AN ACT Relating to commodities; amending RCW 21.30.010, 21.30.040, 21.30.230, 21.30.240, 21.30.280, and 21.30.290; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. This chapter, and any rules, regulations, or orders promulgated pursuant thereto, applies only to commodities contracts as defined in RCW 21.30.010(10) and commodities options as defined in RCW 21.30.010(11).

Sec. 2. Section 1, chapter 14, Laws of 1986 and RCW 21.30.010 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Administrator" means the person designated by the director in accordance with the provisions of RCW 21.20.460.

(2) "Board of trade" means any person or group of persons engaged in buying or selling any commodity or receiving any commodity for sale on consignment, whether such person or group of persons is characterized as a board of trade, exchange, or other form of marketplace.

(3) "Director" means the director of the department of licensing.

(4) "Commodity broker-dealer" means, for the purposes of registration in accordance with this chapter, any person engaged in the business of making offers, sales, or purchases of commodities under commodity contracts or under commodity options.

(5) "Commodity sales representative" means, for the purposes of registration in accordance with this chapter, any person ((~~employed by or representing~~)) authorized to act and acting for a commodity broker-dealer ((~~or issuer in making an offer, sale, or purchase of any commodity under any~~)) in effecting or attempting to effect a transaction in a commodity contract or ((~~under~~)) commodity option.

(6) "Commodity exchange act" means the act of congress known as the commodity exchange act, as amended, codified at 7 U.S.C. Sec. 1 et seq.

(7) "Commodity futures trading commission" means the independent regulatory agency established by congress to administer the commodity exchange act.

(8) "CFTC rule" means any rule, regulation, or order of the commodity futures trading commission in effect on October 1, 1986, and all subsequent amendments, additions, or other revisions thereto, unless the administrator, within ten days following the effective date of any such amendment, addition, or revision, disallows the application thereof by rule or order.

(9) "Commodity" means, except as otherwise specified by the director by rule or order, any agricultural, grain, or livestock product or by-product, any metal or mineral (including a precious metal set forth in subsection (17) of this section), any gem or gemstone (whether characterized as precious, semiprecious, or otherwise), any fuel (whether liquid, gaseous, or otherwise), any foreign currency, and all other goods, articles, products, or items of any kind. However, the term commodity 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 any timber, agricultural, or livestock product grown or raised on real property and offered or sold by the owner or lessee of such real property, or (c) any work of art offered or sold by art dealers, at public auction, or offered or sold through a private sale by the owner thereof.

(10) "Commodity contract" means any account, agreement, or 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. Any commodity contract offered or sold shall, in the absence of evidence to the contrary, be presumed to be offered or sold for speculation or investment purposes. A commodity contract shall not include any contract or agreement which requires, and under which the purchaser receives, within twenty-eight calendar days from the payment in good funds of any portion of the purchase price, physical delivery of the total amount of each commodity to be purchased under the contract or agreement. Physical delivery of a precious metal at a date beyond twenty-eight calendar days from the payment of good funds of any portion of the purchase price shall not result in the creation of a commodity contract if:

(a) The delay in delivery is due to factors beyond the control of, and without any fault attributable to, the seller; and

(b) Either:

(i) The delay is clearly attributable to the then-prevailing market conditions in the relevant primary or wholesale precious metals markets, and delivery is completed within a reasonable time under such market conditions; or

(ii) The delay is clearly attributable to the purchaser's failure to take delivery, and the seller is not entitled to any storage or other fees resulting from such failure.

The burden of proof with respect to prevailing market conditions and their affect upon delivery, or with respect to any other factor preventing delivery within the relevant twenty-eight day period, shall be upon the seller.

(11) "Commodity option" means any account, agreement, or contract giving a party thereto the right to purchase or sell one or more commodities and/or one or more commodity contracts, whether characterized as an option, privilege, indemnity, bid, offer, put, call, advance guaranty, decline guaranty or otherwise, but does not include a commodity option traded on a national securities exchange registered with the United States securities and exchange commission.

(12) "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;

(d) Introducing broker;

(e) Leverage transaction merchant;

(f) An associated person of any of the foregoing;

(g) Floor broker; and

(h) Any other person (other than a futures association) required to register with the commodity futures trading commission.

(13) "Financial institution" means a bank, savings institution, or trust company organized under, or supervised pursuant to, the laws of the United States or of any state.

(14) "Offer" or "offer to sell" includes every offer, every attempt to offer to dispose of, or solicitation of an offer to buy, to purchase, or to acquire, for value.

(15) "Sale" or "sell" includes every sale, contract of sale, contract to sell, or disposition, for value.

(16) "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, but does not include a contract market designated by the commodity futures trading commission or any clearinghouse thereof or a national securities exchange registered with the United States securities and exchange commission (or any employee, officer, or director of such contract market, clearinghouse, or exchange acting solely in that capacity).

(17) "Precious metal" means:

(a) Silver, in either coin, bullion, or other form;

(b) Gold, in either coin, bullion, or other form;

(d) Such other items as the director may specify by rule or order.

Sec. 3. Section 4, chapter 14, Laws of 1986 and RCW 21.30.040 are each amended to read as follows:

(1) The prohibition in RCW 21.30.020 does not apply to the following:

(a) An account, agreement, or transaction within the exclusive jurisdiction of the commodity futures trading commission as granted under the commodity exchange act;

(b) A commodity contract for the purchase of one or more precious metals ((which requires, and under which the purchaser receives, within seven calendar days from the payment in good funds of any portion of the purchase price, physical delivery of the quantity of the precious metals purchased by such payment. However, for purposes of this paragraph, physical delivery is deemed to have occurred if, within such seven-day period)) in which, within seven calendar days from the payment in good funds of any portion of the purchase price, the quantity of precious metals purchased by the payment is delivered (whether in specifically segregated or fungible bulk form) into the possession of a depository (other than the seller) which is either (i) a financial institution, (ii) a depository the warehouse receipts of which are recognized for delivery purposes for any commodity on a contract market designated by the commodity futures trading commission, (iii) a storage facility licensed or regulated by the United States or any agency thereof, or (iv) a depository designated by the director, and the depository (or other person which itself qualifies as a depository as aforesaid) issues and the purchaser receives, a certificate, 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 have previously been disclosed to the purchaser;

(c) A commodity contract which would otherwise meet the requirements of (b) of this subsection except that physical delivery of a precious metal to a depository occurred more than seven calendar days from the payment in good funds of any portion of the purchase price if:

(i) The delay in delivery is due to factors beyond the control of, and without any fault attributable to, the seller; and

(ii) The delay is clearly attributable to the then-prevailing market conditions in the relevant primary or wholesale precious metals markets, and delivery is completed within a reasonable time under such market conditions.

The burden of proof with respect to prevailing market conditions and their affect upon delivery shall be upon the seller.

(d) A commodity contract solely between persons engaged in producing, processing, using commercially, or handling as merchants each commodity subject thereto, or any by-products thereof; or

((~~(d)~~)) (e) A commodity contract under which the offeree or the purchaser is a person referred to in RCW 21.30.030, a person registered with the federal securities and exchange commission as a broker-dealer, an insurance company, an investment company as defined in the federal 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).

(2) The director may issue rules or orders prescribing the terms and conditions of all 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 any person or transaction from any provision of this chapter conditionally or unconditionally and otherwise implementing this chapter for the protection of purchasers and sellers of commodities.

Sec. 4. Section 24, chapter 14, Laws of 1986 and RCW 21.30.230 are each amended to read as follows:

(1) An applicant for licensing as a commodity broker-dealer or commodity sales representative shall file with the administrator or the designee of the administrator an application for licensing together with a consent to service of process pursuant to RCW 21.30.190. The application for licensing must contain the information that the administrator determines, by rule, is necessary or appropriate to facilitate the administration of this chapter.

(2) An applicant for licensing as a commodity broker-dealer or commodity sales representative may file for limited licensing if each of the conditions of (a), (b), and (c) of this subsection are met. An applicant for limited licensing shall file a consent to service of process pursuant to RCW 21.30.190 together with an application for limited licensing available from the administrator. The application for limited licensing must contain the information that the administrator determines, by rule, is necessary or appropriate to determine that the applicant qualifies for limited licensing. The administrator may require any applicant for limited licensing to certify under oath that the applicant meets any or all of the conditions of (a), (b), and (c) of this subsection.

(a) An applicant for limited licensing may engage only in transactions in which the purchaser pays, and the seller receives, one hundred percent of the purchase price in cash or cash equivalent within ten days of the contract of sale; and

(b) No more than twenty-five percent of the total dollar value of the applicant's gross sales of commodities in the fiscal year immediately preceding application shall have constituted commodity contracts or commodity options as defined in this chapter; and

(c) The applicant's gross profit on all transactions in commodity contracts or commodity options, as defined in this chapter, shall not have exceeded five hundred thousand dollars in the fiscal year immediately preceding application, or one million dollars total for the two fiscal years immediately preceding application.

Sec. 5. Section 25, chapter 14, Laws of 1986 and RCW 21.30.240 are each amended to read as follows:

(1) An applicant for licensing shall pay a registration fee as follows:

(a) For a commodity broker-dealer, two hundred dollars; and for each branch office, one hundred dollars; and

(b) For a commodity sales representative, fifty dollars.

(2) Except in any year in which a licensing fee is paid, an applicant shall pay an annual fee as follows:

(a) For a commodity broker-dealer, one hundred dollars; and for each branch office in this state, fifty dollars; and

(b) For a commodity sales representative, thirty-five dollars.

(3) An applicant for limited licensing shall pay a registration fee as follows:

(a) For a commodity broker-dealer, one hundred dollars; and for each branch office in this state, fifty dollars; and

(b) For a commodity sales representative, twenty-five dollars.

(4) Except in any year in which a licensing fee is paid, an applicant for limited licensing shall pay an annual fee as follows:

(a) For a commodity broker-dealer, forty dollars; and for each branch office in this state, twenty dollars; and

(b) For a commodity sales representative, fifteen dollars.

(5) 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.

((~~(4)~~)) (6) If an application is denied or withdrawn or the license is terminated by revocation, cancellation, or withdrawal, the administrator shall retain the fee paid.

Sec. 6. Section 29, chapter 14, Laws of 1986 and RCW 21.30.280 are each amended to read as follows:

If the administrator determines, by rule, that ((~~one or more~~)) additional 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.

Sec. 7. Section 30, chapter 14, Laws of 1986 and RCW 21.30.290 are each amended to read as follows:

For so long as a commodity broker-dealer or commodity sales representative is licensed under this chapter, it shall file an annual report, together with the annual fee specified in RCW 21.30.240((~~(2)~~)), with the administrator or the administrator's designee ((~~at a time and~~)) including ((~~that information that the administrator determines, by rule or order, is necessary or appropriate~~)) such information as may be necessary to carry out this chapter.