HOUSE BILL 2487
State of Washington 57th Legislature 2002 Regular Session
By Representatives McIntire, Benson and Cooper; by request of Department of Financial Institutions
Read first time 01/18/2002. Referred to Committee on Financial Institutions & Insurance.
AN ACT Relating to regulating securities; amending RCW 21.20.005, 21.20.020, 21.20.040, 21.20.110, 21.20.310, 21.20.370, and 21.20.380; and adding a new section to chapter 21.20 RCW.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1. RCW 21.20.005 and 1998 c 15 s 1 are each amended to read as follows:
The definitions set forth in this section shall apply throughout this chapter, unless the context otherwise requires:
(1) "Director" means the director of financial institutions of this state.
(2) "Salesperson" means any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect sales of securities. "Salesperson" does not include an individual who represents an issuer in (a) effecting a transaction in a security exempted by RCW 21.20.310 (1), (2), (3), (4), (9), (10), (11), (12), or (13), (b) effecting transactions exempted by RCW 21.20.320 unless otherwise expressly required by the terms of the exemption, or (c) effecting transactions with existing employees, partners, or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state.
(3) "Broker-dealer" means any person engaged in the business of effecting transactions in securities for the account of others or for that person's own account. "Broker-dealer" does not include (a) a salesperson, issuer, bank, savings institution, or trust company, (b) a person who has no place of business in this state if the person effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions, other broker-dealers, or banks, savings institutions, trust companies, insurance companies, investment companies as defined in the investment company act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees, or (c) a person who has no place of business in this state if during any period of twelve consecutive months that person does not direct more than fifteen offers to sell or to buy into or make more than five sales in this state in any manner to persons other than those specified in (b) of this subsection.
(4) "Guaranteed" means guaranteed as to payment of principal, interest, or dividends.
(5) "Full business day" means all calendar days, excluding therefrom Saturdays, Sundays, and all legal holidays, as defined by statute.
(6) "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" also includes financial planners and other persons who, as an integral component of other financially related services, (a) provide the foregoing investment advisory services to others for compensation as part of a business or (b) hold themselves out as providing the foregoing investment advisory services to others for compensation. Investment adviser shall also include any person who holds himself out as a financial planner.
"Investment adviser" does not include (a) a bank, savings institution, or trust company, (b) a lawyer, accountant, certified public accountant licensed under chapter 18.04 RCW, engineer, or teacher whose performance of these services is solely incidental to the practice of his or her profession, (c) a broker-dealer or its salesperson whose performance of these services is solely incidental to the conduct of its business as a broker-dealer and who receives no special compensation for them, (d) a publisher of any bona fide newspaper, news magazine, news column, newsletter, or business or financial publication or service, whether communicated in hard copy form, by electronic means, or otherwise, that does not consist of the rendering of advice on the basis of the specific investment situation of each client, (e) a radio or television station, (f) a person whose advice, analyses, or reports relate only to securities exempted by RCW 21.20.310(1), (g) an investment adviser representative, or (h) such other persons not within the intent of this paragraph as the director may by rule or order designate.
(7) "Issuer" means any person who issues or proposes to issue any security, except that with respect to certificates of deposit, voting trust certificates, or collateral-trust certificates, or with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors (or persons performing similar functions) or of the fixed, restricted management, or unit type; the term "issuer" means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which the security is issued.
(8) "Nonissuer" means not directly or indirectly for the benefit of the issuer.
(9) "Person" means an individual, a corporation, a partnership, a limited liability company, a limited liability partnership, an association, a joint-stock company, a trust where the interest of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government.
(10) "Sale" or "sell" includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value. "Offer" or "offer to sell" includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.
Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing is considered to constitute part of the subject of the purchase and to have been offered and sold for value. A purported gift of assessable stock is considered to involve an offer and sale. Every sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert into another security of the same or another issuer, is considered to include an offer of the other security.
(11) "Securities Act of 1933," "Securities Exchange Act of 1934," "Public Utility Holding Company Act of 1935," "Investment Company Act of 1940," and "Investment Advisers Act of 1940" means the federal statutes of those names as amended before or after June 10, 1959.
"Security" means any note; stock; treasury stock; bond; debenture;
evidence of indebtedness; certificate of interest or participation in any
profit-sharing agreement; collateral-trust certificate; preorganization
certificate or subscription; transferable share; investment contract;
investment of money or other consideration in the risk capital of a venture
with the expectation of some valuable benefit to the investor where the
investor does not receive the right to exercise practical and actual control
over the managerial decisions of the venture; voting-trust certificate;
certificate of deposit for a security; ((
certificate of)) fractional
undivided interest (( or participation)) in an oil, gas, or (( mining
title or)) mineral lease or in payments out of production under (( such))
a (( title or)) lease, right, or royalty; charitable gift annuity;
any put, call, straddle, option, or privilege on any security, certificate of
deposit, or group or index of securities, including any interest therein or
based on the value thereof; or any put, call, straddle, option, or privilege entered
into on a national securities exchange relating to foreign currency; or, in
general, any interest or instrument commonly known as a "security,"
or any certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant or right to subscribe to
or purchase, any (( of the foregoing; or any sale of or indenture, bond or
contract for the conveyance of land or any interest therein where such land is
situated outside of the state of Washington and such sale or its offering is
not conducted by a real estate broker licensed by the state of Washington))
security under this subsection. This subsection applies whether or not the
security is evidenced by a written document.
(b) "Security" does not include: (i) Any insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed sum of money either in a lump sum or periodically for life or some other specified period; or (ii) an interest in a contributory or noncontributory pension or welfare plan subject to the Employee Retirement Income Security Act of 1974.
(13) "State" means any state, territory, or possession of the United States, as well as the District of Columbia and Puerto Rico.
(14) "Investment adviser representative" means any partner, officer, director, or a person occupying similar status or performing similar functions, or other individual, who is employed by or associated with an investment adviser, and who does any of the following:
(a) Makes any recommendations or otherwise renders advice regarding securities;
(b) Manages accounts or portfolios of clients;
(c) Determines which recommendation or advice regarding securities should be given;
(d) Solicits, offers, or negotiates for the sale of or sells investment advisory services; or
(e) Supervises employees who perform any of the functions under (a) through (d) of this subsection.
(15) "Relatives," as used in RCW 21.20.310(11) includes:
(a) A member's spouse;
(b) Parents of the member or the member's spouse;
(c) Grandparents of the member or the member's spouse;
(d) Natural or adopted children of the member or the member's spouse;
(e) Aunts and uncles of the member or the member's spouse; and
(f) First cousins of the member or the member's spouse.
(16) "Customer" means a person other than a broker-dealer or investment adviser.
(17) "Federal covered security" means any security defined as a covered security in the Securities Act of 1933.
(18) "Federal covered adviser" means any person registered as an investment adviser under section 203 of the Investment Advisers Act of 1940.
Sec. 2. RCW 21.20.020 and 1998 c 15 s 2 are each amended to read as follows:
(1) It is unlawful for any person who receives any consideration from another party primarily for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise:
To employ any device, scheme, or artifice to defraud the other person;
To engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon the other person; or
(c) To engage in any dishonest or unethical practice as the director may define by rule.
This subsection (1) applies whether or not the person is an investment adviser, federal covered adviser, or investment adviser under this chapter or the Investment Advisers Act of 1940.
(3) To act)) (2)
It is unlawful for an investment adviser, acting as principal for his or
her own account, knowingly to sell any security to or purchase any security
from a client, or act as a broker for a person other than such client,
knowingly to effect any sale or purchase of any security for the account of
such client, without disclosing to such client in writing before the execution
of such transaction the capacity in which he or she is acting and obtaining the
consent of the client to such transaction(( ; or (4) To engage in any
dishonest or unethical practice as the director may define by rule)).
This subsection (2) does not apply to a transaction with a customer of a broker-dealer if the broker-dealer is not acting as an investment adviser in relation to the transaction.
Sec. 3. RCW 21.20.040 and 1998 c 15 s 3 are each amended to read as follows:
(1) It is unlawful for
any person to transact business in this state as a broker-dealer or
salesperson, unless: (a) The person is registered under this chapter; (b) the
person is exempted from registration as a broker-dealer or salesperson to sell
or resell condominium units sold in conjunction with an investment contract as
may be provided by rule or order of the director as to persons who are licensed
pursuant to the provisions of chapter 18.85 RCW; (c) the person is a
salesperson who satisfies the requirements of section 15(h)(2) of the
Securities Exchange Act of 1934 and effects in this state no transactions other
than those described by section 15(h)(3) of the Securities Exchange Act of
or)) (d) the person is a salesperson effecting transactions in
open-end investment company securities sold at net asset value without any
sales charges; or (e) the person participates only in the sale or offering
for sale of variable contracts which fund corporate plans meeting the
requirements for qualification under section 401 or 403 of the United States
Internal Revenue Code as set forth in RCW 48.18A.060.
(2) It is unlawful for any broker-dealer or issuer to employ a salesperson unless the salesperson is registered or exempted from registration.
(3) It is unlawful for any person to transact business in this state as an investment adviser or investment adviser representative unless: (a) The person is so registered or exempt from registration under this chapter; (b) the person has no place of business in this state and (i) the person's only clients in this state are investment advisers registered under this chapter, federal covered advisers, broker-dealers, banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, employee benefit plans with assets of not less than one million dollars, or governmental agencies or instrumentalities, whether acting for themselves or as trustees with investment control, or (ii) during the preceding twelve-month period the person has had fewer than six clients who are residents of this state other than those specified in (b)(i) of this subsection; (c) the person is an investment adviser to an investment company registered under the Investment Company Act of 1940; (d) the person is a federal covered adviser and the person has complied with requirements of RCW 21.20.050; or (e) the person is excepted from the definition of investment adviser under section 202(a)(11) of the Investment Advisers Act of 1940.
(4) It is unlawful for any person, other than a federal covered adviser, to hold himself or herself out as, or otherwise represent that he or she is a "financial planner", "investment counselor", or other similar term, as may be specified in rules adopted by the director, unless the person is registered as an investment adviser or investment adviser representative, is exempt from registration under RCW 21.20.040(1), or is excluded from the definition of investment adviser under RCW 21.20.005(6).
(5)(a) It is unlawful for any person registered or required to be registered as an investment adviser under this chapter to employ, supervise, or associate with an investment adviser representative unless such investment adviser representative is registered as an investment adviser representative under this chapter.
(b) It is unlawful for any federal covered adviser or any person required to be registered as an investment adviser under section 203 of the Investment Advisers Act of 1940 to employ, supervise, or associate with an investment adviser representative having a place of business located in this state, unless such investment adviser representative is registered or is exempted from registration under this chapter.
Sec. 4. RCW 21.20.110 and 1998 c 15 s 10 are each amended to read as follows:
(1) The director may by
order deny, suspend, ((
or)) revoke, restrict, condition, or limit any
application or registration of any broker-dealer, salesperson, investment
adviser representative, or investment adviser; or censure or fine the
registrant or an officer, director, partner, or person occupying similar
functions for a registrant; (( or restrict or limit a registrant's function
or activity of business for which registration is required in this state;))
if the director finds that the order is in the public interest and that the
applicant or registrant or, in the case of a broker-dealer or investment
adviser, any partner, officer, (( or)) director, or person occupying
(a) Has filed an application for registration under this section 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 the light of the circumstances under which it was made, false, or misleading with respect to any material fact;
(b) Has willfully violated or willfully failed to comply with any provision of this chapter or a predecessor act or any rule or order under this chapter or a predecessor act, or any provision of chapter 21.30 RCW or any rule or order thereunder;
(c) Has been convicted,
within the past ((
five)) ten years, of any misdemeanor involving
a security, or a commodity contract or commodity option as defined in RCW
21.30.010, or any aspect of the securities (( or investment)),
commodities (( business)), business investments, franchises, business
opportunities, insurance, banking, or finance business, or any felony
involving moral turpitude;
(d) Is permanently or
temporarily enjoined or restrained by any court of competent
jurisdiction in an action brought by the director, a state, or a federal
government agency from engaging in or continuing any conduct or practice
involving any aspect of the securities ((
commodities (( business)), business investments, franchises, business
opportunities, insurance, banking, or finance business;
(e) Is the subject of
an order ((
of the director denying, suspending, or revoking registration as
a broker-dealer, salesperson, investment adviser, or investment adviser
representative)) entered after notice and opportunity for hearing:
(i) By the securities administrator of a state or by the Securities and Exchange Commission denying, revoking, or suspending registration as a broker-dealer, salesperson, investment adviser, or investment adviser representative;
(ii) By the securities administrator of a state or by the Securities and Exchange Commission sanctioning against a broker-dealer or an investment adviser;
(iii) By the Securities and Exchange Commission suspending or expelling the registrant from membership in a self-regulatory organization; or
(iv) By a court adjudicating a United States Postal Service fraud;
The director may not commence a revocation or suspension proceeding more than one year after the date of the order relied on. The director may not enter an order on the basis of an order under another state securities act unless that order was based on facts that would constitute a ground for an order under this section;
(f) Is the subject of
an order ((
entered within the past five years by the securities
administrator of any other state or by the federal securities and exchange
commission denying or revoking registration as a broker-dealer or salesperson,
or a commodity broker-dealer or sales representative, or the substantial
equivalent of those terms as defined in this chapter or by the commodity
futures trading commission denying or revoking registration as a commodity
merchant as defined in RCW 21.30.010, or is the subject of an order of
suspension or expulsion from membership in or association with a
self-regulatory organization registered under the securities exchange act of
1934 or the federal commodity exchange act, or is the subject of a United
States post office fraud order; but (i) the director may not institute a
revocation or suspension proceeding under this clause more than one year from
the date of the order relied on, and (ii) the director may not enter any order
under this clause on the basis of an order unless that order was based on facts
which would currently constitute a ground for an order under this section)),
adjudication, or determination, after notice and opportunity for hearing, by
the Securities and Exchange Commission, the Commodities Futures Trading
Commission, the Federal Trade Commission, or a securities or insurance
regulator of any state that the person has willfully violated the Securities
Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act
of 1940, the Investment Company Act of 1940, the Commodities Exchange Act, the
securities, insurance, or commodities law of any state, or a federal or state
law under which a business involving investments, franchises, business
opportunities, insurance, banking, or finance is regulated;
(g) Has engaged in
dishonest or unethical practices in the securities or ((
(h) Is insolvent,
either in the sense that his or her liabilities exceed his or her assets or in
the sense that he or she cannot meet his or her obligations as they mature; but
the director may not enter an order against ((
a broker-dealer or investment
adviser)) an applicant or registrant under this (( clause)) subsection(1)(h)
without a finding of insolvency as to the (( broker-dealer or investment
adviser)) applicant or registrant;
(i) Has not complied
with a condition imposed by the director under RCW 21.20.100, or is not
qualified on the basis of such factors as training, experience, or knowledge of
the securities business, except as otherwise provided in subsection (2) of
this section; ((
(j) Has failed to supervise reasonably a salesperson or an investment adviser representative, or employee, if the salesperson, investment adviser representative, or employee was subject to the person's supervision and committed a violation of this chapter or a rule adopted or order issued under this chapter. For the purposes of this subsection, no person fails to supervise reasonably another person, if:
(i) There are established procedures, and a system for applying those procedures, that would reasonably be expected to prevent and detect, insofar as practicable, any violation by another person of this chapter, or a rule or order under this chapter; and
(ii) The supervising person has reasonably discharged the duties and obligations required by these procedures and system without reasonable cause to believe that another person was violating this chapter or rules or orders under this chapter;
(k) Has failed to pay the proper filing fee within thirty days after being notified by the director of a deficiency, but the director shall vacate an order under this subsection (1)(k) when the deficiency is corrected;
(l) Within the past ten years has been found, after notice and opportunity for a hearing to have:
(i) Willfully violated the law of a foreign jurisdiction governing or regulating the business of securities, commodities, insurance, or banking;
(ii) Been the subject of an order of a securities regulator of a foreign jurisdiction denying, revoking, or suspending the right to engage in the business of securities as a broker-dealer, agent, investment adviser, or investment adviser representative; or
(iii) Been suspended or expelled from membership by a securities exchange or securities association operating under the authority of the securities regulator of a foreign jurisdiction;
(m) Is the subject of a cease and desist order issued by the Securities and Exchange Commission or issued under the securities or commodities laws of a state; or
(n) Refuses to allow or otherwise impedes the director from conducting an audit, examination, or inspection, or refuses access to any branch office or business location to conduct an audit, examination, or inspection.
(2) The director, by rule or order, may require that an examination, including an examination developed or approved by an organization of securities administrators, be taken by any class of or all applicants. The director, by rule or order, may waive the examination as to a person or class of persons if the administrator determines that the examination is not necessary or appropriate in the public interest or for the protection of investors.
The director may issue a summary order pending final determination of a
proceeding under this section upon a finding that it is in the public interest
and necessary or appropriate for the protection of investors.
The director may not impose a fine under this section except after notice and
opportunity for hearing. The fine imposed under this section may not exceed
five thousand dollars for each act or omission that constitutes the basis for
issuing the order. If a petition for judicial review has not been timely filed
under RCW 34.05.542(2), a certified copy of the director's order requiring
payment of the fine may be filed in the office of the clerk of the superior
court in any county of this state. The clerk shall treat the order of the
director in the same manner as a judgment of the superior court. The
director's order so filed has the same effect as a judgment of the superior
court and may be recorded, enforced, or satisfied in like manner.
(5) Withdrawal from registration as a broker-dealer, salesperson, investment adviser, or investment adviser representative becomes effective thirty days after receipt of an application to withdraw or within such shorter period as the administrator determines, unless a revocation or suspension proceeding is pending when the application is filed. If a proceeding is pending, withdrawal becomes effective upon such conditions as the director, by order, determines. If no proceeding is pending or commenced and withdrawal automatically becomes effective, the administrator may nevertheless commence a revocation or suspension proceeding under subsection (1)(b) of this section within one year after withdrawal became effective and enter a revocation or suspension order as of the last date on which registration was effective.
(6) A person who, directly or indirectly, controls a person not in compliance with any part of this section may also be sanctioned to the same extent as the noncomplying person, unless the controlling person acted in good faith and did not directly or indirectly induce the conduct constituting the violation or cause of action.
(7) The director
shall immediately suspend the license or certificate of a person who has been
certified pursuant to RCW 74.20A.320 by the department of social and health
services as a person who is not in compliance with a support order ((
residential or visitation order)). If the person has continued to meet all
other requirements for reinstatement during the suspension, reissuance of the
license or certificate shall be automatic upon the director's receipt of a
release issued by the department of social and health services stating that the
licensee is in compliance with the order.
Sec. 5. RCW 21.20.310 and 1998 c 15 s 13 are each amended to read as follows:
RCW 21.20.140 through 21.20.300, inclusive, and 21.20.327 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 subsection((
s)) (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 subsection((
s)) (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 insured or
guaranteed by, any insurance company ((
organized under the laws of this
state and)) authorized to do (( and actually doing)) business in this
(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))) (b) regulated in respect of its
rates and charges by a governmental authority of the United States or any state
or municipality; or (( (d))) (c) 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)) and
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 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, as a nonqualified incentive stock option plan adopted with or as a supplement to 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(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. 6. RCW 21.20.370 and 1998 c 15 s 17 are each amended to read as follows:
(1) The director
in his or her discretion ((
(1))) (a) may annually, or more
frequently, make such public or private investigations within or without this
state as the director deems necessary to determine whether any registration
should be granted, denied or revoked or whether any person has violated, is
violating, or is about to violate any provision of this chapter or any rule
or order (( hereunder)) under this chapter, or to aid in the
enforcement of this chapter or in the (( prescribing)) adoption of
rules and forms (( hereunder, (2))) under this chapter, (b) may
engage in the detection and identification of criminal activities subject to
this chapter, (( (3))) (c) may require or permit any person to testify
or to file a statement in writing, under oath or otherwise as the director
may determine, as to all the facts and circumstances concerning the matter to
be investigated, and (( (4))) (d) may publish information
concerning a proceeding, an investigation, or any violation of this
chapter or any rule or order (( hereunder)) under this chapter, if the
director determines it is necessary or appropriate in the public interest or
for the protection of investors.
(2) The enforcement unit of the securities division of the department of financial institutions may be authorized to receive criminal history record information in connection with the investigation of criminal activities subject to this chapter.
Sec. 7. RCW 21.20.380 and 1995 c 46 s 6 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) A subpoena issued to a financial institution under this section may, if the director finds it necessary or appropriate in the public interest or for the protection of investors, include a directive that the financial institution subpoenaed shall not disclose to third parties that are not affiliated with the financial institution, other than to the institution's legal counsel, the existence or content of the subpoena.
(4) 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, or
the failure to comply with a nondisclosure directive under subsection (3) of
this section, a court of competent jurisdiction of any county or the judge
thereof, on application of the director, and after satisfactory evidence of willful
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.
NEW SECTION. Sec. 8. A new section is added to chapter 21.20 RCW to read as follows:
As required by chapter 48.18A RCW, a person selling variable contracts shall be registered as a broker-dealer or securities salesperson as required by this chapter. This chapter, and any rules or orders adopted under this chapter, applies to any person engaged in the offer, sale, or purchase of a variable contract. "Variable contract" means the same as set forth under chapter 48.18A RCW.
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