AN ACT Relating to
securities; and amending RCW 21.20.060, 21.20.090, 21.20.270, 21.20.310,
21.20.340, 21.20.380, and 21.20.390.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF
WASHINGTON:
Sec. 1. RCW 21.20.060 and 1994 c
256 s 7 are each amended to read as follows:
The application shall
contain whatever information the director requires concerning such matters as:
(1) The applicant's
form and place of organization;
(2) The applicant's
proposed method of doing business;
(3) The qualifications
and business history of the applicant and in the case of a broker-dealer or
investment adviser, any partner, officer, or director;
(4) Any injunction or
administrative order or conviction of a misdemeanor involving a security or any
aspect of the securities business and any conviction of a felony; ((and))
(5) The applicant's
financial condition and history; and
(6) The address of
the principal place of business of the applicant and the addresses of all branch
offices of the applicant in this state.
The director ((of
licenses or the duly appointed administrator)) may by rule require a
minimum capital for registered broker-dealers and investment advisers or
prescribe a ratio between net capital and aggregate indebtedness by type or
classification and may by rule allow registrants to maintain a surety bond of
appropriate amount as an alternative method of compliance with minimum capital
or net capital requirements.
Sec. 2. RCW 21.20.090 and 1994 c
256 s 9 are each amended to read as follows:
Registration of a
broker-dealer, salesperson, investment adviser representative, or investment
adviser may be renewed by filing with the director or his or her
authorized agent prior to the expiration thereof an application containing such
information as the director may require to indicate any material change in the
information contained in the original application or any renewal application
for registration as a broker-dealer, salesperson, investment adviser
representative, or investment adviser filed with the director or his or her
authorized agent by the applicant, payment of the prescribed fee, and, in the
case of a broker-dealer((, a financial statement showing the financial
condition of such broker-dealer as of a date within ninety days)) or
investment adviser such financial reports as the director may by rule prescribe.
A registered broker-dealer or investment adviser may file an application for
registration of a successor, and the administrator may at his or her discretion
grant or deny the application.
Sec. 3. RCW 21.20.270 and 1975
1st ex.s. c 84 s 14 are each amended to read as follows:
(1) The director may
require the person who filed the registration statement to file reports, not
more often than quarterly to keep reasonably current the information contained in
the registration statement and to disclose the progress of the offering with
respect to registered securities which (a) are issued by a face-amount
certificate company or a redeemable security issued by an open-end management
company or unit investment trust as those terms are defined in the investment
company act of 1940, or (b) are being offered and sold directly by or for the
account of the issuer. ((A ten dollar fee shall accompany each such report.))
(2) During the period
of public offering of securities registered under the provisions of this
chapter by qualification financial data or statements corresponding to those
required under the provisions of RCW 21.20.210 and to the issuer's fiscal year
shall be filed with the director annually, not more than one hundred twenty
days after the end of each such year. Such statements at the discretion of the
director or administrator shall be certified by a certified public accountant
who is not an employee of the issuer, and the director may verify them by examining
the issuer's books and records. The certificate of such independent certified
public accountant shall be based upon an audit of not less in scope or
procedures followed than that which independent public accountants would
ordinarily make for the purpose of presenting comprehensive and dependable
financial statements, and shall contain such information as the director may
prescribe, by rules ((and regulations)) in the public interest or for
the protection of investors, as to the nature and scope of the audit and the
findings and opinions of the accountants. Each such report shall state that
such independent certified public accountant has verified securities owned,
either by actual examination, or by receipt of a certificate from the
custodian, as the director may prescribe by rules ((and regulations)).
Sec. 4. RCW 21.20.310 and 1994 c
256 s 18 are each amended to read as follows:
RCW 21.20.140 through
21.20.300, inclusive, do not apply to any of the following securities:
(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; but this exemption does not include any security
payable solely from revenues to be received from a nongovernmental industrial
or commercial enterprise unless such payments are made or unconditionally
guaranteed by a person whose securities are exempt from registration by
subsections (7) or (8) of this section: PROVIDED, That the director, by rule
or order, may exempt any security payable solely from revenues to be received
from a nongovernmental industrial or commercial enterprise if the director
finds that registration with respect to such securities is not necessary in the
public interest and for the protection of investors.
(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; but this exemption does not
include any security payable solely from revenues to be received from a
nongovernmental industrial or commercial enterprise unless such payments shall
be made or unconditionally guaranteed by a person whose securities are exempt
from registration by subsections (7) or (8) of this section.
(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 or trust company
organized or 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 building and loan or similar association
organized under the laws of any state and authorized to do business in this
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 this state and authorized to do
and actually doing 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; (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 municipality; 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;
also equipment trust certificates in respect of equipment conditionally sold or
leased to a railroad or public utility, if other securities issued by such
railroad or public utility would be exempt under this subsection.
(8) Any security which
meets the criteria for investment grade securities that the director may adopt
by rule.
(9) Any prime quality
negotiable commercial paper not intended to be marketed to the general public
and not advertised for sale to the general public that is of a type eligible
for discounting by federal reserve banks, that arises out of a current
transaction or the proceeds of which have been or are to be used for a current
transaction, and that 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.
(10) Any ((investment
contract)) security issued in connection with an employee's stock
purchase, savings, pension, profit-sharing, or similar benefit plan if: (a)
The plan meets the requirements for qualification as a pension, profit sharing,
or stock bonus plan under section 401 of the internal revenue code, as an
incentive stock option plan under section 422 of the internal revenue code, or
as an employee stock purchase plan under section 423 of the internal revenue
code; or (b) the director is notified in writing with a copy of the plan
thirty days before offering the plan to employees in this state. In the event
of late filing of notification the director may upon application, for good
cause excuse such late filing if he or she finds it in the public interest to
grant such relief.
(11) Any security
issued by any person organized and operated as a nonprofit organization as
defined in RCW 84.36.800(4) exclusively for religious, educational, fraternal,
or charitable purposes and which nonprofit organization also possesses a
current tax exempt status under the laws of the United States, which security
is offered or sold only to persons who, prior to their solicitation for the
purchase of said securities, were members of, contributors to, or listed as
participants in, the organization, or their relatives, if such nonprofit
organization first files a notice specifying the terms of the offering and the
director does not by order disallow the exemption within the next ten full
business days: PROVIDED, That no offerings may be made until expiration of the
ten full business days. Every such nonprofit organization which files a notice
of exemption of such securities shall pay a filing fee as set forth in RCW
21.20.340(((12))) (11) as now or hereafter amended.
The notice shall
consist of the following:
(a) The name and
address of the issuer;
(b) The names,
addresses, and telephone numbers of the current officers and directors of the
issuer;
(c) A short description
of the security, price per security, and the number of securities to be
offered;
(d) A statement of the
nature and purposes of the organization as a basis for the exemption under this
section;
(e) A statement of the
proposed use of the proceeds of the sale of the security; and
(f) A statement that
the issuer shall provide to a prospective purchaser written information
regarding the securities offered prior to consummation of any sale, which
information shall include the following statements: (i) "ANY PROSPECTIVE
PURCHASER IS ENTITLED TO REVIEW FINANCIAL STATEMENTS OF THE ISSUER WHICH SHALL
BE FURNISHED UPON REQUEST."; (ii) "RECEIPT OF NOTICE OF EXEMPTION BY
THE WASHINGTON ADMINISTRATOR OF SECURITIES DOES NOT SIGNIFY THAT THE
ADMINISTRATOR HAS APPROVED OR RECOMMENDED THESE SECURITIES, NOR HAS THE
ADMINISTRATOR PASSED UPON THE OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE."; and (iii) "THE RETURN OF THE FUNDS OF THE
PURCHASER IS DEPENDENT UPON THE FINANCIAL CONDITION OF THE ORGANIZATION."
(12) Any charitable
gift annuities issued by a board of a state university, regional university, or
of the state college.
(13) Any charitable
gift annuity issued by an insurer or institution holding a certificate of
exemption under RCW 48.38.010.
Sec. 5. RCW 21.20.340 and 1994 c
256 s 20 are each amended to read as follows:
The following fees shall
be paid in advance under the provisions of this chapter:
(1) For registration of
securities by qualification, the fee shall be one hundred dollars for the first
one hundred thousand dollars of initial issue, or portion thereof in this
state, based on offering price, plus one-twentieth of one percent for any
excess over one hundred thousand dollars which are to be offered during that
year: PROVIDED, HOWEVER, That an issuer may upon the payment of a fifty dollar
fee renew for one additional twelve-month period only the unsold portion for
which the registration fee has been paid.
(2) For registration by
coordination of securities issued by an investment company, other than a
closed-end company, as those terms are defined in the Investment Company Act of
1940, the fee shall be one hundred dollars for the first one hundred thousand
dollars of initial issue, or portion thereof in this state, based on offering
price, plus one-twentieth of one percent for any excess over one hundred
thousand dollars which are to be offered in this state during that year:
PROVIDED, HOWEVER, That an issuer may upon the payment of a fifty dollar fee
renew for an additional twelve-month period the unsold portion for which the
registration fee has been paid.
(3) For registration by
coordination of securities not covered by subsection (2) of this section, the
initial filing fee shall be one hundred dollars for the first one hundred
thousand dollars of initial issue, or portion thereof in this state, based on
offering price, plus one-fortieth of one percent for any excess over one
hundred thousand dollars for the first twelve-month period plus one hundred
dollars for each additional twelve months in which the same offering is
continued.
(4) For filing annual
financial statements, the fee shall be twenty-five dollars.
(5)(a) For
filing an amended offering circular after the initial registration permit has
been granted the fee shall be ten dollars.
(b) For filing a
report under RCW 21.20.270(1) the fee shall be ten dollars.
(6) For registration of
a broker-dealer or investment adviser, the fee shall be one hundred fifty
dollars for original registration and seventy-five dollars for each annual
renewal. When an application is denied or withdrawn the director shall retain
one-half of the fee.
(7) For registration of
a salesperson or investment adviser representative, the fee shall be forty
dollars for original registration with each employer and twenty dollars for
each annual renewal. When an application is denied or withdrawn the director
shall retain one-half of the fee.
(8) If a registration
of a broker-dealer, salesperson, investment adviser, or investment adviser
representative is not renewed on or before December 31st of each year the
renewal is delinquent. The director by rule or order may set and assess a fee
for delinquency not to exceed two hundred dollars. Acceptance by the director
of an application for renewal after December 31st is not a waiver of
delinquency. A delinquent application for renewal will not be accepted for
filing after March 1st.
(9)(a) For the transfer
of a broker-dealer license to a successor, the fee shall be fifty dollars.
(b) For the transfer of
a salesperson license from a broker-dealer or issuer to another broker-dealer
or issuer, the transfer fee shall be twenty-five dollars.
(c) For the transfer of
an investment adviser representative license from an investment adviser to
another investment adviser, the transfer fee shall be twenty-five dollars.
(d) For the transfer of
an investment adviser license to a successor, the fee shall be fifty dollars.
(10) The director may
provide by rule for the filing of notice of claim of exemption under RCW
21.20.320 (1), (9), and (17) and set fees accordingly not to exceed three
hundred dollars.
(11) For filing of
notification of claim of exemption from registration pursuant to RCW
21.20.310(11), as now or hereafter amended, the fee shall be fifty dollars for
each filing.
(12) For rendering
interpretative opinions, the fee shall be thirty-five dollars.
(13) For certified
copies of any documents filed with the director, the fee shall be the cost to
the department.
(14) For a duplicate
license the fee shall be five dollars.
All fees collected
under this chapter shall be turned in to the state treasury and are not
refundable, except as herein provided.
Sec. 6. RCW 21.20.380 and 1994 c
256 s 22 are each amended to read as follows:
(1) For the
purpose of any investigation or proceeding under this chapter, the director or
any officer designated by the director may administer oaths and affirmations,
subpoena witnesses, compel their attendance, take evidence, and require the
production of any books, papers, correspondence, memoranda, agreements, or
other documents or records which the director deems relevant or material to the
inquiry.
(2) If the
activities constituting an alleged violation for which the information is
sought would be a violation of this chapter had the activities occurred in this
state, the director may issue and apply to enforce subpoenas in this state at
the request of a securities agency or administrator of another state.
(3) In case of
disobedience on the part of any person to comply with any subpoena lawfully
issued by the director, or on the refusal of any witness to testify to any
matters regarding which the witness may be lawfully interrogated, a court of
competent jurisdiction of any county or the judge thereof, on application of
the director, and after satisfactory evidence of wilful disobedience, may compel
obedience by proceedings for contempt, as in the case of disobedience of the
requirements of a subpoena issued from such a court on a refusal to testify
therein.
Sec. 7. RCW 21.20.390 and 1994 c
256 s 23 are each amended to read as follows:
Whenever it appears to
the director that any person has engaged or is about to engage in any act or
practice constituting a violation of any provision of this chapter or any rule
or order hereunder, the director may in his or her discretion:
(1) Issue an order
directing the person to cease and desist from continuing the act or practice and
to take appropriate affirmative action within a reasonable period of time, as
prescribed by the director, to correct conditions resulting from the act or
practice including, without limitation, a requirement to provide restitution:
PROVIDED, That reasonable notice of and opportunity for a hearing shall be
given: PROVIDED, FURTHER, That the director may issue a temporary order
pending the hearing which shall remain in effect until ten days after the
hearing is held and which shall become final if the person to whom notice is
addressed does not request a hearing within fifteen days after the receipt of
notice; or
(2) The director may
without issuing a cease and desist order, bring an action in any court of
competent jurisdiction to enjoin any such acts or practices and to enforce
compliance with this chapter or any rule or order hereunder. The court may
grant such ancillary relief as it deems appropriate. Upon a proper showing a
permanent or temporary injunction, restraining order, or writ of mandamus shall
be granted and a receiver or conservator may be appointed for the defendant or
the defendant's assets. The director may not be required to post a bond. If
the director prevails, the director shall be entitled to a reasonable
attorney's fee to be fixed by the court.
(3) Whenever it appears
to the director that any person who has received a permit to issue, sell, or
otherwise dispose of securities under this chapter, whether current or
otherwise, has become insolvent, the director may petition a court of competent
jurisdiction to appoint a receiver or conservator for the defendant or the
defendant's assets. The director may not be required to post a bond.
(4) The
director may bring an action for restitution or damages on behalf of the
persons injured by a violation of this chapter, if the court finds that private
civil action would be so burdensome or expensive as to be impractical.
