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First Substitute S.B. 101

Senator Benjamin M. McAdams proposes the following substitute bill:


             1     
UTAH UNIFORM SECURITIES ACT ENFORCEMENT

             2     
2011 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Benjamin M. McAdams

             5     
House Sponsor: Jim Bird

             6      Cosponsor:John L. Valentine              7     
             8      LONG TITLE
             9      General Description:
             10          This bill modifies the Utah Uniform Securities Act to address enforcement.
             11      Highlighted Provisions:
             12          This bill:
             13          .    amends definitions;
             14          .    requires consideration of certain factors in specific enforcement actions;
             15          .    provides for criminal penalty enhancements under certain circumstances;
             16          .    addresses an affirmative defense; and
             17          .    makes technical and conforming amendments.
             18      Money Appropriated in this Bill:
             19          None
             20      Other Special Clauses:
             21          None
             22      Utah Code Sections Affected:
             23      AMENDS:
             24          61-1-13, as last amended by Laws of Utah 2010, Chapter 379
             25          61-1-18.5, as last amended by Laws of Utah 2010, Chapter 286


             26          61-1-20, as last amended by Laws of Utah 2009, Chapter 351
             27          61-1-21, as last amended by Laws of Utah 2009, Chapters 347 and 351
             28     
             29      Be it enacted by the Legislature of the state of Utah:
             30          Section 1. Section 61-1-13 is amended to read:
             31           61-1-13. Definitions.
             32          (1) As used in this chapter:
             33          (a) "Affiliate" means a person that, directly or indirectly, through one or more
             34      intermediaries, controls or is controlled by, or is under common control with a person
             35      specified.
             36          (b) (i) "Agent" means an individual other than a broker-dealer who represents a
             37      broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.
             38          (ii) "Agent" does not include an individual who represents:
             39          (A) an issuer, who receives no commission or other remuneration, directly or
             40      indirectly, for effecting or attempting to effect purchases or sales of securities in this state, and
             41      who effects transactions:
             42          (I) in securities exempted by Subsection 61-1-14 (1)(a), (b), (c), or (g);
             43          (II) exempted by Subsection 61-1-14 (2);
             44          (III) in a covered security as described in Sections 18(b)(3) and 18(b)(4)(D) of the
             45      Securities Act of 1933; or
             46          (IV) with existing employees, partners, officers, or directors of the issuer; or
             47          (B) a broker-dealer in effecting transactions in this state limited to those transactions
             48      described in Section 15(h)(2) of the Securities Exchange Act of 1934.
             49          (iii) A partner, officer, or director of a broker-dealer or issuer, or a person occupying a
             50      similar status or performing similar functions, is an agent only if the partner, officer, director,
             51      or person otherwise comes within the definition of "agent."
             52          (iv) "Agent" does not include a person described in Subsection (3).
             53          (c) (i) "Broker-dealer" means a person engaged in the business of effecting transactions
             54      in securities for the account of others or for the person's own account.
             55          (ii) "Broker-dealer" does not include:
             56          (A) an agent;


             57          (B) an issuer;
             58          (C) a depository institution or trust company;
             59          (D) a person who has no place of business in this state if:
             60          (I) the person effects transactions in this state exclusively with or through:
             61          (Aa) the issuers of the securities involved in the transactions;
             62          (Bb) other broker-dealers;
             63          (Cc) a depository institution, whether acting for itself or as a trustee;
             64          (Dd) a trust company, whether acting for itself or as a trustee;
             65          (Ee) an insurance company, whether acting for itself or as a trustee;
             66          (Ff) an investment company, as defined in the Investment Company Act of 1940,
             67      whether acting for itself or as a trustee;
             68          (Gg) a pension or profit-sharing trust, whether acting for itself or as a trustee; or
             69          (Hh) another financial institution or institutional buyer, whether acting for itself or as a
             70      trustee; or
             71          (II) during any period of 12 consecutive months the person does not direct more than
             72      15 offers to sell or buy into this state in any manner to persons other than those specified in
             73      Subsection (1)(c)(ii)(D)(I), whether or not the offeror or an offeree is then present in this state;
             74          (E) a general partner who organizes and effects transactions in securities of three or
             75      fewer limited partnerships, of which the person is the general partner, in any period of 12
             76      consecutive months;
             77          (F) a person whose participation in transactions in securities is confined to those
             78      transactions made by or through a broker-dealer licensed in this state;
             79          (G) a person who is a principal broker or associate broker licensed in this state and
             80      who effects transactions in a bond or other evidence of indebtedness secured by a real or chattel
             81      mortgage or deed of trust, or by an agreement for the sale of real estate or chattels, if the entire
             82      mortgage, deed of trust, or agreement, together with all the bonds or other evidences of
             83      indebtedness secured thereby, is offered and sold as a unit;
             84          (H) a person effecting transactions in commodity contracts or commodity options;
             85          (I) a person described in Subsection (3); or
             86          (J) other persons as the division, by rule or order, may designate, consistent with the
             87      public interest and protection of investors, as not within the intent of this Subsection (1)(c).


             88          (d) "Buy" or "purchase" means a contract for purchase of, contract to buy, or
             89      acquisition of a security or interest in a security for value.
             90          (e) "Commission" means the Securities Commission created in Section 61-1-18.5 .
             91          (f) "Commodity" means, except as otherwise specified by the division by rule:
             92          (i) an agricultural, grain, or livestock product or byproduct, except real property or a
             93      timber, agricultural, or livestock product grown or raised on real property and offered or sold
             94      by the owner or lessee of the real property;
             95          (ii) a metal or mineral, including a precious metal, except a numismatic coin whose fair
             96      market value is at least 15% greater than the value of the metal it contains;
             97          (iii) a gem or gemstone, whether characterized as precious, semi-precious, or
             98      otherwise;
             99          (iv) a fuel, whether liquid, gaseous, or otherwise;
             100          (v) a foreign currency; and
             101          (vi) all other goods, articles, products, or items of any kind, except a work of art
             102      offered or sold by art dealers, at public auction or offered or sold through a private sale by the
             103      owner of the work.
             104          (g) (i) "Commodity contract" means an account, agreement, or contract for the
             105      purchase or sale, primarily for speculation or investment purposes and not for use or
             106      consumption by the offeree or purchaser, of one or more commodities, whether for immediate
             107      or subsequent delivery or whether delivery is intended by the parties, and whether characterized
             108      as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures
             109      contract, installment or margin contract, leverage contract, or otherwise.
             110          (ii) A commodity contract offered or sold shall, in the absence of evidence to the
             111      contrary, be presumed to be offered or sold for speculation or investment purposes.
             112          (iii) (A) A commodity contract may not include a contract or agreement that requires,
             113      and under which the purchaser receives, within 28 calendar days from the payment in good
             114      funds any portion of the purchase price, physical delivery of the total amount of each
             115      commodity to be purchased under the contract or agreement.
             116          (B) A purchaser is not considered to have received physical delivery of the total
             117      amount of each commodity to be purchased under the contract or agreement when the
             118      commodity or commodities are held as collateral for a loan or are subject to a lien of any


             119      person when the loan or lien arises in connection with the purchase of each commodity or
             120      commodities.
             121          (h) (i) "Commodity option" means an account, agreement, or contract giving a party to
             122      the option the right but not the obligation to purchase or sell one or more commodities or one
             123      or more commodity contracts, or both whether characterized as an option, privilege, indemnity,
             124      bid, offer, put, call, advance guaranty, decline guaranty, or otherwise.
             125          (ii) "Commodity option" does not include an option traded on a national securities
             126      exchange registered:
             127          (A) with the Securities and Exchange Commission; or
             128          (B) on a board of trade designated as a contract market by the Commodity Futures
             129      Trading Commission.
             130          (i) "Depository institution" is as defined in Section 7-1-103 .
             131          (j) "Director" means the director of the division appointed in accordance with Section
             132      61-1-18 .
             133          (k) "Division" means the Division of Securities established by Section 61-1-18 .
             134          (l) "Executive director" means the executive director of the Department of Commerce.
             135          (m) "Federal covered adviser" means a person who:
             136          (i) is registered under Section 203 of the Investment Advisers Act of 1940; or
             137          (ii) is excluded from the definition of "investment adviser" under Section 202(a)(11) of
             138      the Investment Advisers Act of 1940.
             139          (n) "Federal covered security" means a security that is a covered security under Section
             140      18(b) of the Securities Act of 1933 or rules or regulations promulgated under Section 18(b) of
             141      the Securities Act of 1933.
             142          (o) "Fraud," "deceit," and "defraud" are not limited to their common-law meanings.
             143          (p) "Guaranteed" means guaranteed as to payment of principal or interest as to debt
             144      securities, or dividends as to equity securities.
             145          (q) (i) "Investment adviser" means a person who:
             146          (A) for compensation, engages in the business of advising others, either directly or
             147      through publications or writings, as to the value of securities or as to the advisability of
             148      investing in, purchasing, or selling securities; or
             149          (B) for compensation and as a part of a regular business, issues or promulgates


             150      analyses or reports concerning securities.
             151          (ii) "Investment adviser" includes a financial planner or other person who:
             152          (A) as an integral component of other financially related services, provides the
             153      investment advisory services described in Subsection (1)(q)(i) to others for compensation and
             154      as part of a business; or
             155          (B) holds the person out as providing the investment advisory services described in
             156      Subsection (1)(q)(i) to others for compensation.
             157          (iii) "Investment adviser" does not include:
             158          (A) an investment adviser representative;
             159          (B) a depository institution or trust company;
             160          (C) a lawyer, accountant, engineer, or teacher whose performance of these services is
             161      solely incidental to the practice of the profession;
             162          (D) a broker-dealer or its agent whose performance of these services is solely
             163      incidental to the conduct of its business as a broker-dealer and who receives no special
             164      compensation for the services;
             165          (E) a publisher of a bona fide newspaper, news column, news letter, news magazine, or
             166      business or financial publication or service, of general, regular, and paid circulation, whether
             167      communicated in hard copy form, or by electronic means, or otherwise, that does not consist of
             168      the rendering of advice on the basis of the specific investment situation of each client;
             169          (F) a person who is a federal covered adviser;
             170          (G) a person described in Subsection (3); or
             171          (H) such other persons not within the intent of this Subsection (1)(q) as the division
             172      may by rule or order designate.
             173          (r) (i) "Investment adviser representative" means a partner, officer, director of, or a
             174      person occupying a similar status or performing similar functions, or other individual, except
             175      clerical or ministerial personnel, who:
             176          (A) (I) is employed by or associated with an investment adviser who is licensed or
             177      required to be licensed under this chapter; or
             178          (II) has a place of business located in this state and is employed by or associated with a
             179      federal covered adviser; and
             180          (B) does any of the following:


             181          (I) makes a recommendation or otherwise renders advice regarding securities;
             182          (II) manages accounts or portfolios of clients;
             183          (III) determines which recommendation or advice regarding securities should be given;
             184          (IV) solicits, offers, or negotiates for the sale of or sells investment advisory services;
             185      or
             186          (V) supervises employees who perform any of the acts described in this Subsection
             187      (1)(r)(i)(B).
             188          (ii) "Investment adviser representative" does not include a person described in
             189      Subsection (3).
             190          (s) "Investment contract" includes:
             191          (i) an investment in a common enterprise with the expectation of profit to be derived
             192      through the essential managerial efforts of someone other than the investor; or
             193          (ii) an investment by which:
             194          (A) an offeree furnishes initial value to an offerer;
             195          (B) a portion of the initial value is subjected to the risks of the enterprise;
             196          (C) the furnishing of the initial value is induced by the offerer's promises or
             197      representations that give rise to a reasonable understanding that a valuable benefit of some kind
             198      over and above the initial value will accrue to the offeree as a result of the operation of the
             199      enterprise; and
             200          (D) the offeree does not receive the right to exercise practical or actual control over the
             201      managerial decisions of the enterprise.
             202          (t) "Isolated transaction" means not more than a total of two transactions that occur
             203      anywhere during six consecutive months.
             204          (u) (i) "Issuer" means a person who issues or proposes to issue a security or has
             205      outstanding a security that it has issued.
             206          (ii) With respect to a preorganization certificate or subscription, "issuer" means the one
             207      or more promoters of the person to be organized.
             208          (iii) "Issuer" means the one or more persons performing the acts and assuming duties
             209      of a depositor or manager under the provisions of the trust or other agreement or instrument
             210      under which the security is issued with respect to:
             211          (A) interests in trusts, including collateral trust certificates, voting trust certificates, and


             212      certificates of deposit for securities; or
             213          (B) shares in an investment company without a board of directors.
             214          (iv) With respect to an equipment trust certificate, a conditional sales contract, or
             215      similar securities serving the same purpose, "issuer" means the person by whom the equipment
             216      or property is to be used.
             217          (v) With respect to interests in partnerships, general or limited, "issuer" means the
             218      partnership itself and not the general partner or partners.
             219          (vi) With respect to certificates of interest or participation in oil, gas, or mining titles or
             220      leases or in payment out of production under the titles or leases, "issuer" means the owner of
             221      the title or lease or right of production, whether whole or fractional, who creates fractional
             222      interests therein for the purpose of sale.
             223          (v) (i) "Life settlement interest" means the entire interest or a fractional interest in any
             224      of the following that is the subject of a life settlement:
             225          (A) a policy; or
             226          (B) the death benefit under a policy.
             227          (ii) "Life settlement interest" does not include the initial purchase from the owner by a
             228      life settlement provider.
             229          (w) "Nonissuer" means not directly or indirectly for the benefit of the issuer.
             230          (x) "Person" means:
             231          (i) an individual;
             232          (ii) a corporation;
             233          (iii) a partnership;
             234          (iv) a limited liability company;
             235          (v) an association;
             236          (vi) a joint-stock company;
             237          (vii) a joint venture;
             238          (viii) a trust where the interests of the beneficiaries are evidenced by a security;
             239          (ix) an unincorporated organization;
             240          (x) a government; or
             241          (xi) a political subdivision of a government.
             242          (y) "Precious metal" means the following, whether in coin, bullion, or other form:


             243          (i) silver;
             244          (ii) gold;
             245          (iii) platinum;
             246          (iv) palladium;
             247          (v) copper; and
             248          (vi) such other substances as the division may specify by rule.
             249          (z) "Promoter" means a person who, acting alone or in concert with one or more
             250      persons, takes initiative in founding or organizing the business or enterprise of a person.
             251          (aa) (i) Except as provided in Subsection (1)(aa)(ii), "record" means information that
             252      is:
             253          (A) inscribed in a tangible medium; or
             254          (B) (I) stored in an electronic or other medium; and
             255          (II) retrievable in perceivable form.
             256          (ii) This Subsection (1)(aa) does not apply when the context requires otherwise,
             257      including when "record" is used in the following phrases:
             258          (A) "of record";
             259          (B) "official record"; or
             260          (C) "public record."
             261          (bb) (i) "Sale" or "sell" includes a contract for sale of, contract to sell, or disposition of,
             262      a security or interest in a security for value.
             263          (ii) "Offer" or "offer to sell" includes an attempt or offer to dispose of, or solicitation of
             264      an offer to buy, a security or interest in a security for value.
             265          (iii) The following are examples of the definitions in Subsection (1)(bb)(i) or (ii):
             266          (A) a security given or delivered with or as a bonus on account of a purchase of a
             267      security or any other thing, is part of the subject of the purchase, and is offered and sold for
             268      value;
             269          (B) a purported gift of assessable stock is an offer or sale as is each assessment levied
             270      on the stock;
             271          (C) an offer or sale of a security that is convertible into, or entitles its holder to acquire
             272      or subscribe to another security of the same or another issuer is an offer or sale of that security,
             273      and also an offer of the other security, whether the right to convert or acquire is exercisable


             274      immediately or in the future;
             275          (D) a conversion or exchange of one security for another constitutes an offer or sale of
             276      the security received in a conversion or exchange, and the offer to buy or the purchase of the
             277      security converted or exchanged;
             278          (E) securities distributed as a dividend wherein the person receiving the dividend
             279      surrenders the right, or the alternative right, to receive a cash or property dividend is an offer or
             280      sale;
             281          (F) a dividend of a security of another issuer is an offer or sale; or
             282          (G) the issuance of a security under a merger, consolidation, reorganization,
             283      recapitalization, reclassification, or acquisition of assets constitutes the offer or sale of the
             284      security issued as well as the offer to buy or the purchase of a security surrendered in
             285      connection therewith, unless the sole purpose of the transaction is to change the issuer's
             286      domicile.
             287          (iv) The terms defined in Subsections (1)(bb)(i) and (ii) do not include:
             288          (A) a good faith gift;
             289          (B) a transfer by death;
             290          (C) a transfer by termination of a trust or of a beneficial interest in a trust;
             291          (D) a security dividend not within Subsection (1)(bb)(iii)(E) or (F); or
             292          (E) a securities split or reverse split.
             293          (cc) "Securities Act of 1933," "Securities Exchange Act of 1934," and "Investment
             294      Company Act of 1940" mean the federal statutes of those names as amended before or after the
             295      effective date of this chapter.
             296          (dd) "Securities Exchange Commission" means the United States Securities Exchange
             297      Commission created by the Securities Exchange Act of 1934.
             298          (ee) (i) "Security" means a:
             299          (A) note;
             300          (B) stock;
             301          (C) treasury stock;
             302          (D) bond;
             303          (E) debenture;
             304          (F) evidence of indebtedness;


             305          (G) certificate of interest or participation in a profit-sharing agreement;
             306          (H) collateral-trust certificate;
             307          (I) preorganization certificate or subscription;
             308          (J) transferable share;
             309          (K) investment contract;
             310          (L) burial certificate or burial contract;
             311          (M) voting-trust certificate;
             312          (N) certificate of deposit for a security;
             313          (O) certificate of interest or participation in an oil, gas, or mining title or lease or in
             314      payments out of production under such a title or lease;
             315          (P) commodity contract or commodity option;
             316          (Q) interest in a limited liability company;
             317          (R) life settlement interest; or
             318          (S) in general, an interest or instrument commonly known as a "security," or a
             319      certificate of interest or participation in, temporary or interim certificate for, receipt for,
             320      guarantee of, or warrant or right to subscribe to or purchase an item listed in Subsections
             321      (1)(ee)(i)(A) through (R).
             322          (ii) "Security" does not include:
             323          (A) an insurance or endowment policy or annuity contract under which an insurance
             324      company promises to pay money in a lump sum or periodically for life or some other specified
             325      period;
             326          (B) an interest in a limited liability company in which the limited liability company is
             327      formed as part of an estate plan where all of the members are related by blood or marriage, or
             328      the person claiming this exception can prove that all of the members are actively engaged in the
             329      management of the limited liability company; or
             330          (C) (I) a whole long-term estate in real property;
             331          (II) an undivided fractionalized long-term estate in real property that consists of 10 or
             332      fewer owners; or
             333          (III) an undivided fractionalized long-term estate in real property that consists of more
             334      than 10 owners if, when the real property estate is subject to a management agreement:
             335          (Aa) the management agreement permits a simple majority of owners of the real


             336      property estate to not renew or to terminate the management agreement at the earlier of the end
             337      of the management agreement's current term, or 180 days after the day on which the owners
             338      give notice of termination to the manager;
             339          (Bb) the management agreement prohibits, directly or indirectly, the lending of the
             340      proceeds earned from the real property estate or the use or pledge of its assets to a person or
             341      entity affiliated with or under common control of the manager; and
             342          (Cc) the management agreement complies with any other requirement imposed by rule
             343      by the Real Estate Commission under Section 61-2f-103 .
             344          (iii) For purposes of Subsection (1)(ee)(ii)(B), evidence that members vote or have the
             345      right to vote, or the right to information concerning the business and affairs of the limited
             346      liability company, or the right to participate in management, may not establish, without more,
             347      that all members are actively engaged in the management of the limited liability company.
             348          (ff) "State" means a state, territory, or possession of the United States, the District of
             349      Columbia, and Puerto Rico.
             350          (gg) (i) "Undivided fractionalized long-term estate" means an ownership interest in real
             351      property by two or more persons that is [a]:
             352          (A) a tenancy in common; or
             353          (B) any other legal form of undivided estate in real property including:
             354          (I) a fee estate;
             355          (II) a life estate; or
             356          (III) other long-term estate.
             357          (ii) "Undivided fractionalized long-term estate" does not include a joint tenancy.
             358          (hh) "Undue influence" means that a person uses a relationship or position of authority,
             359      trust, or confidence:
             360          (i) that is unrelated to a relationship created:
             361          (A) in the ordinary course of making investments regulated under this chapter; or
             362          (B) by a licensee providing services under this chapter;
             363          (ii) that results in:
             364          (A) an investor perceiving the person as having heightened credibility, personal
             365      trustworthiness, or dependability; or
             366          (B) the person having special access to or control of an investor's financial resources,


             367      information, or circumstances; and
             368          (iii) to:
             369          (A) exploit the trust, dependence, or fear of the investor;
             370          (B) knowingly assist or cause another to exploit the trust, dependence, or fear of the
             371      investor; or
             372          (C) gain control deceptively over the decision making of the investor.
             373          (ii) "Vulnerable adult" means an individual whose age or mental or physical
             374      impairment substantially affects that individual's ability to:
             375          (i) manage the individual's resources; or
             376          (ii) comprehend the nature and consequences of making an investment decision.
             377          [(hh)] (jj) "Whole long-term estate" means a person owns or persons through joint
             378      tenancy own real property through:
             379          (i) a fee estate;
             380          (ii) a life estate; or
             381          (iii) other long-term estate.
             382          [(ii)] (kk) "Working days" means 8 a.m. to 5 p.m., Monday through Friday, exclusive
             383      of legal holidays listed in Section 63G-1-301 .
             384          (2) A term not defined in this section shall have the meaning as established by division
             385      rule. The meaning of a term neither defined in this section nor by rule of the division shall be
             386      the meaning commonly accepted in the business community.
             387          (3) (a) This Subsection (3) applies to:
             388          (i) the offer or sale of a real property estate exempted from the definition of security
             389      under Subsection (1)(ee)(ii)(C); or
             390          (ii) the offer or sale of an undivided fractionalized long-term estate that is the offer of a
             391      security.
             392          (b) A person who, directly or indirectly receives compensation in connection with the
             393      offer or sale as provided in this Subsection (3) of a real property estate is not an agent,
             394      broker-dealer, investment adviser, or investment adviser representative under this chapter if
             395      that person is licensed under Chapter 2f, Real Estate Licensing and Practices Act, as:
             396          (i) a principal broker;
             397          (ii) an associate broker; or


             398          (iii) a sales agent.
             399          (4) The list of real property estates excluded from the definition of securities under
             400      Subsection (1)(ee)(ii)(C) is not an exclusive list of real property estates or interests that are not
             401      a security.
             402          Section 2. Section 61-1-18.5 is amended to read:
             403           61-1-18.5. Securities Commission -- Transition.
             404          (1) (a) There is created a Securities Commission.
             405          (b) The division shall provide staffing to the commission.
             406          (2) (a) The commission shall:
             407          (i) formulate and make recommendations to the director regarding policy and
             408      budgetary matters;
             409          (ii) submit recommendations regarding registration requirements;
             410          (iii) formulate and make recommendations to the director regarding the establishment
             411      of reasonable fees;
             412          (iv) act in an advisory capacity to the director with respect to the exercise of the
             413      director's duties, powers, and responsibilities;
             414          (v) conduct an administrative hearing under this chapter that is not:
             415          (A) delegated by the commission to an administrative law judge or the division relating
             416      to a violation of this chapter; or
             417          (B) expressly delegated to the division under this chapter;
             418          (vi) except as provided in Subsection (2)(b), and consistent with Section 61-1-20 ,
             419      impose a sanction as provided in this chapter;
             420          (vii) review rules made by the division for purposes of concurrence in accordance with
             421      Section 61-1-24 ; and
             422          (viii) perform other duties as this chapter provides.
             423          (b) (i) The commission may delegate to the division the authority to impose a sanction
             424      under this chapter.
             425          (ii) If under Subsection (2)(b)(i) the commission delegates to the division the authority
             426      to impose a sanction, a person who is subject to the sanction may petition the commission for
             427      review of the sanction.
             428          (iii) A person who is sanctioned by the division in accordance with this Subsection


             429      (2)(b) may seek agency review by the executive director only after the commission reviews the
             430      division's action.
             431          (3) (a) The governor shall appoint five members to the commission with the consent of
             432      the Senate as follows:
             433          (i) two members from the securities brokerage community:
             434          (A) who are not from the same broker-dealer or affiliate; and
             435          (B) who have at least five years prior experience in securities matters;
             436          (ii) one member from the securities section of the Utah State Bar:
             437          (A) whose practice primarily involves:
             438          (I) corporate securities; or
             439          (II) representation of plaintiffs in securities cases;
             440          (B) who does not routinely represent clients involved in:
             441          (I) civil or administrative litigation with the division; or
             442          (II) criminal cases brought under this chapter; and
             443          (C) who has at least five years prior experience in securities matters;
             444          (iii) one member who is an officer or director of a business entity not subject to the
             445      reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934; and
             446          (iv) one member from the public at large who has no active participation in the
             447      securities business.
             448          (b) A member may not serve more than two consecutive terms.
             449          (4) (a) Except as required by Subsection (4)(b) and subject to Subsection (4)(c), as
             450      terms of current members expire, the governor shall appoint a new member or reappointed
             451      member to a four-year term.
             452          (b) Notwithstanding Subsection (4)(a), the governor shall, at the time of appointment
             453      or reappointment, adjust the length of terms to ensure that the terms of commission members
             454      are staggered so that approximately half of the commission is appointed every two years.
             455          (c) For purposes of making an appointment to the commission, the governor:
             456          (i) shall as of May 12, 2009:
             457          (A) appoint all five members of the commission; and
             458          (B) stagger the terms of the five members of the commission to comply with
             459      Subsection (4)(b); and


             460          (ii) may not consider the commission an extension of the previous Securities Advisory
             461      Board.
             462          (d) When a vacancy occurs in the membership for any reason, the governor shall
             463      appoint a replacement member for the unexpired term.
             464          (e) A member shall serve until the member's respective successor is appointed and
             465      qualified.
             466          (f) The commission shall annually select one member to serve as chair of the
             467      commission.
             468          (5) (a) The commission shall meet:
             469          (i) at least quarterly on a regular date to be fixed by the commission; and
             470          (ii) at such other times at the call of:
             471          (A) the director; or
             472          (B) any two members of the commission.
             473          (b) A majority of the commission shall constitute a quorum for the transaction of
             474      business.
             475          (c) An action of the commission requires a vote of a majority of members present.
             476          (6) A member of the commission shall, by sworn and written statement filed with the
             477      Department of Commerce and the lieutenant governor, disclose any position of employment or
             478      ownership interest that the member has with respect to an entity or business subject to the
             479      jurisdiction of the division or commission. This statement shall be filed upon appointment and
             480      must be appropriately amended whenever significant changes occur in matters covered by the
             481      statement.
             482          (7) A member may not receive compensation or benefits for the member's service, but
             483      may receive per diem and travel expenses in accordance with:
             484          (a) Section 63A-3-106 ;
             485          (b) Section 63A-3-107 ; and
             486          (c) rules made by the Division of Finance pursuant to Sections 63A-3-106 and
             487      63A-3-107 .
             488          (8) (a) A rule or form made by the division under this section that is in effect on May
             489      11, 2009, is considered to have been concurred with by the commission as of May 12, 2009,
             490      until the commission acts on the rule or form.


             491          (b) For a civil or administrative action pending under this chapter as of May 12, 2009,
             492      brought under the authority of division under this chapter as in effect May 11, 2009 that may be
             493      brought only by the commission under this chapter as in effect on May 12, 2009:
             494          (i) the action shall be considered brought by the commission; and
             495          (ii) the commission may take any act authorized under this chapter regarding that
             496      action.
             497          Section 3. Section 61-1-20 is amended to read:
             498           61-1-20. Enforcement.
             499          (1) Whenever it appears to the director that a person has engaged, is engaging, or is
             500      about to engage in an act or practice constituting a violation of this chapter or a rule or order
             501      under this chapter, in addition to specific powers granted in this chapter:
             502          [(1)] (a) the director may issue an order directing the person to appear before the
             503      commission and show cause why an order should not be issued directing the person to cease
             504      and desist from engaging in the act or practice, or doing an act in furtherance of the activity;
             505          (b) the order to show cause shall state the reasons for the order and the date of the
             506      hearing;
             507          (c) the director shall promptly serve a copy of the order to show cause upon a person
             508      named in the order;
             509          (d) the commission shall hold a hearing on the order to show cause no sooner than 10
             510      business days after the order is issued;
             511          (e) after a hearing, the commission may issue an order to cease and desist from
             512      engaging in an act or practice constituting a violation of this chapter or a rule or order under
             513      this chapter;
             514          (f) the commission may impose a fine;
             515          (g) the commission may bar or suspend that person from associating with a licensed
             516      broker-dealer or investment adviser in this state; and
             517          (h) the commission may impose a combination of sanctions in Subsections (1)(e)
             518      through (g).
             519          (2) (a) The director may bring an action in the appropriate district court of this state or
             520      the appropriate court of another state to enjoin an act or practice and to enforce compliance
             521      with this chapter or a rule or order under this chapter[;].


             522          (b) Upon a proper showing in an action brought under this section, the court may:
             523          (i) issue a permanent or temporary, prohibitory or mandatory injunction;
             524          (ii) issue a restraining order or writ of mandamus;
             525          (iii) enter a declaratory judgment;
             526          (iv) appoint a receiver or conservator for the defendant or the defendant's assets;
             527          (v) order disgorgement;
             528          (vi) order rescission;
             529          (vii) order restitution;
             530          (viii) impose a fine of not more than $10,000 for each violation of the chapter; and
             531          (ix) enter any other relief the court considers just[; and].
             532          (c) The court may not require the division to post a bond in an action brought under
             533      this Subsection (2).
             534          (3) An order issued under Subsection (1) shall be accompanied by written findings of
             535      fact and conclusions of law.
             536          (4) When determining the severity of a sanction to be imposed under this section, the
             537      commission or court shall consider whether:
             538          (a) the person against whom the sanction is to be imposed exercised undue influence;
             539      or
             540          (b) the person against whom the sanction is imposed under this section knows or
             541      should know that an investor in the investment that is the grounds for the sanction is a
             542      vulnerable adult.
             543          Section 4. Section 61-1-21 is amended to read:
             544           61-1-21. Penalties for violations.
             545          (1) A person is guilty of a third degree felony who willfully violates:
             546          (a) a provision of this chapter except Sections 61-1-1 and 61-1-16 ;
             547          (b) an order issued under this chapter; or
             548          (c) Section 61-1-16 knowing the statement made is false or misleading in a material
             549      respect.
             550          (2) [A] Subject to the other provisions of this section, a person who willfully violates
             551      Section 61-1-1 :
             552          (a) is guilty of a third degree felony if, at the time the crime was committed, the


             553      property, money, or thing unlawfully obtained or sought to be obtained was worth less than
             554      $10,000; or
             555          (b) is guilty of a second degree felony if[: (i)], at the time the crime was committed, the
             556      property, money, or thing unlawfully obtained or sought to be obtained was worth $10,000 or
             557      more[; or].
             558          [(ii) (A)] (3) A person who willfully violates Section 61-1-1 is guilty of a second
             559      degree felony if:
             560          (a) at the time the crime was committed, the property, money, or thing unlawfully
             561      obtained or sought to be obtained was worth less than $10,000; and
             562          [(B)] (b) in connection with that violation, the violator knowingly accepted any money
             563      representing:
             564          [(I)] (i) equity in a person's primary residence;
             565          [(II)] (ii) a withdrawal from an individual retirement account; [or]
             566          [(III)] (iii) a withdrawal from a qualified retirement plan as defined in the Internal
             567      Revenue Code; [or]
             568          (iv) an investment by a person over whom the violator exercises undue influence; or
             569          (v) an investment by a person that the violator knows is a vulnerable adult.
             570          [(c)] (4) A person who willfully violates Section 61-1-1 is guilty of [an enhanced] a
             571      second degree felony punishable by imprisonment for an indeterminate term of not less than
             572      three years or more than 15 years if:
             573          [(i)] (a) at the time the crime was committed, the property, money, or thing unlawfully
             574      obtained or sought to be obtained was worth $10,000 or more; and
             575          [(ii)] (b) in connection with that violation, the violator knowingly accepted any money
             576      representing:
             577          [(A)] (i) equity in a person's primary residence;
             578          [(B)] (ii) a withdrawal from an individual retirement account; [or]
             579          [(C)] (iii) a withdrawal from a qualified retirement plan as defined in the Internal
             580      Revenue Code[.];
             581          (iv) an investment by a person over whom the violator exercises undue influence; or
             582          (v) an investment by a person that the violator knows is a vulnerable adult.
             583          [(3) A person may not be imprisoned for the violation of] (5) It is an affirmative


             584      defense under this section against a claim that the person violated an order issued under this
             585      chapter [if] for the person [proves] to prove that the person had no knowledge of the order.
             586          [(4)] (6) In addition to any other penalty for a criminal violation of this chapter, the
             587      sentencing judge may impose a penalty or remedy provided for in Subsection 61-1-20 (2)(b).


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