Connecticut Seal

Substitute Senate Bill No. 360

Public Act No. 04-45

AN ACT CONCERNING THE CONNECTICUT UNIFORM SECURITIES ACT.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36b-6 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(a) No person shall transact business in this state as a broker-dealer unless [he] such person is registered under sections 36b-2 to 36b-33, inclusive. No person shall transact business in this state as a broker-dealer in contravention of a sanction that is currently effective imposed by the Securities and Exchange Commission or by a self-regulatory organization, of which such person is a member, that is registered under federal laws administered by the Securities and Exchange Commission if the sanction would prohibit such person from effecting transactions in securities in this state. No individual shall transact business as an agent in this state unless [he] such individual is (1) registered as an agent of the broker-dealer or issuer whom [he] such individual represents in transacting such business, or (2) an associated person who represents a broker-dealer in effecting transactions described in subdivisions (2) and (3) of [section] Section 15(h) of the Securities Exchange Act of 1934. No individual shall transact business in this state as an agent of a broker-dealer in contravention of a sanction that is currently effective imposed by the Securities and Exchange Commission or a self-regulatory organization registered under the federal laws administered by the Securities and Exchange Commission of which the employing broker-dealer is a member, if the sanction would prohibit the individual employed by such broker-dealer from effecting transactions in securities in this state.

(b) No issuer shall employ an agent unless such agent is registered under sections 36b-2 to 36b-33, inclusive. No broker-dealer shall employ an agent unless such agent is (1) registered under sections 36b-2 to 36b-33, inclusive, or (2) an associated person who represents a broker-dealer in effecting transactions described in subdivisions (2) and (3) of [section] Section 15(h) of the Securities Exchange Act of 1934. The registration of an agent is not effective during any period when [he] such agent is not associated with a particular broker-dealer registered under [said] sections 36b-2 to 36b-33, inclusive, or a particular issuer. When an agent begins or terminates a connection with a broker-dealer or issuer, or begins or terminates those activities which make [him] such individual an agent, both the agent and the broker-dealer or issuer shall promptly notify the commissioner.

(c) No person shall transact business as an investment adviser, within or from this state, unless registered as such by the commissioner as provided in sections 36b-2 to 36b-33, inclusive, or exempted pursuant to subsection (e) of this section. No individual shall transact business as an investment adviser agent, within or from this state, unless [he] such individual is registered as an investment adviser agent of the investment adviser for whom [he] such individual acts in transacting such business. No investment adviser shall engage an investment adviser agent unless such investment adviser agent is registered under said sections. The registration of an investment adviser agent is not effective during any period when [he] such investment adviser agent is not associated with a particular investment adviser. When an investment adviser agent begins or terminates a connection with an investment adviser, both the investment adviser agent and the investment adviser shall promptly notify the commissioner. If an investment adviser or investment adviser agent provides such notice, such investment adviser or investment adviser agent shall not be liable for the failure of the other to give such notice.

(d) No broker-dealer or investment adviser shall transact business from any place of business located within this state unless that place of business is registered as a branch office with the commissioner pursuant to this subsection. [, provided an investment adviser that is registered with the Securities and Exchange Commission may, in lieu of filing an application for branch office registration, file a notice with the commissioner for each branch office of the adviser located within this state together with a nonrefundable notice fee of one hundred dollars per branch office. ] An application for branch office registration shall be made on forms prescribed by the commissioner and shall be filed with the commissioner, together with a nonrefundable application fee of one hundred dollars per branch office. A broker-dealer or investment adviser [, other than an investment adviser that is registered with the Securities and Exchange Commission,] shall promptly notify the commissioner in writing if such broker-dealer or investment adviser (1) engages a new manager at a branch office in this state, (2) acquires a branch office of another broker-dealer or investment adviser in this state, or (3) relocates a branch office in this state. In the case of a branch office acquisition or relocation, such broker-dealer or investment adviser shall pay to the commissioner a nonrefundable fee of one hundred dollars. [An investment adviser that is registered with the Securities and Exchange Commission shall notify the commissioner of an acquisition or relocation of any branch office of the investment adviser in this state in the same manner as and concurrently with the notification of such information to the Securities and Exchange Commission and shall pay to the commissioner a nonrefundable fee of one hundred dollars. ] Each registrant or applicant for branch office registration [, and each investment adviser with a branch office in this state that is registered with the Securities and Exchange Commission,] shall pay the actual cost, as determined by the commissioner, of any reasonable investigation or examination made of such registrant [,] or applicant [or investment adviser] by or on behalf of the commissioner.

(e) The following investment advisers are exempted from the registration requirements under subsection (c) of this section: Any investment adviser that (1) is registered or required to be registered under Section 203 of the Investment Advisers Act of 1940; (2) is excepted from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940; or (3) has no place of business in this state and, during the preceding twelve months, has had no more than five clients who are residents of this state. Any investment adviser claiming an exemption pursuant to subdivision (1) or (2) of this subsection that is not otherwise excluded under subsection (10) of section 36b-3, shall first file with the commissioner a notice of exemption together with a consent to service of process as required by subsection (g) of section 36b-33. The notice of exemption shall contain such information as the commissioner may require and shall be accompanied by a nonrefundable fee of two hundred fifty dollars. Such notice of exemption shall be valid until December thirty-first of the calendar year in which it was first filed and may be renewed annually thereafter upon submission of such information as the commissioner may require together with a nonrefundable fee of one hundred fifty dollars. If any investment adviser that is exempted from registration pursuant to subdivision (1) or (2) of this subsection fails or refuses to pay any fee required by this subsection, the commissioner may require such investment adviser to register pursuant to subsection (c) of this section. For purposes of this subsection, a delay in the payment of a fee or an underpayment of a fee which is promptly remedied shall not constitute a failure or refusal to pay such fee.

(f) Any broker-dealer or investment adviser ceasing to transact business at any office in this state shall, in addition to providing written notice to the commissioner prior to the termination of business activity at that office, (1) provide written notice to each customer or client serviced by such office at least ten business days prior to the termination of business activity at that office, or (2) demonstrate to the commissioner, in writing, the reasons why such notice to customers or clients cannot be provided within the time prescribed. If the commissioner finds that the broker-dealer or investment adviser cannot provide notice to customers or clients at least ten business days prior to the termination of business activity, the commissioner may exempt the broker-dealer or investment adviser from giving such notice. The commissioner shall act upon a request for such exemption within five business days following [his] receipt by the commissioner of the written request for such an exemption. The notice to customers or clients shall contain the following information: The date and reasons why business activity will terminate at the office; if applicable, a description of the procedure the customer or client may follow to maintain the customer's account at any other office of the broker-dealer or investment adviser; the procedure for transferring the customer's or client's account to another broker-dealer or investment adviser; and the procedure for making delivery to the customer or client of any funds or securities held by the broker-dealer or investment adviser.

(g) Any broker-dealer or investment adviser ceasing to transact business at any office in this state as a result of executing an agreement and plan of merger or acquisition shall provide written notice to the commissioner and to each customer or client serviced by such office not later than the date such merger or acquisition is completed. The notice provided to each customer or client shall contain the information specified in subsection (f) of this section.

(h) Any broker-dealer or investment adviser ceasing to transact business at any office in this state as a result of the commencement of a bankruptcy proceeding by such broker-dealer or investment adviser or by a creditor or creditors of such broker-dealer or investment adviser shall immediately upon the filing of a petition with the bankruptcy court, provide written notice to the commissioner. The commissioner shall determine the time and manner in which notice shall be provided to each customer or client serviced by such office.

(i) For purposes of subsections (d), (f), (g) and (h) of this section, "investment adviser" means an investment adviser registered or required to be registered with the commissioner.

Sec. 2. Section 36b-8 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

On receipt of the application for registration as a branch office, broker-dealer, agent, investment adviser or investment adviser agent, the commissioner may make such investigation of the applicant and [his] the applicant's affairs as [he] the commissioner deems necessary or advisable. Upon completion of such investigation, the commissioner shall, subject to [his] the authority of the commissioner to deny, revoke or suspend such registration, enter the name of such person on a register of branch offices, broker-dealers, agents, investment advisers or investment adviser agents, as the case may be, to be kept in [his] the office of the commissioner, properly indexed and open to the public. The information to be entered on the register shall be the name, address and date of registration or renewal and, in the case of broker-dealers or investment advisers, whether such registrant is an individual, partnership, corporation or other form of association. When the registration of any such person is suspended or revoked, the commissioner shall so note on the appropriate register.

Sec. 3. Section 36b-12 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(a) Each person applying for registration as a broker-dealer or investment adviser shall pay to the commissioner or to any person designated by the commissioner in writing to collect such fee on [his behalf a] behalf of the commissioner, a nonrefundable fee of two hundred fifty dollars. [which shall not be refunded. ]

(b) Each person applying for registration as an agent or investment adviser agent shall pay to the commissioner or to any person designated by the commissioner to collect such fee on [his behalf a] behalf of the commissioner, a nonrefundable fee of fifty dollars. [which shall not be refunded. ]

(c) Each registration issued pursuant to this section shall expire at the close of business on December thirty-first of [each calendar year unless renewed] the calendar year in which the registration became effective.

(d) [Each] (1) Except as provided in subdivision (2) of this subsection, each person registered as an agent or investment adviser agent, requesting transfer of [his] the registration of such agent or investment adviser agent to another registered broker-dealer or investment adviser, shall pay to the commissioner or to any person designated by the commissioner in writing to collect such fee on [his] behalf of the commissioner, a nonrefundable fee of fifty dollars for each transfer requested.

(2) Each broker-dealer or investment adviser receiving a mass transfer shall pay to the commissioner or to any person designated by the commissioner in writing to collect such fee on behalf of the commissioner, a nonrefundable fee of fifty dollars for each agent or investment adviser agent whose registration is transferred. For purposes of this subsection, "mass transfer" means a transfer of multiple agents of a broker-dealer or investment adviser agents of an investment adviser from a transferring broker-dealer or investment adviser to a receiving broker-dealer or investment adviser due to a cessation of business activity, succession, acquisition, merger, consolidation or other reorganization affecting the transferring broker-dealer or investment adviser.

(e) Each person [so] applying for registration under subsection (a) or (b) of this section and any registrant applying for renewal of such registration under section 36b-13 shall pay the actual cost, as determined by the commissioner, of any reasonable investigation or examination made of such applicant or registrant by or on behalf of the commissioner.

Sec. 4. Section 36b-15 of the general statutes, as amended by section 87 of public act 03-19 and section 20 of public act 03-259, is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(a) The commissioner may by order deny, suspend or revoke any registration or by order restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if the commissioner finds that (1) the order is in the public interest, and (2) the applicant or registrant or, in the case of a broker-dealer or investment adviser, any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer or investment adviser: (A) Has filed an application for registration which as of its effective date, or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained any statement which was, in light of the circumstances under which it was made, false or misleading with respect to any material fact; (B) has wilfully violated or wilfully failed to comply with any provision of sections 36b-2 to 36b-33, inclusive, or a predecessor statute or any regulation or order under said sections or a predecessor statute; (C) has been convicted, within the past ten years, of any misdemeanor involving a security, any aspect of the securities business, or any felony, provided any denial, suspension or revocation of such registration shall be in accordance with the provisions of section 46a-80; (D) is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities or commodities business; (E) is the subject of a cease and desist order of the commissioner or an order of the commissioner denying, suspending, or revoking registration as a broker-dealer, agent, investment adviser or investment adviser agent; (F) is the subject of any of the following sanctions that are currently effective or were imposed within the past ten years: (i) An order issued by the securities administrator of any other state, Canadian province or territory, or by the Securities and Exchange Commission or the Commodity Futures Trading Commission denying, suspending or revoking registration as a broker-dealer, agent, investment adviser, investment adviser agent or a person required to be registered under the Commodity Exchange Act, 7 USC 1 et seq. , as from time to time amended, and the rules and regulations thereunder, or the substantial equivalent of those terms as defined in sections 36b-2 to 36b-33, inclusive, (ii) an order of the Securities and Exchange Commission or Commodity Futures Trading Commission suspending or expelling such applicant, registrant or person from a national securities or commodities exchange or national securities or commodities association registered under the Securities Exchange Act of 1934 or the Commodity Exchange Act, 7 USC 1 et seq. , as from time to time amended, or, in the case of an individual, an order of the Securities and Exchange Commission or an equivalent order of the commodity futures trading commission barring such individual from association with a broker-dealer or an investment adviser, (iii) a suspension, expulsion or other sanction issued by a national securities exchange or other self-regulatory organization registered under federal laws administered by the Securities and Exchange Commission or the Commodity Futures Trading Commission if the effect of the sanction has not been stayed or overturned by appeal or otherwise, (iv) a United States Post Office fraud order, or (v) a cease and desist order entered by the Securities and Exchange Commission or the securities agency or administrator of any other state or Canadian province or territory; but the commissioner may not (I) institute a revocation or suspension proceeding under this subparagraph more than five years from the date of the sanction relied on, and (II) enter an order under this subparagraph on the basis of an order under any other state act unless that order was based on facts which would constitute a ground for an order under this section; (G) may be denied registration under federal law as a broker-dealer, agent, investment adviser, investment adviser agent or as a person required to be registered under the Commodity Exchange Act, [as amended,] 7 USC 1 et seq. , as from time to time amended, and the rules and regulations promulgated thereunder, or the substantial equivalent of those terms as defined in sections 36b-2 to 36b-33, inclusive; (H) has engaged in fraudulent, dishonest or unethical practices in the securities or commodities business, including abusive sales practices in the business dealings of such applicant, registrant or person with current or prospective customers or clients; (I) is insolvent, either in the sense that the liabilities of such applicant, registrant or person exceed the assets of such applicant, registrant or person, or in the sense that such applicant, registrant or person cannot meet the obligations of such applicant, registrant or person as they mature; but the commissioner may not enter an order against a broker-dealer or investment adviser under this subparagraph without a finding of insolvency as to the broker-dealer or investment adviser; (J) is not qualified on the basis of such factors as training, experience, and knowledge of the securities business, except as otherwise provided in subsection (b) of this section; (K) has failed reasonably to supervise: [the] (i) The agents or investment adviser agents of such applicant or registrant, if the applicant [,] or registrant [or person] is a broker-dealer or investment adviser; or (ii) the agents of a broker-dealer or investment adviser agents of an investment adviser, if such applicant, registrant or other person is or was an agent, investment adviser agent or other person charged with exercising supervisory authority on behalf of [the] a broker-dealer [, or such applicant's or registrant's investment adviser agents if the applicant or registrant is an] or investment adviser; (L) in connection with any investigation conducted pursuant to section 36b-26 or any examination under subsection (d) of section 36b-14, has made any material misrepresentation to the commissioner or upon request made by the commissioner, has withheld or concealed material information from, or refused to furnish material information to the commissioner, provided, there shall be a rebuttable presumption that any records, including, but not limited to, written, visual, audio, magnetic or electronic records, computer printouts and software, and any other documents, that are withheld or concealed from the commissioner in connection with any such investigation or examination are material, unless such presumption is rebutted by substantial evidence; or (M) has failed to pay the proper filing fee; but the commissioner may enter only a denial order under this subparagraph, and the commissioner shall vacate any such order when the deficiency has been corrected. The commissioner may not institute a suspension or revocation proceeding on the basis of a fact or transaction known to the commissioner when the registration became effective unless the proceeding is instituted within one hundred eighty days of the effective date of such registration.

(b) The following provisions govern the application of subparagraph (J) of subdivision (2) of subsection (a) of this section: (1) The commissioner may not enter an order against a broker-dealer on the basis of the lack of qualification of any person other than (A) the broker-dealer [himself if he] if the broker-dealer is an individual, or (B) an agent of the broker-dealer; (2) the commissioner may not enter an order against an investment adviser on the basis of the lack of qualification of any person other than (A) the investment adviser [himself if he] if the investment adviser is an individual, or (B) any other person who represents the investment adviser in doing any of the acts which make [him] the investment adviser an investment adviser; (3) the commissioner may not enter an order solely on the basis of lack of experience if the applicant or registrant is qualified by training or knowledge or both; (4) the commissioner shall consider that an agent who will work under the supervision of a registered broker-dealer need not have the same qualifications as a broker-dealer; (5) the commissioner shall consider that an investment adviser is not necessarily qualified solely on the basis of experience as a broker-dealer or agent. When [he] the commissioner finds that an applicant for initial or renewal registration as a broker-dealer is not qualified as an investment adviser, [he] the commissioner may by order condition the applicant's registration as a broker-dealer upon [his] the applicant's not transacting business in this state as an investment adviser; (6) the commissioner may by regulation provide for an examination, which may be written or oral or both, to be taken by any class of or all applicants, as well as persons who represent or will represent an investment adviser in doing any of the acts which make [him] the investment adviser an investment adviser.

(c) The commissioner may by order summarily postpone or suspend registration pending final determination of any proceeding under this section. Upon the entry of the order, the commissioner shall promptly notify the applicant or registrant, as well as the employer or prospective employer if the applicant or registrant is an agent or an investment adviser agent, that it has been entered and of the reasons therefor and that within fifteen days after the receipt of a written request the matter will be set down for hearing. If no hearing is requested and none is ordered by the commissioner, the order will remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner, after notice of and opportunity for hearing, may modify or vacate the order or extend it until final determination.

(d) If the commissioner finds that any registrant or applicant for registration is no longer in existence or has ceased to do business as a broker-dealer, agent, investment adviser or investment adviser agent, or 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 commissioner may by order cancel the registration or application.

(e) (1) Withdrawal from registration as a broker-dealer, agent, investment adviser or investment adviser agent, or withdrawal of an application for registration as a broker-dealer, agent, investment adviser or investment adviser agent, becomes effective ninety days after receipt of an application to withdraw such registration or a notice of intent to withdraw such application for registration or within such shorter period of time as the commissioner may determine, unless a denial, revocation or suspension proceeding is pending when the application or notice is filed or a proceeding to deny, revoke, suspend or impose conditions upon the withdrawal is instituted within ninety days after the application or notice is filed. If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the commissioner by order determines. If no proceeding is pending or instituted and withdrawal automatically becomes effective, the commissioner may nevertheless institute a denial, revocation or suspension proceeding under subsection (a) of this section within one year after withdrawal became effective.

(2) If the registration of a broker-dealer, agent, investment adviser or investment adviser agent expires due to the registrant's failure to renew, within one year of such expiration, the commissioner may nevertheless institute a revocation or suspension proceeding or issue an order suspending or revoking the registration under subsection (a) of this section.

(f) No order may be entered under this section except as provided in subsection (c) of this section without (1) appropriate prior notice to the applicant or registrant and to the employer or prospective employer if such applicant or registrant is an agent or investment adviser agent, (2) opportunity for hearing, and (3) written findings of fact and conclusions of law.

(g) Notwithstanding the provisions of subsection (a) of this section, the commissioner may deny an application for registration as a broker-dealer, agent, investment adviser, investment adviser agent or branch office if the applicant fails to respond to any request for information required under sections 36b-2 to 36b-33, inclusive, or the regulations adopted pursuant to said sections. The commissioner shall notify the applicant in writing that if such information is not submitted within sixty days the application shall be deemed abandoned and denied. An application filing fee paid prior to the date an application is denied pursuant to this subsection shall not be refunded. Denial of an application pursuant to this subsection shall not preclude the applicant from submitting a new application for registration under said sections. The hearing requirement provided for in subsection (f) of this section shall not apply to the denial of an application issued pursuant to this subsection.

Sec. 5. Subsection (b) of section 36b-21 of the general statutes, as amended by section 146 of public act 03-6 of the June 30 special session, is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(b) The following transactions are exempted from sections 36b-16 and 36b-22: (1) Any isolated nonissuer transaction, whether effected through a broker-dealer or not; (2) any nonissuer transaction by a registered agent of a registered broker-dealer in a security of a class that has been outstanding in the hands of the public for at least ninety days provided, at the time of the transaction: (A) The security is sold at a price reasonably related to the current market price of the security; (B) the security does not constitute the whole or part of an unsold allotment to, or a subscription or participation by, the broker-dealer as an underwriter of the security; (C) a nationally recognized securities manual contains (i) a description of the business and operations of the issuer; (ii) the names of the issuer's officers and directors or, in the case of a non-United-States issuer, the corporate equivalents of such persons in the issuer's country of domicile; (iii) an audited balance sheet of the issuer as of a date within eighteen months, or in the case of a reorganization or merger where the parties to the reorganization or merger had such audited balance sheet, a pro forma balance sheet; and (iv) an audited income statement for each of the issuer's immediately preceding two fiscal years, or for the period of existence of the issuer, if in existence for less than two years, or in the case of a reorganization or merger where the parties to the reorganization or merger had such audited income statement, a pro forma income statement; and (D) the issuer of the security has a class of equity securities listed on a national securities exchange registered under the Securities Exchange Act of 1934, or designated for trading on the National Association of Securities Dealers Automated Quotation System, unless the issuer, including any predecessors of the issuer (i) has been engaged in continuous business for at least three years, or (ii) has total assets of at least two million dollars based on an audited balance sheet of the issuer as of a date within eighteen months, or in the case of a reorganization or merger where the parties to the reorganization or merger had such audited balance sheet, a pro forma balance sheet. The exemption in this subdivision shall not be available for any distribution of securities issued by a blank check company, shell company, dormant company or any issuer that has been merged or consolidated with or has bought out a blank check company, shell company or dormant company unless the issuer or any predecessor has continuously operated its business for at least the preceding five years and has had gross operating revenue in each of the preceding five years, including gross operating revenue of at least five hundred thousand dollars per year in three of the preceding five years; (3) any nonissuer distribution of an outstanding security if the security has a fixed maturity or a fixed interest or dividend provision and there has been no default during the current fiscal year or within the three preceding fiscal years, or during the existence of the issuer and any predecessors if less than three years, in the payment of principal, interest or dividends on the security; (4) any nonissuer transaction effected by or through a registered broker-dealer pursuant to an unsolicited order or offer to buy; but the commissioner may by regulation require that the customer acknowledge upon a specified form that the sale was unsolicited, and that a signed copy of each such form be preserved by the broker-dealer for a specified period or that the confirmation delivered to the purchaser or a memorandum delivered in connection therewith shall confirm that such purchase was unsolicited by the broker-dealer or any agent of the broker-dealer; (5) any transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters; (6) any transaction in a bond or other evidence of indebtedness secured by a real or chattel mortgage or deed of trust or by an agreement for the sale of real estate or chattels, if the entire mortgage, deed of trust or agreement, together with all the bonds or other evidences of indebtedness secured thereby, is offered and sold as a unit; (7) any transaction by an executor, administrator, state marshal, marshal, receiver, trustee in bankruptcy, creditors' committee in a proceeding under the Bankruptcy Act, guardian or conservator; (8) any transaction executed by a bona fide pledgee without any purpose of evading sections 36b-2 to 36b-33, inclusive; (9) any offer or sale to a bank and trust company, a national banking association, a savings bank, a savings and loan association, a federal savings and loan association, a credit union, a federal credit union, trust company, insurance company, investment company as defined in the Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional buyer, or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity; (10) (A) subject to the provisions of this subdivision, any transaction not involving a public offering within the meaning of Section 4(2) of the Securities Act of 1933, but not including any transaction specified in the rules and regulations thereunder. (B) Subject to the provisions of this subdivision, any transaction made in accordance with the uniform exemption from registration for small issuers authorized in Section [19(c)(3)(C)] 19(d)(3)(C) of the Securities Act of 1933. (C) The exemptions set forth in subparagraphs (A) and (B) of this subdivision shall not be available for transactions in securities issued by any blank check company, shell company or dormant company. (D) The exemptions set forth in subparagraphs (A) and (B) of this subdivision may, with respect to any security or transaction or any type of security or transaction, be modified, withdrawn, further conditioned or waived as to conditions, in whole or in part, conditionally or unconditionally, by the commissioner, acting by regulation, rule or order, on a finding that such regulation, rule or order is necessary or appropriate in the public interest or for the protection of investors. (E) A nonrefundable fee of one hundred fifty dollars shall accompany any filing made with the commissioner pursuant to this subdivision; (11) any offer or sale of a preorganization certificate or subscription if (A) no commission or other remuneration is paid or given directly or indirectly for soliciting any prospective subscriber, (B) the number of subscribers does not exceed ten, and (C) no payment is made by any subscriber; (12) any transaction pursuant to an offer to existing security holders of the issuer, including persons who at the time of the transaction are holders of convertible securities, nontransferable warrants or transferable warrants exercisable within not more than ninety days of their issuance, if (A) no commission or other remuneration other than a standby commission is paid or given directly or indirectly for soliciting any security holder in this state, or (B) the issuer first files a notice, in such form and containing such information as the commissioner may by regulation prescribe, specifying the terms of the offer and the commissioner does not by order disallow the exemption within the next ten full business days; (13) any offer, but not a sale, of a security for which registration statements have been filed under both sections 36b-2 to 36b-33, inclusive, and the Securities Act of 1933, if no stop order or refusal order is in effect and no public proceeding or examination looking toward such an order is pending under either said sections or the Securities Act of 1933; (14) any transaction exempt under Section 4(6) of the Securities Act of 1933, and the rules and regulations thereunder. The issuer shall, prior to the first sale, file with the commissioner a notice, in such form and containing such information as the commissioner may by regulation, rule or order prescribe. A nonrefundable fee of one hundred fifty dollars shall accompany any such filing made pursuant to this subdivision; (15) any transaction if all the following conditions are satisfied: (A) The offer and sale is effectuated by the issuer of the security; (B) the total number of purchasers of all securities of the issuer does not exceed ten. A subsequent sale of securities that (i) is registered under sections 36b-2 to 36b-33, inclusive, (ii) is sold pursuant to an exemption under said sections other than this subdivision, or (iii) involves covered securities, shall not be integrated with a sale pursuant to this exemption in computing the number of purchasers hereunder. For the purpose of this subdivision, each of the following is deemed to be a single purchaser of a security: A husband and wife, a child and the parent or guardian of such child when the parent or guardian holds the security for the benefit of the child, a corporation, a partnership, an association or other unincorporated entity, a joint stock company or a trust, but only if the corporation, partnership, association, unincorporated entity, joint stock company or trust was not formed for the purpose of purchasing the security; (C) no advertisement, article, notice or other communication published in any newspaper, magazine or similar medium, or broadcast over television or radio, or any other general solicitation is used in connection with the sale; and (D) no commission, discount or other remuneration is paid or given directly or indirectly in connection with the offer and sale, and the total expenses, excluding legal and accounting fees, in connection with the offer and sale do not exceed one per cent of the total sales price of the securities. For purposes of this subdivision, a difference in the purchase price among the purchasers shall not, in and of itself, be deemed to constitute indirect remuneration; (16) any transaction exempt under Rule 701, 17 CFR Section 230. 701 promulgated under Section 3(b) of the Securities Act of 1933; (17) any other transaction that the commissioner may exempt, conditionally or unconditionally, on a finding that registration is not necessary or appropriate in the public interest or for the protection of investors.

Sec. 6. Subsection (f) of section 36b-29 of the general statutes, as amended by section 22 of public act 03-259, is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(f) No person may bring an action under this section more than two years after the date of the contract of sale or of the contract for investment advisory services, except that [(1) with respect to actions arising out of intentional misrepresentation or fraud in the purchase or sale of any interest in any limited partnership not required to be registered under the Securities Act of 1933, no person may bring an action more than one year from the date when the misrepresentation or fraud is discovered, except that no such action may be brought more than five years from the date of such misrepresentation or fraud, and (2)] with respect to actions arising out of intentional misrepresentation or fraud in the purchase or sale of securities, [other than securities described in subdivision (1) of this subsection,] no person may bring an action more than [one year] two years from the date when the misrepresentation or fraud is discovered or in the exercise of reasonable care should have been discovered, except that no such action may be brought more than [three] five years from the date of such misrepresentation or fraud.

Approved May 4, 2004