S 1399 Session 109 (1991-1992)
S 1399 General Bill, By Hayes, Bryan, Courtney, Giese, Holland, Leventis,
S.S. Martschink, McConnell, McGill, Moore, M.F. Mullinax, M.T. Rose, Russell,
Thomas and Wilson
A Bill to amend the Code of Laws of South Carolina, 1976, by adding Chapter 73
to Title 39 so as to provide for the State Commodity Code.
03/18/92 Senate Introduced and read first time SJ-8
03/18/92 Senate Referred to Committee on Labor, Commerce and
Industry SJ-9
04/28/92 Senate Committee report: Favorable Labor, Commerce and
Industry SJ-33
04/29/92 Senate Read second time SJ-316
04/30/92 Senate Read third time and sent to House SJ-29
05/05/92 House Introduced and read first time HJ-16
05/05/92 House Referred to Committee on Labor, Commerce and
Industry HJ-16
COMMITTEE REPORT
April 28, 1992
S. 1399
Introduced by SENATORS Robert W. Hayes, Jr., Holland, McConnell,
Bryan, Moore, Wilson, Russell, Mullinax, Leventis, Giese, Thomas,
Rose, Courtney, McGill and Martschink
S. Printed 4/28/92--S.
Read the first time March 18, 1992.
THE COMMITTEE ON LABOR, COMMERCE AND
INDUSTRY
To whom was referred a Bill (S. 1399), to amend the Code of Laws
of South Carolina, 1976, by adding Chapter 73 to Title 39, etc.,
respectfully
REPORT:
That they have duly and carefully considered the same, and
recommend that the same do pass:
J. VERNE SMITH, for Committee.
STATEMENT OF ESTIMATED FISCAL
IMPACT
1. Estimated Cost to State-First Year $-0-
2. Estimated Cost to State-Annually
Thereafter $-0-
S. 1399, if enacted, would amend the Code of Laws of South
Carolina, 1976, by adding Chapter 73 to Title 39 so as to provide for the
State Commodity Code. This chapter provides for rules and regulations
governing the Commodity Code. It defines the duties of the
administrator, sets fees, requires an examination and licensing procedure
and requirements.
Section 39-73-330 provides for the administration of this chapter by
the South Carolina Secretary of State. There will be no additional
general funds needed by the Office of the Secretary of State to carry out
these duties. Appropriate personnel and funds are available within this
office to adequately support this new law.
Section 39-73-520 provides for licensing fees by commodity broker-dealers and commodity sales representatives. Legislation does not state
that revenue generated by the licensing fees will be retained by the
Secretary of State's Office, it is therefore, assumed it goes to the General
Fund.
If S. 1399 is enacted, there will be no cost to the General Fund.
It is not possible at this time to identify total revenue that may be
generated by the legislation.
Prepared By: Approved By:
Cheryl H. Morris George N. Dorn, Jr.
State Budget Analyst State Budget Division
A BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976,
BY ADDING CHAPTER 73 TO TITLE 39 SO AS TO PROVIDE FOR
THE STATE COMMODITY CODE.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 39 of the 1976 Code is amended by adding:
"CHAPTER 73
State Commodity Code
Article 1
Commodity Transactions
Section 39-73-10. As used in this chapter:
(1) `Administrator' means the South Carolina Secretary of State.
(2) `Board of Trade' means a person or group of persons engaged
in buying or selling a commodity or receiving it for sale on consignment,
whether the person or group of persons is characterized as a board of
trade, exchange, or other form of marketplace.
(3) `CFTC Rule' means a rule, regulation, or order of the
Commodity Futures Trading Commission in effect on the effective date
of this chapter and their amendments unless the administrator, within ten
days following the effective date of an amendment disallows its
application to this chapter by regulation.
(4) `Commodity' means, except as otherwise specified by the
administrator, an agricultural, a grain, or a livestock product or
by-product, a metal or mineral including a precious metal, a gem, or
gemstone whether characterized as precious, semi-precious, or
otherwise, a fuel whether liquid, gaseous, or otherwise, a foreign
currency, and other goods, articles, products, or items. It does not
include:
(a) a numismatic coin whose fair market value is at least fifteen
percent higher than the value of the metal it contains;
(b) real property or a timber, an agricultural, or a livestock
product grown or raised on real property and offered or sold by the
owner or lessee of the property; or
(c) a work of art offered or sold by art dealers at public auction
or offered or sold through a private sale by the owner.
(5) `Commodity Contract' means an account, an agreement, or a
contract for the purchase or sale, primarily for speculation or investment
purposes and not for use or consumption by the offeree or purchaser of
one or more commodities, whether for immediate or subsequent delivery
or whether delivery is intended by the parties, and whether characterized
as a cash contract, deferred shipment or deferred delivery contract,
forward contract, futures contract, installment or margin contract,
leverage contract, or otherwise. A commodity contract offered or sold,
in the absence of evidence to the contrary, is presumed to be offered or
sold for speculation or investment purposes. A commodity contract does
not include a contract or an agreement which requires and under which
the purchaser receives, within twenty-eight calendar days from the
payment in good funds of a portion of the purchase price, physical
delivery of the total amount of each commodity to be purchased under
the contract or agreement.
(6) `Commodity Exchange Act' means the act of Congress known
as the Commodity Exchange Act, as amended, unless the administrator
within ten days following the effective date of an amendment, disallows
the application to this chapter by regulation.
(7) `Commodity Futures Trading Commission' means the
independent regulatory agency established by Congress to administer the
Commodity Exchange Act.
(8) `Commodity merchant' means any of the following as defined
or described in the Commodity Exchange Act or by CFTC Rule:
(a) futures commission merchant;
(b) commodity pool operator;
(c) commodity trading advisor;
(d) introducing broker;
(e) leverage transaction merchant;
(f) an associated person of item (a), (b), (c), (d), or (e);
(g) floor broker;
(h) other person, other than a futures association, required to
register with the Commodity Futures Trading Commission.
(9) `Commodity option' means an account, an agreement, or a
contract giving a party the right but not the obligation to purchase or sell
one or more commodities or one or more commodity contracts, or all of
the foregoing, whether characterized as an option, privilege, indemnity,
bid, offer, put, call, advance guaranty, decline guaranty, or otherwise.
It does not include an option traded on a national securities exchange
registered with the United States Securities and Exchange Commission.
(10) `Financial institution' means a bank, savings institution, or
trust company organized under, or supervised pursuant to the laws of the
United States or its states.
(11) `Offer' includes every offer to sell, offer to purchase, or offer
to enter into a commodity contract or commodity option.
(12) `Person' means an individual, a corporation, a partnership, an
association, a joint-stock company, a trust where the interests of the
beneficiaries are evidenced by a security, an unincorporated
organization, a government, or a political subdivision of a government.
It does not include a contract market designated by the Commodity
Futures Trading Commission, a clearinghouse of it, a national securities
exchange registered with the Securities and Exchange Commission, or
an employee, an officer, or a director of the contract market,
clearinghouse, or exchange acting solely in that capacity.
(13) `Precious metal' means the following in either coin, bullion,
or other form:
(a) silver;
(b) gold;
(c) platinum;
(d) palladium;
(e) copper;
(f) other items the administrator may specify by regulation.
(14) `Sale' or `sell' includes every sale, contract of sale, contract to
sell, or disposition for value.
Section 39-73-20. Except as otherwise provided in Section
39-73-30 or Section 39-73-40 no person may sell or purchase or offer to
sell or purchase a commodity under commodity contract or under
commodity option or offer to enter into or enter into as seller or
purchaser a commodity contract or a commodity option.
Section 39-73-30. (A) The prohibitions in Section 39-73-20 do
not apply to transaction offered by and in which any of the following
persons, or an employee, an officer, or a director of them acting solely
in that capacity, is the purchaser or seller:
(1) a person registered with the Commodity Futures Trading
Commission as a futures commission merchant or as a leverage
transaction merchant whose activities require registration;
(2) a person registered with the Securities and Exchange
Commission as a broker-dealer whose activities require registration;
(3) a person affiliated with, and whose obligations and
liabilities under the transaction are guaranteed by, a person referred to
in item (1) or (2);
(4) a person who is a member of a contract market designated
by the Commodity Futures Trading Commission, or clearinghouse of it;
(5) a financial institution;
(6) a person registered under the laws of this State as a
securities broker-dealer whose activities require registration;
(7) a person registered as a commodity broker-dealer or
commodity sales representative in accordance with the provisions of
Article 5.
(B) The exemptions in this section do not apply to a transaction
or an activity prohibited by the Commodity Exchange Act or a CFTC
Rule.
Section 39-73-40. (A) The prohibitions in Section 39-73-20 do
not apply to:
(1) an account, an agreement, or a transaction within the
exclusive jurisdiction of the Commodity Futures Trading Commission
as granted under the Commodity Exchange Act;
(2) a commodity contract for the purchase of one or more
precious metals which requires, and under which the purchaser receives,
within twenty-eight calendar days from the payment in good funds of a
portion of the purchase price, physical delivery of the quantity of the
precious metals purchased by the payment. For purposes of this
paragraph physical delivery is deemed to have occurred if, within the
twenty-eight day period, the quantity of precious metals purchased by
the payment is delivered, whether in specifically segregated or fungible
bulk forms into the possession of a depository other than the seller
which is:
(a) a financial institution;
(b) a depository the warehouse receipts of which are
recognized for delivery purposes for a commodity on a contract market
designated by the Commodity Futures Trading Commission;
(c) a storage facility licensed or regulated by the United States
or its agencies, or
(d) a depository designated by the administrator. The
depository or other person which itself qualifies as a depository or a
qualified seller shall issue and the purchaser shall receive a certificate,
a document of title, confirmation, or other instrument evidencing that the
quantity of precious metals has been delivered to the depository and is
being and will continue to be held by the depository on the purchaser's
behalf, free and clear of all liens and encumbrances other than liens of
the purchaser, tax liens, liens agreed to by the purchaser, or liens of the
depository for fees and expenses, which previously have been disclosed
to the purchaser;
(3) a commodity contract solely between persons engaged in
producing, processing, using commercially, or handling as merchants,
each commodity subject to the contract or a by-product of it; or
(4) a commodity contract under which the offeree or the
purchaser is a person referred to in Section 39-73-30, an insurance
company, an investment company as defined in the Investment
Company Act of 1940, or an employee pension and profit sharing or
benefit plan other than a self-employed individual retirement plan or
individual retirement account.
(B) For purposes of item (2) of subsection (A) a qualified seller is
a person who:
(1) is a seller of precious metals and has a tangible net worth
of at least five million dollars or has an affiliate who unconditionally has
guaranteed the obligations and liabilities of the seller, and the affiliate
has a tangible net worth of at least five million dollars;
(2) has stored precious metals with one or more depositories
on behalf of customers for at least the previous three years;
(3) before an offer and annually files with the administrator a
sworn notice of intent to act as a qualified seller under item (2) of
subsection (A) containing:
(a) the seller's name and address and names of its directors,
officers, controlling shareholders, partners, principals, and other
controlling persons;
(b) the address of its principal place of business, state and
date of incorporation or organization, and the name and address of the
seller' registered agent in this State;
(c) a statement that the seller, or a person affiliated with the
seller who has guaranteed the obligations and liabilities of the seller has
a tangible net worth of at least five million dollars;
(d) depository information including:
(i) the name and address of the depository or
depositories that the seller intends to sue;
(ii) the name and address of each depository where the
seller has stored precious metals on behalf of customers for the previous
three years;
(iii) independent verification from each depository
named in subsubitem (ii) that the seller has in fact stored precious metals
on behalf of the seller's customers for the previous three years and a
statement of total deposits made during this period;
(e) financial statements for the seller or the person affiliated
with the seller who has guaranteed the obligations and liabilities of the
seller for the past three years, audited by an independent certified public
accountant, with the accountant's report;
(f) a statement describing the details of all civil, criminal, or
administrative proceedings currently pending or adversely resolved
against the seller or its directors, officers controlling shareholders,
partners, principals, or other controlling persons during the past ten
years including:
(i) civil litigation and administrative proceedings
involving securities or commodities violations or fraud;
(ii) criminal proceedings;
(iii) denials, suspensions, or revocations of securities or
commodities, licenses, or registrations;
(iv) suspensions or expulsions from membership in or
associations with self-regulatory organizations registered under the
Securities Exchange Act of 1934 or the Commodities Exchange Act;
(v) a statement that there were no proceedings.
(4) notifies the administrator within fifteen days of material
changes in the information provided in the notice of intent;
(5) annually furnishes to each purchaser for whom the seller
is then storing precious metals, and to the administrator a report by an
independent certified public accountant of the accountant's examination
of the seller's precious metals storage program.
(C) The administrator, upon request by the seller, may waive one
or more of the exemption requirements in subsection (B), conditionally
or unconditionally.
(D) The administrator, by order, may deny, suspend, revoke, or
place limitations on the authority to engage in business as a qualified
seller under item (2) of subsection (A) if the administrator finds that the
order is in the public interest and that the person, the person's officers,
directors, partners, agents, servants, or employees, a person occupying
a similar status or performing similar functions, or a person who directly
or indirectly controls or is controlled by the seller, or his affiliates or
subsidiaries:
(1) has filed a notice of intention under subsection (C) with
the administrator or the designee of the administrator which was
incomplete in material respect or contained a statement which was, in
light of the circumstances under which it was made, false or misleading
with respect to a material fact;
(2) within the last ten years, has pled guilty or nolo contendere
to, or been convicted of a crime indicating a lack of fitness to engage in
the investment commodity business;
(3) has been enjoined permanently or temporarily by a court
of competent jurisdiction from engaging in or continuing conduct or a
practice which injunction indicates a lack of fitness to engage in the
investment commodities business;
(4) is the subject of an order of the administrator denying,
suspending, or revoking the person's license as a securities
broker-dealer, sales representative, or investment advisor;
(5) is the subject of one or more of the following orders which
currently are effective and which were issued within the last five years:
(a) an order by a securities agency or an administrator of
another state, Canadian province or territory, the Securities and
Exchange Commission, or the Commodity Futures Trading Commission
entered after notice and opportunity for hearing, denying, suspending,
or revoking the person's registration as a futures commission merchant,
commodity trading adviser, commodity pool operator, securities
broker-dealer, sales representative, or investment adviser, or the
substantial equivalent of the foregoing;
(b) suspension or expulsion from membership in, or
association with, a self-regulatory organization registered under the
Securities Exchange Act of 1934 or the Commodity Exchange Act;
(c) a United States Postal Service fraud order;
(d) a cease and desist order entered after notice and
opportunity of hearing by the administrator or a securities agency or an
administrator of another state, Canadian province or territory, the
Securities and Exchange Commission, or the Commodity Futures
Trading Commission;
(e) an order entered by the Commodity Futures Trading
Commission denying, suspending, or revoking registration under the
Commodity Exchange Act.
(6) has engaged in an unethical or a dishonest act or practice
in the investment commodities or securities business; or
(7) has failed reasonably to supervise sales representatives or
employees.
(E) If the public interest or the protection of investors so requires,
the administrator, by order, summarily may deny or suspend the
exemption for a qualified seller. Upon the entry of the order the
administrator promptly shall notify the person claiming the status that an
order has been entered, the reasons for it, and that within thirty days
after the receipt of a written request the matter will be set for hearing.
Section 49-73-355 applies with respect to subsequent proceedings.
(F) If the administrator finds that an applicant or a qualified seller
is no longer in existence, has ceased to do business, is subject to an
adjudication of mental incompetence or to the control of a committee,
conservator, or guardian, or cannot be located after reasonable search,
he, by order, may deny or revoke the exemption for a qualified seller.
(G) The administrator may promulgate regulations prescribing the
terms and conditions of transactions and contracts covered by this
chapter which are not within the exclusive jurisdiction of the
Commodity Futures Trading Commission as granted by the Commodity
Exchange Act exempting and conditionally or unconditionally and
otherwise implementing this chapter for the protection of purchasers and
sellers of commodities.
Section 39-73-50. (A) No person may engage in a trade or
business or otherwise act as a commodity merchant unless he:
(1) is registered or temporarily licensed with the Commodity
Futures Trading Commission for each activity constituting the person as
a commodity merchant and the registration or temporary license has not
expired or been suspended or revoked; or
(2) is exempt from registration by virtue of the Commodity
Exchange Act or of a CFTC rule.
(B) No board of trade may trade or provide a place for the trading
of a commodity contract or commodity option required to be traded on
or subject to the rules of a contract market designated by the Commodity
Futures Trading Commission unless the board of trade has been so
designated for the commodity contract or commodity option and the
designation has not been vacated, suspended, or revoked.
Section 39-73-60. No person, directly or indirectly, in or in
connection with the purchase or sale of, the offer to sell, the offer to
purchase, the offer to enter into, or the entry into of, a commodity
contract or commodity option subject to Sections 39-73-20, 39-73-30,
or 39-73-40(A)(2) or (4), may:
(1) cheat or defraud or attempt to cheat or defraud, a person or
employ a device, a scheme, or an artifice to defraud a person;
(2) make a false report, enter a false record, or make an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made, in the light of the circumstances
under which they were made, not misleading;
(3) engage in a transaction, an act, a practice, or a course of
business including, without limitation a form of advertising or
solicitation which operates or would operate as a fraud or deceit upon a
person; or
(4) misappropriate or convert the funds, security, or property of
a person.
Section 39-73-70. (A) The act, omission or failure of an official,
an agent, or another person acting for an individual, an association, a
partnership, a corporation, or a trust within the scope of his employment
or office is deemed the act, omission or failure of the individual,
association, partnership, corporation, or trust as well as of the official,
agent, or other person.
(B) Every person who directly or indirectly controls another
person liable under this chapter, every partner, officer, or director of the
other person, every person occupying a similar status or performing
similar functions, every employee of the other person who materially
aids in the violation also is liable jointly and severally with and to the
same extent as the other person, unless the person who also is liable by
virtue of this section sustains the burden of proof that he did not know
and in exercise or reasonable care could not have known of the existence
of the facts by reason of which the liability is alleged to exist.
Section 39-73-80. Nothing in this chapter impairs, derogates, or
otherwise, affects the authority or powers of the administrator under
state securities law or the application of this chapter to a person or
transaction subject to state securities law.
Section 39-73-90. This chapter may be construed and implemented
to effectuate its general purpose to protect investors, to prevent and
prosecute illegal and fraudulent schemes involving commodity contracts,
and to maximize coordination with federal and other states' laws and the
administration and enforcement of them. This chapter does not create
rights or remedies upon which actions may be brought by private
persons against persons who violate this chapter.
Article 3
Administration and Enforcement
Section 39-73-310. (A) The administrator may make
investigations, within or without this State, as it finds necessary or
appropriate to:
(1) determine whether a person has violated or is about to
violate this chapter or a regulation of the administrator; or
(2) aid in enforcement of this chapter.
(B) The administrator may publish information concerning a
violation of this chapter or a regulation of the administrator.
(C) For purposes of an investigation or a proceeding under this
chapter the administrator or an officer or employee designated by
regulation may administer oaths and affirmations, subpoena witnesses,
compel their attendance, take evidence, and require the production of
books, papers, correspondence, memoranda, agreements, or other
documents or records which the administrator finds to be relevant or
material to the inquiry.
(D)(1) If a person does not give testimony or produce the
documents required by the administrator or a designated employee
pursuant to an administrative subpoena, the administrator or designated
employee may apply for a court order compelling compliance with the
subpoena or the giving of the required testimony.
(2) The request for order of compliance may be addressed to:
(a) the circuit court of Richland County or the circuit court of
the county where service may be obtained on the person refusing to
testify or produce if the person is within this State; or
(b) the appropriate court of the state having jurisdiction
over the person refusing to testify or produce if the person is outside this
State.
Section 39-73-315. (A) If the administrator believes, whether or
not based upon an investigation conducted under Section 39-73-30, that
a person has engaged or is about to engage in an act or a practice
constituting a violation of this chapter or a related regulation, the
administrator may:
(1) issue a cease and desist order;
(2) issue an order imposing a civil penalty of not more than
ten thousand dollars for a single violation or one hundred thousand
dollars for multiple violations in a single proceeding or a series of
related proceedings;
(3) initiate the actions specified in subsection (B); or
(4) take disciplinary action against a licensed person as
specified in Section 39-73-580.
(B) The administrator may institute one or more of the following
actions in the appropriate courts of this State or in the appropriate courts
of another state in addition to legal or equitable remedies otherwise
available;
(1) a declaratory judgment;
(2) an action for a prohibitory or mandatory injunction to
enjoin the violation and to ensure compliance with this chapter or a
regulation or order of the administrator;
(3) an action for disgorgement;
(4) an action for appointment of a receiver or conservator for
the defendant or the defendant's assets;
(5) an action to enjoin permanently a person from acting as a
commodity broker-dealer or a commodity sales representative, as
defined in Section 39-73-510.
Section 39-73-320. (A)(1) Upon a proper showing by the
administrator that a person has violated or is about to violate this chapter
or a regulation or order of the administrator, the court may grant
appropriate legal or equitable remedies.
(2) Upon a showing of a violation of this chapter or a
regulation or order of the administrator, the court, in addition to
traditional legal and equitable remedies including temporary restraining
orders, permanent or temporary prohibitory or mandatory injunctions,
and writs of prohibition or mandamus, may grant the following special
remedies:
(a) imposition of a civil penalty of not more than ten thousand
dollars for a single violation or one hundred thousand dollars for
multiple violations in a single proceeding or a series of related
proceedings;
(b) disgorgement;
(c) declaratory judgment;
(d) restitution to investors wishing restitution;
(e) appointment of a receiver or conservator for the defendant
or the defendant's assets;
(f) injunction permanently enjoining the defendant from
acting as a commodity broker-dealer or a commodity sales
representative, as defined in Section 39-73-510.
(3) Appropriate remedies when the defendant is shown only
about to violate this chapter or a regulation or order of the administrator
is limited to:
(a) temporary restraining order;
(b) temporary or permanent injunction;
(c) writ of prohibition or mandamus; or
(d) order appointing a receiver or conservator for the
defendant or the defendant's assets.
(B) The court may not require the administrator to post a bond in
an official action under this chapter.
(C)(1) Upon a proper showing by the administrator or securities
or commodity agency of another state that a person, other than a
government or governmental agency or instrumentality, has violated, or
is about to violate, the commodity code of that state or a regulation or
order of the administrator or securities or commodity agency of that
state, the court may grant appropriate legal and equitable remedies.
(2) Upon showing of a violation of the securities or
commodity act of the foreign state or a regulation or order of the
administrator or securities or commodity agency of the foreign state, the
court, in addition to traditional legal or equitable remedies including
temporary restraining orders, permanent or temporary prohibitory or
mandatory injunctions, and writs of prohibition or mandamus, may grant
the following special remedies:
(a) disgorgement;
(b) appointment of a receiver, conservator, or ancillary
receiver or conservator for the defendant or the defendant's assets
located in this State.
(3) Appropriate remedies when the defendant is shown only
about to violate the securities or commodity act of the foreign state or a
regulation or order of the administrator or securities or commodity
agency of the foreign state is limited to:
(a) temporary restraining order;
(b) temporary or permanent injunction;
(c) writ or prohibition or mandamus; or
(d) order appointing a receiver, conservator, or ancillary
receiver or conservator for the defendant or the defendant's assets
located in this State.
Section 39-73-325. (A) A person who wilfully violates a
regulation or order of the administrator under this chapter, upon
conviction, must be fined not more than twenty thousand dollars, or
imprisoned not more than ten years, or both, for each violation.
(B) A person convicted of violating a regulation or order under
this chapter may be fined but must not be imprisoned if the person
proves he had no knowledge of the rule or order.
(C) The administrator may refer evidence available concerning
violations of this chapter or a regulation or order of the administrator to
the Attorney General or the appropriate solicitor who, with or without
a reference from the administrator, may institute the appropriate criminal
proceedings under this chapter.
Section 39-73-330. (A) This chapter must be administered by the
South Carolina Secretary of State.
(B) The administrator and his employees may not use information
filed with or obtained by the administrator which is not public
information for personal gain or benefit and may not conduct securities
or commodity dealings based upon the information, even though public,
if there has not been sufficient time for the securities or commodity
markets to assimilate the information.
(C)(1) Except as provided in item (2), all information collected,
assembled, or maintained by the administrator is public information and
is available for examination by the public.
(2) The following information is confidential and an exception
to item (1):
(a) information obtained in private investigations pursuant to
Section 39-73-310;
(b) information made confidential by the Freedom of
Information Act;
(c) information obtained from federal agencies which must not
be disclosed under federal law.
(3) The administrator in his discretion may disclose
information made confidential under subsection (C)(2)(a) to persons
identified in Section 39-73-335(A).
(4) This chapter does not create or derogate a privilege which
exists at common law, by statute, or otherwise when documentary or
other evidence is sought under subpoena directed to the administrator or
his employees.
Section 39-73-335. (A) To encourage uniform application and
interpretation of this chapter and securities regulation and enforcement
in general, the administrator and his employees may cooperate,
including bearing the expense of the cooperation, with the securities
agencies or administrator of another jurisdiction, the Canadian province
or territory, or other agencies administering this chapter, the Commodity
Futures Trading Commission, the Securities and Exchange Commission,
a self-regulatory organization established under the Commodity
Exchange Act or the Securities Exchange Act of 1934, a national or an
international organization of commodities or securities officials or
agencies, and a governmental law enforcement agency.
(B) The cooperation authorized by subsection (A) includes, but is
not limited to:
(1) making joint examinations or investigations;
(2) holding joint administrative hearings;
(3) filing and prosecuting joint litigation;
(4) sharing and exchanging personnel;
(5) sharing an exchanging information and documents;
(6) formulating and adopting mutual regulations, statements
of policy, guidelines, proposed statutory changes, and releases;
(7) issuing and enforcing subpoenas at the request of the
agency administering this chapter in another jurisdiction, the securities
agency of another jurisdiction, the Commodity Futures Trading
Commission, or the Securities and Exchange Commission if the
information sought also is subject to lawful subpoena for conduct
occurring in this State.
Section 39-73-340. (A) In addition to specific authority granted
elsewhere in this chapter, the administrator may make, amend, rescind
regulations, forms, and orders as are necessary to carry out this chapter.
The regulations or forms must include, but are not limited to, regulations
defining terms, whether or not used in this chapter. the definitions must
not be inconsistent with this chapter. For the purpose of regulations or
forms the administrator may classify commodities and commodity
contracts, persons, and matters within the administrator's jurisdiction.
(B) Unless specifically provided in this chapter, no regulation,
form, or order may be adopted, amended, or rescinded unless the
administrator finds that action is:
(1) necessary or appropriate in the public interest or for the
protection of investors;
(2) consistent with the purposes fairly intended by the policy
and provisions of this chapter.
(C) Regulations and forms of the administrator must be published.
(D) A provision of this chapter imposing liability does not apply
to an act done or omitted in good faith in conformity with a regulation,
order, or form adopted by the administrator, notwithstanding that the
regulation, order, or form may be amended, rescinded, or determined by
judicial or other authority to be invalid.
Section 39-73-345. When a person, including a nonresident of this
State, engages in conduct prohibited or made actionable by the chapter
or a regulation or order of the administrator, the engaging in the conduct
constitutes the appointment of the administrator as the person's attorney
to receive service of lawful process in a noncriminal proceeding against
the person, a successor, or personal representative, which grows out of
that conduct and which is brought under the chapter or a regulation or
order of the administrator with the same force as if served personally.
Section 39-73-350. (A) Sections 39-73-20, 39-73-50, and
39-73-60 apply to persons who:
(1) sell or offer to sell when an offer to:
(a) sell is made in this State; or
(b) buy is made and accepted in this State;
(2) buy or offer to buy when an offer to:
(a) buy is made in this State; or
(b) sell is made and accepted in this State.
(B) For the purpose of this section, an offer to sell or buy is made
in this State, whether or not either party is then present in this State,
when the offer:
(1) originates from this State; or
(2) is directed by the offeror to this State and received at the
place to which it is directed, or at a post office in this State for a mailed
offer.
(C) For the purpose of this section, an offer to buy or sell is
accepted in this State when acceptance:
(1) is communicated to the offeror in this State;
(2) previously has not been communicated to the offeror,
orally or in writing, outside this State, and acceptance is communicated
to the offeror in this State, whether or not either party is then present in
this State, when the offeree directs it to the offeror in this State,
reasonably believing the offeror to be in this State and it is received at
the place to which it is directed or at a post office in this State for a
mailed acceptance.
(D) An offer to sell or to buy is not made in this State when one
or both of the following exist:
(1) The publisher circulates or there is circulated on his behalf
in this State a bona fide newspaper or other publication of general,
regular, and paid circulation which is not published in this State or
which is published in this State but has had more than two-thirds of its
circulation outside this State during the past twelve months.
(2) A radio or television program originating outside this State
is received in this State.
Section 39-73-355. (A) The administrator shall commence an
administrative proceeding under this chapter by entering a notice of
intent to do a contemplated act or a summary order. The notice of intent
or summary order may be entered without notice, and without
opportunity for hearing and need not be supported by findings of fact or
conclusions of law but must be in writing.
(B) Upon entry of a notice of intent or summary order, the
administrator promptly shall notify all interested parties that the notice
or summary order has been entered and its reasons. If the proceeding is
pursuant to a notice of intent, the administrator shall inform all
interested parties of the date, time, and place set for the hearing on the
notice. If the proceeding is pursuant to a summary order, the
administrator shall inform all interested parties that they have thirty
business days from the entry of the order to file a written request for a
hearing on the matter with the administrator and that the hearing will be
scheduled to commence within thirty business days after the receipt of
the written request.
(C) If the proceeding is pursuant to a summary order, the
administrator, whether or not a written request for a hearing is received
from an interested party, may set the matter down for hearing on the
administrator's own motion.
(D) If no hearing is requested and none is ordered by the
administrator, the summary order automatically becomes a final order
after thirty business days.
(E) If a hearing is requested or ordered, the administrator, after
notice of a hearing to and an opportunity for a hearing for all interested
persons, may modify or vacate the order or extend it until final
determination.
(F) No final order or order after hearing may be returned without:
(1) appropriate notice to all interested persons;
(2) opportunity for hearing by all interested persons;
(3) entry of written findings of fact and conclusions of law.
(G) Every hearing in an administrative proceeding under this
chapter is public unless the administrator grants a request joined in by
all the respondents that the hearing be conducted privately.
Section 39-73-360. (A) A person aggrieved by a final order of the
administrator may obtain a review of the order in court by filing, within
sixty days after the entry of the order, a written petition requesting the
order be modified or set aside in whole or in part. A copy of the petition
for review must be served upon the administrator.
(B) Upon the filing of a petition for review, except where the
taking of additional evidence is ordered by the court pursuant to
subsection (E) or (F), the court shall have exclusive jurisdiction of the
matter, and the administrator may not modify or set aside the order, in
whole or part.
(C) The filing of a petition for review under subsection (A), unless
specifically ordered by the court, does not operate as a stay of the
administrator's order, and the administrator may enforce or ask the court
to enforce the order pending the outcome of the review proceedings.
(D) Upon receipt of the petition for review, the administrator shall
certify and file in the court a copy of the order and the transcript or
record of the evidence upon which it was based. If the order became
final by operation of law under Section 39-73-355(D), the administrator
shall certify and file in court the summary order and evidence of its
source upon the parties to it and an affidavit certifying that no hearing
has been held and the order became final pursuant to Section
39-73-355(D).
(E) If the aggrieved party or the administrator applies to the court
for leave to adduce additional evidence and shows to the satisfaction of
the court there were reasonable grounds for failure to adduce the
evidence in the hearing before the administrator or other good cause, the
court may order the additional evidence to be taken by the administrator
under conditions the court considers proper.
(F) If new evidence is ordered taken by the court, the
administrator may modify the findings and order by reason of the
additional evidence and shall file in the court the additional evidence
with modified or new findings or order.
(G) The court shall review the petition based upon the original
record before the administrator as amended under subsections (E) and
(F). The findings of the administrator as to the facts, if supported by
competent, material, and substantive evidence, are conclusive. Based
upon this review, the court may affirm, modify, enforce, or set aside the
order, in whole or in part.
(H) The judgment of the court is subject to review by the court.
Section 39-73-365. It is not necessary to negate the exemptions of
this chapter in a complaint, information, indictment, a writ, or a
proceeding brought under this chapter. The burden of proof of the
exemption is upon the party claiming it.
Section 39-73-370. It is a defense in a complaint, information,
indictment, a writ, or a proceeding brought under this chapter alleging
a violation of Section 39-73-20 based solely on the failure in an
individual case to make physical delivery within the applicable time
under Section 39-73-10(5) or Section 39-73-40(A)(2) if:
(1) failure to make physical delivery was due solely to factors
beyond the control of the seller, the seller's officers, directors, partners,
agents, servants, or employees, persons occupying a similar status or
performing similar functions, persons who directly or indirectly control
or are controlled by the seller, or the seller's affiliates, subsidiaries, or
successors;
(2) physical delivery was completed within a reasonable time
under the applicable circumstances.
Article 5
Licensing
Section 39-73-510. (A) As used in this article:
(1) `Commodity broker-dealer' means a person engaged in the
business of effecting transactions in commodity contracts or commodity
options, as defined in Article I, for the account of others or for the
person's own account.
(2) `Commodity sales representative' means a person
authorized to act and acting for a commodity broker-dealer in effecting
or attempting to effect a transaction in a commodity contract or a
commodity option.
(B) The application for licensing must contain the information the
administrator determines by regulation is necessary or appropriate to
facilitate the administration of this chapter.
Section 39-73-520. (A) An applicant for licensing shall pay a
registration fee as follows:
(1) commodity broker-dealer:
(a) two hundred fifty dollars;
(b) one hundred dollars for each branch office;
(2) commodity sales representative: seventy-five dollars.
(B) Except in a year in which a licensing fee is paid, an applicant
shall pay an annual fee as follows:
(1) a commodity broker-dealer:
(a) seventy-five dollars;
(b) fifty dollars for each branch office in this State;
(2) commodity sales representative: fifty dollars.
(C) For purposes of this section, a branch office means each office
of a commodity broker-dealer in this State, other than the principal
office in this State of the commodity broker-dealer, from which three or
more commodity sales representatives transact business.
(D) If an application is denied or withdrawn or the license is
terminated by revocation, cancellation, or withdrawal, the administrator
retains the fee paid.
Section 39-73-530. (A) The administrator, by regulation or order,
may impose an examination requirement upon:
(1) an applicant applying for licensing under this article;
(2) a class of applicants.
(B) A required examination may be administered by the
administrator or designee of the administrator. Examinations may be
oral, written, or both and may differ for each class of applicants.
(C) The administrator, by order, may waive an examination
requirement imposed pursuant to subsection (A) as to an applicant if he
determines that the examination is not necessary for the protection of
investors.
Section 39-73-540. (A) Unless a proceeding under Section
39-73-580 has been instituted, the license of a commodity broker-dealer
or commodity sales representative is effective thirty days after an
application for licensing and the last of additional information requested
by the administrator or the administrator's designee has been filed if all
examination requirements imposed pursuant to Section 39-73-530 have
been satisfied. The administrator, by order, may authorize an earlier
effective date of licensing.
(B) The license of a commodity broker-dealer or commodity sales
representative expires December thirty-first of the year for which it was
issued or at another time the administrator by regulation prescribes.
(C) The license of a commodity sales representative is effective
only with respect to transactions effected as an employee or otherwise
on behalf of the commodity broker-dealer for whom the commodity
sales representative is licensed.
(D) No person at one time may act as a commodity sales
representative for more than one commodity broker-dealer, except where
the:
(1) commodity broker-dealers for whom the commodity sales
representative act are affiliated by direct or indirect common control, a
commodity sales representative may represent each of those
organizations;
(2) administrator, by regulation or order, authorizes multiple
licenses as consistent with the public interest and protection of investors.
(E) When a commodity sales representative begins or terminates
association with a commodity broker-dealer or begins or terminates
activities which make that person a commodity sales representative the
commodity sales representative and the former commodity broker-dealer
on whose behalf the commodity sales representative was acting shall
notify promptly the administrator or his designee.
(F) If the administrator determines by regulation that one or more
classifications of licenses as a commodity broker-dealer or commodity
sales representative which are subject to limitations and conditions on
the nature of the activities which may be conducted by those persons are
consistent with the public interest and the protection of investors, the
administrator may authorize the licensing of persons subject to specific
limitations and conditions.
Section 39-73-550. A commodity broker-dealer or commodity sales
representative licensed under this chapter shall file an annual report with
the fee specified in Section 39-73-520(B) with the administrator or his
designee at a time and including the information the administrator
determines, by regulation or order, is necessary or appropriate.
Section 39-73-560. (A)(1)(a) The administrator by regulation may
require a licensed commodity broker-dealer to maintain:
(i) a minimum net capital;
(ii) a prescribed ratio between net capital and aggregate
indebtedness.
(b) The minimum net capital and net
capital-to-aggregate-indebtedness ratio may vary with type or class of
commodity broker-dealer.
(2) If a licensed commodity broker-dealer believes, or has
reasonable cause to believe, that a requirement imposed on it under this
subsection is not being met, it promptly shall notify the administrator of
its current financial condition.
(B) The administrator by regulation may require the furnishing of
fidelity bonds from commodity broker-dealers.
(C) A licensed commodity broker-dealer shall file financial and
other reports the administrator determines by regulation are necessary or
appropriate.
(D)(1) A licensed commodity broker-dealer or commodity sales
representative shall make and maintain records the administrator
determines by regulation are necessary or appropriate.
(2) Required records may be maintained in computer or
microfilm format or other form of data storage if the records readily are
accessible to the administrator.
(3) Required records must be preserved for five years unless
the administrator by regulation specifies either a longer or shorter period
for a particular type or class of records.
(E) If the information contained in a document filed with the
administrator or his designee pursuant to Section 39-73-510 or this
section, except for those documents which the administrator, by
regulation or order, may exclude from this requirement, is or becomes
inaccurate or incomplete in a material respect, the licensed person
promptly shall file a correcting amendment, unless notification of the
correction has been given under Section 39-73-540(E).
Section 39-73-570. (A) The administrator, without prior notice,
may examine the records and require copies of the records which a
licensed commodity broker-dealer or commodity sales representative is
required to make and maintain under Section 39-73-560(D), within or
without this State, in a manner reasonable under the circumstances.
Commodity broker-dealers and commodity sales representatives shall
make their records available to the administrator in a readable form.
(B) The administrator may copy records or require a licensed
person to copy records and provide the copies to the administrator in a
manner reasonable under the circumstances.
(C) The administrator may impose reasonable fees for conducting
an examination pursuant to this section.
Section 39-73-580. (A) The administrator by order may deny,
suspend, or revoke a license, limit the activities which an applicant or
licensed person may perform in this State, censure an applicant or a
licensed person, or bar an applicant or a licensed person from
association with a licensed commodity broker-dealer if the administrator
finds:
(1) the order is in the public interest;
(2) the applicant or licensed person or, for a commodity
broker-dealer, a partner, an officer, a director, a person occupying a
similar status or performing similar functions, or a person directly or
indirectly controlling the commodity broker-dealer:
(a) filed an application for licensing with the administrator or
his designee which, as of its effective date or as of a date after filing for
an order denying effectiveness, was incomplete in a material respect or
contained a statement which was, in light of the circumstances under
which it was made, false or misleading with respect to a material fact;
(b) (i) violated or failed to comply with this chapter, a
predecessor act, or a regulation or order under this chapter or a
predecessor act;
(ii) is the subject of an adjudication or determination
within the last five years by a securities agency, the administrator, or a
court of competent jurisdiction that the person wilfully violated the
Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Advisers Act of 1940, the Investment Company Act of 1940,
the Commodity Exchange Act, or the securities or commodity law of
another state. However, this provision applies only if the acts
constituting the violation of that state's law would constitute a violation
of this chapter if the acts had taken place in this State.
(c) within the last ten years, pled guilty or nolo contendere to,
or been convicted of, a crime indicating a lack of fitness to engage in the
investment commodity business;
(d) permanently or temporarily is enjoined by a court of
competent jurisdiction from engaging in, or continuing, a conduct or
practice which injunction indicates a lack of fitness to engage in the
investment commodities business;
(e) is subject of a order of the administrator denying,
suspending, or revoking the person's license as a commodity or
securities broker-dealer, sales representative, or investment adviser;
(f) is the subject of one or more of the following which
currently are effective and which were issued within the last five years:
(i) an order by the securities agency or administrator
of another state, the Canadian province or territory, or the Securities and
Exchange Commission, entered after notice and opportunity for hearing,
denying, suspending, or revoking the person's license as a commodities
or securities broker-dealer, sales representative, or investment adviser,
or the substantial equivalent;
(ii) a suspension or expulsion from membership in or
association with a self-regulatory organization registered under the
Securities and Exchange Act of 1934 or the Commodity Exchange Act;
(iii) a United States Postal Service fraud order;
(iv) a cease and desist order entered after notice and
opportunity for hearing by the Administrator or the securities agency or
administrator of another state, the Canadian province or territory, the
Securities and Exchange Commission, or the Commodity Futures
Trading Commission;
(v) an order entered by the Commodity Futures Trading
Commission denying, suspending, or revoking registration under the
Commodity Exchange Act;
(g) engaged in an unethical or dishonest conduct or practice
in the investment commodities or securities business;
(h) is insolvent in the sense that liabilities exceed assets or
that obligations cannot be met as they mature;
(i) is not qualified on the basis of factors such as training,
experience, and knowledge of the securities business. This
determination must be governed and limited by subsection (B);
(j) failed reasonably to supervise sales representatives or
employees; or
(k) failed to pay the proper filing fee within thirty days
after being notified by the administrator of the deficiency. However, the
administrator shall vacate an order under this subsection when the
deficiency has been corrected.
(B) If the public interest or the protection of investors so requires
the administrator by order summarily may suspend a license or postpone
the effective date of a license. Upon the entry of the order the
administrator promptly shall notify the applicant or licensed person, as
well as the commodity broker-dealer with whom the person is or will be
associated if the applicant or licensed person is a commodity sales
representative, that an order has been entered and of its reasons and that
within thirty days after the receipt of a written request the matter will be
set down for hearing. Section 39-73-355 applies with respect to
subsequent proceedings.
(C) If the administrator finds that an applicant or a licensed person
is no longer in existence or has ceased to do business as a commodity
broker-dealer or commodity sales representative, is subject to an
adjudication of mental incompetence or to the control of a committee,
conservator, or guardian, or cannot be located after reasonable search,
the administrator by order may cancel the application or license.
(D) The administrator may not institute a suspension or revocation
proceeding on the basis of a fact or transaction disclosed in the license
application unless the proceeding is instituted within the next ninety
days following issuance of the license."
SECTION 2. This act takes effect two hundred days after approval
by the Governor.
-----XX----- |