FINAL BILL REPORT

SB 5178

                                  C 243 L 87

BYSenators Moore, Metcalf, Bender, Johnson, Smitherman, Pullen, Newhouse and Fleming

Authorizing limited commodity brokers license and providing additional exceptions to RCW 21.30.020.

Senate Committee on Financial Institutions

House Committe on Financial Institutions & Insurance

SYNOPSIS AS ENACTED

BACKGROUND:

The 1986 Commodities Act authorizes the Securities Administrator to regulate all transactions in precious metals which constitute commodities contracts.  A commodities contract exists if physical delivery of precious metals occurs beyond 28 days of payment of any portion of the purchase price.  A seller of precious metals engaging in commodities contracts is regulated as a commodities broker-dealer and is subject to registration and compliance provisions which include minimum net capital requirements, surety bond requirements, and detailed reporting requirements.

Representatives of the precious metals industry in Washington have expressed serious concern that the cost of registration and compliance is disproportionate to the earnings of the average precious metals dealer and could force dealers to quit the business or alter selling procedures to avoid the purview of the act.  Additional concern has been expressed that the statutory definition of a commodities contract does not account for delays in the primary or wholesale markets, over which the seller has no control, but that may affect the date on which the buyer is able to take physical delivery.

Although regulations have been adopted which reduce the cost of registration and compliance for qualifying precious metals dealers, statutory relief is sought in this area, as well as that of delivery dates and fee structures.

SUMMARY:

An exemption from registration is created.  A person claiming the exemption must file notice and must meet the following criteria: (1) 100 percent of the purchase price for transactions in commodities must be received within ten days from the contract of sale; (2) only 25 percent of commodity transactions in a single year may constitute commodity contracts or commodity options; (3) gross profits on commodity contracts or commodity options may not exceed $500,000 in the year immediately preceding the year in which the exemption is claimed, or $1,000,000 in the two years immediately preceding the year in which the exemption is claimed; and (4) property and casualty insurance must be maintained in an amount sufficient to cover the value of commodities stored for customers.

A person must renew his or her claim of exemption every two years.

VOTES ON FINAL PASSAGE:

      Senate    44     1

      House 93   3 (House amended)

      Senate    49     0 (Senate concurred)

EFFECTIVE:July 26, 1987