May
             669      11, 2009, is considered to have been concurred with by the commission as of May 12, 2009,
             670      until the commission acts on the rule or form.
             671          (b) For a civil or administrative action pending under this chapter as of May 12, 2009,
             672      brought under the authority of division under this chapter as in effect May 11, 2009, that may
             673      be brought only by the commission under this chapter as in effect on May 12, 2009:
             674          (i) the action shall be considered brought by the commission; and
             675          (ii) the commission may take any act authorized under this chapter regarding that
             676      action.


             677          Section 7. Section 61-1-18.7 is amended to read:
             678           61-1-18.7. Funding of securities investor education, training, and enforcement.
             679          (1) (a) There is created a restricted special revenue fund known as the "Securities
             680      Investor Education, Training, and Enforcement Fund" to provide revenue for the purposes
             681      stated in this section.
             682          (b) For purposes of this section, "fund" means the Securities Investor Education,
             683      Training, and Enforcement Fund.
             684          (2) Money received by the state by reason of civil penalties ordered and administrative
             685      fines collected pursuant to this chapter shall be deposited in the fund, and is subject to the
             686      requirements of Title 51, Chapter 5, Funds Consolidation Act.
             687          (3) A fine collected by the division after July 1, 1989, pursuant to a voluntary
             688      settlement or administrative order shall be deposited into the fund.
             689          (4) (a) The fund shall earn interest.
             690          (b) Interest earned on fund money shall be deposited into the fund.
             691          (5) Notwithstanding Title 63J, Chapter 1, Budgetary Procedures Act, the director may
             692      use money in the fund, upon concurrence of the commission and the [executive director of the
             693      Department of Commerce] commissioner, in a manner consistent with the duties of the
             694      division and commission under this chapter and only for any or all of the following and the
             695      expense of providing them:
             696          (a) education and training of Utah residents in matters concerning securities laws and
             697      investment decisions, by publications or presentations;
             698          (b) education of registrants and licensees under this chapter, by:
             699          (i) publication of this chapter and rules and policy statements and opinion letters issued
             700      under this chapter; and
             701          (ii) sponsorship of seminars or meetings to educate registrants and licensees as to the
             702      requirements of this chapter;
             703          (c) investigation and litigation; and
             704          (d) to pay an award to a reporter as provided in Part 1, Securities Fraud Reporting
             705      Program Act.
             706          (6) If the balance in the fund exceeds $500,000 at the close of any fiscal year, the
             707      excess shall be transferred to the General Fund.


             708          Section 8. Section 61-1-23 is amended to read:
             709           61-1-23. Review of orders.
             710          A person aggrieved by a final order under this chapter determining all of the issues of
             711      an adjudicative proceeding may obtain review of the order by the [executive director]
             712      commissioner in accordance with Title 63G, Chapter 4, Administrative Procedures Act.
             713          Section 9. Transition.
             714          (1) By no later than January 1, 2014, the Division of Securities shall renumber its rules
             715      to be located with the rules of the Insurance Department and make other necessary changes
             716      consistent with this bill.
             717          (2) Cases under Title 61, Chapter 1, Utah Uniform Securities Act, pending before the
             718      executive director of the Department of Commerce as of June 30, 2013, shall be transferred to
             719      the insurance commissioner.
             720          Section 10. Effective date.
             721          This bill takes effect on July 1, 2013.


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