HOUSE BILL REPORT

ESB 5178

As Amended by the House

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

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

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass with amendment (11).

      Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Betrozoff, Chandler, Crane, Dellwo, Ferguson, P. King, Meyers, Nutley and Winsley.

House Staff:Harry Reinert (786-7110)

AS PASSED HOUSE APRIL 14, 1987

BACKGROUND:

The 1986 Commodities Act authorizes the Securities Administrator to regulate all transactions in commodities and commodities contracts.  For purposes of the act, a commodities contract exists if physical delivery of the commodity does not occur within 28 days of payment of any portion of the purchase price.  Commodities broker-dealers are subject to registration and compliance provisions which include minimum net capital requirements, surety bond requirements, and detailed reporting requirements.  A precious metals dealer is not required to register any precious metals contracts which provide that the precious metals will be delivered within seven days of the payment of any portion of the purchase price.

SUMMARY:

An exemption from commodities broker registration is created.  A person claiming the exemption must file notice of exemption, or a renewal of the exemption, file consent to services of process, maintain insurance on any stored commodities,  and 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; and (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.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Linda Strout, Attorney, Washington State Coin and Bullion Dealers; Debra Bortner, Department of Licensing; John Maxwell, Chief Enforcement Officer, Securities Division; Chris Rhyne, Washington State Coin and Bullion Dealers.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The commodities transaction act imposes a burden on coin and bullion dealers.  The bill will provide some relief from the harder provisions of the act.

House Committee - Testimony Against:      None Presented.