Download Zipped Introduced WordPerfect HB0078.ZIP
[Status][Bill Documents][Fiscal Note][Bills Directory]
8 LONG TITLE
9 General Description:
10 This bill modifies the Utah Uniform Securities Act to create the Securities
11 Commission, outline its powers and duties, and make other substantive changes.
12 Highlighted Provisions:
13 This bill:
14 . creates the Securities Commission;
15 . outlines the powers and duties of the Securities Commission, including modifying
16 the powers and duties of the Division of Securities and its director;
17 . modifies definitions including the definition of a security;
18 . addresses disciplinary proceedings;
19 . addresses language related to licensing;
20 . addresses requirements related to associations between licensed and unlicensed
22 . requires the identification of a principal or designated official;
23 . expands the scope of criminal pleas considered to determine if disciplinary action or
24 licensing restrictions should be taken;
25 . addresses disciplinary action or licensing restrictions for entities that are materially
26 the same;
27 . addresses civil actions that could result in disciplinary action;
28 . repeals registration by notification;
29 . modifies the automatic effectiveness related to registration;
30 . updates language related to means of providing notices;
31 . addresses provisions related to an issuer agent;
32 . modifies provisions related to exemptions and registration of securities;
33 . modifies remedies available for enforcement;
34 . modifies provisions related to private causes of action;
35 . provides that prosecutors may bring criminal proceedings without referral from the
37 . deletes outdated language including references to repealed federal law; and
38 . makes technical and conforming changes.
39 Monies Appropriated in this Bill:
41 Other Special Clauses:
43 Utah Code Sections Affected:
45 31A-5-302, as last amended by Laws of Utah 1987, Chapter 91
46 61-1-3, as last amended by Laws of Utah 1997, Chapter 160
47 61-1-4, as last amended by Laws of Utah 2008, Chapter 382
48 61-1-6, as last amended by Laws of Utah 2008, Chapter 382
49 61-1-9, as last amended by Laws of Utah 1991, Chapter 161
50 61-1-11, as last amended by Laws of Utah 1994, Chapter 12
51 61-1-11.1, as last amended by Laws of Utah 2008, Chapter 382
52 61-1-12, as last amended by Laws of Utah 2008, Chapter 382
53 61-1-13, as last amended by Laws of Utah 2008, Chapter 382
54 61-1-14, as last amended by Laws of Utah 2008, Chapter 382
55 61-1-15.5, as last amended by Laws of Utah 2008, Chapter 382
56 61-1-18, as last amended by Laws of Utah 2006, Chapter 139
57 61-1-18.2, as enacted by Laws of Utah 1983, Chapter 284
58 61-1-18.3, as enacted by Laws of Utah 1983, Chapter 284
59 61-1-18.5, as last amended by Laws of Utah 2002, Chapter 176
60 61-1-18.6, as last amended by Laws of Utah 2008, Chapter 382
61 61-1-18.7, as last amended by Laws of Utah 2008, Chapter 382
62 61-1-19, as last amended by Laws of Utah 1990, Chapter 133
63 61-1-20, as last amended by Laws of Utah 1994, Chapter 12
64 61-1-21, as last amended by Laws of Utah 2001, Chapter 149
65 61-1-21.5, as last amended by Laws of Utah 1993, Chapters 38 and 158
66 61-1-22, as last amended by Laws of Utah 2007, Chapter 292
67 61-1-23, as last amended by Laws of Utah 2008, Chapter 382
68 61-1-24, as last amended by Laws of Utah 1991, Chapter 161
69 61-1-25, as last amended by Laws of Utah 1983, Chapter 284
71 61-1-8, as last amended by Laws of Utah 1991, Chapter 161
72 61-1-30, as last amended by Laws of Utah 2008, Chapter 250
74 Be it enacted by the Legislature of the state of Utah:
75 Section 1. Section 31A-5-302 is amended to read:
76 31A-5-302. Registration of securities.
77 (1) [
78 commissioner [
79 (i) by coordination under Section 61-1-9 [
80 (ii) by qualification under Section 61-1-10 . [
81 (b) A registration statement [
83 (2) The commissioner has the powers specified in Sections 61-1-12 , 61-1-15 , 61-1-19 ,
84 61-1-20 , and 61-1-24 .
85 (3) [
86 regulation of securities under this part.
87 (4) As used in this chapter, the words "commission" or "division" under Title 61,
88 Chapter 1, Utah Uniform Securities Act, mean the insurance commissioner.
89 Section 2. Section 61-1-3 is amended to read:
90 61-1-3. Licensing of broker-dealers, agents, and investment advisers.
91 (1) It is unlawful for [
92 or agent unless the person is licensed under this chapter.
93 (2) (a) It is unlawful for [
94 unless the agent is licensed. The license of an agent is not effective during any period when
96 (i) a particular broker-dealer licensed under this chapter; or
97 (ii) a particular issuer.
98 (b) When an agent begins or terminates [
99 broker-dealer or issuer, or begins or terminates [
100 the agent [
101 (c) An agent who terminates an association with a broker-dealer or issuer is considered
102 to be unlicensed until the day on which the division:
103 (i) approves the agent's association with a different broker-dealer or issuer; and
104 (ii) notifies the agent of the division's approval of the association.
105 (d) (i) It is unlawful for a broker-dealer or an issuer engaged, directly or indirectly, in
106 offering, offering to purchase, purchasing, or selling a security in this state, to employ or
107 associate with an individual to engage in an activity related to a securities transaction in this
108 state if:
109 (A) (I) the license of the individual is suspended or revoked; or
110 (II) the individual is barred from employment or association with a broker-dealer, an
111 issuer, or a state or federal covered investment adviser; and
112 (B) the suspension, revocation, or bar described in Subsection (2)(d)(i)(A) is by an
114 (I) under this chapter;
115 (II) of the Securities and Exchange Commission;
116 (III) of a self-regulatory organization; or
117 (IV) of a securities administrator of a state other than Utah.
118 (ii) A broker-dealer or issuer does not violate this Subsection (2)(d) if the broker-dealer
119 or issuer did not know and in the exercise of reasonable care could not have known, of the
120 suspension, revocation, or bar.
121 (iii) An order under this chapter may modify or waive, in whole or in part, the
122 application of Subsection (2)(d)(i) to a broker-dealer or issuer.
123 (3) It is unlawful for [
124 adviser or as an investment adviser representative unless:
125 (a) the person is licensed under this chapter; [
126 (b) the person's only clients in this state are:
127 (i) one or more of the following whether acting for itself or as a trustee with investment
129 (A) an investment [
131 (B) another investment [
132 (C) a federal covered [
134 (D) a broker-dealer;
135 (E) a depository institution;
136 (F) a trust company;
137 (G) an insurance [
138 (H) an employee benefit [
139 (I) a governmental [
141 (ii) other institutional investors as are designated by rule or order of the director; or
142 (c) the person has no place of business in this state and during the preceding 12-month
143 period has had not more than five clients, other than those specified in Subsection (3)(b), who
144 are residents of this state.
145 (4) (a) It is unlawful for [
146 (i) a person required to be licensed as an investment adviser under this chapter to
147 employ an investment adviser representative unless the investment adviser representative is
148 licensed under this chapter, [
149 representative is not effective during any period when the person is not employed by an
150 investment adviser licensed under this chapter; [
151 (ii) a federal covered adviser to employ, supervise, or associate with an investment
152 adviser representative having a place of business located in this state, unless [
153 investment adviser representative is:
154 (A) licensed under this chapter; or [
155 (B) exempt from licensing[
156 (iii) an investment adviser, directly or indirectly, to employ or associate with an
157 individual to engage in an activity related to providing investment advice in this state if:
158 (A) (I) the license of the individual is suspended or revoked; or
159 (II) the individual is barred from employment or association with a state or federal
160 covered investment adviser, broker-dealer, or issuer; and
161 (B) the suspension, revocation, or bar is by an order:
162 (I) under this chapter;
163 (II) of the Securities and Exchange Commission;
164 (III) a self-regulatory organization; or
165 (IV) a securities administrator of a state other than Utah.
166 (b) (i) An investment adviser does not violate Subsection (4)(a)(iii) if the investment
167 adviser did not know, and in the exercise of reasonable care could not have known, of the
168 suspension, revocation, or bar.
169 (ii) An order under this chapter may waive, in whole or in part, the application of
170 Subsection (4)(a)(iii) to an investment adviser.
172 chapter begins or terminates employment with an investment adviser, the investment adviser
173 shall promptly notify the division.
174 (d) An investment adviser representative who terminates association with an
175 investment adviser is considered unlicensed until the day on which the division:
176 (i) approves the investment adviser representative's association with a different
177 investment adviser; and
178 (ii) notifies the investment adviser representative of the division's approval of the
180 (5) Except with respect to an investment [
181 described under Subsections (3)(b) or (3)(c), it is unlawful for [
182 to conduct advisory business in this state unless [
184 Section 3. Section 61-1-4 is amended to read:
185 61-1-4. Licensing and notice filing procedure.
186 (1) (a) A broker-dealer, agent, investment adviser, or investment adviser representative
188 application together with a consent to service of process under Section 61-1-26 .
189 (b) (i) The application shall contain the applicant's Social Security number and
190 whatever information the division by rule requires concerning such matters as:
191 (A) the applicant's form and place of organization;
192 (B) the applicant's proposed method of doing business;
193 (C) (I) the qualifications and business history of the applicant; and
194 (II) in the case of a broker-dealer or investment adviser, the qualifications and business
195 history of any partner, officer, or director, any person occupying a similar status or performing
196 similar functions, or any person directly or indirectly controlling the broker-dealer or
197 investment adviser;
198 (D) [
199 (I) an injunction [
201 (II) a felony conviction [
202 (E) the applicant's financial condition and history.
203 (ii) An applicant's Social Security number is a private record under Subsection
204 63G-2-302 (1)(h).
205 (c) The division may, by rule or order, require an applicant for an initial license to
206 publish an announcement of the application in one or more specified newspapers published in
207 this state.
208 (d) [
210 agent, investment adviser, or investment adviser representative expires on December 31 of
211 each year.
212 (e) (i) If no denial order is in effect and no proceeding is pending under Section 61-1-6 ,
213 a license becomes effective at noon of the 30th day after an application is filed.
214 (ii) The division may by rule or order specify an earlier effective date and may by order
215 defer the effective date until noon of the 30th day after the filing of any amendment.
216 (iii) Licensing of a broker-dealer automatically constitutes licensing of only one
217 partner, officer, director, or a person occupying a similar status or performing similar functions
218 as a licensed agent of the broker-dealer.
219 (iv) Licensing of an investment adviser automatically constitutes licensing of only one
220 partner, officer, director, or a person occupying a similar status or performing similar functions.
221 (v) (A) For purposes of the activities of a licensee in this state, during the time period
222 that a broker-dealer or investment adviser is licensed in this state:
223 (I) the broker-dealer shall maintain a principal; and
224 (II) the investment adviser shall maintain a designated official.
225 (B) The division may by rule made in accordance with Title 63G, Chapter 3, Utah
226 Administrative Rulemaking Act, provide a process for a person to identify for the division:
227 (I) a principal or designated official at the time a license is issued; and
228 (II) a different principal or designated official if:
229 (Aa) a broker-dealer changes its principal; or
230 (Bb) an investment adviser changes its designated official.
231 (C) A principal or designated official identified in Subsection (1)(e)(v)(A) is not
232 required to be separately licensed with the division.
233 (2) Except with respect to a federal covered [
234 those described in Subsection 61-1-3 (3)(b) or (c), a federal covered adviser shall file with the
235 division, [
236 consisting of [
237 Commission as the division by rule or order may require.
238 (3) (a) [
239 shall pay a reasonable filing fee as determined under Section 61-1-18.4 .
240 (b) [
241 investment adviser representative who is subject to licensing under this chapter shall pay a
242 reasonable filing fee as determined under Section 61-1-18.4 .
243 (c) [
244 and renewal notice filing fee as determined under Section 61-1-18.4 .
245 (d) If the license or renewal is not granted or the application is withdrawn, the division
246 shall retain the fee.
247 (4) A licensed broker-dealer or investment adviser may file an application for licensing
248 of a successor for the unexpired portion of the year. There shall be no filing fee.
249 (5) The division may by rule or order:
250 (a) require a minimum capital for a licensed [
251 the limitations of Section 15 of the Securities Exchange Act of 1934[
252 (b) establish minimum financial requirements for an investment [
253 (i) subject to the limitations of Section 222 of the Investment Advisers Act of 1940[
255 (ii) which may include different requirements for [
256 adviser who [
257 funds or securities and [
258 (6) (a) The division may by rule or order require a licensed [
259 broker-dealer or investment [
260 authority over client funds or securities to post one or more bonds in amounts and under
261 conditions as the division may prescribe, subject to the limitations of Section 15 of the
262 Securities Exchange Act of 1934 for [
263 Investment Advisers Act of 1940 for an investment [
265 (b) [
266 a required bond.
267 (c) [
268 case of an investment adviser whose minimum financial requirements, which may be defined
269 by rule, exceeds the amounts required by the division.
270 (d) [
271 cause of action under Section 61-1-22 and, if the division by rule or order requires, by any
272 person who has a cause of action not arising under this chapter.
273 (e) [
275 (i) the expiration of [
276 violation; or
277 (ii) the expiration of two years after the discovery by the plaintiff of the facts
278 constituting the violation[
279 Section 4. Section 61-1-6 is amended to read:
280 61-1-6. Denial, suspension, revocation, cancellation, or withdrawal of license --
282 (1) Subject to the [
283 provisions of this section and by means of an adjudicative [
284 in accordance with Title 63G, Chapter 4, Administrative Procedures Act[
285 (a) the commission may issue an order:
288 person occupying a similar status or performing similar functions for a licensee from
289 employment with a licensed broker-dealer or investment adviser;
291 business for which a license is required in this state;
294 Subsection (1)(a); or
295 (b) the director may deny a license.
296 (2) (a) The [
297 with Subsection (1)(a) or the director may impose a sanction in accordance with Subsection
298 (1)(b) if the commission or director finds:
299 (i) that it is in the public interest; and [
300 (ii) with respect to the applicant or licensee or, in the case of a broker-dealer or
301 investment adviser, [
302 status or performing similar functions, or [
303 broker-dealer or investment adviser, that the person:
305 application or as of any date after filing in the case of an order denying effectiveness[
306 (I) was incomplete in [
307 (II) contained [
308 was made, false or misleading with respect to [
310 chapter or a predecessor act or [
312 a plea of no contest, a plea in abeyance, or a similar plea of guilty to:
313 (I) a misdemeanor involving:
314 (Aa) fraud or dishonesty; or
315 (Bb) a security or any aspect of the securities business[
316 (II) a felony;
318 jurisdiction from engaging in or continuing [
319 the securities business;
321 predecessor [
322 investment adviser, or investment adviser representative; or
323 (II) is the subject of an order of the director or a predecessor denying a license as a
324 broker-dealer, agent, investment adviser, or investment adviser representative;
327 commodities agency or administrator of another state, Canadian province or territory, or a court
328 of competent jurisdiction that the person has willfully violated:
329 (Aa) the Securities Act of 1933[
330 (Bb) the Securities Exchange Act of 1934[
331 (Cc) the Investment Advisers Act of 1940[
332 (Dd) the Investment Company Act of 1940[
333 (Ee) the Commodity Exchange Act[
334 (Ff) the securities or commodities law of [
336 (Aa) entered within the past five years by the securities administrator of [
337 Canadian province or territory or by the Securities and Exchange Commission denying or
338 revoking a license as a broker-dealer, agent, investment adviser, or investment adviser
339 representative, or the substantial equivalent of those terms; [
340 (Bb) of the Securities and Exchange Commission suspending or expelling the person
341 from a national securities exchange or national securities association registered under the
342 Securities Exchange Act of 1934[
343 (Cc) that is a United States post office fraud order; [
351 that obligations cannot be met as they mature, except that the director or commission may not
352 enter an order against a broker-dealer or investment adviser under this Subsection
355 of the securities business, except as otherwise provided in Subsection [
357 (I) agents or employees, if the person is a broker-dealer[
358 (II) investment adviser representatives or employees, if the person is an investment
359 adviser; [
361 the division of a deficiency[
369 (L) subject to Subsection (2)(c), is a licensee or applicant that is materially the same
370 entity as an entity that is defunct, insolvent, statutorily disqualified, barred, or described in
371 Subsection (2)(a)(ii)(D); or
372 (M) has had a final judgment entered against the person in a civil action on grounds of:
373 (I) fraud;
374 (II) embezzlement;
375 (III) misrepresentation; or
376 (IV) deceit.
377 (b) (i) The commission may not commence an agency action to revoke or suspend a
378 license under Subsection (2)(a)(ii)(F) more than one year from the day on which the order on
379 which the division relies is entered.
380 (ii) The commission or director may not enter an order under Subsection (2)(a)(ii)(F)
381 on the basis of an order under another state's law unless that order is issued on the basis of facts
382 that would constitute a ground for an agency action under this section on the day on which the
383 notice of agency action is filed.
384 (c) (i) For purposes of Subsection (2)(a)(ii)(L), the director or commission may
385 consider one or more factors in determining whether an entity is materially the same as another
386 entity including the following:
387 (A) the entity has one or more of the same executive officers as the prior entity;
388 (B) the entity conducts operations in the same location as the prior entity;
389 (C) the entity employs two or more agents from the prior entity;
390 (D) the entity solicits or serves two or more customers of the prior entity;
391 (E) the entity has a name similar to the prior entity; or
392 (F) another factor showing a relationship between the entity and the prior entity.
393 (ii) In addition to imposing a sanction in accordance with Subsection (1), for an entity
394 that is materially the same as an entity described in Subsection (2)(a)(ii)(L), the director or the
395 commission may:
396 (A) limit the license of the entity; or
397 (B) require additional disclosures to the customers or employees of the entity.
401 basis of a fact or transaction known to [
402 unless the proceeding is instituted within the [
403 takes effect.
406 (a) The director or commission may not enter an order against a broker-dealer on the
407 basis of the lack of qualification of [
408 (i) the broker-dealer if the broker-dealer is an individual; or
409 (ii) an agent of the broker-dealer.
410 (b) The director or commission may not enter an order against an investment adviser
411 on the basis of the lack of qualification of [
412 (i) the investment adviser if the investment adviser is an individual; or
413 (ii) an investment adviser representative.
414 (c) The director or commission may not enter an order solely on the basis of lack of
415 experience if the applicant or licensee is qualified by training or knowledge.
416 (d) The director or commission shall consider that:
417 (i) an agent who will work under the supervision of a licensed broker-dealer need not
418 have the same qualifications as a broker-dealer; and [
419 (ii) an investment adviser representative who will work under the supervision of a
420 licensed investment adviser need not have the same qualifications as an investment adviser.
421 (e) (i) The director or commission shall consider that an investment adviser is not
422 necessarily qualified solely on the basis of experience as a broker-dealer or agent.
423 (ii) When the director finds that an applicant for a license as a broker-dealer is not
424 qualified as an investment adviser, the director may condition the applicant's license as a
425 broker-dealer upon the applicant's not transacting business in this state as an investment
427 (f) (i) The division may by rule provide for examinations, which may be written or oral
428 or both, to be taken by any class of or all applicants.
429 (ii) The division may by rule or order waive the examination requirement as to a person
430 or class of persons if the division determines that the examination is not necessary for the
431 protection of investors.
433 in existence, has ceased to do business as a broker-dealer, agent, investment adviser, or
434 investment adviser representative, or is subject to an adjudication of mental incompetence or to
435 the control of a committee, conservator, or guardian, or cannot be located after reasonable
436 search, the division may summarily cancel or deny the license or application according to the
437 procedures and requirements of Title 63G, Chapter 4, Administrative Procedures Act.
439 investment adviser representative becomes effective 30 days after receipt of an application to
440 withdraw or within a shorter period of time as determined by the director, unless:
441 (i) a revocation or suspension proceeding is pending when the application is filed;
442 (ii) a proceeding to revoke or suspend or to impose conditions upon the withdrawal is
443 instituted within 30 days after the application is filed; or
444 (iii) additional information is requested by the division regarding the withdrawal
446 (b) (i) If a proceeding described in Subsection [
447 director shall designate by order when and under what conditions the withdrawal becomes
449 (ii) If additional information is requested, withdrawal is effective 30 days after the
450 additional information is filed.
451 (c) (i) If no proceeding is pending or instituted, and withdrawal automatically becomes
452 effective, the director may initiate a revocation or suspension proceeding under this section
453 within one year after withdrawal [
454 (ii) The [
456 Section 5. Section 61-1-9 is amended to read:
457 61-1-9. Registration by coordination.
458 (1) [
459 Regulation A or [
460 of 1933 in connection with the same offering may be registered by coordination.
461 (2) A registration statement under this section shall contain the following information
462 and be accompanied by the following documents in addition to the information specified in
463 Subsection 61-1-11 (3) and the consent to service of process required by Section 61-1-26 :
464 (a) one copy of the disclosure statement together with all its amendments filed under
465 the Securities Act of 1933;
466 (b) if the division by rule or otherwise requires, a copy of the articles of incorporation
467 and bylaws or their substantial equivalents currently in effect, a copy of any agreements with or
468 among underwriters, a copy of any indenture or other instrument governing the issuance of the
469 security to be registered and a specimen or copy of the security;
470 (c) if the division requests, any other information, or copies of any other documents,
471 filed under the Securities Act of 1933; and
472 (d) an undertaking to forward all future amendments to the disclosure statement
473 promptly and in any event not later than the first working day after the day they are forwarded
474 to or filed with the Securities and Exchange Commission, whichever first occurs.
475 (3) A registration statement under this section automatically becomes effective at the
476 moment the disclosure statement becomes effective if all the following conditions are satisfied:
477 (a) no stop order is in effect and no proceeding is pending under Section 61-1-12 ;
478 (b) the disclosure statement [
479 working days; and
480 (c) a statement of the maximum and minimum proposed offering prices and the
481 maximum underwriting discounts and commissions [
482 days or such shorter period as the division permits by rule or otherwise and the offering is
483 made within those limitations.
484 (4) (a) [
485 (i) notify the division [
486 the disclosure statement became effective and the content of the price amendment, if any[
487 and [
488 (ii) file a posteffective amendment containing the information and documents in the
489 price amendment.
490 (b) "Price amendment" means the final federal amendment [
491 statement of the:
492 (i) offering price[
493 (ii) underwriting and selling discounts or commissions[
494 (iii) amount of proceeds[
495 (iv) conversion rates[
496 (v) call prices[
497 (vi) other matters dependent upon the offering price.
498 (5) (a) Upon failure to receive the required notification and posteffective amendment
499 with respect to the price amendment, the division may enter a stop order, without notice or
500 hearing, retroactively denying effectiveness to the registration statement or suspending its
501 effectiveness until compliance with Subsection (4), if [
502 registrant [
504 (b) If the registrant proves compliance with the requirements of Subsection (4) as to
505 notice and posteffective amendment, the stop order is void as of the time of its entry.
506 (6) The division may by rule or otherwise waive either or both of the conditions
507 specified in Subsections (3)(b) and (3)(c).
508 (7) If the disclosure statement becomes effective before all the conditions in
509 Subsections (3)(b) and (3)(c) are satisfied and they are not waived, the disclosure statement
510 automatically becomes effective as soon as all the conditions are satisfied.
511 (8) If the registrant advises the division of the date when the disclosure statement is
512 expected to become effective, the division shall promptly advise the registrant [
514 whether it then contemplates the institution of proceedings under Section 61-1-12 , but this
515 advice by the division does not preclude the institution of such a proceeding at any time.
516 (9) The division may by rule or order permit registration by coordination of [
517 security for which a notification or similar document [
518 Act of 1933 in connection with the same offering.
519 Section 6. Section 61-1-11 is amended to read:
520 61-1-11. Provisions applicable to registration generally.
521 (1) A registration statement may be filed by the issuer, [
522 whose behalf the offering is to be made, or a licensed broker-dealer.
523 (2) [
524 under Section 61-1-18.4 .
525 (3) [
526 (a) the amount of securities to be offered in this state;
527 (b) the states in which a registration statement or similar document in connection with
528 the offering [
529 (c) [
530 by the regulatory authorities in each state or by [
532 (4) [
533 preceding the filing of a registration statement may be incorporated by reference in the
534 registration statement to the extent that the document is currently accurate.
535 (5) The division may permit the omission of [
536 from [
537 (6) In the case of a nonissuer distribution, information may not be required under
538 Subsection (9) or Section 61-1-10 [
539 filing the registration statement or to the persons on whose behalf the distribution is to be
540 made, or can be furnished by them without unreasonable effort or expense.
541 (7) (a) The division may require as a condition of registration by qualification or
543 (i) that [
544 a consideration substantially different from the public offering price, or to [
545 consideration other than cash, be deposited in escrow; and
546 (ii) that the proceeds from the sale of the registered security be impounded until the
547 issuer receives a specified amount from the sale of the security either in this state or elsewhere.
548 (b) The division may determine the conditions of [
549 required by this Subsection (7), but it may not reject a depository solely because of location in
550 another state.
551 (8) (a) [
552 (b) All outstanding securities of the same class as a registered security are considered
553 to be registered for the purpose of [
554 (i) so long as the registration statement is effective; and
555 (ii) between the 30th day after the entry of [
556 the effectiveness of the registration statement under Section 61-1-12 , if the registration
557 statement did not relate in whole or in part to a nonissuer distribution, and one year from the
558 effective date of the registration statement.
559 (c) A registration statement may not be withdrawn for one year from its effective date
560 if [
561 (d) A registration statement may be withdrawn otherwise only in the discretion of the
563 (9) So long as a registration statement is effective and the offering is not completely
564 sold, the division may require the person who filed the registration statement to file reports, not
565 more often than quarterly, to keep reasonably current the information contained in the
566 registration statement and to disclose the progress of the offering.
567 (10) (a) A registration statement may be amended after its effective date so as to
568 increase the securities specified to be offered and sold, if the public offering price and
569 underwriters' discounts and commissions are not changed from the respective amounts of
570 which the division was informed.
571 (b) The amendment becomes effective when the division so orders.
572 (c) [
573 under Section 61-1-18.4 with respect to the additional securities proposed to be offered.
574 (d) The amendment relates back to the date of the sale of the additional security being
575 registered, provided that within six months of the date of the sale the amendment is filed and
576 the additional registration fee is paid.
586 Securities Act of 1933 or that is a "mortgage related security" as defined in Section 3(a)(41) of
587 the Securities Exchange Act of 1934 [
588 to the same extent as [
589 the United States or an agency or instrumentality of the United States. Accordingly, any such
590 security shall comply with the applicable registration and qualification requirements set forth in
591 this chapter.
592 (b) This Subsection (11) specifically overrides the preemption of state law contained in
593 Section 106(c) of the Secondary Mortgage Market Enhancement Act of 1984, Public Law
594 Number 98-440.
595 Section 7. Section 61-1-11.1 is amended to read:
596 61-1-11.1. Hearings for certain exchanges of securities.
597 (1) An application may be made to the division for approval to issue securities or to
598 deliver other consideration in exchange for:
599 (a) one or more [
600 (b) partly in exchange for one or more [
601 property interests, and partly for cash.
602 (2) The director may:
603 (a) hold a hearing upon the fairness of the terms and conditions of an exchange
604 described in Subsection (1); and
605 (b) approve or disapprove the terms and conditions of an exchange described in
606 Subsection (1).
607 (3) After conducting a hearing under this section, if the director finds that the terms and
608 conditions of an exchange described in Subsection (1) are fair to those to whom the securities
609 will be issued, the director may:
610 (a) approve the fairness of the terms and conditions of the exchange described in
611 Subsection (1); and
612 (b) approve the exchange described in Subsection (1).
613 (4) In a hearing under this section, all persons to whom it is proposed to issue securities
614 or to deliver other consideration in an exchange under Subsection (1) may appear.
615 (5) An application under Subsection (1) shall contain the information and be
616 accompanied by the documents required by rule or order of the division.
617 (6) [
618 determined under Section 61-1-18.4 .
619 (7) An applicant under this section shall provide adequate notice of any hearing under
620 this section to all persons that have a right to appear, under Subsection (4), at the hearing.
621 (8) An application may be made under this section regardless of whether the security or
622 transaction being issued is:
623 (a) exempt from registration; or
624 (b) not required to be registered.
625 (9) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
626 division may establish rules to govern the conduct of a hearing permitted by this section in
627 accordance with Sections 61-1-18.5 and 61-1-24 .
628 (10) This section is intended to provide for a fairness hearing that satisfies the
629 requirements of [
630 Section 77c(a)(10), or any comparable section that may subsequently be enacted.
631 Section 8. Section 61-1-12 is amended to read:
632 61-1-12. Denial, suspension, and revocation of registration.
633 (1) Upon approval by a majority of the [
634 director, by means of an adjudicative [
635 Title 63G, Chapter 4, Administrative Procedures Act, may issue a stop order that denies
636 effectiveness to, or suspends or revokes the effectiveness of, any securities registration
637 statement and may impose a fine if the director finds that the order is in the public interest and
639 (a) the registration statement, as of its effective date or as of any earlier date in the case
640 of an order denying effectiveness, or [
641 its effective date, or [
642 material respect, or contains [
643 which it was made, false or misleading with respect to [
644 (b) [
645 under this chapter, [
646 (i) the person filing the registration statement;
647 (ii) the issuer, [
648 occupying a similar status or performing similar functions, or [
649 indirectly controlling or controlled by the issuer, but only if the person filing the registration
650 statement is directly or indirectly controlled by or acting for the issuer; or
651 (iii) [
652 (c) subject to Subsection (5), the security registered or sought to be registered is the
653 subject of an administrative stop order or similar order, or a permanent or temporary injunction
654 of [
655 applicable to the offering; [
661 (d) the issuer's enterprise or method of business includes or would include activities
662 that are illegal where performed;
663 (e) the offering has worked or tended to work a fraud upon purchasers or would so
665 (f) the offering [
666 underwriters' and sellers' discounts, commissions, or other compensation, or promoters' profits
667 or participation, or unreasonable amounts or kinds of options;
671 failure to comply with the undertaking required by Subsection 61-1-9 (2)(d); or
673 (2) The director may enter an order under this section but may vacate the order if the
674 director finds that the conditions that prompted its entry have changed or that it is otherwise in
675 the public interest to do so.
676 (3) The director may not issue a stop order against an effective registration statement
677 on the basis of a fact or transaction known to the division when the registration statement
678 became effective unless the proceeding is instituted within the [
679 which the registration statement becomes effective.
680 (4) [
681 reason of [
682 person proves by a preponderance of the evidence that the person did not know, and in the
683 exercise of reasonable care could not have known, of the order.
684 (5) (a) The director may not commence agency action against an effective registration
685 statement under Subsection (1)(c) more than one year from the day on which the order or
686 injunction on which the director relies is issued.
687 (b) The director may not enter an order under Subsection (1)(c) on the basis of an order
688 or injunction entered under the securities act of another state unless that order or injunction is
689 issued on the basis of facts that would constitute a ground for a stop order under this section at
690 the time the director commences the agency action.
691 Section 9. Section 61-1-13 is amended to read:
692 61-1-13. Definitions.
693 (1) As used in this chapter:
694 (a) "Affiliate" means a person that, directly or indirectly, through one or more
695 intermediaries, controls or is controlled by, or is under common control with a person
697 (b) (i) "Agent" means [
698 broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.
699 (ii) "Agent" does not include an individual who represents:
700 (A) an issuer, who receives no commission or other remuneration, directly or
701 indirectly, for effecting or attempting to effect purchases or sales of securities in this state, and
702 who effects transactions:
703 (I) in securities exempted by Subsection 61-1-14 (1)(a), (b), (c), [
704 (II) exempted by Subsection 61-1-14 (2);
705 (III) in a covered security as described in Sections 18(b)(3) and 18(b)(4)(D) of the
706 Securities Act of 1933; or
707 (IV) with existing employees, partners, officers, or directors of the issuer; or
708 (B) a broker-dealer in effecting transactions in this state limited to those transactions
709 described in Section 15(h)(2) of the Securities Exchange Act of 1934.
710 (iii) A partner, officer, or director of a broker-dealer or issuer, or a person occupying a
711 similar status or performing similar functions, is an agent only if the partner, officer, director,
712 or person otherwise comes within the definition of "agent."
713 (iv) "Agent" does not include a person described in Subsection (3).
714 (c) (i) "Broker-dealer" means [
715 transactions in securities for the account of others or for the person's own account.
716 (ii) "Broker-dealer" does not include:
717 (A) an agent;
718 (B) an issuer;
719 (C) a [
721 (D) a person who has no place of business in this state if:
722 (I) the person effects transactions in this state exclusively with or through:
723 (Aa) the issuers of the securities involved in the transactions;
724 (Bb) other broker-dealers; [
729 (Cc) a depository institution, whether acting for itself or as a trustee;
730 (Dd) a trust company, whether acting for itself or as a trustee;
731 (Ee) an insurance company, whether acting for itself or as a trustee;
732 (Ff) an investment company, as defined in the Investment Company Act of 1940,
733 whether acting for itself or as a trustee;
734 (Gg) a pension or profit-sharing trust, whether acting for itself or as a trustee; or
735 (Hh) another financial institution or institutional buyer, whether acting for itself or as a
736 trustee; or
737 (II) during any period of 12 consecutive months the person does not direct more than
738 15 offers to sell or buy into this state in any manner to persons other than those specified in
739 Subsection (1)(c)(ii)(D)(I), whether or not the offeror or [
740 present in this state;
741 (E) a general partner who organizes and effects transactions in securities of three or
742 fewer limited partnerships, of which the person is the general partner, in any period of 12
743 consecutive months;
744 (F) a person whose participation in transactions in securities is confined to those
745 transactions made by or through a broker-dealer licensed in this state;
746 (G) a person who is a real estate broker licensed in this state and who effects
747 transactions in a bond or other evidence of indebtedness secured by a real or chattel mortgage
748 or deed of trust, or by an agreement for the sale of real estate or chattels, if the entire mortgage,
749 deed or trust, or agreement, together with all the bonds or other evidences of indebtedness
750 secured thereby, is offered and sold as a unit;
751 (H) a person effecting transactions in commodity contracts or commodity options;
752 (I) a person described in Subsection (3); or
753 (J) other persons as the division, by rule or order, may designate, consistent with the
754 public interest and protection of investors, as not within the intent of this Subsection (1)(c).
755 (d) "Buy" or "purchase" means [
756 acquisition of a security or interest in a security for value.
757 (e) "Commission" means the Securities Commission created in Section 61-1-18.5 .
759 (i) [
760 or [
761 or sold by the owner or lessee of the real property;
762 (ii) [
763 whose fair market value is at least 15% greater than the value of the metal it contains;
764 (iii) [
766 (iv) [
767 (v) [
768 (vi) all other goods, articles, products, or items of any kind, except [
769 offered or sold by art dealers, at public auction or offered or sold through a private sale by the
770 owner of the work.
772 the purchase or sale, primarily for speculation or investment purposes and not for use or
773 consumption by the offeree or purchaser, of one or more commodities, whether for immediate
774 or subsequent delivery or whether delivery is intended by the parties, and whether characterized
775 as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures
776 contract, installment or margin contract, leverage contract, or otherwise.
777 (ii) [
778 contrary, be presumed to be offered or sold for speculation or investment purposes.
779 (iii) (A) A commodity contract [
781 payment in good funds any portion of the purchase price, physical delivery of the total amount
782 of each commodity to be purchased under the contract or agreement.
783 (B) [
784 amount of each commodity to be purchased under the contract or agreement when the
785 commodity or commodities are held as collateral for a loan or are subject to a lien of any
786 person when the loan or lien arises in connection with the purchase of each commodity or
789 a party to the option the right but not the obligation to purchase or sell one or more
790 commodities or one or more commodity contracts, or both whether characterized as an option,
791 privilege, indemnity, bid, offer, put, call, advance guaranty, decline guaranty, or otherwise.
792 (ii) "Commodity option" does not include an option traded on a national securities
793 exchange registered:
794 (A) with the [
795 (B) on a board of trade designated as a contract market by the Commodity Futures
796 Trading Commission.
797 (i) "Depository institution" is as defined in Section 7-1-103 .
800 61-1-18 .
805 (i) is registered under Section 203 of the Investment Advisers Act of 1940; or
806 (ii) is excluded from the definition of "investment adviser" under Section 202(a)(11) of
807 the Investment Advisers Act of 1940.
809 under Section 18(b) of the Securities Act of 1933 or rules or regulations promulgated under
810 Section 18(b) of the Securities Act of 1933.
814 debt securities, or dividends as to equity securities.
816 (A) for compensation, engages in the business of advising others, either directly or
817 through publications or writings, as to the value of securities or as to the advisability of
818 investing in, purchasing, or selling securities; or
819 (B) for compensation and as a part of a regular business, issues or promulgates
820 analyses or reports concerning securities.
821 (ii) "Investment adviser" includes a financial [
822 person who:
823 (A) as an integral component of other financially related services, [
824 the investment advisory services described in Subsection (1)[
825 compensation and as part of a business; or
826 (B) [
827 services described in Subsection (1)[
828 (iii) "Investment adviser" does not include:
829 (A) an investment adviser representative;
830 (B) a [
831 (C) a lawyer, accountant, engineer, or teacher whose performance of these services is
832 solely incidental to the practice of the profession;
833 (D) a broker-dealer or its agent whose performance of these services is solely
834 incidental to the conduct of its business as a broker-dealer and who receives no special
835 compensation for the services;
836 (E) a publisher of [
837 magazine, or business or financial publication or service, of general, regular, and paid
838 circulation, whether communicated in hard copy form, or by electronic means, or otherwise,
839 that does not consist of the rendering of advice on the basis of the specific investment situation
840 of each client;
841 (F) [
842 (G) a person described in Subsection (3); or
843 (H) such other persons not within the intent of this Subsection (1)[
844 division may by rule or order designate.
846 of, or a person occupying a similar status or performing similar functions, or other individual,
847 except clerical or ministerial personnel, who:
848 (A) (I) is employed by or associated with an investment adviser who is licensed or
849 required to be licensed under this chapter; or
850 (II) has a place of business located in this state and is employed by or associated with a
851 federal covered adviser; and
852 (B) does any of the following:
853 (I) makes [
854 regarding securities;
855 (II) manages accounts or portfolios of clients;
856 (III) determines which recommendation or advice regarding securities should be given;
857 (IV) solicits, offers, or negotiates for the sale of or sells investment advisory services;
859 (V) supervises employees who perform any of the acts described in this Subsection
861 (ii) "Investment [
862 in Subsection (3).
863 (s) "Investment contract" includes:
864 (i) an investment in a common enterprise with the expectation of profit to be derived
865 through the essential managerial efforts of someone other than the investor; or
866 (ii) an investment by which:
867 (A) an offeree furnishes initial value to an offerer;
868 (B) a portion of the initial value is subjected to the risks of the enterprise;
869 (C) the furnishing of the initial value is induced by the offerer's promises or
870 representations that give rise to a reasonable understanding that a valuable benefit of some kind
871 over and above the initial value will accrue to the offeree as a result of the operation of the
872 enterprise; and
873 (D) the offeree does not receive the right to exercise practical or actual control over the
874 managerial decisions of the enterprise.
875 (t) "Isolated transaction" means not more than a total of two transactions that occur
876 anywhere during six consecutive months.
878 security or has outstanding a security that it has issued.
879 (ii) With respect to a preorganization certificate or subscription, "issuer" means the
881 (iii) "Issuer" means the [
882 assuming duties of a depositor or manager under the provisions of the trust or other agreement
883 or instrument under which the security is issued with respect to:
884 (A) interests in trusts, including collateral trust certificates, voting trust certificates, and
885 certificates of deposit for securities; or
886 (B) shares in an investment company without a board of directors.
887 (iv) With respect to an equipment trust certificate, a conditional sales contract, or
888 similar securities serving the same purpose, "issuer" means the person by whom the equipment
889 or property is to be used.
890 (v) With respect to interests in partnerships, general or limited, "issuer" means the
891 partnership itself and not the general partner or partners.
892 (vi) With respect to certificates of interest or participation in oil, gas, or mining titles or
893 leases or in payment out of production under the titles or leases, "issuer" means the owner of
894 the title or lease or right of production, whether whole or fractional, who creates fractional
895 interests therein for the purpose of sale.
898 (i) an individual;
899 (ii) a corporation;
900 (iii) a partnership;
901 (iv) a limited liability company;
902 (v) an association;
903 (vi) a joint-stock company;
904 (vii) a joint venture;
905 (viii) a trust where the interests of the beneficiaries are evidenced by a security;
906 (ix) an unincorporated organization;
907 (x) a government; or
908 (xi) a political subdivision of a government.
910 (i) silver;
911 (ii) gold;
912 (iii) platinum;
913 (iv) palladium;
914 (v) copper; and
915 (vi) such other substances as the division may specify by rule.
917 more persons, takes initiative in founding or organizing the business or enterprise of a person.
918 (z) (i) Except as provided in Subsection (1)(z)(ii), "record" means information that is:
919 (A) inscribed in a tangible medium; or
920 (B) (I) stored in an electronic or other medium; and
921 (II) retrievable in perceivable form.
922 (ii) This Subsection (1)(z) does not apply when the context requires otherwise,
923 including when "record" is used in the following phrases:
924 (A) "of record";
925 (B) "official record"; or
926 (C) "public record."
928 disposition of, a security or interest in a security for value.
929 (ii) "Offer" or "offer to sell" includes [
930 solicitation of an offer to buy, a security or interest in a security for value.
931 (iii) The following are examples of the definitions in Subsection (1)[
932 (A) [
933 purchase of a security or any other thing, is part of the subject of the purchase, and [
934 offered and sold for value;
935 (B) a purported gift of assessable stock is an offer or sale as is each assessment levied
936 on the stock;
937 (C) an offer or sale of a security that is convertible into, or entitles its holder to acquire
938 or subscribe to another security of the same or another issuer is an offer or sale of that security,
939 and also an offer of the other security, whether the right to convert or acquire is exercisable
940 immediately or in the future;
941 (D) [
942 constitutes an offer or sale of the security received in a conversion or exchange, and the offer to
943 buy or the purchase of the security converted or exchanged;
944 (E) securities distributed as a dividend wherein the person receiving the dividend
945 surrenders the right, or the alternative right, to receive a cash or property dividend is an offer or
947 (F) a dividend of a security of another issuer is an offer or sale; or
948 (G) the issuance of a security under a merger, consolidation, reorganization,
949 recapitalization, reclassification, or acquisition of assets [
950 or sale of the security issued as well as the offer to buy or the purchase of [
951 surrendered in connection therewith, unless the sole purpose of the transaction is to change the
952 issuer's domicile.
953 (iv) The terms defined in Subsections (1)[
954 (A) a good faith gift;
955 (B) a transfer by death;
956 (C) a transfer by termination of a trust or of a beneficial interest in a trust;
957 (D) a security dividend not within Subsection (1)[
958 (E) a securities split or reverse split[
964 federal statutes of those names as amended before or after the effective date of this chapter.
965 (cc) "Securities Exchange Commission" means the United States Securities Exchange
966 Commission created by the Securities Exchange Act of 1934.
968 (A) note;
969 (B) stock;
970 (C) treasury stock;
971 (D) bond;
972 (E) debenture;
973 (F) evidence of indebtedness;
974 (G) certificate of interest or participation in [
975 (H) collateral-trust certificate;
976 (I) preorganization certificate or subscription;
977 (J) transferable share;
978 (K) investment contract;
979 (L) burial certificate or burial contract;
980 (M) voting-trust certificate;
981 (N) certificate of deposit for a security;
982 (O) certificate of interest or participation in an oil, gas, or mining title or lease or in
983 payments out of production under such a title or lease;
984 (P) commodity contract or commodity option;
985 (Q) interest in a limited liability company;
986 (R) viatical settlement interest; or
987 (S) in general, [
989 guarantee of, or warrant or right to subscribe to or purchase [
990 listed in Subsections (1)(dd)(i)(A) through (R).
991 (ii) "Security" does not include [
992 (A) an insurance or endowment policy or annuity contract under which an insurance
993 company promises to pay money in a lump sum or periodically for life or some other specified
995 (B) an interest in a limited liability company in which the limited liability company is
996 formed as part of an estate plan where all of the members are related by blood or marriage,
998 the members are actively engaged in the management of the limited liability company; or
999 (C) (I) a whole long-term estate in real property;
1000 (II) an undivided fractionalized long-term estate in real property that consists of ten or
1001 fewer owners; or
1002 (III) an undivided fractionalized long-term estate in real property that consists of more
1003 than ten owners if, when the real property estate is subject to a management agreement:
1004 (Aa) the management agreement permits a simple majority of owners of the real
1005 property estate to not renew or to terminate the management agreement at the earlier of the end
1006 of the management agreement's current term, or 180 days after the day on which the owners
1007 give notice of termination to the manager;
1008 (Bb) the management agreement prohibits, directly or indirectly, the lending of the
1009 proceeds earned from the real property estate or the use or pledge of its assets to [
1010 or entity affiliated with or under common control of the manager; and
1011 (Cc) the management agreement complies with any other requirement imposed by rule
1012 by the Real Estate Commission under Section 61-2-26 .
1013 (iii) For purposes of Subsection (1)[
1014 have the right to vote, or the right to information concerning the business and affairs of the
1015 limited liability company, or the right to participate in management, [
1016 without more, that all members are actively engaged in the management of the limited liability
1019 District of Columbia, and Puerto Rico.
1021 real property by two or more persons that is a:
1022 (A) tenancy in common; or
1023 (B) any other legal form of undivided estate in real property including:
1024 (I) a fee estate;
1025 (II) a life estate; or
1026 (III) other long-term estate.
1027 (ii) "Undivided fractionalized long-term estate" does not include a joint tenancy.
1029 fractional interest in any of the following that is the subject of a viatical settlement:
1030 (A) a life insurance policy; or
1031 (B) the death benefit under a life insurance policy.
1032 (ii) "Viatical settlement interest" does not include the initial purchase from the viator
1033 by a viatical settlement provider.
1035 tenancy [
1036 (i) a fee estate;
1037 (ii) a life estate; or
1038 (iii) other long-term estate.
1040 of legal holidays listed in Section 63G-1-301 .
1041 (2) A term not defined in this section shall have the meaning as established by division
1042 rule. The meaning of a term neither defined in this section nor by rule of the division shall be
1043 the meaning commonly accepted in the business community.
1044 (3) (a) This Subsection (3) applies to:
1045 (i) the offer or sale of a real property estate exempted from the definition of security
1046 under Subsection (1)[
1047 (ii) the offer or sale of an undivided fractionalized long-term estate that is the offer of a
1049 (b) A person who, directly or indirectly receives compensation in connection with the
1050 offer or sale as provided in this Subsection (3) of a real property estate is not an agent,
1051 broker-dealer, investment adviser, or [
1052 chapter if that person is licensed under Chapter 2, Division of Real Estate, as:
1053 (i) a principal real estate broker;
1054 (ii) an associate real estate broker; or
1055 (iii) a real estate sales agent.
1056 (4) The list of real property estates excluded from the definition of securities under
1057 Subsection (1)[
1058 not a security.
1059 Section 10. Section 61-1-14 is amended to read:
1060 61-1-14. Exemptions.
1061 (1) The following securities are [
1062 (a) [
1063 States, [
1064 other instrumentality of one or more of the foregoing, or [
1065 the foregoing;
1066 (b) [
1067 political subdivision of [
1068 instrumentality of one or more of the foregoing, or [
1069 which the United States currently maintains diplomatic relations, if the security is recognized
1070 as a valid obligation by the issuer or guarantor;
1071 (c) [
1072 by, [
1074 of [
1084 security regulated in respect of its rates or in its issuance by a governmental authority of the
1085 United States, [
1094 (e) (i) a federal covered security specified in the Securities Act of 1933, Section
1095 18(b)(1), 15 U.S.C. Section 77r(b)(1), or by rule adopted under that provision;
1096 (ii) a security listed or approved for listing on another securities market specified by
1097 rule under this chapter;
1098 (iii) any of the following with respect to a security described in Subsection (1)(e)(i) or
1100 (A) a put or a call option contract;
1101 (B) a warrant; or
1102 (C) a subscription right on or with respect to the security;
1103 (iv) an option or similar derivative security on a security or an index of securities or
1104 foreign currencies issued by a clearing agency that is:
1105 (A) registered under the Securities Exchange Act of 1934; and
1106 (B) listed or designated for trading on a national securities exchange, or a facility of a
1107 national securities association registered under the Securities Exchange Act of 1934;
1108 (v) an offer or sale, of the underlying security in connection with the offer, sale, or
1109 exercise of an option or other security that was exempt when the option or other security was
1110 written or issued; or
1111 (vi) an option or a derivative security designated by the Securities and Exchange
1112 Commission under Securities Exchange Act of 1934, Section 9(b), 15 U.S.C. Section 78i(b);
1114 private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social,
1115 athletic, or reformatory purposes, or as a chamber of commerce or trade or professional
1116 association; and
1117 (ii) [
1118 Provisions Relating to Agricultural Cooperative Associations, and [
1119 corporation to which [
1120 with [
1131 purchase, option, savings, pension, profit-sharing, or similar benefit plan;
1160 (h) a security issued by an investment company that is registered, or that has filed a
1161 registration statement, under the Investment Company Act of 1940; and
1163 is not necessary or appropriate for the protection of investors.
1164 (2) The following transactions are [
1165 61-1-15 :
1166 (a) [
1168 (b) [
1170 (i) information about the issuer of the security as required by the division is currently
1171 listed in a securities manual recognized by the division, and the listing is based upon such
1172 information as required by rule of the division; or
1173 (ii) the security has a fixed maturity or a fixed interest or dividend provision and there
1175 or during the existence of the issuer and any predecessors if less than three years, in the
1176 payment of principal, interest, or dividends on the security;
1177 (c) [
1178 pursuant to an unsolicited order or offer to buy;
1179 (d) [
1180 is made and an underwriter, or among underwriters;
1181 (e) [
1182 chattel mortgage or deed of trust, or by an agreement for the sale of real estate or chattels, if the
1183 entire mortgage, deed of trust, or agreement, together with all the bonds or other evidences of
1184 indebtedness secured thereby, is offered and sold as a unit;
1185 (f) [
1186 in bankruptcy, guardian, or conservator;
1187 (g) [
1188 evading this chapter;
1189 (h) [
1190 itself or in a fiduciary capacity:
1191 (i) a [
1192 (ii) a trust company[
1193 (iii) an insurance company[
1194 (iv) an investment company as defined in the Investment Company Act of 1940[
1195 (v) a pension or profit-sharing trust[
1196 (vi) other financial institution or institutional investor[
1197 (vii) a broker-dealer[
1199 (i) [
1200 (i) no commission or other remuneration is paid or given directly or indirectly for
1201 soliciting [
1202 (ii) the number of subscribers acquiring [
1203 not exceed ten; [
1204 (iii) there is no general advertising or solicitation in connection with the offer or sale;
1206 (iv) no payment is made by a subscriber;
1207 (j) [
1208 securities to its existing securities holders, if:
1209 (i) no commission or other remuneration, other than a standby commission is paid or
1210 given directly or indirectly for soliciting [
1211 (ii) the transaction constitutes [
1212 (A) the conversion of convertible securities;
1213 (B) the exercise of nontransferable rights or warrants;
1214 (C) the exercise of transferable rights or warrants if the rights or warrants are
1215 exercisable not more than 90 days after their issuance; or
1216 (D) the purchase of securities under a preemptive right; [
1220 (E) a transaction other than one specified in Subsections (2)(j)(ii)(A) through (D) if:
1221 (I) the division is furnished with:
1222 (Aa) a general description of the transaction;
1223 (Bb) the disclosure materials to be furnished to the issuer's securities holders in the
1224 transaction; and
1225 (Cc) a non-refundable fee; and
1226 (II) the division does not, by order, deny or revoke the exemption within 20 working
1227 days after the day on which the filing required by Subsection (2)(j)(ii)(E)(I) is complete;
1228 (k) [
1230 or refusal order is in effect and no public proceeding or examination looking toward such an
1231 order is pending;
1232 (l) a distribution of securities as a dividend if the person distributing the dividend is the
1233 issuer of the securities distributed;
1234 (m) [
1235 where the broker-dealer or issuer files with the division, and the broker-dealer maintains in the
1236 broker-dealer's records, and makes reasonably available upon request to [
1237 expressing an interest in a proposed transaction in the security with the broker-dealer
1238 information prescribed by the division under its rules;
1239 (n) [
1240 (o) [
1241 are defined in [
1242 sold by installment contract, if the [
1243 (i) Title 57, Chapter 8, Condominium Ownership Act, or if the units are located in
1244 another state, the condominium act of that state[
1245 (ii) Title 57, Chapter 11, Utah Uniform Land Sales Practices Act[
1246 (iii) Title 57, Chapter 19, Timeshare and Camp Resort Act[
1247 (iv) Title 70C, Utah [
1248 (p) [
1249 reorganization, recapitalization, reclassification, or sale of assets, if the consideration for
1250 which, in whole or in part, is the issuance of securities of a person or persons, and if:
1251 (i) the transaction or series of transactions is incident to a vote of the securities holders
1252 of each person involved or by written consent or resolution of some or all of the securities
1253 holders of each person involved;
1254 (ii) the vote, consent, or resolution is given under a provision in:
1255 (A) the applicable corporate statute or other controlling statute;
1256 (B) the controlling articles of incorporation, trust indenture, deed of trust, or
1257 partnership agreement; or
1258 (C) the controlling agreement among securities holders;
1259 (iii) (A) one person involved in the transaction is required to file proxy or
1260 informational materials under Section 14(a) or (c) of the Securities Exchange Act of 1934 or
1261 Section 20 of the Investment Company Act of 1940 and has so filed;
1262 (B) one person involved in the transaction is an insurance company [
1263 exempt from filing under Section 12(g)(2)(G) of the Securities Exchange Act of 1934, and has
1264 filed proxy or informational materials with the appropriate regulatory agency or official of its
1265 domiciliary state; or
1266 (C) all persons involved in the transaction are exempt from filing under Section
1267 12(g)(1) of the Securities Exchange Act of 1934, and file with the division such proxy or
1268 informational material as the division requires by rule;
1269 (iv) the proxy or informational material is filed with the division and distributed to all
1270 securities holders entitled to vote in the transaction or series of transactions at least ten working
1271 days prior to any necessary vote by the securities holders or action on any necessary consent or
1272 resolution; and
1273 (v) the division does not, by order, deny or revoke the exemption within ten working
1274 days after filing of the proxy or informational materials;
1275 (q) [
1276 of an issuer if:
1277 (i) the transaction is part of an issue in which there are not more than 15 purchasers in
1278 this state, other than those designated in Subsection (2)(h), during any 12 consecutive months;
1279 (ii) no general solicitation or general advertising is used in connection with the offer to
1280 sell or sale of the securities;
1281 (iii) no commission or other similar compensation is given, directly or indirectly, to a
1282 person other than a broker-dealer or agent licensed under this chapter, for soliciting a
1283 prospective purchaser in this state;
1284 (iv) the seller reasonably believes that all the purchasers in this state are purchasing for
1285 investment; and
1286 (v) the transaction is part of an aggregate offering that does not exceed [
1287 $1,000,000, or a greater amount as prescribed by a division rule, during any 12 consecutive
1288 months; [
1292 (r) [
1293 (s) a transaction in a security, whether or not the security or transaction is otherwise
1294 exempt if:
1295 (i) the transaction is:
1296 (A) in exchange for one or more outstanding securities, claims, or property interests; or
1297 (B) partly for cash and partly in exchange for one or more outstanding securities,
1298 claims, or property interests; and
1299 (ii) the terms and conditions are approved by the director after a hearing under Section
1300 61-1a-408 ;
1301 (t) a transaction incident to a judicially approved reorganization in which a security is
1303 (i) in exchange for one or more outstanding securities, claims, or property interests; or
1304 (ii) partly for cash and partly in exchange for one or more outstanding securities,
1305 claims, or property interests;
1306 (u) a nonissuer transaction by a federal covered investment adviser with investments
1307 under management in excess of $100,000,000 acting in the exercise of discretionary authority
1308 in a signed record for the account of others; and
1310 necessary or appropriate for the protection of investors.
1311 (3) [
1312 determined under Section 61-1-18.4 .
1313 (4) Upon approval by a majority of the [
1314 director, by means of an adjudicative proceeding conducted in accordance with Title 63G,
1315 Chapter 4, Administrative Procedures Act, may deny or revoke [
1316 Subsection (1)[
1317 (a) a specific security, transaction, or series of transactions; or
1318 (b) [
1320 impose a fine if the [
1321 (i) the application for or notice of exemption filed with the division is incomplete in
1323 circumstances under which it was made, false or misleading with respect to [
1325 (ii) [
1326 under this chapter has been willfully violated in connection with the offering or exemption by:
1327 (A) the person filing [
1328 (B) the issuer, [
1329 occupying a similar status or performing similar functions, or [
1330 indirectly controlling or controlled by the issuer, but only if the person filing the application for
1331 or notice of exemption is directly or indirectly controlled by or acting for the issuer; or
1332 (C) [
1333 (iii) subject to Subsection (8), the security for which the exemption is sought is the
1334 subject of an administrative stop order or similar order, or a permanent or temporary injunction
1335 or [
1336 applicable to the offering or exemption; [
1341 (iv) the issuer's enterprise or method of business includes or would include activities
1342 that are illegal where performed;
1343 (v) the offering has worked, has tended to work, or would operate to work a fraud upon
1345 (vi) the offering [
1346 and sellers' discounts, commissions, or other compensation, or promoters' profits or
1347 participation, or unreasonable amounts or kinds of options;
1348 (vii) an exemption is sought for a security or transaction [
1349 the exemption; or
1350 (viii) the proper filing fee, if required, has not been paid.
1351 (5) (a) [
1352 (b) [
1353 reason of [
1354 Subsection (5) if the person sustains the burden of proof that the person did not know, and in
1355 the exercise of reasonable care could not have known, of the order.
1356 (6) The exemption created by Subsection (2)(j) is not available for an offer or sale of a
1357 security to an existing securities holder who has acquired the holder's security from the issuer
1358 in a transaction in violation of Section 61-1-7 .
1359 (7) As to a security, a transaction, or a type of security or transaction, the division may:
1360 (a) withdraw or further condition the exemption described in Subsection (2)(q); or
1361 (b) waive one or more of the conditions described in Subsection (2)(q).
1362 (8) (a) The director may not institute a proceeding against an effective exemption under
1363 Subsection (4)(b) more than one year from the day on which the order or injunction on which
1364 the director relies is issued.
1365 (b) The director may not enter an order under Subsection (4)(b) on the basis of an order
1366 or injunction entered under another state act unless that order or injunction is issued on the
1367 basis of facts that would constitute a ground for a stop order under this section at the time the
1368 director enters the order.
1369 Section 11. Section 61-1-15.5 is amended to read:
1370 61-1-15.5. Federal covered securities.
1371 (1) The division by rule or order may require the filing of any of the following
1372 documents with respect to a covered security under Section 18(b)(2) of the Securities Act of
1374 (a) prior to the initial offer of federal covered security in this state, a notice form as
1375 prescribed by the division or all documents that are part of a federal registration statement filed
1376 with the [
1377 together with a consent to service of process signed by the issuer and a filing fee as determined
1378 under Section 61-1-18.4 ;
1379 (b) after the initial offer of such federal covered security in this state, all documents
1380 that are part of an amendment to a federal registration statement filed with the U.S. Securities
1381 and Exchange Commission under the Securities Act of 1933, which shall be filed concurrently
1382 with the division;
1383 (c) a report of the value of federal covered securities offered or sold in this state,
1384 together with a filing fee as determined under Section 61-1-18.4 ; and
1385 (d) a notice filing under this section shall be effective for one year and shall be
1386 renewed annually in order to continue to offer or sell the federal covered securities for which
1387 the notice was filed.
1388 (2) With respect to [
1389 of the Securities Act of 1933, the division by rule or order may require the issuer to file a notice
1390 on SEC Form D and a consent to service of process signed by the issuer no later than 15 days
1391 after the first sale of such covered security in this state, together with a filing fee as determined
1392 under Section 61-1-18.4 .
1393 (3) The division by rule or order may require the filing of [
1394 the [
1395 to a covered security under [
1396 18(b)(3) or (4), together with a filing fee as determined under Section 61-1-18.4 .
1397 (4) Upon approval by a majority of the [
1398 director, by means of an adjudicative [
1399 Title 63G, Chapter 4, Administrative Procedures Act, may issue a stop order suspending the
1400 offer and sale of [
1401 18(b)(1) of the Securities Act of 1933, if the director finds that the order is in the public interest
1402 and there is a failure to comply with any condition established under this section.
1403 (5) The division by rule or order may waive any or all of the provisions of this section.
1404 Section 12. Section 61-1-18 is amended to read:
1405 61-1-18. Division of Securities established -- Director -- Investigators.
1406 (1) (a) There is established within the Department of Commerce a Division of
1408 (b) The division [
1410 (c) [
1411 Subject to Section 61-1-18.5 , the division shall administer and enforce this chapter.
1412 (d) The director shall hold office at the pleasure of the governor.
1413 (2) The director, with the approval of the executive director, may employ [
1414 staff [
1415 by the director according to standards established by the Department of Human Resource
1417 (3) An investigator employed pursuant to Subsection (2) who meets the training
1418 requirements of Subsection 53-13-105 (3) may be designated a special function officer, as
1419 defined in Section 53-13-105 , by the director, but is not eligible for retirement benefits under
1420 the Public Safety Employee's Retirement System.
1421 Section 13. Section 61-1-18.2 is amended to read:
1422 61-1-18.2. Budget -- Annual report.
1423 The director shall annually prepare and submit to the executive director:
1424 (1) a budget for the expenses of the division and commission for the administration and
1425 enforcement of this chapter for the next fiscal year; and
1426 (2) a report outlining the division's and commission's work for the preceding fiscal
1428 Section 14. Section 61-1-18.3 is amended to read:
1429 61-1-18.3. Information obtained by division or commission -- Use for personal
1430 benefit prohibited -- Disclosure.
1431 (1) It is unlawful for [
1433 non-public information [
1435 (2) This chapter [
1436 division, the commission, or [
1437 disclose [
1438 necessary or appropriate in a proceeding or investigation under this chapter.
1439 (3) No provision of this chapter either creates or derogates from [
1441 under subpoena directed to:
1442 (a) the division;
1443 (b) the commission; or [
1444 (c) a member of the commission; or
1445 (d) an employee of the division.
1446 Section 15. Section 61-1-18.5 is amended to read:
1447 61-1-18.5. Securities Commission -- Transition.
1448 (1) (a) There is [
1452 (b) The division shall provide staffing to the commission.
1454 (i) formulate and make recommendations to the director regarding policy and
1455 budgetary matters;
1456 (ii) submit recommendations regarding registration requirements [
1457 (iii) formulate and make recommendations to the director regarding the establishment
1458 of reasonable fees; [
1459 (iv) [
1461 (v) conduct an administrative hearing under this chapter that is not:
1462 (A) delegated by the commission to an administrative law judge or the division relating
1463 to a violation of this chapter; or
1464 (B) expressly delegated to the division under this chapter;
1465 (vi) except as provided in Subsection (2)(b), impose a sanction as provided in this
1467 (vii) review rules made by the division for purposes of concurrence in accordance with
1468 Section 61-1-24 ; and
1469 (viii) perform other duties as this chapter provides.
1470 (b) (i) The commission may delegate to the division the authority to impose a sanction
1471 under this chapter.
1472 (ii) If under Subsection (2)(b)(i) the commission delegates to the division the authority
1473 to impose a sanction, a person who is subject to the sanction may petition the commission for
1474 review of the sanction.
1475 (iii) A person who is sanctioned by the division in accordance with this Subsection
1476 (2)(b) may seek agency review by the executive director only after the commission reviews the
1477 division's action.
1479 appoint five members [
1480 commission with the consent of the Senate as follows:
1481 (i) two members from the securities brokerage community:
1482 (A) who are not from the same broker-dealer or affiliate; and
1483 (B) who have at least five years prior experience in securities matters;
1484 (ii) one member from the securities section of the Utah State Bar [
1485 (A) whose practice primarily involves:
1486 (I) corporate securities; or
1487 (II) representation of plaintiffs in securities cases;
1488 (B) who does not routinely represent clients involved in:
1489 (I) civil or administrative litigation with the division; or
1490 (II) criminal cases brought under this chapter; and
1491 (C) who has at least five years prior experience in securities matters;
1492 (iii) one member who is an officer or director of a [
1493 subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1494 1934 ; and
1495 (iv) one member from the public at large who has no active participation in the
1496 securities business.
1497 (b) [
1499 (4)(c), as terms of current [
1500 member or reappointed member to a four-year term.
1501 (b) Notwithstanding [
1502 the time of appointment or reappointment, adjust the length of terms to ensure that the terms of
1503 commission members are staggered so that approximately half of the [
1504 appointed every two years.
1505 (c) For purposes of making an appointment to the commission, the governor:
1506 (i) shall as of the effective date of this bill:
1507 (A) appoint all five members of the commission; and
1508 (B) stagger the terms of the five members of the commission to comply with
1509 Subsection (4)(b); and
1510 (ii) may not consider the commission an extension of the previous Securities Advisory
1513 shall appoint a replacement [
1516 (f) The commission shall annually select one member to serve as chair of the
1518 (5) (a) The [
1519 (i) at least quarterly on a regular date to be fixed by the [
1520 (ii) at such other times at the call of:
1521 (A) the director; or
1522 (B) any two members of the [
1523 (b) A majority of the [
1524 of business. [
1525 (c) An action of the commission requires a vote of a majority of [
1527 (6) [
1528 filed with the Department of Commerce and the lieutenant governor, disclose any position of
1529 employment or ownership interest that the member has with respect to [
1530 business subject to the jurisdiction of the division or commission. This statement shall be filed
1531 upon appointment and must be appropriately amended whenever significant changes occur in
1532 matters covered by the statement.
1533 (7) (a) [
1534 benefits for [
1535 the performance of the member's official duties at the rates established by the Division of
1536 Finance under Sections 63A-3-106 and 63A-3-107 .
1537 (b) [
1538 member's service.
1539 (8) (a) A rule or form made by the division under this section that is in effect on May
1540 11, 2009, is considered to have been concurred with by the commission as of May 12, 2009,
1541 until the commission acts on the rule or form.
1542 (b) For a civil or administrative action pending under this chapter as of May 12, 2009,
1543 brought under the authority of division under this chapter as in effect May 11, 2009 that may be
1544 brought only by the commission under this chapter as in effect on May 12, 2009:
1545 (i) the action shall be considered brought by the commission; and
1546 (ii) the commission may take any act authorized under this chapter regarding that
1548 Section 16. Section 61-1-18.6 is amended to read:
1549 61-1-18.6. Procedures -- Adjudicative proceedings.
1550 The [
1551 and requirements of Title 63G, Chapter 4, Administrative Procedures Act, in [
1552 adjudicative [
1553 Section 17. Section 61-1-18.7 is amended to read:
1554 61-1-18.7. Funding of securities investor education and training.
1555 (1) (a) There is created a restricted special revenue fund known as the "Securities
1556 Investor Education and Training Fund" to provide revenue for educating the public and the
1557 securities industry as provided in this section.
1558 (b) For purposes of this section, "fund" means the Securities Investor Education and
1559 Training Fund.
1560 (2) All money received by the state by reason of civil penalties ordered and
1561 administrative fines collected pursuant to this chapter shall be deposited in the [
1563 Chapter 5, Funds Consolidation Act.
1564 (3) [
1565 after July 1, 1989, pursuant to a voluntary [
1566 order shall be deposited into the fund.
1567 (4) (a) The fund shall earn interest.
1568 (b) All interest earned on fund monies shall be deposited into the fund.
1569 (5) Notwithstanding Title 63J, Chapter 1, Budgetary Procedures Act, the director may
1570 use [
1572 consistent with the duties of the division and commission under this chapter and only for any or
1573 all of the following and the expense of providing them:
1574 (a) education and training of Utah residents in matters concerning securities laws and
1575 investment decisions, by publications or presentations;
1576 (b) education of registrants and licensees under this chapter, by:
1577 (i) publication of this chapter and rules and policy statements and opinion letters [
1579 (ii) sponsorship of seminars or meetings to educate registrants and licensees as to the
1580 requirements of this chapter; and
1581 (c) investigation and litigation.
1582 (6) If the balance in the fund exceeds $100,000 at the close of any fiscal year, the
1583 excess shall be transferred to the General Fund.
1584 Section 18. Section 61-1-19 is amended to read:
1585 61-1-19. Investigations authorized.
1586 (1) (a) The division [
1587 within or without this state as [
1588 person has violated, is violating, or is about to violate [
1589 rule or order [
1590 (b) To aid in the enforcement of this chapter or in the prescribing of rules and forms
1592 statement in writing, under oath or otherwise as to all the facts and circumstances concerning
1593 the matter to be investigated.
1594 (c) The division may publish information concerning [
1595 or the violation of [
1596 (2) For the purpose of [
1597 division, the commission, or [
1598 (a) administer [
1599 (b) subpoena [
1600 (c) take evidence; and
1601 (d) require the production of any books, papers, correspondence, memoranda,
1602 agreements, or other documents or records relevant or material to the investigation.
1603 Section 19. Section 61-1-20 is amended to read:
1604 61-1-20. Enforcement.
1605 Whenever it appears to the director that [
1606 about to engage in [
1607 or order under this chapter, in addition to [
1608 (1) (a) the director may issue an order directing the person to appear before the
1610 to cease and desist from engaging in the act or practice, or doing [
1611 the activity;
1612 (b) the order to show cause shall state the reasons for the order and the date of the
1614 (c) the director shall promptly serve a copy of the order to show cause upon [
1615 person named in the order;
1616 (d) the [
1617 than ten business days after the order is issued;
1618 (e) after a hearing, the [
1619 from engaging in [
1620 or order under this chapter[
1622 (f) the [
1623 (g) the [
1624 licensed broker-dealer or investment adviser in this state[
1625 (h) the commission may impose a combination of sanctions in Subsections (1)(e)
1626 through (g).
1627 (2) (a) The director may bring an action in the appropriate district court of this state or
1628 the appropriate court of another state to enjoin [
1629 enforce compliance with this chapter or [
1630 (b) upon a proper showing in an action brought under this section, the court may:
1631 (i) issue a permanent or temporary, prohibitory or mandatory injunction;
1632 (ii) issue a restraining order or writ of mandamus;
1633 (iii) enter a declaratory judgment;
1634 (iv) appoint a receiver or conservator for the defendant or the defendant's assets;
1635 (v) order disgorgement;
1636 (vi) order rescission;
1637 (vii) order restitution;
1641 (c) the court may not require the division to post a bond in an action brought under this
1643 (3) An order issued under Subsection (1) shall be accompanied by written findings of
1644 fact and conclusions of law.
1645 Section 20. Section 61-1-21 is amended to read:
1646 61-1-21. Penalties for violations.
1647 (1) A person is guilty of a third degree felony who willfully violates [
1648 (a) a provision of this chapter except Sections 61-1-1 and 61-1-16 [
1650 (b) a rule or order issued under this chapter[
1651 (c) Section 61-1-16 knowing the statement made [
1652 a material respect.
1653 (2) A person who willfully violates Section 61-1-1 :
1654 (a) is guilty of a third degree felony if, at the time the crime was committed, the
1655 property, money, or thing unlawfully obtained or sought to be obtained was worth less than
1657 (b) is guilty of a second degree felony if:
1658 (i) at the time the crime was committed, the property, money, or thing unlawfully
1659 obtained or sought to be obtained was worth $10,000 or more; or
1660 (ii) (A) at the time the crime was committed, the property, money, or thing unlawfully
1661 obtained or sought to be obtained was worth less than $10,000; and
1662 (B) in connection with that violation, the violator knowingly accepted any money
1664 (I) equity in a person's [
1665 (II) a withdrawal from [
1666 (III) a withdrawal from [
1667 Revenue Code; or
1668 (c) is guilty of [
1669 an indeterminate term of not less than three years or more than 15 years if:
1670 (i) at the time the crime was committed, the property, money, or thing unlawfully
1671 obtained or sought to be obtained was worth $10,000 or more; and
1672 (ii) in connection with that violation, the violator knowingly accepted any money
1674 (A) equity in a person's [
1675 (B) a withdrawal from [
1676 (C) a withdrawal from [
1677 Revenue Code.
1678 (3) [
1679 issued under this chapter if [
1680 rule or order.
1681 (4) In addition to any other penalty for a criminal violation of this chapter, the
1682 sentencing judge may impose [
1683 61-1-20 (2)(b).
1684 Section 21. Section 61-1-21.5 is amended to read:
1685 61-1-21.5. Legal counsel -- Prosecutions.
1686 (1) The attorney general shall advise and represent the division, the commission, and
1688 counsel or services in:
1689 (a) the exercise or defense of the division's or commission's power; or
1690 (b) the performance of [
1691 (2) With the concurrence of the attorney general, the staff of the division may represent
1692 the division in hearings conducted during the course of adjudicative proceedings of the
1693 commission or the division.
1694 (3) (a) In the prosecution of all criminal actions under this chapter, the attorney general,
1695 county attorney, or district attorney of the appropriate jurisdiction, shall provide all legal
1696 services for the division, the commission, and [
1697 (b) The division or commission may refer [
1698 concerning [
1699 (i) the attorney general; or
1700 (ii) the appropriate county attorney [
1701 United States Attorney's Office.
1702 (4) The attorney general, a county attorney, or a district attorney of the appropriate
1703 jurisdiction may institute a criminal proceeding under this chapter, with or without referral
1704 from the division.
1705 Section 22. Section 61-1-22 is amended to read:
1706 61-1-22. Sales and purchases in violation -- Remedies -- Limitation of actions.
1707 (1) (a) [
1708 (i) offers or sells a security in violation of:
1709 (A) Subsection 61-1-3 (1)[
1710 (B) Section 61-1-7 [
1711 (C) Subsection 61-1-17 (2)[
1712 (D) a rule or order under Section 61-1-15 , which requires the affirmative approval of
1713 sales literature before it is used[
1714 (E) a condition imposed under Subsection 61-1-10 (4) or 61-1-11 (7)[
1715 (ii) offers, sells, or purchases a security in violation of Subsection 61-1-1 (2).
1716 (b) A person described in Subsection (1)(a) is liable to [
1717 security to or buying the security from [
1718 The person to whom the person described in Subsection (1)(a) is liable may sue either at law or
1719 in equity to recover the consideration paid for the security, together with interest at 12% per
1720 year from the date of payment, costs, and reasonable [
1721 of [
1722 the person no longer owns the security.
1724 (i) subtract from the amount that would be recoverable upon a tender [
1725 Subsection (7)(b) the value of the security when the buyer disposed of [
1726 security; and
1727 (ii) add to the amount calculated under Subsection (1)(c)(i) interest at:
1728 (A) 12% per year [
1729 (I) beginning the day on which the security is purchased by the buyer; and
1730 (II) ending on the date of disposition[
1731 (B) after the period described in Subsection (1)(c)(ii)(A), 12% per year on the amount
1732 lost at disposition.
1733 (2) The court in a suit brought under Subsection (1) may award an amount equal to
1734 three times the consideration paid for the security, together with interest, costs, and [
1735 attorney fees, less any amounts, all as specified in Subsection (1) upon a showing that the
1736 violation was reckless or intentional.
1737 (3) A person who offers or sells a security in violation of Subsection 61-1-1 (2) is not
1738 liable under Subsection (1)(a) if the purchaser knew of the untruth or omission, or the seller did
1739 not know and in the exercise of reasonable care could not have known of the untrue statement
1740 or misleading omission.
1741 (4) (a) Every person who directly or indirectly controls a seller or buyer liable under
1742 Subsection (1), every partner, officer, or director of such a seller or buyer, every person
1743 occupying a similar status or performing similar functions, every employee of such a seller or
1744 buyer who materially aids in the sale or purchase, and every broker-dealer or agent who
1745 materially aids in the sale or purchase are also liable jointly and severally with and to the same
1746 extent as the seller or purchaser, unless the nonseller or nonpurchaser who is so liable sustains
1747 the burden of proof that [
1748 reasonable care could not have known, of the existence of the facts by reason of which the
1749 liability is alleged to exist.
1750 (b) There is contribution as in cases of contract among the several persons so liable.
1751 (5) [
1753 (6) A cause of action under this section survives the death of [
1754 have been a plaintiff or defendant.
1755 (7) (a) [
1756 this section unless brought before the earlier of:
1757 (i) the expiration of [
1758 violation; or
1759 (ii) the expiration of two years after the discovery by the plaintiff of the facts
1760 constituting the violation[
1761 (b) [
1762 (i) the buyer or seller received a written offer, before suit and at a time when [
1763 buyer or seller owned the security, to refund the consideration paid together with interest at
1764 12% per year from the date of payment, less the amount of any income received on the security,
1765 and [
1766 (ii) the buyer or seller received such an offer before suit and at a time when [
1767 buyer or seller did not own the security, unless [
1768 writing within 30 days of its receipt.
1769 (8) [
1770 violation of this chapter or any rule or order [
1771 acquired [
1772 of which its making or performance was in violation, may not base [
1773 (9) A condition, stipulation, or provision binding a person acquiring a security to waive
1774 compliance with this chapter or a rule or order [
1775 (10) (a) The rights and remedies provided by this chapter are in addition to any other
1776 rights or remedies that may exist at law or in equity.
1777 (b) This chapter does not create [
1778 Subsection 61-1-4 (6).
1779 Section 23. Section 61-1-23 is amended to read:
1780 61-1-23. Review of orders.
1782 determining all of the issues of an adjudicative proceeding may obtain review of the order by
1783 the executive director in accordance with Title 63G, Chapter 4, Administrative Procedures Act.
1784 Section 24. Section 61-1-24 is amended to read:
1785 61-1-24. Rules, forms, and orders.
1786 (1) (a) [
1787 rescind [
1789 (b) For the purpose of [
1790 (i) classify securities, persons, and matters within [
1791 commission or division; and
1792 (ii) prescribe different requirements for different classes.
1796 (c) The division shall make rules in accordance with Title 63G, Chapter 3, Utah
1797 Administrative Rulemaking Act, except that the division may not make, amend, or rescind a
1798 rule or form under this chapter without the concurrence of the commission.
1800 with the securities administrators of the other states and the Securities and Exchange
1801 Commission to achieve maximum uniformity in the form and content of registration
1802 statements, applications, and reports wherever practicable.
1804 (i) the form and content of a financial [
1806 (ii) the circumstances under which a consolidated financial [
1807 be filed; and
1808 (iii) whether or not [
1809 by an independent public [
1810 (b) [
1811 in accordance with generally accepted accounting principles.
1814 does not apply to [
1815 form, or order of the division or an order of the commission, notwithstanding that the rule,
1816 form, or order may later be amended or rescinded or be determined by judicial or other
1817 authority to be invalid for any reason.
1819 meaning of Sections 61-1-1 and 61-1-2 if it finds that:
1820 (a) the [
1821 defraud [
1822 (b) the rule is not inconsistent with this chapter.
1823 Section 25. Section 61-1-25 is amended to read:
1824 61-1-25. Record of registrations.
1825 (1) A document is filed when it is received by the division.
1826 (2) (a) The division shall keep a register of:
1827 (i) all applications for registration and registration statements [
1828 ever been effective under this chapter; and
1829 (ii) all denial, suspension, or revocation orders [
1830 this chapter.
1831 (b) The register shall be open for public inspection.
1832 (3) The information contained in or filed with [
1833 application, or report may be made available to the public under [
1834 division prescribes.
1835 (4) (a) [
1836 shall furnish to [
1837 requested, of [
1839 (i) upon request; and
1840 (ii) at a reasonable charge prescribed by the division.
1841 (b) In [
1842 under this Subsection (4) is prima facie evidence of the contents of the entry or document
1844 (5) The division [
1845 issue an interpretative [
1846 concurs in the interpretative opinion.
1847 Section 26. Repealer.
1848 This bill repeals:
1849 Section 61-1-8, Registration by notification.
1850 Section 61-1-30, Prior law repealed -- Savings clause.
Legislative Review Note
as of 12-18-08 1:07 PM