PRINTER'S NO. 1054
No. 893 Session of 2001
INTRODUCED BY HOLL, WAGNER, COSTA, PUNT, THOMPSON, TILGHMAN,
BELL, LEMMOND AND MUSTO, MAY 25, 2001
REFERRED TO BANKING AND INSURANCE, MAY 25, 2001
AN ACT
1 Amending the act of December 5, 1972 (P.L.1280, No.284),
2 entitled "An act relating to securities; prohibiting
3 fraudulent practices in relation thereto; requiring the
4 registration of broker-dealers, agents, investment advisers,
5 and securities; and making uniform the law with reference
6 thereto," further providing for definitions, for exempt
7 securities and transactions, for exemption proceedings, for
8 registration by coordination, for general registration
9 provisions, for denial, suspension, revocation and
10 conditioning of registrations, for federally covered
11 securities, for exemptions, for registration and notice
12 filing procedures, for time limitations on rights of actions,
13 for right of the Pennsylvania Securities Commission to bring
14 actions, for investigations and subpoenas and for criminal
15 penalties; providing for return of sales compensation;
16 further providing for administration, for fees, for
17 assessments, for administrative files, for miscellaneous
18 powers of commission, for hearings and judicial review, for
19 regulations and forms and orders; and providing for burden of
20 proof.
21 The General Assembly of the Commonwealth of Pennsylvania
22 hereby enacts as follows:
23 Section 1. Section 102(a), (d), (e) and (p) of the act of
24 December 5, 1972 (P.L.1280, No.284), known as the Pennsylvania
25 Securities Act of 1972, amended November 24, 1998 (P.L.829,
26 No.109), are amended and the section is amended by adding
1 subsections to read:
2 Section 102. Definitions.--When used in this act, the
3 following definitions shall be applicable, unless the context
4 otherwise requires:
5 (a) "Advertisement" means any [publicly disseminated,
6 written or printed communication, including without limitation,
7 communication by radio, television, or other public media]
8 communication, used in connection with a sale or purchase or an
9 offer to sell or purchase a security which is publicly
10 disseminated by means of print, radio, television, Internet or
11 other media.
12 * * *
13 (d) "Bank" means [any bank, banking and trust company,
14 savings bank, trust company or private bank, as defined in the
15 Banking Code of 1965, act of November 30, 1965 (P.L.847), or any
16 savings and loan association, as defined in the Savings
17 Association Code of 1967, act of December 14, 1967 (P.L.746), or
18 any successor statutes thereto, or any banking institution,
19 trust company or savings and loan institution organized under
20 the laws of the United States, or of any state, territory or the
21 District of Columbia, or a receiver, conservator or other
22 liquidating agent of any of the foregoing.] a bank, savings
23 bank, savings institution, savings and loan association, thrift
24 institution, trust company or similar organization which is
25 organized or chartered under the laws of a state or of the
26 United States, is authorized to and receives deposits and is
27 supervised and examined by an official or agency of a state or
28 the United States if its deposits are insured by the Federal
29 Deposit Insurance Corporation or a successor authorized by
30 Federal law.
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1 (e) "Broker-dealer" means any person engaged in the business
2 of effecting transactions in securities for the account of
3 others or for his own account. "Broker-dealer" does not include:
4 (i) An agent;
5 (ii) An issuer;
6 (iii) A bank[, when effecting transactions for its own
7 account or for the account of another under section 302(c);]
8 which meets the exceptions from the definition of "broker" under
9 section 3(a)(4)(B) or the definition of "dealer" under section
10 3(a)(5)(B) of the Securities Exchange Act of 1934 (48 Stat. 881,
11 15 U.S.C. § 78c(a)(4)(B) and (5)(B));
12 (iv) An executor, administrator, guardian, conservator or
13 pledgee;
14 (v) A person who has no place of business in this State if
15 he effects transactions in this State exclusively with or
16 through (A) the issuers of the securities involved in the
17 transactions, (B) broker-dealers or institutional investors;
18 (vi) A person licensed as a real estate broker or agent
19 under the act of February 19, 1980 (P.L.15, No.9), known as the
20 Real Estate Licensing and Registration Act, and whose
21 transactions in securities are isolated transactions incidental
22 to that business; or
23 (vii) Other persons not within the intent of this subsection
24 whom the commission by regulation designates.
25 * * *
26 (k.1) "Knowing and knowingly" as used in sections 511(a) and
27 512(a) shall have the same meaning as the term "knowingly" is
28 defined in 18 Pa.C.S. § 302(b)(2) (relating to general
29 requirements of culpability).
30 * * *
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1 (p) "Publish" means publicly to issue or circulate by
2 newspaper, mail, radio, [or] television, Internet or other media
3 or otherwise to disseminate to the public.
4 * * *
5 (w) "Wilful and wilfully" mean the following:
6 (1) As used in all sections of the act, except section 511
7 with respect to a wilful violation of section 401(a) of the act,
8 and notwithstanding any law or statute to the contrary, wilful
9 means that the person acted intentionally in the sense that the
10 person intended to do the act and was aware of what the person
11 was doing. Proof of evil motive or intent to violate the act or
12 knowledge that the person's conduct violated the act is not
13 required.
14 (2) For purposes of section 511 with respect to a wilful
15 violation of section 401(a) of the act, wilful means that the
16 person acted intentionally, knowingly, recklessly or negligently
17 as those terms are defined in 18 Pa.C.S. § 302 (relating to
18 general requirements of culpability).
19 Section 2. Section 202 (f) of the act, amended May 9, 1984
20 (P.L.235, No.52) and November 24, 1998 (P.L.829, No.109), is
21 amended to read:
22 Section 202. Exempt Securities.--The following securities
23 are exempted from sections 201 and 211:
24 * * *
25 (f) Any security listed, or approved for listing upon notice
26 of issuance, on the New York, American, or Philadelphia stock
27 exchange [or any other securities exchange] or quoted on [any
28 national quotation service designated by regulation of the
29 commission and any security (except securities of an open-end or
30 closed-end investment company, face amount certificate company
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1 or unit investment trust, as such persons are classified in the
2 Investment Company Act of 1940) which satisfies the margin
3 requirements of the Board of Governors of the Federal Reserve
4 System under Regulation T and any supplement or any successor
5 regulation thereto] the National Market System of the Nasdaq
6 Stock Market; any other security of the same issuer which is of
7 senior or substantially equal rank; any security called for by
8 subscription rights or warrants so listed, approved or quoted;
9 and any warrant or right to purchase or subscribe to any of the
10 foregoing.
11 * * *
12 Section 3. Section 203(i.1) and (p) of the act, amended
13 December 7, 1994 (P.L.869, No.126) and November 24, 1998
14 (P.L.829, No.109), are amended to read:
15 Section 203. Exempt Transactions.--The following
16 transactions are exempted from sections 201 and 211:
17 * * *
18 (i.1) Any sale of an equity security, except securities of
19 an open-end or closed-end investment company, face amount
20 certificate company or unit investment trust, as such persons
21 are classified in the Investment Company Act of 1940 (54 Stat.
22 789, 15 U.S.C. § 80a-1 et seq.), if: (i) the securities are
23 proposed to be registered under section 5 of the Securities Act
24 of 1933 (15 U.S.C. § 77e) [or exempted under Regulation A
25 promulgated under section 3(b) thereof (15 U.S.C. § 77c(b))]
26 and, in fact, become registered under section 5 of the
27 Securities Act of 1933 (15 U.S.C. § 77e) [or exempted from
28 registration pursuant to Regulation A promulgated under section
29 3(b) of such act; (ii) a copy of any final prospectus or final
30 offering circular utilized or proposed to be utilized in
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1 connection therewith is filed with the commission at the time
2 the notice required by clause (viii) is filed; (iii) the
3 applicable filing fee specified in section 602(b.1) is paid with
4 respect to such offering]; (iv) the issuer of the security is a
5 reporting company as defined in section 102(q); (v) no stop
6 order or refusal order is in effect and no public proceeding or
7 investigation looking toward such an order is pending under the
8 Securities Act of 1933 or this act; (vi) the equity security is
9 listed on a national securities exchange registered under the
10 Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. § 78a
11 et seq.) or quoted on the [National Association of Securities
12 Dealers Automated Quotation System] National Market System or
13 Small Cap Market of the Nasdaq Stock Market; (vii) the issuer,
14 at the time [it files the notice required in clause (viii) with
15 the commission] the registration statement becomes effective
16 under section 5 of the Securities Act of 1933, has not received
17 an auditor's report for the immediately preceding fiscal year
18 expressing substantial doubt about the issuer's ability to
19 continue as a going concern unless the securities being sold in
20 reliance upon this subsection are the subject of an offering
21 that is being underwritten on a firm commitment basis by a
22 broker-dealer registered under section 301[; and (viii) the
23 issuer has filed a notice with the commission in the form and
24 manner which the commission, by regulation, may prescribe. As a
25 condition of the continuing effectiveness of this exemption,
26 copies of any post-effective amendment or sticker to such
27 prospectus or offering circular must be filed with the
28 commission within two business days after the same is filed with
29 the Securities and Exchange Commission]. An exemption under this
30 section shall terminate upon the termination of the registration
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1 statement under section 5 [(15 U.S.C. § 77e) or the exemption
2 from registration pursuant to Regulation A promulgated under
3 section 3(b) (15 U.S.C. § 77c(b))] of the Securities Act of
4 1933. For purposes of this subsection, the commission, by
5 regulation, may define the term "equity security."
6 * * *
7 (p) Any offer or sale of an evidence of indebtedness of an
8 issuer [either: organized exclusively for educational,
9 benevolent, fraternal, religious, charitable, social, athletic
10 or reformatory purposes and not for pecuniary profit, if no part
11 of the net earnings of the issuer inures to the benefit of any
12 private shareholder or individual; or organized as a chamber of
13 commerce or trade or professional association if there has been
14 filed with the commission a notice identifying the security and
15 the basis of its qualification under this exemption together
16 with such further information as the commission may by
17 regulation require, and if the commission does not by order
18 disallow the exemption within ten days or such shorter period as
19 it may permit. The security qualifies under this exemption if:
20 (i) the issuer and any predecessor have not defaulted within the
21 current fiscal year and the three preceding fiscal years in any
22 fixed interest or principal obligation; (ii) the issuer complies
23 with regulations of the commission with respect to trust
24 indentures and the use of a prospectus; (iii) the securities
25 proposed to be sold are secured by a mortgage or deed of trust
26 upon land and buildings, which mortgage or deed of trust is or
27 will become a first lien at or prior to the issuance of such
28 evidences of indebtedness, or provision satisfactory to the
29 commission is made for escrowing the proceeds from their sale
30 until such first lien is established, and the total amount of
20010S0893B1054 - 7 -
1 such securities does not exceed seventy-five per cent of the
2 then fair market value of the land and buildings included in
3 such mortgage or deed of trust, less the amount of any unpaid
4 special assessment taxes; and (iv) any person who accepts an
5 offer to purchase securities under this subsection has received
6 a written notice of his right to withdraw his acceptance as
7 provided by section 207(m)(2). This exemption shall not apply to
8 the securities of any nonprofit organization if any promoter
9 thereof expects or intends to make a profit directly or
10 indirectly from any business or activity associated with the
11 organization or operation of such nonprofit organization.]
12 described in section 202(e)(i) or (ii) of this act if all the
13 following are met:
14 (1) The issuer files a notice with the commission in the
15 form prescribed by the commission not later than five business
16 days before the issuer receives from any person an executed
17 subscription agreement or other contract to purchase the
18 securities being offered or the issuer receives consideration
19 from any person therefor, whichever is earlier. The notice filed
20 with the commission shall be accompanied by a copy of a
21 disclosure document and any offering literature to be used in
22 connection with an offer or sale of securities under this
23 section.
24 (2) The filing fee prescribed in section 602(b.1)(x) has
25 been paid.
26 (3) Each person who accepts an offer to purchase securities
27 under this subsection has received a written notice of a right
28 to withdraw an acceptance as provided in section 207(m)(2).
29 (4) The issuer and any predecessor of the issuer have not
30 defaulted within the current fiscal year or the three preceding
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1 fiscal years with respect to any debt security previously sold
2 by the issuer or its predecessor.
3 (5) The total amount of securities proposed to be offered
4 under this subsection are secured by a mortgage or deed of trust
5 upon the existing land and buildings owned by the issuer which
6 mortgage or deed of trust is or will become a first lien at or
7 prior to the issuance of the securities or there exists a
8 provision satisfactory to the commission for escrowing of the
9 proceeds from the sale of the securities until such first lien
10 is established.
11 (6) The total amount of securities proposed to be offered
12 under this subsection does not exceed, as of the time the form
13 required by this subsection is filed with the commission,
14 seventy-five per cent of the fair market value of the land and
15 buildings to be included in the mortgage or deed of trust, less
16 the amount of any unpaid special assessment taxes.
17 (7) No promoter of the issuer expects or intends to make a
18 profit directly or indirectly from any business activity
19 associated with the organization or operation of the issuer.
20 * * *
21 Section 4. Section 204 of the act is amended to read:
22 Section 204. Exemption Proceedings.--(a) The commission may
23 by regulation as to any type of security or transaction, or by
24 order in a particular case, as to any security or transaction
25 increase the number of purchasers or offerees permitted, or
26 waive the conditions in either of sections 202 or 203.
27 (b) The commission may by order deny or revoke any exemption
28 specified in section 202 or 203 with respect to a specific
29 security or transaction. [No such order may be entered without
30 appropriate prior notice to all interested parties, opportunity
20010S0893B1054 - 9 -
1 for hearing, and written findings of fact and conclusions of
2 law, except that the commission may by order summarily deny or
3 revoke any of the specified exemptions pending final
4 determination of any proceeding under this section. Upon the
5 entry of a summary order, the commission shall promptly notify
6 all interested parties that it has been entered and reasons
7 therefor and that within fifteen days of the receipt of a
8 written request the matter will be set down for hearing. If no
9 hearing is requested and none is ordered by the commission, the
10 order will remain in effect until it is modified or vacated by
11 the commission. If a hearing is requested or ordered, the
12 commission, after notice of and opportunity for hearing to all
13 interested persons, may modify or vacate the order or extend it
14 until final determination.] The order may be issued summarily
15 without notice or hearing. Upon issuance of a summary order, the
16 commission shall promptly provide the order to the person
17 against whom it is issued. The order shall contain findings of
18 fact and conclusions of law and include a notice affording the
19 person an opportunity for a hearing under section 607(a). No
20 order under this section [may] shall operate retroactively. No
21 person [may] shall be considered to have violated section 201 by
22 reason of any offer or sale effected after the entry of an order
23 under this section if he sustains the burden of proof that he
24 did not know, and in the exercise of reasonable care could not
25 have known, of the order.
26 [(c) In any proceeding under this act, the burden of proving
27 an exemption or an exception from a definition is upon the
28 person claiming it.]
29 Section 5. Section 205(c) of the act, amended November 24,
30 1998 (P.L.829, No.109), is amended to read:
20010S0893B1054 - 10 -
1 Section 205. Registration by Coordination.--* * *
2 (c) [(1) A registration statement filed under this section
3 for the offering of securities by an open-end or closed-end
4 investment company, face amount certificate company or unit
5 investment trust, as such persons are classified in the
6 Investment Company Act of 1940, automatically becomes effective
7 if (i) the Federal registration statement or notification is
8 effective with the Securities and Exchange Commission; (ii) no
9 stop order is in effect in this State and no proceeding is
10 pending under section 208; (iii) the registration statement or a
11 predecessor registration statement has been on file with the
12 commission for at least five days; and (iv) the fee specified in
13 section 602(b.1) has been paid.
14 (2) All other registration statements] A registration
15 statement or notification of proposed sale filed under this
16 section automatically become effective at the moment the Federal
17 registration statement or notification becomes effective if (i)
18 no stop order is in effect in this State and no proceeding is
19 pending under section 208; (ii) the registration statement or
20 notification has been on file with the commission for at least
21 ten days; and (iv) the offering is made within these
22 limitations.
23 * * *
24 Section 6. Section 207(j.1) and (l) of the act, amended
25 December 18, 1990 (P.L.755, No.190) and November 24, 1998
26 (P.L.829, No.109), are amended to read:
27 Section 207. General Registration Provisions.--* * *
28 (j.1) [Except for a registration by coordination for an
29 open-end or closed-end investment company, face amount
30 certificate company or unit investment trust, as such persons
20010S0893B1054 - 11 -
1 are classified in the Investment Company Act of 1940 (54 Stat.
2 789, 15 U.S.C. § 80a-1 et seq.), a] A registration by
3 coordination is effective for one year from its effective date.
4 The effectiveness of a registration by coordination may be
5 extended beyond the initial one-year effectiveness period in
6 increments of one-year periods up to a maximum of three years
7 from the initial effectiveness date, provided that the security
8 is being offered or distributed in a nonexempted transaction by
9 or for the account of the issuer or other person on whose behalf
10 the offering is being made, or by any underwriter or broker-
11 dealer who is still offering part of an unsold allotment or
12 subscription taken by him as a participant in the distribution
13 and the commission has been notified of such continued offering
14 and the period thereof. [A registration by coordination for an
15 open-end or closed-end investment company or face amount
16 certificate company, as such persons are classified in the
17 Investment Company Act of 1940, is effective for the period
18 beginning with its effective date and ending sixty days after
19 the registrant's fiscal year end for the year in which the
20 filing under section 205 became effective. A registration by
21 coordination for a unit investment trust, as such a person is
22 classified in the Investment Company Act of 1940, is effective
23 for the period beginning with its effective date in this State
24 and ending one year after the date the registration statement
25 for the same securities became effective with the Securities and
26 Exchange Commission.] A registration by qualification is
27 effective for one year from its effective date. The fact that a
28 registration statement has been effective in this State with
29 respect to any security does not permit sales of securities of
30 the same class by the issuer or an affiliate of the issuer if
20010S0893B1054 - 12 -
1 such person did not file the registration statement, unless a
2 separate registration statement is filed and declared effective
3 with respect thereto, or an exemption from registration is
4 available. A registration statement may not be withdrawn after
5 its effective date if any of the securities registered have been
6 sold in this State, unless permitted by regulation or order of
7 the commission. No registration statement is effective during
8 the time a stop order is in effect under section 208. [The
9 effectiveness of a registration statement filed by an open-end
10 or closed-end investment company, face amount certificate
11 company or unit investment trust, as such persons are classified
12 in the Investment Company Act of 1940, shall not be terminated
13 as a result of a post-effective amendment seeking to register an
14 additional amount of securities which becomes effective under
15 the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a et
16 seq.).]
17 * * *
18 (l) [(1) Except as provided in paragraph (2), a] A
19 registration statement relating to any offering of securities
20 may be amended after its effective date so as to increase the
21 specified amount of securities proposed to be offered in this
22 State. The amendment becomes effective upon the payment of the
23 required filing fee, if any, and when the commission so orders.
24 [(2) Amendments to a registration statement of an open-end
25 or closed-end investment company, face amount certificate
26 company or unit investment trust, as such persons are classified
27 in the Investment Company Act of 1940, so as to increase the
28 specified amount of securities proposed to be offered in this
29 State are effective upon filing with the commission provided
30 that the aggregate fee specified in section 602(b.1) has been
20010S0893B1054 - 13 -
1 paid.]
2 * * *
3 Section 7. Section 208(c), 211(c) and (d), 302(c) and (e.1)
4 and 303(a)(iii) of the act, amended November 24, 1998 (P.L.829,
5 No.109), are amended to read:
6 Section 208. Denial, Suspension, and Revocation of
7 Registrations.--* * *
8 (c) The commission may by order deny, postpone, suspend or
9 revoke the effectiveness of a registration statement. [No order
10 may be entered without prior notice to the applicant or
11 registrant, opportunity for hearing and written findings of fact
12 and conclusions of law, except that the commission may by order
13 summarily deny, postpone, suspend or revoke the effectiveness of
14 a registration statement pending final determination of any
15 proceeding under this subsection. Upon the entry of the order,
16 the commission shall promptly notify the applicant or registrant
17 that it has been entered and the reasons therefor and that,
18 within fifteen days after the receipt of a written request, the
19 matter will be set down for hearing. If no hearing is requested
20 and none is ordered by the commission, the order will remain in
21 effect until it is modified or vacated by the commission. If a
22 hearing is requested or ordered, the commission, after notice of
23 and opportunity for hearing to the applicant or registrant, may
24 modify or vacate the order or make it permanent.] The order may
25 be issued summarily without notice or hearing. Upon issuance of
26 a summary order, the commission shall promptly provide the order
27 to the applicant or registrant. The order shall contain findings
28 of fact and conclusions of law and include a notice affording
29 the applicant or registrant an opportunity for a hearing under
30 section 607(a). No order shall operate retroactively. No person
20010S0893B1054 - 14 -
1 [may] shall be considered to have violated section 201 solely by
2 reason of an order entered under this section for any offer or
3 sale effected after the entry of an order under this section if
4 the person sustains the burden of proof that the person did not
5 know, and in the exercise of reasonable care could not have
6 known, of the order.
7 Section 211. Federally Covered Securities.--* * *
8 (c) (1) The commission may issue a stop order suspending
9 the offer or sale of a security described in subsection (a) or
10 (b) upon finding that:
11 [(1)] (i) The order is necessary or appropriate in the
12 public interest for protection of investors; and
13 [(2)] (ii) There is a failure to comply with any condition
14 established under this section.
15 (2) A stop order under this section may be issued summarily
16 without notice or hearing. Upon issuance of a summary order, the
17 commission shall promptly provide the order to the person
18 against whom it is issued. The order shall contain findings of
19 fact and conclusions of law and include a notice affording the
20 person an opportunity for a hearing under section 607(a). No
21 person shall be considered to have violated section 201 solely
22 by reason of an order entered under this section for an offer or
23 sale effected after the entry of an order under this section if
24 the person sustains the burden of proof that the person did not
25 know, and in the exercise of reasonable care could not have
26 known, of the order.
27 [(d) Notwithstanding the provisions of subsections (a) and
28 (b), for the period ending October 10, 1999, the commission may
29 require the registration of a security described in subsection
30 (a) or (b) pursuant to section 201 if the issuer has not paid
20010S0893B1054 - 15 -
1 the correct fee and, if applicable, the correct assessment and
2 the nonpayment or underpayment of the fee or assessment has not
3 been remedied by the commission receiving the amount due from
4 the issuer within ten calendar days following receipt by the
5 issuer of a written notice from the commission concerning the
6 nonpayment or underpayment of the fee or assessment required by
7 this section or section 602(b.1) or 602.1(a)(5).]
8 Section 302. Exemptions.--The following persons shall be
9 exempted from the registration provisions of section 301:
10 * * *
11 (c) [A bank not registered as a broker-dealer under this act
12 executing orders for the purchase or sale of securities for the
13 account of the purchaser or seller thereof.] A person who
14 represents an issuer in effecting transactions in securities
15 registered under section 205 or 206 who:
16 (1) Is a bona fide officer, director, partner or employe of
17 the issuer or an individual occupying similar status or
18 performing similar functions; and
19 (2) Does not receive any compensation, directly or
20 indirectly, for effecting the transactions.
21 * * *
22 [(e.1) Any person who represents an issuer in effecting
23 transactions in securities registered under section 205 or 206
24 who:
25 (1) Is a bona fide officer, director, partner or employe of
26 the issuer or an individual occupying similar status or
27 performing similar functions; and
28 (2) Does not receive any compensation, directly or
29 indirectly, for effecting the transactions.]
30 * * *
20010S0893B1054 - 16 -
1 Section 303. Registration and Notice Filing Procedure.--(a)
2 * * *
3 (iii) A federally covered adviser shall file with the
4 commission, prior to acting as a federally covered adviser in
5 this State, a copy of such documents as have been filed with the
6 Securities and Exchange Commission which the commission by
7 regulation may require, together with the fee specified in
8 section 602(d.1). This requirement shall not apply to a
9 federally covered adviser that:
10 (A) Has [its principal] a place of business in this State
11 and whose only clients in this State are investment advisers,
12 federally covered advisers, broker-dealers or institutional
13 investors;
14 (B) Does not have a place of business in this State and
15 during the preceding twelve-month period has had not more than
16 five clients who are residents of this State, exclusive of other
17 investment advisers, federally covered advisers, broker-dealers
18 or institutional investors; or
19 (C) Meets the definition of any person described in section
20 102(j)(i) through (viii) [or (x) and (xi).], (x) or (xi), except
21 a person described in section 102(j)(iii) that has an individual
22 employed by or associated with such person who meets the
23 definition of investment adviser representative in section
24 102(j.1)(ii).
25 * * *
26 Section 8. Section 305(a)(i) and (xiv) and (d) of the act,
27 added or amended December 18, 1990 (P.L.755, No.190) and
28 November 24, 1998 (P.L.829, No.190), are amended and the section
29 is amended by adding a subsection and clause to read:
30 Section 305. Denial, Suspension, Revocation and Conditioning
20010S0893B1054 - 17 -
1 of Registration.
2 (a) The commission may, by order, deny, suspend, revoke or
3 condition any registration or may censure any registrant if it
4 finds that such order is in the public interest and that such
5 registrant or applicant, or in the case of any broker-dealer or
6 investment adviser, any affiliate thereof, whether prior or
7 subsequent to becoming associated with such person:
8 (i) Has[, in any application for registration or in any
9 report required to be filed with the commission under this act,
10 or in any proceeding before the commission, wilfully made or
11 caused to be made any statement which was at the time and in the
12 light of the circumstances under which it was made false or
13 misleading with respect to any material fact, or has wilfully
14 omitted to state in any such application, report or proceeding,
15 any material fact which is required to be stated therein or
16 necessary in order to make the statements made, in the light of
17 the circumstances under which they are made, not misleading, or
18 has wilfully failed to amend or supplement such an application,
19 report or statement in a timely manner in accordance with rules
20 which may be adopted by the commission; or] filed an application
21 for registration or a document in connection with an application
22 for registration which as of its effective date, or as of a date
23 after filing in the case of an order denying effectiveness, was
24 incomplete in a material respect or contained a statement which
25 was, in light of the circumstances under which it was made,
26 false or misleading with respect to a material fact; or
27 * * *
28 (xiv) Is subject to any currently effective order or orders
29 entered within the past five years [of any securities] by any
30 regulator of another country:
20010S0893B1054 - 18 -
1 (A) denying registration to, or revoking or suspending the
2 registration of, such person as a broker-dealer, agent,
3 investment adviser, [associated person] investment adviser
4 representative, futures commission merchant, commodity pool
5 operator, commodity trading adviser or a person associated with
6 a futures commission merchant, commodity pool operator or
7 commodity trading adviser; or [is]
8 (B) denying, revoking or suspending the person's legal
9 authorization to engage in the business of banking or insurance;
10 or
11 (xv) Is subject to any currently effective order of any
12 securities exchange or self-regulatory organization operating
13 under the authority of the securities regulator of another
14 country suspending or expelling such person from membership in
15 such exchange or self-regulatory association[.]; or
16 (xvi) Is subject to a currently effective order or orders
17 entered within the past five years by a state insurance
18 regulator or Federal or state banking regulator denying
19 registration, articles of incorporation or association,
20 certificate of organization or authorization to do business,
21 charter or license, or revoking or suspending the registration,
22 articles of incorporation or association, certificate of
23 organization or authorization to do business, charter or license
24 of such person to engage in the insurance, banking, or other
25 financial services industry, or finding that such person has
26 engaged in fraudulent, unethical, dishonest or abusive practices
27 in connection with any aspect of the business of insurance,
28 banking or other financial services.
29 (a.1) The commission, by order, may deny the application of:
30 (i) an agent or investment adviser representative if the
20010S0893B1054 - 19 -
1 individual is obligated, pursuant to an award of an arbitration
2 panel, to pay compensation to purchasers of securities and, as
3 of the date the application is filed with the commission, has
4 not paid the awarded compensation to the purchasers in full and
5 within the time period specified by the arbitration panel; or
6 (ii) a broker-dealer or investment adviser if a promoter,
7 director, chief executive officer, chief financial officer,
8 chief operations officer, chief legal officer, chief compliance
9 officer or general partner (or person occupying a similar status
10 or performing similar functions) of the applicant held a similar
11 position with another broker-dealer, investment adviser or
12 federally covered adviser which entity, pursuant to an award of
13 an arbitration panel, is obligated to pay compensation to
14 purchasers of securities and, as of the date the application is
15 filed with the commission, has not paid the awarded compensation
16 to the purchasers in full within the time period specified by
17 the arbitration panel.
18 The commission may issue an order prospectively rescinding a
19 denial order issued under this subsection if the person whose
20 application has been denied under this subsection provides
21 credible evidence that the compensation awarded by the
22 arbitration panel which was the basis for denial of the
23 application under this subsection has been paid in full and in
24 cash.
25 * * *
26 (d) The commission may by order summarily deny, postpone or
27 suspend an application [for] or registration pending final
28 determination of any proceeding under this section. [Upon the
29 entry of the order, the commission shall promptly notify the
30 applicant or registrant, as well as the employer or prospective
20010S0893B1054 - 20 -
1 employer if the applicant or registrant is an agent, that it has
2 been entered and of the reasons therefor and that within fifteen
3 days after the receipt of a written request the matter will be
4 set down for hearing. If no hearing is requested and none is
5 ordered by the commission, the order will remain in effect until
6 it is modified or vacated by the commission. If a hearing is
7 requested or ordered, the commission, after notice of and
8 opportunity for hearing, may modify or vacate the order or
9 extend it until final determination.] The order may be issued
10 summarily without notice or hearing. Upon issuance of a summary
11 order, the commission shall promptly provide the order to the
12 applicant or registrant and the employer or prospective employer
13 if the applicant or registrant is an agent or investment adviser
14 representative. The order shall contain findings of fact and
15 conclusions of law and include a notice affording the applicant
16 or registrant an opportunity for a hearing in accordance with
17 section 607(a).
18 * * *
19 Section 9. Section 504(d) of the act is amended to read:
20 Section 504. Time Limitations on Rights of Action.--* * *
21 (d) No purchaser may commence an action under section 501,
22 502 or 503 if, before suit is commenced, the purchaser has
23 received a written offer: (i) stating the respect in which
24 liability under such section may have arisen and fairly advising
25 the purchaser of his rights; offering to repurchase the security
26 for cash, payable on delivery of the security, equal to the
27 consideration paid, together with interest at the legal rate
28 from the date of payment, less the amount of any income or
29 distributions, in cash or in kind, received thereon or, if the
30 purchaser no longer owns the security, offering to pay the
20010S0893B1054 - 21 -
1 purchaser upon acceptance of the offer an amount in cash equal
2 to the damages computed in accordance with section 501(a); and
3 (ii) stating that the offer may be accepted by the purchaser at
4 any time within a specified period of not less than thirty days
5 after the date of receipt thereof, or such shorter period as the
6 commission may by rule prescribe; and the purchaser has failed
7 to accept such offer in writing within the specified period. The
8 limitations on a purchaser commencing an action under this
9 subsection shall not apply if the purchaser has accepted an
10 offer to repurchase made under this subsection within the time
11 period specified under this subsection and has complied with all
12 the terms of this subsection but has not received the cash
13 payment specified by this subsection within ninety days of the
14 date of acceptance of the offer to repurchase.
15 * * *
16 Section 10. Section 509(c) of the act amended November 24,
17 1998 (P.L.829, No.109), is amended to read:
18 Section 509. Right of Commission to Bring Actions for
19 Injunction and Equitable Relief; Class Actions; Contempt of
20 Commission Orders.--* * *
21 (c) Any person violating any (i) stop order issued under
22 section 208, (ii) cease advertising order issued under section
23 606(c), (iii) cease and desist order issued under section
24 606(c.1), (iv) order of the commission requiring a rescission
25 pursuant to section 513 [or], (v) order of the commission
26 imposing any bar described in section 512, (vi) order of the
27 commission requiring return of sales compensation under section
28 514(a), or (vii) any order of the commission imposing an
29 administrative assessment under section 602.1(b) or (c) from
30 which no appeal of such an order has been taken pursuant to
20010S0893B1054 - 22 -
1 section 607(d) of the act or which has been sustained on appeal,
2 or which has been appealed but where no supersedeas has been
3 granted for the period [in] during which the order has been
4 violated, shall be deemed to be in contempt of such order. Upon
5 petition and certification of such order by the commission, the
6 Commonwealth Court or any of the courts of common pleas if it
7 finds after hearing or otherwise that the person is not in
8 compliance with the order shall adjudge the person in contempt
9 of the order and shall assess such civil penalties of an amount
10 not less than [three] five thousand dollars [($3,000)] ($5,000)
11 nor greater than [ten] fifteen thousand dollars [($10,000)]
12 ($15,000) per violation and [issue such further orders] grant
13 such equitable relief as it may deem appropriate.
14 Section 11. Section 510 of the act is amended by adding a
15 subsection to read:
16 Section 510. Investigations and Subpoenas.--* * *
17 (e) At the request of the securities regulatory authority of
18 another jurisdiction, the commission may provide assistance if
19 the requesting authority states that it is conducting an
20 investigation which it deems necessary to determine whether a
21 person has violated, is violating or is about to violate laws or
22 rules relating to securities matters that the requesting
23 authority administers or enforces. The commission may, in its
24 sole discretion, conduct such investigation and use the powers
25 conferred under this section as the commission deems necessary
26 to collect information and evidence pertinent to the request for
27 assistance. The assistance may be provided without regard to
28 whether the facts stated in the request would constitute a
29 violation of this act or the laws of this Commonwealth. In
30 deciding whether to provide such assistance, the commission
20010S0893B1054 - 23 -
1 shall consider whether:
2 (i) the requesting authority is permitted and has agreed to
3 provide reciprocal assistance in securities matters to the
4 commission; and
5 (ii) compliance with the request would prejudice the public
6 interest.
7 Section 12. Section 511(b) of the act, amended November 24,
8 1998 (P.L.829, No.109), is amended to read:
9 Section 511. Criminal Penalties.--* * *
10 (b) A person who wilfully violates section 401, 408 or 409
11 commits a felony of the third degree and may be fined not more
12 than ten thousand dollars ($10,000) if none of the victims of
13 the person's violative conduct were individuals aged [65] 60 or
14 more and not more than fifty thousand dollars ($50,000) if any
15 of the victims of the person's violative conduct were
16 individuals aged [65] 60 or more, or imprisoned for not more
17 than seven years, or both. In addition to fine or imprisonment,
18 or both, the person may be sentenced to make restitution.
19 * * *
20 Section 13. This act is amended by adding a section to read:
21 Section 514. Return of Sales Compensation.--(a) After
22 giving notice and opportunity for hearing, the commission, where
23 it has determined that a person who represented an issuer in
24 effecting transactions in securities in this Commonwealth while
25 in willful violation of section 301(a) and received compensation
26 in connection with these transactions, may issue an order,
27 accompanied by written findings of fact and conclusions of law,
28 which requires the person to return to purchasers of securities
29 in this Commonwealth, in cash, the amount of compensation
30 received for effecting those securities transactions.
20010S0893B1054 - 24 -
1 (b) No order shall be issued under this section if the
2 transactions in securities meet any of the following criteria:
3 (1) The transactions involved securities which were the
4 subject of an effective registration statement filed with the
5 United States Securities and Exchange Commission under section 5
6 of the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77(a) et
7 seq.).
8 (2) The transactions involved securities which are exempted
9 securities under section 3(a) of the Securities Act of 1933
10 except sections 3(a)(4) and 3(a)(11).
11 (3) The transactions are exempt from registration under
12 section 5 of the Securities Act of 1933 pursuant to section 4
13 thereof except a transaction for which the issuer is relying on
14 any rule or regulation promulgated by the United States
15 Securities and Exchange Commission under section 4(2) of the
16 Securities Act of 1933.
17 (c) The commission may issue more than one order under this
18 section against the same person involving the same security.
19 (d) An order issued under this section shall not be deemed
20 conclusive as to the total number of purchasers in this
21 Commonwealth of any particular security or the total dollar
22 amount of sales compensation received by a person for
23 transactions effected in a particular security with purchasers
24 in this Commonwealth for which liability may be imposed under
25 subsection (a).
26 Section 14. Section 601(c) of the act is amended and the
27 section is amended by adding a subsection to read:
28 Section 601. Administration.--* * *
29 (c) It is unlawful for the commission or any of its officers
30 or employes to use for personal benefit any information which is
20010S0893B1054 - 25 -
1 filed with or obtained by the commission and which is not
2 generally available to the public. Nothing in this act
3 authorizes the commission or any of its officers or employes to
4 disclose such confidential information except among themselves
5 or to other securities administrators, regulatory authorities or
6 governmental agencies, or when necessary or appropriate in a
7 proceeding or investigation under this act or any other law of
8 this State. [No provision of this act either creates or
9 derogates from any privilege which exists at common law or
10 otherwise when documentary or other evidence is sought under a
11 subpoena directed to the commission or any of its officers or
12 employes.]
13 (c.1) Except for the privileges created in this subsection,
14 no provision of this act either creates or derogates from any
15 privilege which exists at common law or otherwise when
16 documentary or other evidence is sought under a subpoena
17 directed to the commission or any of its officers or employes.
18 (1) The documents described in clause (2) and any testimony
19 sought concerning information in those documents are privileged
20 from disclosure under a subpoena directed to the commission or
21 any of its officers or employes if the documents relate to:
22 (i) An investigation authorized under section 510 which has
23 not been closed.
24 (ii) An action in which neither the commission nor any of
25 its officers or employes is a party.
26 (2) The documents which are the subject of the privilege
27 created in clause (1) include:
28 (i) Documents relating to an investigation conducted under
29 section 510, including, but not limited to, statements made or
30 taken in accordance with section 510(a) or (b) and documents in
20010S0893B1054 - 26 -
1 possession of the commission under section 510(a)(ii).
2 (ii) Documents received in connection with a subpoena issued
3 under section 510.
4 (iii) Documents relating to an examination conducted under
5 section 304(d).
6 (iv) Documents obtained from a securities administrator,
7 regulatory authority or law enforcement or governmental agency
8 relating to an investigation authorized under section 510 or an
9 examination conducted in accordance with section 304(d).
10 (v) Documents deemed confidential by order of the commission
11 under section 603(c).
12 (3) Complaints filed with the commission and testimony
13 concerning information in the complaints are privileged
14 absolutely from disclosure under a subpoena directed to the
15 commission or its officers or employes.
16 (4) No privilege is created under clause (1) or (3) if
17 document sought under a subpoena directed to the commission or
18 its officers or employees is otherwise publicly available.
19 * * *
20 Section 15. Section 602(b.1), (i) and (v) of the act,
21 amended or added December 18, 1990 (P.L.755, No.190) and
22 December 7, 1994 (P.L.869, No.126) are amended to read:
23 Section 602. Fees.--* * *
24 (b.1) Filing fees for sales of securities:
25 [(i) Exemption filings under section 203(i)... $250]
26 * * *
27 (v) Exemption filings under section
28 203(o)[(ii)] shall be:............................ 250
29 * * *
30 Section 16. Sections 602.1(a)(1) and (2), (c)(1), 603 and
20010S0893B1054 - 27 -
1 606 of the act, amended November 24, 1998 (P.L.829, No.109), are
2 amended to read:
3 Section 602.1. Assessments.--(a) (1) Each agent and
4 investment adviser representative, when applying for an initial
5 license under section 301 or changing employers, shall pay a
6 compliance assessment in accordance with the following schedule:
7 [twenty-seven dollars ($27) for the period July 1, 1995, through
8 June 30, 1998, thirty dollars ($30) for the period July 1, 1998,
9 through June 30, 2001,] thirty-two dollars ($32) for the period
10 July 1, 2001, through June 30, 2004, [and] thirty-five dollars
11 ($35) for the period July 1, 2004, through June 30, 2007,
12 thirty-seven dollars ($37) for the period July 1, 2007, through
13 June 30, 2010, and forty dollars ($40) thereafter.
14 (2) Each agent and investment adviser representative, when
15 applying for a renewal license under section 301, shall pay a
16 compliance assessment in accordance with the following schedule:
17 [twelve dollars ($12) for the period July 1, 1995, through June
18 30, 1998, fifteen dollars ($15) for the period July 1, 1998,
19 through June 30, 2001,] seventeen dollars ($17) for the period
20 July 1, 2001, through June 30, 2004, [and] twenty ($20) for the
21 period July 1, 2004, through June 30, 2007, twenty-two dollars
22 ($22) for the period July 1, 2007, through June 30, 2010, and
23 twenty-five ($25) thereafter.
24 * * *
25 (c) After giving notice and opportunity for a hearing, the
26 commission may issue an order accompanied by written findings of
27 fact and conclusions of law which imposes an administrative
28 assessment in the amounts provided in paragraph (1) against a
29 broker-dealer, agent, investment adviser or investment adviser
30 representative registered under section 301 or an affiliate of
20010S0893B1054 - 28 -
1 any broker-dealer or investment adviser where the commission
2 determines that the person willfully has violated this act or a
3 rule or order of the commission under this act or has engaged in
4 dishonest or unethical practices in the securities business; has
5 taken unfair advantage of a customer; or has failed reasonably
6 to supervise its agents or employes or against any other person
7 if the commission determines that the person wilfully violated
8 section [401(a) or (c), 406, 408, 409 or 512(d); section 401(b)
9 or 407;] 301, 401, 404, 406 through 409 or 512(d) or a cease and
10 desist order issued by the commission under section 606(c.1).
11 (1) The commission, in issuing an order under this
12 subsection, may impose the administrative assessments set forth
13 below. Each act or omission that provides a basis for issuing an
14 order under this subsection shall constitute a separate
15 violation.
16 (i) In issuing an order against any broker-dealer, agent,
17 investment adviser or investment adviser representative
18 registered under section 301 or an affiliate of any broker-
19 dealer or investment adviser, the commission may impose an
20 administrative assessment of up to twenty-five thousand dollars
21 ($25,000) for a single violation or up to two hundred fifty
22 thousand dollars ($250,000) for multiple violations in a single
23 proceeding or a series of related proceedings. If any of the
24 victims of the person's violative conduct were individuals aged
25 [65] 60 or more, the commission also may impose a special
26 administrative assessment in addition to the foregoing amounts
27 of up to twenty-five thousand dollars ($25,000).
28 (ii) In issuing an order against a person for wilful
29 violation of section 401(a) or (c), 404, 406, 408, 409 or 512(d)
30 or for wilful violation of a cease and desist order issued under
20010S0893B1054 - 29 -
1 section 606(c.1), the commission may impose an administrative
2 assessment of up to twenty-five thousand dollars ($25,000) for a
3 single violation or up to one hundred fifty thousand dollars
4 ($150,000) for multiple violations in a single proceeding or a
5 series of related proceedings. In addition to the foregoing
6 assessment, the commission also may impose a special
7 administrative assessment of up to twenty-five thousand dollars
8 ($25,000) for each of the provisions described as follows that
9 the commission determines are applicable:
10 (A) The person, within seven years [of] prior to the
11 commission taking action under this subsection [has been], was
12 the subject of: a criminal felony conviction[,]; an injunction
13 issued by any court of competent jurisdiction; or an order of
14 the Securities and Exchange Commission, the Commodity Futures
15 Trading Commission, the securities [administrator], banking or
16 insurance regulator of another state, a Federal banking
17 regulator or the securities, banking or insurance regulatory
18 authority of another country which found that the person
19 wilfully had violated any provision of the Federal or state
20 securities, banking, insurance, or commodities laws or the
21 securities, commodities, insurance or banking laws of another
22 country[, provided that the foregoing convictions occurred or
23 the injunctions or orders were entered prior to the violation
24 for which this special administrative assessment is being
25 imposed].
26 (B) The person's violative conduct involved individuals aged
27 [65] 60 or more.
28 (C) The person's violative conduct involved use of the
29 Internet or boiler room tactics which included, without
30 limitation, use of any high-pressure sales tactics designed to
20010S0893B1054 - 30 -
1 create an artificially short time period for which the person
2 being solicited is pressured to make an investment decision or
3 overcome the person's reluctance to commit to the investment
4 being offered, use of scripts designed to allay any objections
5 or concerns expressed by the person being solicited or making
6 repeated telephone calls or sending multiple e-mail messages to
7 the same person pressuring the person to make an immediate
8 investment decision.
9 (iii) In issuing an order against [persons] a person for
10 wilful violation of section 401(b) or 407, the commission may
11 impose an administrative assessment of up to twenty-five
12 thousand dollars ($25,000) for each of the criteria described in
13 subclause (ii)(A) and (C) that the commission determines are
14 applicable. No assessment shall be imposed under this subclause
15 if the person is subject to an administrative assessment imposed
16 under any other provision of this subsection.
17 (iv) In issuing an order against a person, other than a
18 Federally covered adviser, for wilful violation of section 301,
19 the commission may impose the following administrative
20 assessments unless the person is subject to an administrative
21 assessment imposed under any other provision of this subsection
22 or the public proceeding to which the assessment relates was
23 instituted prior to the date of enactment of this subclause:
24 (A) For a person who, at the time of the wilful violation,
25 was not registered under section 301, was not registered as a
26 broker or dealer with the United States Securities and Exchange
27 Commission under the Securities Exchange Act of 1934 (948
28 Stat.881, 15 U.S.C. § 78(a) et seq.) and was not a member of a
29 national securities association registered under that act, the
30 commission may impose an administrative assessment of up to
20010S0893B1054 - 31 -
1 twenty-five thousand dollars ($25,000) for a single violation or
2 up to one hundred twenty-five thousand dollars ($125,000) for
3 multiple violations in a single proceeding or series of related
4 proceedings.
5 (B) For a person (not an individual) that, at the time of
6 the wilful violation, was not registered under section 301 but
7 was registered as a broker or dealer with the United States
8 Securities and Exchange Commission under the Securities Exchange
9 Act of 1934 and was a member of a national securities
10 association registered under that act, the commission may impose
11 an administrative assessment of up to twenty-five thousand
12 dollars ($25,000) for a single violation or up to one hundred
13 fifty thousand dollars ($150,000) for multiple violations in a
14 single proceeding or series of related proceedings.
15 An assessment imposed under this subclause shall be in addition
16 to any liability a person may have under an order issued under
17 section 514.
18 (v) In issuing an order for wilful violation of section
19 301(c.1)(1)(ii) against a person that is a Federally covered
20 adviser, the commission may impose the following administrative
21 assessments:
22 (A) Up to fifty thousand dollars ($50,000) if the number of
23 investment adviser representatives involved in the violation was
24 less than five.
25 (B) Up to one hundred thousand dollars ($100,000) if the
26 number of investment adviser representatives involved in the
27 violation was five or more.
28 (vi) In issuing an order for a wilful violation of section
29 301(f) against a person that is a federally covered adviser, the
30 commission may impose an administrative assessment of one
20010S0893B1054 - 32 -
1 thousand dollars ($1,000).
2 * * *
3 Section 603. Administrative Files.--(a) A document is filed
4 when it is received by the commission or by any other person
5 which the commission by regulation or order may designate.
6 (b) The commission shall keep a register of all registrants,
7 registration statements and notice filings which are or have
8 ever been effective under this act [and predecessor laws] and
9 all denial, suspension or revocation orders which have been
10 entered under this act [and predecessor laws]. The register
11 shall be open for public inspection [except with respect to
12 summary suspensions under sections 208(c) and 305(d)].
13 (c) The information contained in or filed with any
14 registration statement, application, notice filing or report
15 shall be made available to the public in accordance with
16 regulations prescribed by the commission; [provided that, upon
17 proper showing of the registrant or issuer, the commission shall
18 treat certain filings as confidential.] except that the
19 commission may make the following orders or regulations:
20 (1) Upon proper showing of the registrant or issuer, the
21 commission may order certain filings or parts of filings
22 nonpublic.
23 (2) The commission, by rule or order, may deem certain
24 categories of information filed with the commission as
25 nonpublic.
26 (d) The commission upon request shall furnish to any person,
27 at a reasonable charge, [photostatic or other copies, certified
28 under seal of the commission if certification is requested, of
29 any entry in the register or any order or other document made
30 available to the public under subsection (c) above.] a copy of
20010S0893B1054 - 33 -
1 any document described in subsection (c) in any medium available
2 to the commission. Upon request and payment of a reasonable
3 charge, the document may be certified under the seal of the
4 commission.
5 (e) The commission, by order, may subsequently make public
6 information contained in the documents described in subsection
7 (c)(1) and (2) and the order may limit the amount of information
8 made public or place conditions on its use. Prior to issuing an
9 order under this subsection, the commission shall notify in
10 writing the person who originally requested confidentiality at
11 the person's last known address in the commission's files at
12 least thirty days before the commission may issue an order under
13 this subsection.
14 Section 606. Miscellaneous Powers of Commission.--(a) The
15 commission may, by regulation, require any issuer of securities
16 registered under this act or exempted from registration under
17 section 203(d) or (p), which issuer has not filed reports with
18 the Securities and Exchange Commission pursuant to sections 13
19 or 15(d) of the Securities Exchange Act of 1934 (48 Stat. 881,
20 15 U.S.C. §§ 78m or 78o(d)), to distribute financial information
21 to its security holders at least annually.
22 (b) If, in its opinion, the public interest and the
23 protection of investors[,] so require, the commission may apply
24 to a court of competent jurisdiction for an order[,] suspending
25 all trading in this [State] Commonwealth by broker-dealers and
26 agents in any security for any period.
27 (c) No person shall publish in this State any advertisement
28 concerning any security (other than advertisements relating to
29 federally covered securities, tombstone advertisements permitted
30 under the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a
20010S0893B1054 - 34 -
1 et seq.) and the Investment Company Act of 1940 (54 Stat. 789,
2 15 U.S.C. § 80a-1 et seq.) and the rules and regulations
3 promulgated thereunder) except in accordance with such rules as
4 the commission may promulgate from time to time. No person shall
5 publish any advertisement concerning any security in this State
6 after the commission issues a cease advertising order in which
7 it finds that the advertisement [contains any statement that is
8 false or misleading in any material respect or omits to make
9 any] contained an untrue statement of a material fact or omitted
10 to state a material [statement] fact necessary in order to make
11 the statements made, in the light of the circumstances under
12 which they [are] were made, not misleading [and so notifies the
13 person in writing. Such notification may be given]. The order
14 may be issued summarily without notice or hearing. [Within
15 thirty days after the receipt of a notification under this
16 section, the person desiring to use the advertisement may
17 request in writing that the order be rescinded. Upon the receipt
18 of such a written request, the matter shall be set down for
19 hearing to commence within thirty days after such receipt unless
20 the person making the request consents to a later date. After
21 such hearing, the commission shall determine whether to affirm
22 and continue or to rescind such order.] Upon issuance of a
23 summary order, the commission shall promptly provide the order
24 to the person against whom it is issued. The order shall contain
25 findings of fact and conclusions of law and include a notice
26 affording the person an opportunity for a hearing under section
27 607(a).
28 (c.1) Whenever the commission finds that any person has
29 engaged or is about to engage in any act or practice
30 constituting a violation of any provision of this act or any
20010S0893B1054 - 35 -
1 rule or order thereunder, the commission may order such person
2 to cease and desist from such act or practice. [and shall notify
3 the person in writing. Notification may be given summarily
4 without notice or hearing. Within thirty days after receipt of a
5 notification under this section, the person desiring to engage
6 in such act or practice may file a written request that the
7 order be rescinded. Upon receipt of the written request, the
8 matter will be set down for a hearing to commence within thirty
9 days after such receipt unless the person making the request
10 consents to a later date. After such hearing, the commission
11 shall determine whether to affirm and continue, modify or
12 rescind such order.] The order may be issued summarily without
13 notice or hearing. Upon issuance of a summary order, the
14 commission shall promptly provide the order to the person
15 against whom it is issued. The order shall contain findings of
16 fact and conclusions of law and include a notice affording the
17 person an opportunity for a hearing under section 607(a).
18 (d) The commission may, by regulation, delegate any powers
19 specified in this act to be exercised by the commission to
20 members of the commission's staff, except for powers related to
21 hearings.
22 Section 17. Section 607 of the act is amended to read:
23 Section 607. Hearings and Judicial Review.--(a) Within
24 thirty days after [any order has become effective without a
25 hearing, any interested party may apply to] receipt of a summary
26 order issued under section 204(b), 208(c), 211(c), 305(d),
27 606(c) or 606(c.1), the person against whom the order was issued
28 and entered may file with the commission a written request for a
29 hearing in respect to any matters determined by the order.[, and
30 a hearing shall be held within thirty days after the application
20010S0893B1054 - 36 -
1 is filed. After the hearing the commission may modify the order
2 as it deems appropriate.] Upon receipt of the written request,
3 the matter shall be set down for a hearing to commence within
4 thirty days after receipt of the request unless the person
5 making the request consents to a later date. If the person
6 making the request consents to a later date for the hearing but
7 fails, after notification by first class mail, to the person's
8 last known address in the commission's files, to consent to a
9 hearing date that is within one hundred eighty days of the date
10 the written request for a hearing was filed with the commission
11 under this subsection, the request for hearing shall be deemed
12 abandoned and the summary order shall be deemed a final order.
13 After hearing, the commission may determine to rescind, modify
14 or vacate the summary order or make it a final order. If no
15 hearing is requested or a request for a hearing is filed
16 untimely, the summary order shall be deemed to be a final order.
17 (b) Within thirty days after [any order has become effective
18 after a hearing, any interested party] receipt of an order
19 issued and entered by the commission after a hearing, the person
20 against whom the order was issued and entered may apply to the
21 commission for a rehearing. The commission, in its sole
22 discretion, may grant the application and hold a rehearing. [if
23 in its judgment sufficient reasons therefor appear. After
24 rehearing, the commission may vacate or modify the order, and
25 any order vacating the original order shall have the same effect
26 as an original order. Failure to grant an application for
27 rehearing within thirty days from the date of the filing shall
28 constitute a denial; and failure, within fifteen days after the
29 conclusion of a rehearing, to issue an order affirming, vacating
30 or modifying the original order shall constitute an affirmation
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1 of the original order.] Failure of the commission to grant a
2 rehearing within thirty days of receipt of an application shall
3 constitute a denial. After rehearing, the commission may issue
4 an order affirming, vacating or modifying the original order.
5 (c) [Disciplinary hearings] Hearings and rehearings shall be
6 public. [unless the commission grants a request joined in by all
7 parties that the hearing be conducted privately. Investigatory
8 hearings shall not be open to members of the general public
9 unless all parties to the hearing agree otherwise.]
10 (d) Orders of the commission shall be subject to judicial
11 review in accordance with law, but orders originally entered
12 without a hearing may be reviewed only if the party seeking
13 review has [requested] filed a request for a hearing within the
14 time provided [by] under subsection (a). Filing for judicial
15 review of a commission order shall not operate as a stay of the
16 commission's order unless specifically ordered by the court.
17 Section 18. Section 609(f) of the act, amended November 24,
18 1998 (P.L.829, No.109), is amended to read:
19 Section 609. Regulations, Forms and Orders.--* * *
20 (f) (1) An application for registration of securities [or
21 registration of a broker-dealer, agent, investment adviser or
22 investment adviser representative] shall be deemed abandoned if
23 the application has been on file with the commission for a
24 minimum of twelve consecutive months and the applicant has
25 failed to respond to the commission's notice [of warning] of
26 abandonment sent by first class mail to the applicant's last
27 known address in the commission's files within sixty calendar
28 days [of the date of the warning.] after the date the
29 notification was mailed by the commission. There shall be no
30 refund of any fees [or assessments] paid by the applicant.
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1 (2) An application for registration as a broker-dealer,
2 agent, investment advisor or investment adviser representative
3 shall be deemed abandoned if the application has been on file
4 with the commission for a minimum of six consecutive months and
5 the applicant has failed to respond to the commission's notice
6 of abandonment sent by first class mail to the applicant's last
7 known address in the commission's files within sixty calendar
8 days after the date the notification was mailed by the
9 commission. There shall be no refund of any fees or assessments
10 paid by the applicant.
11 Section 19. The act is amend by adding a section to read:
12 Section 612. Burden of Proof.--(a) In a civil action or
13 administrative proceeding under this act, a person claiming
14 status as a Federally covered security or adviser or an
15 exemption, exception or exclusion from a definition has the
16 burden of proving the availability of the status, exemption,
17 exception or exclusion.
18 (b) In a proceeding for a criminal violation of this act, a
19 person claiming status as a Federally covered security adviser
20 or an exemption, exception or exclusion from a definition has
21 the burden of going forward with evidence of the claim,
22 exemption, exception or exclusion.
23 Section 20. Section 704 of the act is repealed.
24 Section 21. This act shall take effect in 60 days.
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