House Bill No. 5281
House Bill No. 5281
PUBLIC ACT NO. 98-162
AN ACT CONCERNING THE CONNECTICUT UNIFORM
SECURITIES ACT.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. Subdivision (10) of section 36b-3
of the general statutes, as amended by section 1
of public act 97-220, is repealed and the
following is substituted in lieu thereof:
(10) "Investment adviser" means any person
who, for compensation, engages in the business of
advising others, either directly or through
publications or writings, as to the value of
securities or as to the advisability of investing
in, purchasing or selling securities, or who, for
compensation and as a part of a regular business,
issues or promulgates analyses or reports
concerning securities. "Investment adviser" does
not include (A) AN INVESTMENT ADVISER AGENT; (B) 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 or a trust company; [(B)] (C) a lawyer,
accountant, engineer, or teacher whose performance
of these services is solely incidental to the
practice of his profession; [(C)] (D) a
broker-dealer whose performance of these services
is solely incidental to the conduct of his
business as a broker-dealer and who receives no
special compensation for them; [(D)] (E) a
publisher of any bona fide newspaper, news
magazine, or business or financial publication of
general, regular, and paid circulation; [(E)] (F)
a person whose advice, analyses or reports relate
only to securities exempted by subdivision (1) of
subsection (a) of section 36b-21, as amended by
section 11 of [this act] PUBLIC ACT 97-220 AND
SECTION 6 OF THIS ACT; [(F)] (G) any insurance
company under the supervision of the Insurance
Commissioner or any affiliate thereof, as defined
in subsection (b) of section 38a-129, when
providing services to separate accounts of that
insurance company or registered investment
companies all of whose shares are owned by such
insurance company or its insurance company
affiliates or by the separate accounts of that
insurance company or its insurance company
affiliates; and [(G)] (H) such other persons not
within the intent of this [subsection] SUBDIVISION
as the commissioner may by regulation or order
designate.
Sec. 2. Subdivision (11) of section 36b-3 of
the general statutes, as amended by section 1 of
public act 97-220, is repealed and the following
is substituted in lieu thereof:
(11) (A) "Investment adviser agent" includes
(i) any individual, [other than an investment
adviser, or a sole proprietor of an investment
adviser] INCLUDING AN OFFICER, PARTNER OR DIRECTOR
OF AN INVESTMENT ADVISER, OR AN INDIVIDUAL
OCCUPYING A SIMILAR STATUS OR PERFORMING SIMILAR
FUNCTIONS, employed, appointed or authorized by OR
ASSOCIATED WITH an investment adviser to solicit
business from any person for such investment
adviser, within or from this state, and who
receives compensation or other remuneration,
directly or indirectly, for such solicitation; [.
An officer, partner or director of an investment
adviser, or an individual occupying a similar
status or performing similar functions, is an
investment adviser agent only if he otherwise
comes within this definition.] OR (ii) ANY
PARTNER, OFFICER, OR DIRECTOR OF AN INVESTMENT
ADVISER, OR AN INDIVIDUAL OCCUPYING A SIMILAR
STATUS OR PERFORMING SIMILAR FUNCTIONS, OR OTHER
INDIVIDUAL EMPLOYED, APPOINTED, OR AUTHORIZED BY
OR ASSOCIATED WITH AN INVESTMENT ADVISER, WHO
MAKES ANY RECOMMENDATION OR OTHERWISE RENDERS
ADVICE REGARDING SECURITIES TO CLIENTS AND WHO
RECEIVES COMPENSATION OR OTHER REMUNERATION,
DIRECTLY OR INDIRECTLY, FOR SUCH ADVISORY
SERVICES.
(B) "INVESTMENT ADVISER AGENT" DOES NOT
INCLUDE AN INDIVIDUAL EMPLOYED, APPOINTED OR
AUTHORIZED BY, ASSOCIATED WITH OR ACTING ON BEHALF
OF AN INVESTMENT ADVISER EXEMPT FROM REGISTRATION
UNDER SUBDIVISION (1) OR (2) OF SUBSECTION (e) OF
SECTION 36b-6, AS AMENDED BY SECTION 3 OF PUBLIC
ACT 97-220, WHO IS A "SUPERVISED PERSON" UNLESS
(i) MORE THAN TEN PER CENT OF THE ADVISORY CLIENTS
ARE NATURAL PERSONS AND THE SUPERVISED PERSON HAS
A PLACE OF BUSINESS IN THIS STATE, (ii) THE
SUPERVISED PERSON ON A REGULAR BASIS SOLICITS,
MEETS WITH, OR OTHERWISE COMMUNICATES WITH CLIENTS
OF THE EXEMPT INVESTMENT ADVISER IN THIS STATE,
AND (iii) THE SUPERVISED PERSON DOES NOT
EXCLUSIVELY RENDER IMPERSONAL INVESTMENT ADVICE.
(C) FOR PURPOSES OF SUBPARAGRAPH (B) OF THIS
SUBDIVISION: (i) "IMPERSONAL INVESTMENT ADVICE"
MEANS INVESTMENT ADVISORY SERVICES PROVIDED BY
MEANS OF WRITTEN MATERIAL OR ORAL STATEMENTS THAT
DO NOT PURPORT TO MEET THE OBJECTIVES OR NEEDS OF
SPECIFIC INDIVIDUALS OR ACCOUNTS; (ii) "NATURAL
PERSON" DOES NOT INCLUDE AN INDIVIDUAL WHO
IMMEDIATELY AFTER ENTERING INTO THE INVESTMENT
ADVISORY CONTRACT WITH THE EXEMPT INVESTMENT
ADVISER HAS AT LEAST FIVE HUNDRED THOUSAND DOLLARS
UNDER MANAGEMENT WITH SUCH INVESTMENT ADVISER, OR
WHO THE EXEMPT INVESTMENT ADVISER REASONABLY
BELIEVES, IMMEDIATELY PRIOR TO ENTERING INTO THE
ADVISORY CONTRACT, HAS A NET WORTH TOGETHER WITH
ASSETS HELD JOINTLY WITH A SPOUSE, AT THE TIME THE
CONTRACT IS ENTERED INTO, OF MORE THAN ONE MILLION
DOLLARS; AND (iii) "SUPERVISED PERSON" MEANS ANY
PARTNER, OFFICER, DIRECTOR, OR OTHER PERSON
OCCUPYING A SIMILAR STATUS OR PERFORMING SIMILAR
FUNCTIONS, OR EMPLOYEE OF AN EXEMPT INVESTMENT
ADVISER, OR OTHER PERSON WHO PROVIDES INVESTMENT
ADVICE ON BEHALF OF SUCH INVESTMENT ADVISER AND IS
SUBJECT TO THE SUPERVISION AND CONTROL OF SUCH
INVESTMENT ADVISER.
(D) "INVESTMENT ADVISER AGENT" DOES NOT
INCLUDE SUCH OTHER INDIVIDUALS NOT WITHIN THE
INTENT OF THIS SUBDIVISION AS THE COMMISSIONER MAY
BY REGULATION OR ORDER DESIGNATE.
Sec. 3. Subsection (d) of section 36b-6 of the
general statutes, as amended by section 3 of
public act 97-220, is repealed and the following
is substituted in lieu thereof:
(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 [him] 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, the broker-dealer or
investment adviser shall pay to the commissioner
an additional nonrefundable fee of one hundred
dollars.] 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.
Sec. 4. Section 36b-14 of the general
statutes, as amended by section 7 of public act
97-220, is repealed and the following is
substituted in lieu thereof:
(a) (1) Every registered [broker-dealer and]
investment adviser shall make, [and] keep AND
PRESERVE such accounts, correspondence, memoranda,
papers, books and other records as the
commissioner by regulation prescribes. All SUCH
records [so required] shall be preserved for such
period as the commissioner by regulation
prescribes.
(2) EVERY INVESTMENT ADVISER THAT IS
REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR EXCEPTED FROM THE DEFINITION OF
INVESTMENT ADVISER UNDER SECTION 202(a)(11) OF THE
INVESTMENT ADVISERS ACT OF 1940, AND EVERY
REGISTERED BROKER-DEALER, SHALL MAKE, KEEP AND
PRESERVE SUCH ACCOUNTS, CORRESPONDENCE, MEMORANDA,
PAPERS, BOOKS AND OTHER RECORDS AS THE SECURITIES
AND EXCHANGE COMMISSION REQUIRES. ALL SUCH RECORDS
SHALL BE PRESERVED FOR SUCH PERIOD AS THE
SECURITIES AND EXCHANGE COMMISSION REQUIRES.
(3) [Such] ALL records REFERRED TO IN THIS
SUBSECTION may be stored on microfilm, microfiche
or on an electronic data processing system or
similar system utilizing an internal memory device
provided that a printed copy of any such record is
immediately accessible.
(b) (1) Every registered [broker-dealer and]
investment adviser shall file such financial
reports as the commissioner by regulation
prescribes.
(2) EVERY INVESTMENT ADVISER THAT IS
REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR EXCEPTED FROM THE DEFINITION OF
INVESTMENT ADVISER UNDER SECTION 202(a)(11) OF THE
INVESTMENT ADVISERS ACT OF 1940, AND EVERY
REGISTERED BROKER-DEALER, SHALL FILE SUCH
FINANCIAL REPORTS AS THE COMMISSIONER BY
REGULATION PRESCRIBES, EXCEPT THAT THE
COMMISSIONER SHALL NOT REQUIRE THE FILING OF
FINANCIAL REPORTS THAT ARE NOT REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
(c) If the information contained in any
document filed with the commissioner UNDER THIS
SECTION is or becomes inaccurate or incomplete in
any material respect, the [registrant] THE PERSON
MAKING THE FILING shall promptly file a correcting
amendment unless notification of the correction
has been given under [subsection (b) of section
36b-6] SECTIONS 36b-2 TO 36b-33, INCLUSIVE, AS
AMENDED BY THIS ACT.
(d) All the records OF A REGISTERED INVESTMENT
ADVISER AND A REGISTERED BROKER-DEALER referred to
in subsection (a) of this section are subject at
any time or from time to time to such reasonable
periodic, special or other examinations by
[representatives of] the commissioner, within or
without this state, as the commissioner deems
necessary or appropriate in the public interest or
for the protection of investors. EVERY REGISTERED
INVESTMENT ADVISER AND EVERY REGISTERED
BROKER-DEALER SHALL KEEP SUCH RECORDS OPEN TO
EXAMINATION BY THE COMMISSIONER AND, UPON THE
COMMISSIONER'S REQUEST, SHALL PROVIDE COPIES OF
ANY SUCH RECORDS TO THE COMMISSIONER. For the
purpose of avoiding unnecessary duplication of
examinations, the commissioner, insofar as [he]
THE COMMISSIONER deems it practicable in
administering this subsection, may cooperate with
the securities administrators of other states, the
Securities and Exchange Commission, and any
national securities exchange or national
securities association registered under the
Securities Exchange Act of 1934.
Sec. 5. Section 36b-20 of the general
statutes, as amended by section 10 of public act
97-220, is repealed and the following is
substituted in lieu thereof:
(a) The commissioner may issue a stop order
denying effectiveness to, or suspending or
revoking the effectiveness of, any registration
statement if he finds (1) that the order is in the
public interest and (2) that: (A) The registration
statement as of its effective date or as of any
earlier date in the case of an order denying
effectiveness, or any report under subsection (j)
of section 36b-19, as amended by section 9 of
[this act] PUBLIC ACT 97-220, is incomplete in any
material respect BUT IS NOT ABANDONED PURSUANT TO
SUBSECTION (e) OF THIS SECTION or contains any
statement which was, in the light of the
circumstances under which it was made, false or
misleading with respect to any material fact; (B)
any provision of sections 36b-2 to 36b-33,
inclusive, as amended by this act AND PUBLIC ACT
97-220, or any regulation, order or condition
lawfully imposed under said sections has been
wilfully violated, in connection with the
offering, by (i) the person filing the
registration statement, (ii) the issuer, any
partner, officer or director of the issuer, any
person occupying a similar status or performing
similar functions, or any person directly or
indirectly controlling or controlled by the
issuer, provided the person filing the
registration statement is directly or indirectly
controlled by or acting for the issuer, or (iii)
any underwriter; (C) the security registered or
sought to be registered is the subject of an
administrative stop order or similar order or a
permanent or temporary injunction of any court of
competent jurisdiction entered under any other
federal or state act applicable to the offering;
except the commissioner (i) may not institute a
proceeding against an effective registration
statement under this subparagraph more than one
year from the date of the order or injunction
relied on, and (ii) may not enter an order under
this subparagraph on the basis of an order or
injunction entered under any other state act
unless that order or injunction was based on facts
which would currently constitute a ground for a
stop order under this section; (D) the issuer's
enterprise or method of business includes or would
include activities which are illegal where
performed; (E) the offering has worked or tended
to work a fraud upon purchasers or would so
operate; (F) the offering has been or would be
made with unreasonable amounts of underwriters'
and sellers' discounts, commissions or other
compensation, or promoters' profits or
participation, or unreasonable amounts or kinds of
options; (G) when a security is sought to be
registered by coordination, there has been a
failure to comply with the undertaking required by
subdivision (4) of subsection (b) of section
36b-17; (H) the applicant or registrant has failed
to pay the proper filing fee; but the commissioner
may enter only a denial order under this clause
and he shall vacate any such order when the
deficiency has been corrected; or (I) the issuer
is a blank check company. The commissioner may not
institute a stop order proceeding against an
effective registration statement on the basis of a
fact or transaction known to him when the
registration statement became effective unless the
proceeding is instituted within one hundred eighty
days of the effective date of such registration
statement.
(b) The commissioner may by order summarily
postpone or suspend the effectiveness of the
registration statement pending final determination
of any proceeding under this section. Upon the
entry of the order, the commissioner shall
promptly notify each person specified in
subsection (c) of this section 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, the
commissioner may modify or vacate the order or
extend it until final determination.
(c) No stop order may be entered under this
section except as provided in subsection (b) of
this section without: (1) Appropriate prior notice
to the applicant or registrant, the issuer and the
person on whose behalf the securities are to be or
have been offered; (2) opportunity for hearing;
and (3) written findings of fact and conclusions
of law.
(d) The commissioner may vacate or modify a
stop order if he finds that the conditions which
prompted its entry have changed or that it is
otherwise in the public interest to do so.
(e) THE COMMISSIONER MAY DEEM ANY REGISTRATION
STATEMENT TO BE ABANDONED IF THE PERSON FILING THE
REGISTRATION STATEMENT FAILS TO RESPOND TO ANY
REQUEST FOR INFORMATION REQUIRED UNDER THIS
CHAPTER, AS AMENDED BY THIS ACT, OR ANY REGULATION
OR ORDER UNDER THIS CHAPTER, AS AMENDED BY THIS
ACT. THE COMMISSIONER SHALL NOTIFY THE PERSON
FILING THE REGISTRATION STATEMENT, THE ISSUER AND
THE PERSON ON WHOSE BEHALF THE SECURITIES ARE TO
BE OR HAVE BEEN OFFERED, IN WRITING, THAT IF SUCH
INFORMATION IS NOT SUBMITTED WITHIN SIXTY DAYS OF
SUCH WRITTEN NOTIFICATION, THE REGISTRATION
STATEMENT SHALL BE DEEMED ABANDONED. ANY FILING
FEE PAID PRIOR TO THE DATE THE REGISTRATION
STATEMENT IS DEEMED ABANDONED PURSUANT TO THIS
SUBSECTION SHALL NOT BE REFUNDED. ABANDONMENT OF
THE REGISTRATION STATEMENT PURSUANT TO THIS
SUBSECTION SHALL NOT PRECLUDE THE PERSON FILING
THE REGISTRATION STATEMENT FROM SUBMITTING A NEW
REGISTRATION STATEMENT UNDER SECTIONS 36b-17 OR
36b-18, AS AMENDED. THE HEARING REQUIREMENT IN
SUBSECTION (c) OF THIS SECTION SHALL NOT APPLY TO
ABANDONMENT PURSUANT TO THIS SUBSECTION.
Sec. 6. Subsection (a) of section 36b-21 of
the general statutes, as amended by section 11 of
public act 97-220, is repealed and the following
is substituted in lieu thereof:
(a) The following securities are exempted from
sections 36b-16, as amended by section 8 of [this
act] PUBLIC ACT 97-220, and 36b-22, as amended by
section 12 of [this act] PUBLIC ACT 97-220: (1)
Any security including a revenue obligation issued
or guaranteed by the United States, any state, any
political subdivision of a state, or any agency or
corporate or other instrumentality of one or more
of the foregoing; or any certificate of deposit
for any of the foregoing; (2) any security issued
or guaranteed by Canada, any Canadian province,
any political subdivision of any such province,
any agency or corporate or other instrumentality
of one or more of the foregoing, or any other
foreign government with which the United States
currently maintains diplomatic relations, if the
security is recognized as a valid obligation by
the issuer or guarantor; (3) any security issued
by and representing an interest in or a debt of,
or guaranteed by, any bank organized under the
laws of the United States, or any bank, savings
institution or trust company organized and
supervised under the laws of any state; (4) any
security issued by and representing an interest in
or a debt of, or guaranteed by, any federal
savings and loan association, or any savings and
loan or similar association organized under the
laws of any state; (5) any security issued by and
representing an interest in or a debt of, or
guaranteed by, any insurance company organized
under the laws of any state and authorized to do
business in this state; (6) any security issued or
guaranteed by any federal credit union or any
credit union, industrial loan association or
similar association organized and supervised under
the laws of this state; (7) any security issued or
guaranteed by any railroad, other common carrier,
public utility or holding company which is (A)
subject to the jurisdiction of the Interstate
Commerce Commission or its successor agency; (B) a
registered holding company under the Public
Utility Holding Company Act of 1935 or a
subsidiary of such a company within the meaning of
that act; (C) regulated in respect of its rates
and charges by a governmental authority of the
United States or any state; or (D) regulated in
respect of the issuance or guarantee of the
security by a governmental authority of the United
States, any state, Canada or any Canadian
province; (8) (A) ANY SECURITY APPEARING ON THE
LIST OF OVER-THE-COUNTER AND FOREIGN SECURITIES
APPROVED FOR MARGIN BY THE BOARD OF GOVERNORS OF
THE FEDERAL RESERVE SYSTEM WHICH IS NOT OTHERWISE
A COVERED SECURITY, (B) ANY WARRANT OR RIGHT TO
PURCHASE OR SUBSCRIBE TO ANY SECURITY DESCRIBED IN
SUBPARAGRAPH (A) OF THIS SUBDIVISION, AND (C) any
warrant or right to purchase or subscribe to any
security listed or approved for listing upon
notice of issuance on [(A)] (i) the New York Stock
Exchange, the American Stock Exchange, the Chicago
Board Options Exchange and such other securities
exchanges as may be designated by the commissioner
from time to time, [(B)] (ii) the list of
over-the-counter securities approved for margin by
the Board of Governors of the Federal Reserve
System WHERE SUCH SECURITY IS A COVERED SECURITY,
or [(C)] (iii) the national market system of the
National Association of Securities Dealers
Automated Quotation System established pursuant to
the Securities Exchange Act of 1934; (9) any
security issued by any person organized and
operated not for private profit but exclusively
for religious, educational, benevolent,
charitable, fraternal, social, athletic or
reformatory purposes, or as a Chamber of Commerce
or trade or professional association; (10) any
commercial paper which arises out of a current
transaction or the proceeds of which have been or
are to be used for current transactions, and which
evidences an obligation to pay cash within nine
months of the date of issuance, exclusive of days
of grace, or any renewal of such paper which is
likewise limited, or any guarantee of such paper
or of any such renewal; (11) any security issued
in connection with an employees' stock purchase,
stock option, savings, pension, profit-sharing or
similar benefit plan; (12) any security issued by
any cooperative apartment corporation incorporated
under the laws of this state, located in and
operating wholly within the borders of this state,
in conjunction with the execution of proprietary
leases; (13) any security issued by any person,
organized and located in this state and operating
exclusively for the purpose of promoting the
industrial or commercial development of this
state, or such development of any political
subdivision thereof or such development of any
regional planning area within this state, if such
persons are approved by the Commissioner of
Economic and Community Development and such
approval has been certified, in writing, by said
Commissioner of Economic and Community Development
to the commissioner; such approval and
certification shall be conclusive as to the nature
and purpose of such person; (14) any security
issued by the Connecticut Development Credit
Corporation; (15) any security issued by any
nonstock corporation, which is incorporated under
the laws of this state as a cooperative marketing
corporation and has its principal place of
business in this state, and which is a farmers'
cooperative organization as defined in Section 521
of the Internal Revenue Code of 1986, or any
subsequent corresponding internal revenue code of
the United States, as from time to time amended,
if such corporation has been certified in writing
by the Connecticut Department of Agriculture to
the commissioner to be a bona fide cooperative
marketing corporation; such certification shall be
conclusive as to the nature and purpose of such
corporation; (16) any security issued by all
cooperative associations organized or existing
under chapter 595; (17) any security issued by any
person organized, located and operating within or
from the borders of this state, when selling or
offering for sale an interest in real estate
limited partnerships or real estate syndications
exclusively, if such person has obtained a permit
from the Real Estate Commission; (18) any security
which, prior to or within sixty days after October
1, 1977, has been sold or disposed of by the
issuer or bona fide offered to the public, but
this exemption shall not apply to any new offer of
any such security by an issuer or underwriter
subsequent to such sixty days; (19) any interest
or participation in any common trust fund or
similar fund established and maintained by a bank,
or by one or more banks under common control as
otherwise authorized by general statute,
exclusively for the collective investment and
reinvestment of assets contributed thereto by such
bank in its fiduciary capacity; (20) any security
issued by a worker cooperative corporation formed
under the provisions of sections 33-418f to
33-418o, inclusive; (21) any other security 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. 7. Subsection (b) of section 36b-21 of
the general statutes, as amended by section 11 of
public act 97-220, is repealed and the following
is substituted in lieu thereof:
(b) The following transactions are exempted
from sections 36b-16, as amended by section 8 of
[this act] PUBLIC ACT 97-220, and 36b-22, as
amended by section 12 of [this act] PUBLIC ACT
97-220: (1) Any isolated nonissuer transaction,
whether effected through a broker-dealer or not;
(2) any nonissuer [distribution of an outstanding
security if (A) a recognized securities manual
contains the names of the issuer's officers and
directors, a balance sheet of the issuer as of a
date within eighteen months, and a profit and loss
statement for either the fiscal year preceding
that date or the most recent year of operations]
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; (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
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,
except that 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; [or (B)] (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;
[(3)] (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;
[(4)] (5) any transaction between the issuer or
other person on whose behalf the offering is made
and an underwriter, or among underwriters; [(5)]
(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; [(6)] (7) any transaction by an
executor, administrator, sheriff, marshal,
receiver, trustee in bankruptcy, creditors'
committee in a proceeding under the Bankruptcy
Act, guardian or conservator; [(7)] (8) any
transaction executed by a bona fide pledgee
without any purpose of evading sections 36b-2 to
36b-33, inclusive, as amended by this act AND
PUBLIC ACT 97-220; [(8)] (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; [(9)] (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) of the
Securities Act of 1933. (C) The exemptions set
forth in [subdivisions (9)] SUBPARAGRAPHS (A) and
[(9)] (B) of this [subsection] 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 [subdivisions (9)] SUBPARAGRAPHS (A) and [(9)]
(B) of this [subsection] 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 fee of one hundred
fifty dollars shall accompany any filing made with
the commissioner pursuant to this subdivision;
[(10)] (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; [(11)] (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;
[(12)] (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, as amended by this act AND PUBLIC ACT
97-220, 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; [(13)] (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 fee of one hundred
fifty dollars shall accompany any such filing made
pursuant to this subdivision; [(14)] (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, as amended by this act
AND PUBLIC ACT 97-220, (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 his parent or guardian 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; [(15)] (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. 8. Subsection (d) of section 36b-27 of
the general statutes, as amended by section 13 of
public act 97-220, is repealed and the following
is substituted in lieu thereof:
(d) (1) Whenever the commissioner finds as the
result of an investigation that any person or
persons have violated any of the provisions of
sections 36b-2 to 36b-33, inclusive, as amended by
this act AND PUBLIC ACT 97-220, or any regulation,
rule or order adopted or issued under said
sections, the commissioner may send a notice to
such person or persons by registered mail, return
receipt requested. Any such notice shall include:
(A) A reference to the title, chapter, regulation,
rule or order alleged to have been violated; (B) a
short and plain statement of the matter asserted
or charged; (C) the maximum fine that may be
imposed for such violation; and (D) the time and
place for the hearing. Such hearing shall be fixed
for a date not earlier than fourteen days after
the notice is mailed.
(2) The commissioner shall hold a hearing upon
the charges made unless such person or persons
fail to appear at the hearing. Said hearing shall
be held in accordance with the provisions of
chapter 54. After the hearing if the commissioner
finds that the person or persons have violated any
of the provisions of sections 36b-2 to 36b-33,
inclusive, as amended by this act AND PUBLIC ACT
97-220, or any regulation, rule or order adopted
or issued under said sections, the commissioner
may, in his discretion and in addition to any
other remedy authorized by said sections, order
that a [civil penalty] FINE not exceeding ten
thousand dollars per violation be imposed upon
such person or persons. If such person or persons
fail to appear at the hearing, the commissioner
may, as the facts require, order that a [civil
penalty] FINE not exceeding ten thousand dollars
per violation be imposed upon such person or
persons. The commissioner shall send a copy of any
order issued pursuant to this subsection by
registered mail, return receipt requested, to any
person or persons named in such order.
Sec. 9. (NEW) (a) Section 6 of The
Philanthropy Protection Act of 1995, 15 USC
Section 80a-3a, shall not preempt the laws of this
state that require registration or qualification
of securities or require any person to register as
or be subject to regulation as a broker-dealer,
agent, investment adviser or investment adviser
agent.
(b) The Philanthropy Protection Act of 1995,
Public Law 104-62, shall not apply in any
administrative or judicial action as a defense to
any claim that any person, security, interest, or
participation of the type described in said act
and the amendments made by said act is subject to
the provisions of sections 36b-2 to 36b-33,
inclusive, of the general statutes, as amended by
this act.
Approved June 4, 1998