PRIOR PRINTER'S NO. 1054 PRINTER'S NO. 1805
No. 893 Session of 2001
INTRODUCED BY HOLL, WAGNER, COSTA, PUNT, THOMPSON, TILGHMAN,
BELL, LEMMOND, MUSTO AND SCHWARTZ, MAY 25, 2001
SENATOR HOLL, BANKING AND INSURANCE, AS AMENDED, MARCH 19, 2002
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 SALARIES OF <--
17 COMMISSIONERS, for fees, for assessments, for administrative
18 files, for miscellaneous powers of commission, for hearings
19 and judicial review, for regulations and forms and orders;
20 and providing for burden of 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
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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 AND the three <--
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1 preceding fiscal years with respect to any debt security
2 previously sold 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 (8) THE ISSUER COMPLIES WITH REGULATIONS OF THE COMMISSION <--
21 WITH RESPECT TO TRUST INDENTURES AND THE USE OF AN OFFERING
22 DOCUMENT.
23 * * *
24 Section 4. Section 204 of the act is amended to read:
25 Section 204. Exemption Proceedings.--(a) The commission may
26 by regulation as to any type of security or transaction, or by
27 order in a particular case, as to any security or transaction
28 increase the number of purchasers or offerees permitted, or
29 waive the conditions in either of sections 202 or 203.
30 (b) The commission may by order deny or revoke any exemption
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1 specified in section 202 or 203 with respect to a specific
2 security or transaction. [No such order may be entered without
3 appropriate prior notice to all interested parties, opportunity
4 for hearing, and written findings of fact and conclusions of
5 law, except that the commission may by order summarily deny or
6 revoke any of the specified exemptions pending final
7 determination of any proceeding under this section. Upon the
8 entry of a summary order, the commission shall promptly notify
9 all interested parties that it has been entered and reasons
10 therefor and that within fifteen days of the receipt of a
11 written request the matter will be set down for hearing. If no
12 hearing is requested and none is ordered by the commission, the
13 order will remain in effect until it is modified or vacated by
14 the commission. If a hearing is requested or ordered, the
15 commission, after notice of and opportunity for hearing to all
16 interested persons, may modify or vacate the order or extend it
17 until final determination.] The order may SHALL be issued <--
18 summarily without notice or hearing. Upon issuance of a summary
19 order, the commission shall promptly provide the order to the
20 person against whom it is issued. The order shall contain
21 findings of fact and conclusions of law and include a notice
22 affording the person an opportunity for a hearing under section
23 607(a). No order under this section [may] shall operate
24 retroactively. No person [may] shall be considered to have
25 violated section 201 by reason of any offer or sale effected
26 after the entry of an order under this section if he sustains
27 the burden of proof that he did not know, and in the exercise of
28 reasonable care could not have known, of the order.
29 [(c) In any proceeding under this act, the burden of proving
30 an exemption or an exception from a definition is upon the
20010S0893B1805 - 10 -
1 person claiming it.]
2 Section 5. Section 205(c) of the act, amended November 24,
3 1998 (P.L.829, No.109), is amended to read:
4 Section 205. Registration by Coordination.--* * *
5 (c) [(1) A registration statement filed under this section
6 for the offering of securities by an open-end or closed-end
7 investment company, face amount certificate company or unit
8 investment trust, as such persons are classified in the
9 Investment Company Act of 1940, automatically becomes effective
10 if (i) the Federal registration statement or notification is
11 effective with the Securities and Exchange Commission; (ii) no
12 stop order is in effect in this State and no proceeding is
13 pending under section 208; (iii) the registration statement or a
14 predecessor registration statement has been on file with the
15 commission for at least five days; and (iv) the fee specified in
16 section 602(b.1) has been paid.
17 (2) All other registration statements] A registration
18 statement or notification of ANY proposed sale filed under this <--
19 section automatically become effective at the moment the Federal
20 registration statement or notification becomes effective if (i)
21 no stop order is in effect in this State and no proceeding is
22 pending under section 208; AND (ii) the registration statement <--
23 or notification has been on file with the commission for at
24 least ten days[; and (iv) the offering is made within these <--
25 limitations]. <--
26 * * *
27 Section 6. Section 207(j.1) and (l) of the act, amended
28 December 18, 1990 (P.L.755, No.190) and November 24, 1998
29 (P.L.829, No.109), are amended to read:
30 Section 207. General Registration Provisions.--* * *
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1 (j.1) [Except for a registration by coordination for an
2 open-end or closed-end investment company, face amount
3 certificate company or unit investment trust, as such persons
4 are classified in the Investment Company Act of 1940 (54 Stat.
5 789, 15 U.S.C. § 80a-1 et seq.), a] A registration by
6 coordination is effective for one year from its effective date.
7 The effectiveness of a registration by coordination may be
8 extended beyond the initial one-year effectiveness period in
9 increments of one-year periods up to a maximum of three years
10 from the initial effectiveness date, provided that the security
11 is being offered or distributed in a nonexempted transaction by
12 or for the account of the issuer or other person on whose behalf
13 the offering is being made, or by any underwriter or broker-
14 dealer who is still offering part of an unsold allotment or
15 subscription taken by him as a participant in the distribution
16 and the commission has been notified of such continued offering
17 and the period thereof. [A registration by coordination for an
18 open-end or closed-end investment company or face amount
19 certificate company, as such persons are classified in the
20 Investment Company Act of 1940, is effective for the period
21 beginning with its effective date and ending sixty days after
22 the registrant's fiscal year end for the year in which the
23 filing under section 205 became effective. A registration by
24 coordination for a unit investment trust, as such a person is
25 classified in the Investment Company Act of 1940, is effective
26 for the period beginning with its effective date in this State
27 and ending one year after the date the registration statement
28 for the same securities became effective with the Securities and
29 Exchange Commission.] A registration by qualification is
30 effective for one year from its effective date. The fact that a
20010S0893B1805 - 12 -
1 registration statement has been effective in this State with
2 respect to any security does not permit sales of securities of
3 the same class by the issuer or an affiliate of the issuer if
4 such person did not file the registration statement, unless a
5 separate registration statement is filed and declared effective
6 with respect thereto, or an exemption from registration is
7 available. A registration statement may not be withdrawn after
8 its effective date if any of the securities registered have been
9 sold in this State, unless permitted by regulation or order of
10 the commission. No registration statement is effective during
11 the time a stop order is in effect under section 208. [The
12 effectiveness of a registration statement filed by an open-end
13 or closed-end investment company, face amount certificate
14 company or unit investment trust, as such persons are classified
15 in the Investment Company Act of 1940, shall not be terminated
16 as a result of a post-effective amendment seeking to register an
17 additional amount of securities which becomes effective under
18 the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a et
19 seq.).]
20 * * *
21 (l) [(1) Except as provided in paragraph (2), a] A
22 registration statement relating to any offering of securities
23 may be amended after its effective date so as to increase the
24 specified amount of securities proposed to be offered in this
25 State. The amendment becomes effective upon the payment of the
26 required filing fee, if any, and when the commission so orders.
27 [(2) Amendments to a registration statement of an open-end
28 or closed-end investment company, face amount certificate
29 company or unit investment trust, as such persons are classified
30 in the Investment Company Act of 1940, so as to increase the
20010S0893B1805 - 13 -
1 specified amount of securities proposed to be offered in this
2 State are effective upon filing with the commission provided
3 that the aggregate fee specified in section 602(b.1) has been
4 paid.]
5 * * *
6 Section 7. Section 208(c), 211(c) and (d), 302(c) and (e.1)
7 and 303(a)(iii) AND (IV) of the act, amended November 24, 1998 <--
8 (P.L.829, No.109), are amended to read:
9 Section 208. Denial, Suspension, and Revocation of
10 Registrations.--* * *
11 (c) The commission may by order deny, postpone, suspend or
12 revoke the effectiveness of a registration statement. [No order
13 may be entered without prior notice to the applicant or
14 registrant, opportunity for hearing and written findings of fact
15 and conclusions of law, except that the commission may by order
16 summarily deny, postpone, suspend or revoke the effectiveness of
17 a registration statement pending final determination of any
18 proceeding under this subsection. Upon the entry of the order,
19 the commission shall promptly notify the applicant or registrant
20 that it has been entered and the reasons therefor and that,
21 within fifteen days after the receipt of a written request, the
22 matter will be set down for hearing. If no hearing is requested
23 and none is ordered by the commission, the order will remain in
24 effect until it is modified or vacated by the commission. If a
25 hearing is requested or ordered, the commission, after notice of
26 and opportunity for hearing to the applicant or registrant, may
27 modify or vacate the order or make it permanent.] The order may
28 be issued summarily without notice or hearing. Upon issuance of
29 a summary order, the commission shall promptly provide the order
30 to the applicant or registrant. The order shall contain findings
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1 of fact and conclusions of law and include a notice affording
2 the applicant or registrant an opportunity for a hearing under
3 section 607(a). No order shall operate retroactively. No person
4 [may] shall be considered to have violated section 201 solely by
5 reason of an order entered under this section for any offer or
6 sale effected after the entry of an order under this section if
7 the person sustains the burden of proof that the person did not
8 know, and in the exercise of reasonable care could not have
9 known, of the order.
10 Section 211. Federally Covered Securities.--* * *
11 (c) (1) The commission may issue a stop order suspending
12 the offer or sale of a security described in subsection (a) or
13 (b) upon finding that:
14 [(1)] (i) The order is necessary or appropriate in the
15 public interest for protection of investors; and
16 [(2)] (ii) There is a failure to comply with any condition
17 established under this section.
18 (2) A stop order under this section may be issued summarily
19 without notice or hearing. Upon issuance of a summary order, the
20 commission shall promptly provide the order to the person
21 against whom it is issued. The order shall contain findings of
22 fact and conclusions of law and include a notice affording the
23 person an opportunity for a hearing under section 607(a). No
24 person shall be considered to have violated section 201 solely
25 by reason of an order entered under this section for an offer or
26 sale effected after the entry of an order under this section if
27 the person sustains the burden of proof that the person did not
28 know, and in the exercise of reasonable care could not have
29 known, of the order.
30 [(d) Notwithstanding the provisions of subsections (a) and
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1 (b), for the period ending October 10, 1999, the commission may
2 require the registration of a security described in subsection
3 (a) or (b) pursuant to section 201 if the issuer has not paid
4 the correct fee and, if applicable, the correct assessment and
5 the nonpayment or underpayment of the fee or assessment has not
6 been remedied by the commission receiving the amount due from
7 the issuer within ten calendar days following receipt by the
8 issuer of a written notice from the commission concerning the
9 nonpayment or underpayment of the fee or assessment required by
10 this section or section 602(b.1) or 602.1(a)(5).]
11 Section 302. Exemptions.--The following persons shall be
12 exempted from the registration provisions of section 301:
13 * * *
14 (c) [A bank not registered as a broker-dealer under this act
15 executing orders for the purchase or sale of securities for the
16 account of the purchaser or seller thereof.] A person who
17 represents an issuer in effecting transactions in securities
18 registered under section 205 or 206 who:
19 (1) Is a bona fide officer, director, partner or employe of
20 the issuer or an individual occupying similar status or
21 performing similar functions; and
22 (2) Does not receive any compensation, directly or
23 indirectly, for effecting the transactions.
24 * * *
25 [(e.1) Any person who represents an issuer in effecting
26 transactions in securities registered under section 205 or 206
27 who:
28 (1) Is a bona fide officer, director, partner or employe of
29 the issuer or an individual occupying similar status or
30 performing similar functions; and
20010S0893B1805 - 16 -
1 (2) Does not receive any compensation, directly or
2 indirectly, for effecting the transactions.]
3 * * *
4 Section 303. Registration and Notice Filing Procedure.--(a)
5 * * *
6 (iii) A federally covered adviser shall file with the
7 commission, prior to acting as a federally covered adviser in
8 this State, a copy of such documents as have been filed with the
9 Securities and Exchange Commission which the commission by
10 regulation may require, together with the fee specified in
11 section 602(d.1). This requirement shall not apply to a
12 federally covered adviser that:
13 (A) Has [its principal] a place of business in this State
14 and whose only clients in this State are investment advisers,
15 federally covered advisers, broker-dealers or institutional
16 investors;
17 (B) Does not have a place of business in this State and
18 during the preceding twelve-month period has had not more than
19 five clients who are residents of this State, exclusive of other
20 investment advisers, federally covered advisers, broker-dealers
21 or institutional investors; or
22 (C) Meets the definition of any person described in section
23 102(j)(i) through (viii) [or (x) and (xi).], (x) or (xi), except
24 a person described in section 102(j)(iii) FEDERALLY COVERED <--
25 ADVISER THAT IS ALSO A BROKER-DEALER REGISTERED UNDER SECTION
26 301, that has an individual employed by or associated with such
27 person who meets the definition of investment adviser
28 representative in section 102(j.1)(ii).
29 [(IV) NOTWITHSTANDING THE PROVISIONS OF CLAUSE (III), UNTIL <--
30 OCTOBER 10, 1999, THE COMMISSION MAY REQUIRE THE REGISTRATION OF
20010S0893B1805 - 17 -
1 A FEDERALLY COVERED ADVISER UNDER SECTION 301 IF THE FEDERALLY
2 COVERED ADVISER HAS NOT PAID THE CORRECT FEE AND THE NONPAYMENT
3 OR UNDERPAYMENT OF THE FEE HAS NOT BEEN REMEDIED BY THE
4 COMMISSION RECEIVING THE AMOUNT DUE WITHIN TEN CALENDAR DAYS
5 FOLLOWING RECEIPT BY THE FEDERALLY COVERED ADVISER OF WRITTEN
6 NOTICE FROM THE COMMISSION CONCERNING THE NONPAYMENT OR
7 UNDERPAYMENT OF THE FEE REQUIRED BY THIS SECTION AND SECTION
8 602(D.1).]
9 * * *
10 Section 8. Section 305(a)(i) and (xiv) and (d) of the act,
11 added or amended December 18, 1990 (P.L.755, No.190) and
12 November 24, 1998 (P.L.829, No.190), are amended and the section
13 is amended by adding a subsection and clause to read:
14 Section 305. Denial, Suspension, Revocation and Conditioning
15 of Registration.
16 (a) The commission may, by order, deny, suspend, revoke or
17 condition any registration or may censure any registrant if it
18 finds that such order is in the public interest and that such
19 registrant or applicant, or in the case of any broker-dealer or
20 investment adviser, any affiliate thereof, whether prior or
21 subsequent to becoming associated with such person:
22 (i) Has[, in any application for registration or in any
23 report required to be filed with the commission under this act,
24 or in any proceeding before the commission, wilfully made or
25 caused to be made any statement which was at the time and in the
26 light of the circumstances under which it was made false or
27 misleading with respect to any material fact, or has wilfully
28 omitted to state in any such application, report or proceeding,
29 any material fact which is required to be stated therein or
30 necessary in order to make the statements made, in the light of
20010S0893B1805 - 18 -
1 the circumstances under which they are made, not misleading, or
2 has wilfully failed to amend or supplement such an application,
3 report or statement in a timely manner in accordance with rules
4 which may be adopted by the commission; or] filed an application
5 for registration or a document in connection with an application
6 for registration which as of its effective date, or as of a date
7 after filing in the case of an order denying effectiveness, was
8 incomplete in a material respect or contained a statement which
9 was, in light of the circumstances under which it was made,
10 false or misleading with respect to a material fact; or
11 * * *
12 (xiv) Is subject to any currently effective order or orders
13 entered within the past five years [of any securities] by any
14 regulator of another country:
15 (A) denying registration to, or revoking or suspending the
16 registration of, such person as a broker-dealer, agent,
17 investment adviser, [associated person] investment adviser
18 representative, futures commission merchant, commodity pool
19 operator, commodity trading adviser or a person associated with
20 a futures commission merchant, commodity pool operator or
21 commodity trading adviser; or [is]
22 (B) denying, revoking or suspending the person's legal
23 authorization to engage in the business of banking or insurance;
24 or
25 (xv) Is subject to any currently effective order of any
26 securities exchange or self-regulatory organization operating
27 under the authority of the securities regulator of another
28 country suspending or expelling such person from membership in
29 such exchange or self-regulatory association[.]; or
30 (xvi) Is subject to a currently effective order or orders
20010S0893B1805 - 19 -
1 entered within the past five years by a state insurance
2 regulator or Federal or state banking regulator denying
3 registration, articles of incorporation or association,
4 certificate of organization or authorization to do business,
5 charter or license, or revoking or suspending the registration,
6 articles of incorporation or association, certificate of
7 organization or authorization to do business, charter or license
8 of such person to engage in the insurance, banking, or other
9 financial services industry, or finding that such person has
10 engaged in fraudulent, unethical, dishonest or abusive practices
11 in connection with any aspect of the business of insurance,
12 banking or other financial services.
13 (a.1) The commission, by order, may deny the application of:
14 (i) an agent or investment adviser representative if the
15 individual is obligated, pursuant to an award of an arbitration
16 panel, to pay compensation to purchasers of securities and, as
17 of the date the application is filed with the commission, has
18 not paid the awarded compensation to the purchasers in full and
19 within the time period specified by the arbitration panel; or
20 (ii) a broker-dealer or investment adviser if a promoter,
21 director, chief executive officer, chief financial officer,
22 chief operations officer, chief legal officer, chief compliance
23 officer or general partner (or person occupying a similar status
24 or performing similar functions) of the applicant held a similar
25 position with another broker-dealer, investment adviser or
26 federally covered adviser which entity, pursuant to an award of
27 an arbitration panel, is obligated to pay compensation to
28 purchasers of securities and, as of the date the application is
29 filed with the commission, has not paid the awarded compensation
30 to the purchasers in full within the time period specified by
20010S0893B1805 - 20 -
1 the arbitration panel.
2 The commission may issue an order prospectively rescinding a
3 denial order issued under this subsection if the person whose
4 application has been denied under this subsection provides
5 credible evidence that the compensation awarded by the
6 arbitration panel which was the basis for denial of the
7 application under this subsection has been paid in full and in
8 cash.
9 * * *
10 (d) The commission may by order summarily deny, postpone or
11 suspend an application [for] or registration pending final
12 determination of any proceeding under this section. [Upon the
13 entry of the order, the commission shall promptly notify the
14 applicant or registrant, as well as the employer or prospective
15 employer if the applicant or registrant is an agent, that it has
16 been entered and of the reasons therefor and that within fifteen
17 days after the receipt of a written request the matter will be
18 set down for hearing. If no hearing is requested and none is
19 ordered by the commission, the order will remain in effect until
20 it is modified or vacated by the commission. If a hearing is
21 requested or ordered, the commission, after notice of and
22 opportunity for hearing, may modify or vacate the order or
23 extend it until final determination.] The order may be issued
24 summarily without notice or hearing. Upon issuance of a summary
25 order, the commission shall promptly provide the order to the
26 applicant or registrant and the employer or prospective employer
27 if the applicant or registrant is an agent or investment adviser
28 representative. The order shall contain findings of fact and
29 conclusions of law and include a notice affording the applicant
30 or registrant an opportunity for a hearing in accordance with
20010S0893B1805 - 21 -
1 section 607(a).
2 * * *
3 Section 9. Section 504(d) of the act is amended to read:
4 Section 504. Time Limitations on Rights of Action.--* * *
5 (d) No purchaser may commence an action under section 501,
6 502 or 503 if, before suit is commenced, the purchaser has
7 received a written offer: (i) stating the respect in which
8 liability under such section may have arisen and fairly advising
9 the purchaser of his rights; offering to repurchase the security
10 for cash, payable on delivery of the security, equal to the
11 consideration paid, together with interest at the legal rate
12 from the date of payment, less the amount of any income or
13 distributions, in cash or in kind, received thereon or, if the
14 purchaser no longer owns the security, offering to pay the
15 purchaser upon acceptance of the offer an amount in cash equal
16 to the damages computed in accordance with section 501(a); and
17 (ii) stating that the offer may be accepted by the purchaser at
18 any time within a specified period of not less than thirty days
19 after the date of receipt thereof, or such shorter period as the
20 commission may by rule prescribe; and the purchaser has failed
21 to accept such offer in writing within the specified period. The
22 limitations on a purchaser commencing an action under this
23 subsection shall not apply if the purchaser has accepted an
24 offer to repurchase made under this subsection within the time
25 period specified under this subsection and has complied with all
26 the terms of this subsection but has not received the cash
27 payment specified by this subsection within ninety days of the
28 date of acceptance of the offer to repurchase.
29 * * *
30 Section 10. Section 509(c) of the act amended November 24,
20010S0893B1805 - 22 -
1 1998 (P.L.829, No.109), is amended to read:
2 Section 509. Right of Commission to Bring Actions for
3 Injunction and Equitable Relief; Class Actions; Contempt of
4 Commission Orders.--* * *
5 (c) Any person violating any (i) stop order issued under
6 section 208, (ii) cease advertising order issued under section
7 606(c), (iii) cease and desist order issued under section
8 606(c.1), (iv) order of the commission requiring a rescission
9 pursuant to section 513 [or], (v) order of the commission
10 imposing any bar described in section 512, (vi) order of the
11 commission requiring return of sales compensation under section
12 514(a), or (vii) any order of the commission imposing an
13 administrative assessment under section 602.1(b) or (c) from
14 which no appeal of such an order has been taken pursuant to
15 section 607(d) of the act or which has been sustained on appeal,
16 or which has been appealed but where no supersedeas has been
17 granted for the period [in] during which the order has been
18 violated, shall be deemed to be in contempt of such order. Upon
19 petition and certification of such order by the commission, the
20 Commonwealth Court or any of the courts of common pleas if it
21 finds after hearing or otherwise that the person is not in
22 compliance with the order shall adjudge the person in contempt
23 of the order and shall assess such civil penalties of an amount
24 not less than [three] five thousand dollars [($3,000)] ($5,000)
25 nor greater than [ten] fifteen thousand dollars [($10,000)]
26 ($15,000) per violation and [issue such further orders] grant
27 such equitable relief as it may deem appropriate.
28 Section 11. Section 510 of the act is amended by adding a
29 subsection to read:
30 Section 510. Investigations and Subpoenas.--* * *
20010S0893B1805 - 23 -
1 (e) At the request of the securities regulatory authority of
2 another jurisdiction, the commission may provide assistance if
3 the requesting authority states that it is conducting an
4 investigation which it deems necessary to determine whether a
5 person has violated, is violating or is about to violate laws or
6 rules relating to securities matters that the requesting
7 authority administers or enforces. The commission may, in its
8 sole discretion, conduct such investigation and use the powers
9 conferred under this section as the commission deems necessary
10 to collect information and evidence pertinent to the request for
11 assistance. The assistance may be provided without regard to
12 whether the facts stated in the request would constitute a
13 violation of this act or the laws of this Commonwealth. In
14 deciding whether to provide such assistance, the commission
15 shall consider whether:
16 (i) the requesting authority is permitted and has agreed to
17 provide reciprocal assistance in securities matters to the
18 commission; and
19 (ii) compliance with the request would prejudice the public
20 interest.
21 Section 12. Section 511(b) of the act, amended November 24,
22 1998 (P.L.829, No.109), is amended to read:
23 Section 511. Criminal Penalties.--* * *
24 (b) A person who wilfully violates section 401, 408 or 409
25 commits a felony of the third degree and may be fined not more
26 than ten thousand dollars ($10,000) if none of the victims of
27 the person's violative conduct were individuals aged [65] 60 or
28 more and not more than fifty thousand dollars ($50,000) if any
29 of the victims of the person's violative conduct were
30 individuals aged [65] 60 or more, or imprisoned for not more
20010S0893B1805 - 24 -
1 than seven years, or both. In addition to fine or imprisonment,
2 or both, the person may be sentenced to make restitution.
3 * * *
4 Section 13. This THE act is amended by adding a section to <--
5 read:
6 Section 514. Return of Sales Compensation.--(a) After
7 giving notice and opportunity for hearing, the commission, where
8 it has determined that a person who represented an issuer in
9 effecting transactions in securities in this Commonwealth while
10 in willful violation of section 301(a) and received compensation
11 in connection with these transactions, may issue an order,
12 accompanied by written findings of fact and conclusions of law,
13 which requires the person to return to purchasers of securities
14 in this Commonwealth, in cash, the amount of compensation
15 received for effecting those securities transactions.
16 (b) No order shall be issued under this section if the
17 transactions in securities meet any of the following criteria:
18 (1) The transactions involved securities which were the
19 subject of an effective registration statement filed with the
20 United States Securities and Exchange Commission under section 5
21 of the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77(a) et
22 seq.).
23 (2) The transactions involved securities which are exempted
24 securities under section 3(a) of the Securities Act of 1933
25 except sections 3(a)(4) and 3(a)(11).
26 (3) The transactions are exempt from registration under
27 section 5 of the Securities Act of 1933 pursuant to section 4
28 thereof except a transaction for which the issuer is relying on
29 any rule or regulation promulgated by the United States
30 Securities and Exchange Commission under section 4(2) of the
20010S0893B1805 - 25 -
1 Securities Act of 1933.
2 (c) The commission may issue more than one order under this
3 section against the same person involving the same security.
4 (d) An order issued under this section shall not be deemed
5 conclusive as to the total number of purchasers in this
6 Commonwealth of any particular security or the total dollar
7 amount of sales compensation received by a person for
8 transactions effected in a particular security with purchasers
9 in this Commonwealth for which liability may be imposed under
10 subsection (a).
11 Section 14. Section 601(c) of the act is amended and the
12 section is amended by adding a subsection to read:
13 Section 601. Administration.--* * *
14 (c) It is unlawful for the commission or any of its officers
15 or employes to use for personal benefit any information which is
16 filed with or obtained by the commission and which is not
17 generally available to the public. Nothing in this act
18 authorizes the commission or any of its officers or employes to
19 disclose such confidential information except among themselves
20 or to other securities administrators, regulatory authorities or
21 governmental agencies, or when necessary or appropriate in a
22 proceeding or investigation under this act or any other law of
23 this State. [No provision of this act either creates or
24 derogates from any privilege which exists at common law or
25 otherwise when documentary or other evidence is sought under a
26 subpoena directed to the commission or any of its officers or
27 employes.]
28 (c.1) Except for the privileges created in this subsection,
29 no provision of this act either creates or derogates from any
30 privilege which exists at common law or otherwise when
20010S0893B1805 - 26 -
1 documentary or other evidence is sought under a subpoena
2 directed to the commission or any of its officers or employes.
3 (1) The documents described in clause (2) and any testimony
4 sought concerning information in those documents are privileged
5 from disclosure under a subpoena directed to the commission or
6 any of its officers or employes if the documents relate to:
7 (i) An investigation authorized under section 510 which has
8 not been closed.
9 (ii) An action in which neither the commission nor any of
10 its officers or employes is a party.
11 (2) The documents which are the subject of the privilege
12 created in clause (1) include:
13 (i) Documents relating to an investigation conducted under
14 section 510, including, but not limited to, statements made or
15 taken in accordance with section 510(a) or (b) and documents in
16 possession of the commission under section 510(a)(ii).
17 (ii) Documents received in connection with a subpoena issued
18 under section 510.
19 (iii) Documents relating to an examination conducted under
20 section 304(d).
21 (iv) Documents obtained from a securities administrator,
22 regulatory authority or law enforcement or governmental agency
23 relating to an investigation authorized under section 510 or an
24 examination conducted in accordance with section 304(d).
25 (v) Documents deemed confidential by order of the commission
26 under section 603(c).
27 (3) Complaints filed with the commission and testimony
28 concerning information in the complaints are privileged
29 absolutely from disclosure under a subpoena directed to the
30 commission or its officers or employes.
20010S0893B1805 - 27 -
1 (4) No privilege is created under clause (1) or (3) if
2 document sought under a subpoena directed to the commission or
3 its officers or employees is otherwise publicly available.
4 * * *
5 SECTION 15. SECTION 601.1 OF THE ACT, ADDED MAY 7, 1998 <--
6 (P.L.342, NO.51), IS AMENDED TO READ:
7 SECTION 601.1. SALARIES OF COMMISSIONERS.--(A) THE CHAIRMAN
8 OF THE COMMISSION SHALL RECEIVE A SALARY AT THE RATE OF [TWENTY-
9 EIGHT THOUSAND FIVE HUNDRED DOLLARS ($28,500)] THIRTY-EIGHT
10 THOUSAND FIVE HUNDRED DOLLARS ($38,500) PER ANNUM. EACH OTHER
11 MEMBER OF THE COMMISSION SHALL RECEIVE A SALARY AT THE RATE OF
12 [TWENTY-SIX THOUSAND DOLLARS ($26,000)] THIRTY-SIX THOUSAND
13 DOLLARS ($36,000) PER ANNUM.
14 (B) THE COMMISSIONERS SHALL RECEIVE ANNUAL COST-OF-LIVING
15 INCREASES UNDER SECTION 3(E) OF THE ACT OF SEPTEMBER 30, 1983
16 (P.L.160, NO.39), KNOWN AS THE "PUBLIC OFFICIAL COMPENSATION
17 LAW."
18 Section 15 16. Section 602(b.1), (i) and (v) of the act, <--
19 amended or added December 18, 1990 (P.L.755, No.190) and
20 December 7, 1994 (P.L.869, No.126) are amended to read:
21 Section 602. Fees.--* * *
22 (b.1) Filing fees for sales of securities:
23 [(i) Exemption filings under section 203(i)... $250]
24 * * *
25 (v) Exemption filings under section
26 203(o)[(ii)] shall be:............................ 250
27 * * *
28 Section 16 17. Sections 602.1(a)(1) and (2), (c)(1), 603 and <--
29 606 of the act, amended November 24, 1998 (P.L.829, No.109), are
30 amended to read:
20010S0893B1805 - 28 -
1 Section 602.1. Assessments.--(a) (1) Each agent and
2 investment adviser representative, when applying for an initial
3 license under section 301 or changing employers, shall pay a
4 compliance assessment in accordance with the following schedule:
5 [twenty-seven dollars ($27) for the period July 1, 1995, through
6 June 30, 1998, thirty dollars ($30) for the period July 1, 1998,
7 through June 30, 2001,] thirty-two dollars ($32) for the period
8 July 1, 2001, through June 30, 2004, [and] thirty-five dollars
9 ($35) for the period July 1, 2004, through June 30, 2007,
10 thirty-seven dollars ($37) for the period July 1, 2007, through
11 June 30, 2010, and forty dollars ($40) thereafter.
12 (2) Each agent and investment adviser representative, when
13 applying for a renewal license under section 301, shall pay a
14 compliance assessment in accordance with the following schedule:
15 [twelve dollars ($12) for the period July 1, 1995, through June
16 30, 1998, fifteen dollars ($15) for the period July 1, 1998,
17 through June 30, 2001,] seventeen dollars ($17) for the period
18 July 1, 2001, through June 30, 2004, [and] twenty ($20) for the
19 period July 1, 2004, through June 30, 2007, twenty-two dollars
20 ($22) for the period July 1, 2007, through June 30, 2010, and
21 twenty-five ($25) thereafter.
22 * * *
23 (c) After giving notice and opportunity for a hearing, the
24 commission may issue an order accompanied by written findings of
25 fact and conclusions of law which imposes an administrative
26 assessment in the amounts provided in paragraph (1) against a
27 broker-dealer, agent, investment adviser or investment adviser
28 representative registered under section 301 or an affiliate of
29 any broker-dealer or investment adviser where the commission
30 determines that the person willfully has violated this act or a
20010S0893B1805 - 29 -
1 rule or order of the commission under this act or has engaged in
2 dishonest or unethical practices in the securities business; has
3 taken unfair advantage of a customer; or has failed reasonably
4 to supervise its agents or employes or against any other person
5 if the commission determines that the person wilfully violated
6 section [401(a) or (c), 406, 408, 409 or 512(d); section 401(b)
7 or 407;] 301, 401, 404, 406 through 409 or 512(d) or a cease and
8 desist order issued by the commission under section 606(c.1).
9 (1) The commission, in issuing an order under this
10 subsection, may impose the administrative assessments set forth
11 below. Each act or omission that provides a basis for issuing an
12 order under this subsection shall constitute a separate
13 violation.
14 (i) In issuing an order against any broker-dealer, agent,
15 investment adviser or investment adviser representative
16 registered under section 301 or an affiliate of any broker-
17 dealer or investment adviser, the commission may impose an
18 administrative assessment of up to twenty-five thousand dollars
19 ($25,000) for a single violation or up to two hundred fifty
20 thousand dollars ($250,000) for multiple violations in a single
21 proceeding or a series of related proceedings. If any of the
22 victims of the person's violative conduct were individuals aged
23 [65] 60 or more, the commission also may impose a special
24 administrative assessment in addition to the foregoing amounts
25 of up to twenty-five thousand dollars ($25,000).
26 (ii) In issuing an order against a person for wilful
27 violation of section 401(a) or (c), 404, 406, 408, 409 or 512(d)
28 or for wilful violation of a cease and desist order issued under
29 section 606(c.1), the commission may impose an administrative
30 assessment of up to twenty-five thousand dollars ($25,000) for a
20010S0893B1805 - 30 -
1 single violation or up to one hundred fifty thousand dollars
2 ($150,000) for multiple violations in a single proceeding or a
3 series of related proceedings. In addition to the foregoing
4 assessment, the commission also may impose a special
5 administrative assessment of up to twenty-five thousand dollars
6 ($25,000) for each of the provisions described as follows that
7 the commission determines are applicable:
8 (A) The person, within seven years [of] prior to the
9 commission taking action under this subsection [has been], was
10 the subject of: a criminal felony conviction[,]; an injunction
11 issued by any court of competent jurisdiction; or an order of
12 the Securities and Exchange Commission, the Commodity Futures
13 Trading Commission, the securities [administrator], banking or
14 insurance regulator of another state, a Federal banking
15 regulator or the securities, banking or insurance regulatory
16 authority of another country which found that the person
17 wilfully had violated any provision of the Federal or state
18 securities, banking, insurance, or commodities laws or the
19 securities, commodities, insurance or banking laws of another
20 country[, provided that the foregoing convictions occurred or
21 the injunctions or orders were entered prior to the violation
22 for which this special administrative assessment is being
23 imposed].
24 (B) The person's violative conduct involved individuals aged
25 [65] 60 or more.
26 (C) The person's violative conduct involved use of the
27 Internet or boiler room tactics which included, without
28 limitation, use of any high-pressure sales tactics designed to
29 create an artificially short time period for which the person
30 being solicited is pressured to make an investment decision or
20010S0893B1805 - 31 -
1 overcome the person's reluctance to commit to the investment
2 being offered, use of scripts designed to allay any objections
3 or concerns expressed by the person being solicited or making
4 repeated telephone calls or sending multiple e-mail messages to
5 the same person pressuring the person to make an immediate
6 investment decision.
7 (iii) In issuing an order against [persons] a person for
8 wilful violation of section 401(b) or 407, the commission may
9 impose an administrative assessment of up to twenty-five
10 thousand dollars ($25,000) for each of the criteria described in
11 subclause (ii)(A) and (C) that the commission determines are
12 applicable. No assessment shall be imposed under this subclause
13 if the person is subject to an administrative assessment imposed
14 under any other provision of this subsection.
15 (iv) In issuing an order against a person, other than a
16 Federally covered adviser, for wilful violation of section 301,
17 the commission may impose the following administrative
18 assessments unless the person is subject to an administrative
19 assessment imposed under any other provision of this subsection
20 or the public proceeding to which the assessment relates was
21 instituted prior to the date of enactment of this subclause:
22 (A) For a person who, at the time of the wilful violation,
23 was not registered under section 301, was not registered as a
24 broker or dealer with the United States Securities and Exchange
25 Commission under the Securities Exchange Act of 1934 (948
26 Stat.881, 15 U.S.C. § 78(a) et seq.) and was not a member of a
27 national securities association registered under that act, the
28 commission may impose an administrative assessment of up to
29 twenty-five thousand dollars ($25,000) for a single violation or
30 up to one hundred twenty-five thousand dollars ($125,000) for
20010S0893B1805 - 32 -
1 multiple violations in a single proceeding or series of related
2 proceedings.
3 (B) For a person (not an individual) that, at the time of
4 the wilful violation, was not registered under section 301 but
5 was registered as a broker or dealer with the United States
6 Securities and Exchange Commission under the Securities Exchange
7 Act of 1934 and was a member of a national securities
8 association registered under that act, the commission may impose
9 an administrative assessment of up to twenty-five thousand
10 dollars ($25,000) for a single violation or up to one hundred
11 fifty thousand dollars ($150,000) for multiple violations in a
12 single proceeding or series of related proceedings.
13 An assessment imposed under this subclause shall be in addition
14 to any liability a person may have under an order issued under
15 section 514.
16 (v) In issuing an order for wilful violation of section
17 301(c.1)(1)(ii) against a person that is a Federally covered
18 adviser, the commission may impose the following administrative
19 assessments:
20 (A) Up to fifty thousand dollars ($50,000) if the number of
21 investment adviser representatives involved in the violation was
22 less than five.
23 (B) Up to one hundred thousand dollars ($100,000) if the
24 number of investment adviser representatives involved in the
25 violation was five or more.
26 (vi) In issuing an order for a wilful violation of section
27 301(f) against a person that is a federally covered adviser, the
28 commission may impose an administrative assessment of one
29 thousand dollars ($1,000).
30 * * *
20010S0893B1805 - 33 -
1 Section 603. Administrative Files.--(a) A document is filed
2 when it is received by the commission or by any other person
3 which the commission by regulation or order may designate.
4 (b) The commission shall keep a register of all registrants,
5 registration statements and notice filings which are or have
6 ever been effective under this act [and predecessor laws] and
7 all denial, suspension or revocation orders which have been
8 entered under this act [and predecessor laws]. The register
9 shall be open for public inspection [except with respect to
10 summary suspensions under sections 208(c) and 305(d)].
11 (c) The information contained in or filed with any
12 registration statement, application, notice filing or report
13 shall be made available to the public in accordance with
14 regulations prescribed by the commission; [provided that, upon
15 proper showing of the registrant or issuer, the commission shall
16 treat certain filings as confidential.] except that the
17 commission may make the following orders or regulations:
18 (1) Upon proper showing of the registrant or issuer, the
19 commission may order certain filings or parts of filings
20 nonpublic.
21 (2) The commission, by rule or order, may deem certain
22 categories of information filed with the commission as
23 nonpublic.
24 (d) The commission upon request shall furnish to any person,
25 at a reasonable charge, [photostatic or other copies, certified
26 under seal of the commission if certification is requested, of
27 any entry in the register or any order or other document made
28 available to the public under subsection (c) above.] a copy of
29 any document described in subsection (c) in any medium available
30 to the commission. Upon request and payment of a reasonable
20010S0893B1805 - 34 -
1 charge, the document may be certified under the seal of the
2 commission.
3 (e) The commission, by order, may subsequently make public
4 information contained in the documents described in subsection
5 (c)(1) and (2) and the order may limit the amount of information
6 made public or place conditions on its use. Prior to issuing an
7 order under this subsection, the commission shall notify in
8 writing the person who originally requested confidentiality at
9 the person's last known address in the commission's files at
10 least thirty days before the commission may issue an order under
11 this subsection.
12 Section 606. Miscellaneous Powers of Commission.--(a) The
13 commission may, by regulation, require any issuer of securities
14 registered under this act or exempted from registration under
15 section 203(d) or (p), which issuer has not filed reports with
16 the Securities and Exchange Commission pursuant to sections 13
17 or 15(d) of the Securities Exchange Act of 1934 (48 Stat. 881,
18 15 U.S.C. §§ 78m or 78o(d)), to distribute financial information
19 to its security holders at least annually.
20 (b) If, in its opinion, the public interest and the
21 protection of investors[,] so require, the commission may apply
22 to a court of competent jurisdiction for an order[,] suspending
23 all trading in this [State] Commonwealth by broker-dealers and
24 agents in any security for any period.
25 (c) No person shall publish in this State any advertisement
26 concerning any security (other than advertisements relating to
27 federally covered securities, tombstone advertisements permitted
28 under the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a
29 et seq.) and the Investment Company Act of 1940 (54 Stat. 789,
30 15 U.S.C. § 80a-1 et seq.) and the rules and regulations
20010S0893B1805 - 35 -
1 promulgated thereunder) except in accordance with such rules as
2 the commission may promulgate from time to time. No person shall
3 publish any advertisement concerning any security in this State
4 after the commission issues a cease advertising order in which
5 it finds that the advertisement [contains any statement that is
6 false or misleading in any material respect or omits to make
7 any] contained an untrue statement of a material fact or omitted
8 to state a material [statement] fact necessary in order to make
9 the statements made, in the light of the circumstances under
10 which they [are] were made, not misleading [and so notifies the
11 person in writing. Such notification may be given]. The order
12 may be issued summarily without notice or hearing. [Within
13 thirty days after the receipt of a notification under this
14 section, the person desiring to use the advertisement may
15 request in writing that the order be rescinded. Upon the receipt
16 of such a written request, the matter shall be set down for
17 hearing to commence within thirty days after such receipt unless
18 the person making the request consents to a later date. After
19 such hearing, the commission shall determine whether to affirm
20 and continue or to rescind such order.] Upon issuance of a
21 summary order, the commission shall promptly provide the order
22 to the person against whom it is issued. The order shall contain
23 findings of fact and conclusions of law and include a notice
24 affording the person an opportunity for a hearing under section
25 607(a).
26 (c.1) Whenever the commission finds that any person has
27 engaged or is about to engage in any act or practice
28 constituting a violation of any provision of this act or any
29 rule or order thereunder, the commission may order such person
30 to cease and desist from such act or practice. [and shall notify
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1 the person in writing. Notification may be given summarily
2 without notice or hearing. Within thirty days after receipt of a
3 notification under this section, the person desiring to engage
4 in such act or practice may file a written request that the
5 order be rescinded. Upon receipt of the written request, the
6 matter will be set down for a hearing to commence within thirty
7 days after such receipt unless the person making the request
8 consents to a later date. After such hearing, the commission
9 shall determine whether to affirm and continue, modify or
10 rescind such order.] The order may be issued summarily without
11 notice or hearing. Upon issuance of a summary order, the
12 commission shall promptly provide the order to the person
13 against whom it is issued. The order shall contain findings of
14 fact and conclusions of law and include a notice affording the
15 person an opportunity for a hearing under section 607(a).
16 (d) The commission may, by regulation, delegate any powers
17 specified in this act to be exercised by the commission to
18 members of the commission's staff, except for powers related to
19 hearings.
20 Section 17 18. Section 607 of the act is amended to read: <--
21 Section 607. Hearings and Judicial Review.--(a) Within
22 thirty days after [any order has become effective without a
23 hearing, any interested party may apply to] receipt of a summary
24 order issued under section 204(b), 208(c), 211(c), 305(d),
25 606(c) or 606(c.1), the person against whom the order was issued
26 and entered may file with the commission a written request for a
27 hearing in respect to any matters determined by the order.[, and
28 a hearing shall be held within thirty days after the application
29 is filed. After the hearing the commission may modify the order
30 as it deems appropriate.] Upon receipt of the written request,
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1 the matter shall be set down for a hearing to commence within
2 thirty days after receipt of the request unless the person
3 making the request consents to a later date. If the person
4 making the request consents to a later date for the hearing but
5 fails, after notification by first class mail, to the person's
6 last known address in the commission's files, to consent to a
7 hearing date that is within one hundred eighty days of the date
8 the written request for a hearing was filed with the commission
9 under this subsection, the request for hearing shall be deemed
10 abandoned and the summary order shall be deemed a final order.
11 After hearing, the commission may determine to rescind, modify
12 or vacate the summary order or make it a final order. If no
13 hearing is requested or a request for a hearing is filed
14 untimely, the summary order shall be deemed to be a final order.
15 (b) Within thirty days after [any order has become effective
16 after a hearing, any interested party] receipt of an order
17 issued and entered by the commission after a hearing, the person
18 against whom the order was issued and entered may apply to the
19 commission for a rehearing. The commission, in its sole
20 discretion, may grant the application and hold a rehearing. [if
21 in its judgment sufficient reasons therefor appear. After
22 rehearing, the commission may vacate or modify the order, and
23 any order vacating the original order shall have the same effect
24 as an original order. Failure to grant an application for
25 rehearing within thirty days from the date of the filing shall
26 constitute a denial; and failure, within fifteen days after the
27 conclusion of a rehearing, to issue an order affirming, vacating
28 or modifying the original order shall constitute an affirmation
29 of the original order.] Failure of the commission to grant a
30 rehearing within thirty days of receipt of an application shall
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1 constitute a denial. After rehearing, the commission may issue
2 an order affirming, vacating or modifying the original order.
3 (c) [Disciplinary hearings] Hearings and rehearings shall be
4 public. [unless the commission grants a request joined in by all
5 parties that the hearing be conducted privately. Investigatory
6 hearings shall not be open to members of the general public
7 unless all parties to the hearing agree otherwise.]
8 (d) Orders of the commission shall be subject to judicial
9 review in accordance with law, but orders originally entered
10 without a hearing may be reviewed only if the party seeking
11 review has [requested] filed a request for a hearing within the
12 time provided [by] under subsection (a). Filing for judicial
13 review of a commission order shall not operate as a stay of the
14 commission's order unless specifically ordered by the court.
15 Section 18 19. Section 609(f) of the act, amended November <--
16 24, 1998 (P.L.829, No.109), is amended to read:
17 Section 609. Regulations, Forms and Orders.--* * *
18 (f) (1) An application for registration of securities [or
19 registration of a broker-dealer, agent, investment adviser or
20 investment adviser representative] shall be deemed abandoned if
21 the application has been on file with the commission for a
22 minimum of twelve consecutive months and the applicant has
23 failed to respond to the commission's notice [of warning] of
24 abandonment sent by first class mail to the applicant's last
25 known address in the commission's files within sixty calendar
26 days [of the date of the warning.] after the date the
27 notification was mailed by the commission. There shall be no
28 refund of any fees [or assessments] paid by the applicant.
29 (2) An application for registration as a broker-dealer,
30 agent, investment advisor or investment adviser representative
20010S0893B1805 - 39 -
1 shall be deemed abandoned if the application has been on file
2 with the commission for a minimum of six consecutive months and
3 the applicant has failed to respond to the commission's notice
4 of abandonment sent by first class mail to the applicant's last
5 known address in the commission's files within sixty calendar
6 days after the date the notification was mailed by the
7 commission. There shall be no refund of any fees or assessments
8 paid by the applicant.
9 Section 19 20. The act is amend by adding a section to read: <--
10 Section 612. Burden of Proof.--(a) In a civil action or
11 administrative proceeding under this act, a person claiming
12 status as a Federally covered security or adviser or an
13 exemption, exception or exclusion from a definition has the
14 burden of proving the availability of the status, exemption,
15 exception or exclusion.
16 (b) In a proceeding for a criminal violation of this act, a
17 person claiming status as a Federally covered security adviser
18 or an exemption, exception or exclusion from a definition has
19 the burden of going forward with evidence of the claim,
20 exemption, exception or exclusion.
21 Section 20 21. Section 704 of the act is repealed. <--
22 Section 21 22. This act shall take effect in 60 days. <--
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