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.
(12)(a)
"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:
(((1)))
(a) To employ any device, scheme, or artifice to defraud the other
person;
(((2)))
(b) 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 1934; ((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 similar functions:
(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 ((or investment)),
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 ((investment))
commodities business;
(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; ((or))
(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.
(((2)))
(3) 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.
(((3)))
(4) 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
((or a 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
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))) (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.
