PRIOR PRINTER'S NOS. 1054, 1805 PRINTER'S NO. 2036
No. 893 Session of 2001
INTRODUCED BY HOLL, WAGNER, COSTA, PUNT, THOMPSON, TILGHMAN,
BELL, LEMMOND, MUSTO AND SCHWARTZ, MAY 25, 2001
SENATOR THOMPSON, APPROPRIATIONS, RE-REPORTED AS AMENDED,
JUNE 4, 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 AND for registration and notice <--
12 filing procedures; PROVIDING FOR PREARRANGED TRADING <--
13 PROGRAMS; FURTHER PROVIDING for time limitations on rights of
14 actions, for right of the Pennsylvania Securities Commission
15 to bring actions, for investigations and subpoenas and for
16 criminal penalties; providing for return of sales
17 compensation; further providing for administration, for
18 salaries of commissioners, for fees, for assessments, for
19 administrative files, for miscellaneous powers of commission,
20 for hearings and judicial review, for regulations and forms
21 and orders; and providing for burden of proof.
22 The General Assembly of the Commonwealth of Pennsylvania
23 hereby enacts as follows:
24 Section 1. Section 102(a), (d), (e) and (p) of the act of
25 December 5, 1972 (P.L.1280, No.284), known as the Pennsylvania
26 Securities Act of 1972, amended November 24, 1998 (P.L.829,
1 No.109), are amended and the section is amended by adding
2 subsections to read:
3 Section 102. Definitions.--When used in this act, the
4 following definitions shall be applicable, unless the context
5 otherwise requires:
6 (a) "Advertisement" means any [publicly disseminated,
7 written or printed communication, including without limitation,
8 communication by radio, television, or other public media]
9 communication, used in connection with a sale or purchase or an
10 offer to sell or purchase a security which is publicly
11 disseminated by means of print, radio, television, Internet or
12 other media.
13 * * *
14 (d) "Bank" means [any bank, banking and trust company,
15 savings bank, trust company or private bank, as defined in the
16 Banking Code of 1965, act of November 30, 1965 (P.L.847), or any
17 savings and loan association, as defined in the Savings
18 Association Code of 1967, act of December 14, 1967 (P.L.746), or
19 any successor statutes thereto, or any banking institution,
20 trust company or savings and loan institution organized under
21 the laws of the United States, or of any state, territory or the
22 District of Columbia, or a receiver, conservator or other
23 liquidating agent of any of the foregoing.] a bank, savings
24 bank, savings institution, savings and loan association, thrift
25 institution, trust company or similar organization which is
26 organized or chartered under the laws of a state or of the
27 United States, is authorized to and receives deposits and is
28 supervised and examined by an official or agency of a state or
29 BY the United States if its deposits are insured by the Federal <--
30 Deposit Insurance Corporation or a successor authorized by
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1 Federal law.
2 (e) "Broker-dealer" means any person engaged in the business
3 of effecting transactions in securities for the account of
4 others or for his own account. "Broker-dealer" does not include:
5 (i) An agent;
6 (ii) An issuer;
7 (iii) A bank[, when effecting transactions for its own
8 account or for the account of another under section 302(c);]
9 which meets the exceptions from the definition of "broker" under
10 section 3(a)(4)(B) OR (E) or the definition of "dealer" under <--
11 section 3(a)(5)(B) OR (C) of the Securities Exchange Act of 1934 <--
12 (48 Stat. 881, 15 U.S.C. § 78c(a)(4)(B) and (5)(B)); OR (E) AND <--
13 5(B) OR (C));
14 (iv) An executor, administrator, guardian, conservator or
15 pledgee;
16 (v) A person who has no place of business in this State if
17 he effects transactions in this State exclusively with or
18 through (A) the issuers of the securities involved in the
19 transactions, (B) broker-dealers or institutional investors;
20 (vi) A person licensed as a real estate broker or agent
21 under the act of February 19, 1980 (P.L.15, No.9), known as the
22 Real Estate Licensing and Registration Act, and whose
23 transactions in securities are isolated transactions incidental
24 to that business; or
25 (vii) Other persons not within the intent of this subsection
26 whom the commission by regulation designates.
27 * * *
28 (k.1) "Knowing and knowingly" as used in sections 511(a) and
29 512(a) shall have the same meaning as the term "knowingly" is
30 defined in 18 Pa.C.S. § 302(b)(2) (relating to general
20010S0893B2036 - 3 -
1 requirements of culpability).
2 * * *
3 (p) "Publish" means publicly to issue or circulate by
4 newspaper, mail, radio, [or] television, Internet or other media
5 or otherwise to disseminate to the public.
6 * * *
7 (w) "Wilful and wilfully" mean the following:
8 (1) As used in all sections of the act, except section 511
9 with respect to a wilful violation of section 401(a) of the act,
10 and notwithstanding any law or statute to the contrary, wilful
11 means that the person acted intentionally in the sense that the
12 person intended to do the act and was aware of what the person
13 was doing. Proof of evil motive or intent to violate the act or
14 knowledge that the person's conduct violated the act is not
15 required.
16 (2) For purposes of section 511 with respect to a wilful
17 violation of section 401(a) of the act, wilful means that the
18 person acted intentionally, knowingly, recklessly or negligently
19 as those terms are defined in 18 Pa.C.S. § 302 (relating to
20 general requirements of culpability).
21 Section 2. Section 202 (f) of the act, amended May 9, 1984
22 (P.L.235, No.52) and November 24, 1998 (P.L.829, No.109), is
23 amended to read:
24 Section 202. Exempt Securities.--The following securities
25 are exempted from sections 201 and 211:
26 * * *
27 (f) Any security listed, or approved for listing upon notice
28 of issuance, on the New York, American, or Philadelphia stock
29 exchange [or any other securities exchange] or quoted on [any
30 national quotation service designated by regulation of the
20010S0893B2036 - 4 -
1 commission and any security (except securities of an open-end or
2 closed-end investment company, face amount certificate company
3 or unit investment trust, as such persons are classified in the
4 Investment Company Act of 1940) which satisfies the margin
5 requirements of the Board of Governors of the Federal Reserve
6 System under Regulation T and any supplement or any successor
7 regulation thereto] the National Market System of the Nasdaq
8 Stock Market; any other security of the same issuer which is of
9 senior or substantially equal rank; any security called for by
10 subscription rights or warrants so listed, approved or quoted;
11 and any warrant or right to purchase or subscribe to any of the
12 foregoing.
13 * * *
14 Section 3. Section 203(i.1) and (p) of the act, amended
15 December 7, 1994 (P.L.869, No.126) and November 24, 1998
16 (P.L.829, No.109), are amended to read:
17 Section 203. Exempt Transactions.--The following
18 transactions are exempted from sections 201 and 211:
19 * * *
20 (i.1) Any sale of an equity security, except securities of
21 an open-end or closed-end investment company, face amount
22 certificate company or unit investment trust, as such persons
23 are classified in the Investment Company Act of 1940 (54 Stat.
24 789, 15 U.S.C. § 80a-1 et seq.), if: (i) the securities are
25 proposed to be registered under section 5 of the Securities Act
26 of 1933 (15 U.S.C. § 77e) [or exempted under Regulation A
27 promulgated under section 3(b) thereof (15 U.S.C. § 77c(b))]
28 and, in fact, become registered under section 5 of the
29 Securities Act of 1933 (15 U.S.C. § 77e) [or exempted from
30 registration pursuant to Regulation A promulgated under section
20010S0893B2036 - 5 -
1 3(b) of such act; (ii) a copy of any final prospectus or final
2 offering circular utilized or proposed to be utilized in
3 connection therewith is filed with the commission at the time
4 the notice required by clause (viii) is filed; (iii) the
5 applicable filing fee specified in section 602(b.1) is paid with
6 respect to such offering]; (iv) the issuer of the security is a
7 reporting company as defined in section 102(q); (v) no stop
8 order or refusal order is in effect and no public proceeding or
9 investigation looking toward such an order is pending under the
10 Securities Act of 1933 or this act; (vi) the equity security is
11 listed on a national securities exchange registered under the
12 Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. § 78a
13 et seq.) or quoted on the [National Association of Securities
14 Dealers Automated Quotation System] National Market System or
15 Small Cap Market of the Nasdaq Stock Market; (vii) the issuer,
16 at the time [it files the notice required in clause (viii) with
17 the commission] the registration statement becomes effective
18 under section 5 of the Securities Act of 1933, has not received
19 an auditor's report for the immediately preceding fiscal year
20 expressing substantial doubt about the issuer's ability to
21 continue as a going concern unless the securities being sold in
22 reliance upon this subsection are the subject of an offering
23 that is being underwritten on a firm commitment basis by a
24 broker-dealer registered under section 301[; and (viii) the
25 issuer has filed a notice with the commission in the form and
26 manner which the commission, by regulation, may prescribe. As a
27 condition of the continuing effectiveness of this exemption,
28 copies of any post-effective amendment or sticker to such
29 prospectus or offering circular must be filed with the
30 commission within two business days after the same is filed with
20010S0893B2036 - 6 -
1 the Securities and Exchange Commission]. An exemption under this
2 section shall terminate upon the termination of the registration
3 statement under section 5 [(15 U.S.C. § 77e) or the exemption
4 from registration pursuant to Regulation A promulgated under
5 section 3(b) (15 U.S.C. § 77c(b))] of the Securities Act of
6 1933. For purposes of this subsection, the commission, by
7 regulation, may define the term "equity security."
8 * * *
9 (p) Any offer or sale of an evidence of indebtedness of an
10 issuer either: organized exclusively for educational,
11 benevolent, fraternal, religious, charitable, social, athletic
12 or reformatory purposes and not for pecuniary profit, if no part
13 of the net earnings of the issuer inures to the benefit of any
14 private shareholder or individual; or organized as a chamber of
15 commerce or trade or professional association if [there has been
16 filed with the commission a notice identifying the security and
17 the basis of its qualification under this exemption together
18 with such further information as the commission may by
19 regulation require, and if the commission does not by order
20 disallow the exemption within ten days or such shorter period as
21 it may permit. The security qualifies under this exemption if:
22 (i) the issuer and any predecessor have not defaulted within the
23 current fiscal year and the three preceding fiscal years in any
24 fixed interest or principal obligation; (ii) the issuer complies
25 with regulations of the commission with respect to trust
26 indentures and the use of a prospectus; (iii) the securities
27 proposed to be sold are secured by a mortgage or deed of trust
28 upon land and buildings, which mortgage or deed of trust is or
29 will become a first lien at or prior to the issuance of such
30 evidences of indebtedness, or provision satisfactory to the
20010S0893B2036 - 7 -
1 commission is made for escrowing the proceeds from their sale
2 until such first lien is established, and the total amount of
3 such securities does not exceed seventy-five per cent of the
4 then fair market value of the land and buildings included in
5 such mortgage or deed of trust, less the amount of any unpaid
6 special assessment taxes; and (iv) any person who accepts an
7 offer to purchase securities under this subsection has received
8 a written notice of his right to withdraw his acceptance as
9 provided by section 207(m)(2). This exemption shall not apply to
10 the securities of any nonprofit organization if any promoter
11 thereof expects or intends to make a profit directly or
12 indirectly from any business or activity associated with the
13 organization or operation of such nonprofit organization.] all
14 the following are met:
15 (1) The issuer files a notice with the commission in the
16 form prescribed by the commission not later than five business
17 days before the issuer receives from any person an executed
18 subscription agreement or other contract to purchase the
19 securities being offered or the issuer receives consideration
20 from any person therefor, whichever is earlier. The notice filed
21 with the commission shall be accompanied by a copy of a
22 disclosure document and any offering literature to be used in
23 connection with an offer or sale of securities under this
24 section.
25 (2) The filing fee prescribed in section 602(b.1)(x) has
26 been paid.
27 (3) Each person who accepts an offer to purchase securities
28 under this subsection has received a written notice of a right
29 to withdraw an acceptance as provided in section 207(m)(2).
30 (4) The issuer and any predecessor of the issuer have not
20010S0893B2036 - 8 -
1 defaulted within the current fiscal year and the three preceding
2 fiscal years with respect to any debt security previously sold
3 by the issuer or its predecessor.
4 (5) The total amount of securities proposed to be offered
5 under this subsection are secured by a mortgage or deed of trust
6 upon the existing land and buildings owned by the issuer which
7 mortgage or deed of trust is or will become a first lien at or
8 prior to the issuance of the securities or there exists a
9 provision satisfactory to the commission for escrowing of the
10 proceeds from the sale of the securities until such first lien
11 is established.
12 (6) The total amount of securities proposed to be offered
13 under this subsection does not exceed, as of the time the form
14 required by this subsection is filed with the commission,
15 seventy-five per cent of the fair market value of the land and
16 buildings to be included in the mortgage or deed of trust.
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
20010S0893B2036 - 9 -
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 shall be issued summarily
18 without notice or hearing. Upon issuance of a summary order, the
19 commission shall promptly provide the order to the person
20 against whom it is issued. The order shall contain findings of
21 fact and conclusions of law and include a notice affording the
22 person an opportunity for a hearing under section 607(a). No
23 order under this section [may] shall operate retroactively. No
24 person [may] shall be considered to have violated section 201 by
25 reason of any offer or sale effected after the entry of an order
26 under this section if he sustains the burden of proof that he
27 did not know, and in the exercise of reasonable care could not
28 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
20010S0893B2036 - 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.--* * *
20010S0893B2036 - 11 -
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
20010S0893B2036 - 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
20010S0893B2036 - 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
20010S0893B2036 - 14 -
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
20010S0893B2036 - 15 -
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
20010S0893B2036 - 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 federally covered adviser that is also a broker-dealer
25 registered under section 301, that has an individual employed by
26 or associated with such person who meets the definition of
27 investment adviser representative in section 102(j.1)(ii).
28 [(iv) Notwithstanding the provisions of clause (iii), until
29 October 10, 1999, the commission may require the registration of
30 a federally covered adviser under section 301 if the federally
20010S0893B2036 - 17 -
1 covered adviser has not paid the correct fee and the nonpayment
2 or underpayment of the fee has not been remedied by the
3 commission receiving the amount due within ten calendar days
4 following receipt by the federally covered adviser of written
5 notice from the commission concerning the nonpayment or
6 underpayment of the fee required by this section and section
7 602(d.1).]
8 * * *
9 Section 8. Section 305(a)(i) and (xiv) and (d) of the act,
10 added or amended December 18, 1990 (P.L.755, No.190) and
11 November 24, 1998 (P.L.829, No.190), are amended and the section
12 is amended by adding a subsection and clause to read:
13 Section 305. Denial, Suspension, Revocation and Conditioning
14 of Registration.
15 (a) The commission may, by order, deny, suspend, revoke or
16 condition any registration or may censure any registrant if it
17 finds that such order is in the public interest and that such
18 registrant or applicant, or in the case of any broker-dealer or
19 investment adviser, any affiliate thereof, whether prior or
20 subsequent to becoming associated with such person:
21 (i) Has[, in any application for registration or in any
22 report required to be filed with the commission under this act,
23 or in any proceeding before the commission, wilfully made or
24 caused to be made any statement which was at the time and in the
25 light of the circumstances under which it was made false or
26 misleading with respect to any material fact, or has wilfully
27 omitted to state in any such application, report or proceeding,
28 any material fact which is required to be stated therein or
29 necessary in order to make the statements made, in the light of
30 the circumstances under which they are made, not misleading, or
20010S0893B2036 - 18 -
1 has wilfully failed to amend or supplement such an application,
2 report or statement in a timely manner in accordance with rules
3 which may be adopted by the commission; or] filed an application
4 for registration or a document in connection with an application
5 for registration which as of its effective date, or as of a date
6 after filing in the case of an order denying effectiveness, was
7 incomplete in a material respect or contained a statement which
8 was, in light of the circumstances under which it was made,
9 false or misleading with respect to a material fact; or
10 * * *
11 (xiv) Is subject to any currently effective order or orders
12 entered within the past five years [of any securities] by any
13 regulator of another country:
14 (A) denying registration to, or revoking or suspending the
15 registration of, such person as a broker-dealer, agent,
16 investment adviser, [associated person] investment adviser
17 representative, futures commission merchant, commodity pool
18 operator, commodity trading adviser or a person associated with
19 a futures commission merchant, commodity pool operator or
20 commodity trading adviser; or [is]
21 (B) denying, revoking or suspending the person's legal
22 authorization to engage in the business of banking or insurance;
23 or
24 (xv) Is subject to any currently effective order of any
25 securities exchange or self-regulatory organization operating
26 under the authority of the securities regulator of another
27 country suspending or expelling such person from membership in
28 such exchange or self-regulatory association[.]; or
29 (xvi) Is subject to a currently effective order or orders
30 entered within the past five years by a state insurance
20010S0893B2036 - 19 -
1 regulator or Federal or state banking regulator denying
2 registration, articles of incorporation or association,
3 certificate of organization or authorization to do business,
4 charter or license, or revoking or suspending the registration,
5 articles of incorporation or association, certificate of
6 organization or authorization to do business, charter or license
7 of such person to engage in the insurance, banking, or other
8 financial services industry, or finding that such person has
9 engaged in fraudulent, unethical, dishonest or abusive practices
10 in connection with any aspect of the business of insurance,
11 banking or other financial services.
12 (a.1) The commission, by order, may deny the application of:
13 (i) an agent or investment adviser representative if the
14 individual is obligated, pursuant to an award of an arbitration
15 panel, to pay compensation to purchasers of securities and, as
16 of the date the application is filed with the commission, has
17 not paid the awarded compensation to the purchasers in full and
18 within the time period specified by the arbitration panel; or
19 (ii) a broker-dealer or investment adviser if a promoter,
20 director, chief executive officer, chief financial officer,
21 chief operations officer, chief legal officer, chief compliance
22 officer or general partner (or person occupying a similar status
23 or performing similar functions) of the applicant held a similar
24 position with another broker-dealer, investment adviser or
25 federally covered adviser which entity, pursuant to an award of
26 an arbitration panel, is obligated to pay compensation to
27 purchasers of securities and, as of the date the application is
28 filed with the commission, has not paid the awarded compensation
29 to the purchasers in full within the time period specified by
30 the arbitration panel.
20010S0893B2036 - 20 -
1 The commission may issue an order prospectively rescinding a
2 denial order issued under this subsection if the person whose
3 application has been denied under this subsection provides
4 credible evidence that the compensation awarded by the
5 arbitration panel which was the basis for denial of the
6 application under this subsection has been paid in full and in
7 cash.
8 * * *
9 (d) The commission may by order summarily deny, postpone or
10 suspend an application [for] or registration pending final
11 determination of any proceeding under this section. [Upon the
12 entry of the order, the commission shall promptly notify the
13 applicant or registrant, as well as the employer or prospective
14 employer if the applicant or registrant is an agent, that it has
15 been entered and of the reasons therefor and that within fifteen
16 days after the receipt of a written request the matter will be
17 set down for hearing. If no hearing is requested and none is
18 ordered by the commission, the order will remain in effect until
19 it is modified or vacated by the commission. If a hearing is
20 requested or ordered, the commission, after notice of and
21 opportunity for hearing, may modify or vacate the order or
22 extend it until final determination.] The order may be issued
23 summarily without notice or hearing. Upon issuance of a summary
24 order, the commission shall promptly provide the order to the
25 applicant or registrant and the employer or prospective employer
26 if the applicant or registrant is an agent or investment adviser
27 representative. The order shall contain findings of fact and
28 conclusions of law and include a notice affording the applicant
29 or registrant an opportunity for a hearing in accordance with
30 section 607(a).
20010S0893B2036 - 21 -
1 * * *
2 SECTION 9. THE ACT IS AMENDED BY ADDING A SECTION TO READ: <--
3 SECTION 410. PREARRANGED TRADING PROGRAMS.--IN CONNECTION
4 WITH THE OFFER, SALE OR PURCHASE OF ANY SECURITY IN THIS STATE,
5 NO PERSON SHALL BE DEEMED TO HAVE VIOLATED SECTION 401 OR 406 OR
6 OTHERWISE TO HAVE MADE AN UNTRUE STATEMENT OF A MATERIAL FACT OR
7 OMITTED TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
8 STATEMENTS MADE, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH
9 THEY WERE MADE, NOT MISLEADING IF SUCH PERSON DEMONSTRATES THAT
10 THE OFFER, SALE OR PURCHASE WAS PREARRANGED IN ACCORDANCE WITH
11 17 C.F.R. § 240.10B5-1(C) (RELATING TO TRADING "ON THE BASIS OF"
12 MATERIAL NONPUBLIC INFORMATION IN INSIDER TRADING CASES), OR ANY
13 SUCCESSOR THERETO, PROMULGATED UNDER SECTION 10(B) OF THE
14 SECURITIES EXCHANGE ACT OF 1934 (48 STAT. 881, 15 U.S.C. § 79A
15 ET SEQ.).
16 Section 9 10. Section 504(d) of the act is amended to read: <--
17 Section 504. Time Limitations on Rights of Action.--* * *
18 (d) No purchaser may commence an action under section 501,
19 502 or 503 if, before suit is commenced, the purchaser has
20 received a written offer: (i) stating the respect in which
21 liability under such section may have arisen and fairly advising
22 the purchaser of his rights; offering to repurchase the security
23 for cash, payable on delivery of the security, equal to the
24 consideration paid, together with interest at the legal rate
25 from the date of payment, less the amount of any income or
26 distributions, in cash or in kind, received thereon or, if the
27 purchaser no longer owns the security, offering to pay the
28 purchaser upon acceptance of the offer an amount in cash equal
29 to the damages computed in accordance with section 501(a); and
30 (ii) stating that the offer may be accepted by the purchaser at
20010S0893B2036 - 22 -
1 any time within a specified period of not less than thirty days
2 after the date of receipt thereof, or such shorter period as the
3 commission may by rule prescribe; and the purchaser has failed
4 to accept such offer in writing within the specified period. The
5 limitations on a purchaser commencing an action under this
6 subsection shall not apply if the purchaser has accepted an
7 offer to repurchase made under this subsection within the time
8 period specified under this subsection and has complied with all
9 the terms of this subsection but has not received the cash
10 payment specified by this subsection within ninety days of the
11 date of acceptance of the offer to repurchase.
12 * * *
13 Section 10 11. Section 509(c) of the act amended November <--
14 24, 1998 (P.L.829, No.109), is amended to read:
15 Section 509. Right of Commission to Bring Actions for
16 Injunction and Equitable Relief; Class Actions; Contempt of
17 Commission Orders.--* * *
18 (c) Any person violating any (i) stop order issued under
19 section 208, (ii) cease advertising order issued under section
20 606(c), (iii) cease and desist order issued under section
21 606(c.1), (iv) order of the commission requiring a rescission
22 pursuant to section 513 [or], (v) order of the commission
23 imposing any bar described in section 512, (vi) order of the
24 commission requiring return of sales compensation under section
25 514(a), or (vii) any order of the commission imposing an
26 administrative assessment under section 602.1(b) or (c) from
27 which no appeal of such an order has been taken pursuant to
28 section 607(d) of the act or which has been sustained on appeal,
29 or which has been appealed but where no supersedeas has been
30 granted for the period [in] during which the order has been
20010S0893B2036 - 23 -
1 violated, shall be deemed to be in contempt of such order. Upon
2 petition and certification of such order by the commission, the
3 Commonwealth Court or any of the courts of common pleas if it
4 finds after hearing or otherwise that the person is not in
5 compliance with the order shall adjudge the person in contempt
6 of the order and shall assess such civil penalties of an amount
7 not less than [three] five thousand dollars [($3,000)] ($5,000)
8 nor greater than [ten] fifteen thousand dollars [($10,000)]
9 ($15,000) per violation and [issue such further orders] grant
10 such equitable relief as it may deem appropriate.
11 Section 11 12. Section 510 of the act is amended by adding a <--
12 subsection to read:
13 Section 510. Investigations and Subpoenas.--* * *
14 (e) At the request of the securities regulatory authority of
15 another jurisdiction, the commission may provide assistance if
16 the requesting authority states that it is conducting an
17 investigation which it deems necessary to determine whether a
18 person has violated, is violating or is about to violate laws or
19 rules relating to securities matters that the requesting
20 authority administers or enforces. The commission may, in its
21 sole discretion, conduct such investigation and use the powers
22 conferred under this section as the commission deems necessary
23 to collect information and evidence pertinent to the request for
24 assistance. The assistance may be provided without regard to
25 whether the facts stated in the request would constitute a
26 violation of this act or the laws of this Commonwealth. In
27 deciding whether to provide such assistance, the commission
28 shall consider whether:
29 (i) the requesting authority is permitted and has agreed to
30 provide reciprocal assistance in securities matters to the
20010S0893B2036 - 24 -
1 commission; and
2 (ii) compliance with the request would prejudice the public
3 interest.
4 Section 12 13. Section 511(b) of the act, amended November <--
5 24, 1998 (P.L.829, No.109), is amended to read:
6 Section 511. Criminal Penalties.--* * *
7 (b) A person who wilfully violates section 401, 408 or 409
8 commits a felony of the third degree and may be fined not more
9 than [ten thousand dollars ($10,000)] TWENTY THOUSAND DOLLARS <--
10 ($20,000) if none of the victims of the person's violative
11 conduct were individuals aged [65] 60 or more and not more than
12 [fifty thousand dollars ($50,000)] ONE HUNDRED THOUSAND DOLLARS <--
13 ($100,000) if any of the victims of the person's violative
14 conduct were individuals aged [65] 60 or more, or imprisoned for
15 not more than seven years, or both. In addition to fine or
16 imprisonment, or both, the person may be sentenced to make
17 restitution.
18 * * *
19 Section 13 14. The act is amended by adding a section to <--
20 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.
20010S0893B2036 - 25 -
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 15. 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
20010S0893B2036 - 26 -
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
20010S0893B2036 - 27 -
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 16. Section 601.1 of the act, added May 7, 1998 <--
21 (P.L.342, No.51), is amended to read:
22 Section 601.1. Salaries of Commissioners.--(a) The chairman
23 of the commission shall receive a salary at the rate of [twenty-
24 eight thousand five hundred dollars ($28,500)] thirty-eight
25 thousand five hundred dollars ($38,500) per annum. Each other
26 member of the commission shall receive a salary at the rate of
27 [twenty-six thousand dollars ($26,000)] thirty-six thousand
28 dollars ($36,000) per annum.
29 (b) The commissioners shall receive annual cost-of-living
30 increases under section 3(e) of the act of September 30, 1983
20010S0893B2036 - 28 -
1 (P.L.160, No.39), known as the "Public Official Compensation
2 Law."
3 Section 16 17. Section 602(b.1)(i) and (v) of the act, <--
4 amended or added December 18, 1990 (P.L.755, No.190) and
5 December 7, 1994 (P.L.869, No.126) are amended to read:
6 Section 602. Fees.--* * *
7 (b.1) Filing fees for sales of securities:
8 [(i) Exemption filings under section 203(i)... $250]
9 * * *
10 (v) Exemption filings under section
11 203(o)[(ii)] shall be:............................ 250
12 * * *
13 Section 17 18. Sections 602.1(a)(1) and (2), (c)(1), 603 and <--
14 606 of the act, amended November 24, 1998 (P.L.829, No.109), are
15 amended to read:
16 Section 602.1. Assessments.--(a) (1) Each agent and
17 investment adviser representative, when applying for an initial
18 license under section 301 or changing employers, shall pay a
19 compliance assessment in accordance with the following schedule:
20 [twenty-seven dollars ($27) for the period July 1, 1995, through
21 June 30, 1998, thirty dollars ($30) for the period July 1, 1998,
22 through June 30, 2001,] thirty-two dollars ($32) for the period
23 July 1, 2001, through June 30, 2004, [and] thirty-five dollars
24 ($35) for the period July 1, 2004, through June 30, 2007,
25 thirty-seven dollars ($37) for the period July 1, 2007, through
26 June 30, 2010, and forty dollars ($40) thereafter.
27 (2) Each agent and investment adviser representative, when
28 applying for a renewal license under section 301, shall pay a
29 compliance assessment in accordance with the following schedule:
30 [twelve dollars ($12) for the period July 1, 1995, through June
20010S0893B2036 - 29 -
1 30, 1998, fifteen dollars ($15) for the period July 1, 1998,
2 through June 30, 2001,] seventeen dollars ($17) for the period
3 July 1, 2001, through June 30, 2004, [and] twenty ($20) for the
4 period July 1, 2004, through June 30, 2007, twenty-two dollars
5 ($22) for the period July 1, 2007, through June 30, 2010, and
6 twenty-five ($25) thereafter.
7 * * *
8 (c) After giving notice and opportunity for a hearing, the
9 commission may issue an order accompanied by written findings of
10 fact and conclusions of law which imposes an administrative
11 assessment in the amounts provided in paragraph (1) against a
12 broker-dealer, agent, investment adviser or investment adviser
13 representative registered under section 301 or an affiliate of
14 any broker-dealer or investment adviser where the commission
15 determines that the person willfully has violated this act or a
16 rule or order of the commission under this act or has engaged in
17 dishonest or unethical practices in the securities business; has
18 taken unfair advantage of a customer; or has failed reasonably
19 to supervise its agents or employes or against any other person
20 if the commission determines that the person wilfully violated
21 section [401(a) or (c), 406, 408, 409 or 512(d); section 401(b)
22 or 407;] 301, 401, 404, 406 through 409 or 512(d) or a cease and
23 desist order issued by the commission under section 606(c.1).
24 (1) The commission, in issuing an order under this
25 subsection, may impose the administrative assessments set forth
26 below. Each act or omission that provides a basis for issuing an
27 order under this subsection shall constitute a separate
28 violation.
29 (i) In issuing an order against any broker-dealer, agent,
30 investment adviser or investment adviser representative
20010S0893B2036 - 30 -
1 registered under section 301 or an affiliate of any broker-
2 dealer or investment adviser, the commission may impose an
3 administrative assessment of up to [twenty-five thousand dollars <--
4 ($25,000)] FIFTY THOUSAND DOLLARS ($50,000) for a single <--
5 violation or up to [two hundred fifty thousand dollars <--
6 ($250,000)] FIVE HUNDRED THOUSAND DOLLARS ($500,000) for <--
7 multiple violations in a single proceeding or a series of
8 related proceedings. If any of the victims of the person's
9 violative conduct were individuals aged [65] 60 or more, the
10 commission also may impose a special administrative assessment
11 in addition to the foregoing amounts of up to [twenty-five <--
12 thousand dollars ($25,000)] FIFTY THOUSAND DOLLARS ($50,000). <--
13 (ii) In issuing an order against a person for wilful
14 violation of section 401(a) or (c), 404, 406, 408, 409 or 512(d)
15 or for wilful violation of a cease and desist order issued under
16 section 606(c.1), the commission may impose an administrative
17 assessment of up to [twenty-five thousand dollars ($25,000)] <--
18 FIFTY THOUSAND DOLLARS ($50,000) for a single violation or up to <--
19 [one hundred fifty thousand dollars ($150,000)] THREE HUNDRED <--
20 THOUSAND DOLLARS ($300,000) for multiple violations in a single
21 proceeding or a series of related proceedings. In addition to
22 the foregoing assessment, the commission also may impose a
23 special administrative assessment of up to [twenty-five thousand <--
24 dollars ($25,000)] FIFTY THOUSAND DOLLARS ($50,000) for each of <--
25 the provisions described as follows that the commission
26 determines are applicable:
27 (A) The person, within seven years [of] prior to the
28 commission taking action under this subsection [has been], was
29 the subject of: a criminal felony conviction[,]; an injunction
30 issued by any court of competent jurisdiction; or an order of
20010S0893B2036 - 31 -
1 the Securities and Exchange Commission, the Commodity Futures
2 Trading Commission, the securities [administrator], banking or
3 insurance regulator of another state, a Federal banking
4 regulator or the securities, banking or insurance regulatory
5 authority of another country which found that the person
6 wilfully had violated any provision of the Federal or state
7 securities, banking, insurance, or commodities laws or the
8 securities, commodities, insurance or banking laws of another
9 country[, provided that the foregoing convictions occurred or
10 the injunctions or orders were entered prior to the violation
11 for which this special administrative assessment is being
12 imposed].
13 (B) The person's violative conduct involved individuals aged
14 [65] 60 or more.
15 (C) The person's violative conduct involved use of the
16 Internet or boiler room tactics which included, without
17 limitation, use of any high-pressure sales tactics designed to
18 create an artificially short time period for which the person
19 being solicited is pressured to make an investment decision or
20 overcome the person's reluctance to commit to the investment
21 being offered, use of scripts designed to allay any objections
22 or concerns expressed by the person being solicited or making
23 repeated telephone calls or sending multiple e-mail messages to
24 the same person pressuring the person to make an immediate
25 investment decision.
26 (iii) In issuing an order against [persons] a person for
27 wilful violation of section 401(b) or 407, the commission may
28 impose an administrative assessment of up to twenty-five
29 thousand dollars ($25,000) for each of the criteria described in
30 subclause (ii)(A) and (C) that the commission determines are
20010S0893B2036 - 32 -
1 applicable. No assessment shall be imposed under this subclause
2 if the person is subject to an administrative assessment imposed
3 under any other provision of this subsection.
4 (iv) In issuing an order against a person, other than a
5 federally covered adviser, for wilful violation of section 301,
6 the commission may impose the following administrative
7 assessments unless the person is subject to an administrative
8 assessment imposed under any other provision of this subsection
9 or the public proceeding to which the assessment relates was
10 instituted prior to the date of enactment of this subclause:
11 (A) For a person who, at the time of the wilful violation,
12 was not registered under section 301, was not registered as a
13 broker or dealer with the United States Securities and Exchange
14 Commission under the Securities Exchange Act of 1934 (948 Stat.
15 881, 15 U.S.C. § 78(a) et seq.) and was not a member of a
16 national securities association registered under that act, the
17 commission may impose an administrative assessment of up to
18 twenty-five thousand dollars ($25,000) for a single violation or <--
19 up to one hundred twenty-five thousand dollars ($125,000) for
20 FIFTY THOUSAND DOLLARS ($50,000) FOR A SINGLE VIOLATION OR UP TO <--
21 TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) FOR multiple
22 violations in a single proceeding or series of related
23 proceedings.
24 (B) For a person (not an individual) that, at the time of
25 the wilful violation, was not registered under section 301 but
26 was registered as a broker or dealer with the United States
27 Securities and Exchange Commission under the Securities Exchange
28 Act of 1934 and was a member of a national securities
29 association registered under that act, the commission may impose
30 an administrative assessment of up to twenty-five thousand <--
20010S0893B2036 - 33 -
1 dollars ($25,000) for a single violation or up to one hundred
2 fifty thousand dollars ($150,000) FIFTY THOUSAND DOLLARS <--
3 ($50,000) FOR A SINGLE VIOLATION OR UP TO THREE HUNDRED THOUSAND
4 DOLLARS ($300,000) for multiple violations in a single
5 proceeding or series of related proceedings.
6 An assessment imposed under this subclause shall be in addition
7 to any liability a person may have under an order issued under
8 section 514.
9 (v) In issuing an order for wilful violation of section
10 301(c.1)(1)(ii) against a person that is a federally covered
11 adviser, the commission may impose the following administrative
12 assessments:
13 (A) Up to fifty thousand dollars ($50,000) ONE HUNDRED <--
14 THOUSAND DOLLARS ($100,000) if the number of investment adviser
15 representatives involved in the violation was less than five.
16 (B) Up to one hundred thousand dollars ($100,000) TWO <--
17 HUNDRED THOUSAND DOLLARS ($200,000) if the number of investment
18 adviser representatives involved in the violation was five or
19 more.
20 (vi) In issuing an order for a wilful violation of section
21 301(f) against a person that is a federally covered adviser, the
22 commission may impose an administrative assessment of one <--
23 thousand dollars ($1,000) TWO THOUSAND DOLLARS ($2,000). <--
24 * * *
25 Section 603. Administrative Files.--(a) A document is filed
26 when it is received by the commission or by any other person
27 which the commission by regulation or order may designate.
28 (b) The commission shall keep a register of all registrants,
29 registration statements and notice filings which are or have
30 ever been effective under this act [and predecessor laws] and
20010S0893B2036 - 34 -
1 all denial, suspension or revocation orders which have been
2 entered under this act [and predecessor laws]. The register
3 shall be open for public inspection [except with respect to
4 summary suspensions under sections 208(c) and 305(d)].
5 (c) The information contained in or filed with any
6 registration statement, application, notice filing or report
7 shall be made available to the public in accordance with
8 regulations prescribed by the commission; [provided that, upon
9 proper showing of the registrant or issuer, the commission shall
10 treat certain filings as confidential.] except that the
11 commission may make the following orders or regulations:
12 (1) Upon proper showing of the registrant or issuer, the
13 commission may order certain filings or parts of filings
14 nonpublic.
15 (2) The commission, by rule or order, may deem certain
16 categories of information filed with the commission as
17 nonpublic.
18 (d) The commission upon request shall furnish to any person,
19 at a reasonable charge, [photostatic or other copies, certified
20 under seal of the commission if certification is requested, of
21 any entry in the register or any order or other document made
22 available to the public under subsection (c) above.] a copy of
23 any document described in subsection (c) in any medium available
24 to the commission. Upon request and payment of a reasonable
25 charge, the document may be certified under the seal of the
26 commission.
27 (e) The commission, by order, may subsequently make public
28 information contained in the documents described in subsection
29 (c)(1) and (2) and the order may limit the amount of information
30 made public or place conditions on its use. Prior to issuing an
20010S0893B2036 - 35 -
1 order under this subsection, the commission shall notify in
2 writing the person who originally requested confidentiality at
3 the person's last known address in the commission's files at
4 least thirty days before the commission may issue an order under
5 this subsection.
6 Section 606. Miscellaneous Powers of Commission.--(a) The
7 commission may, by regulation, require any issuer of securities
8 registered under this act or exempted from registration under
9 section 203(d) or (p), which issuer has not filed reports with
10 the Securities and Exchange Commission pursuant to sections 13
11 or 15(d) of the Securities Exchange Act of 1934 (48 Stat. 881,
12 15 U.S.C. §§ 78m or 78o(d)), to distribute financial information
13 to its security holders at least annually.
14 (b) If, in its opinion, the public interest and the
15 protection of investors[,] so require, the commission may apply
16 to a court of competent jurisdiction for an order[,] suspending
17 all trading in this [State] Commonwealth by broker-dealers and
18 agents in any security for any period.
19 (c) No person shall publish in this State any advertisement
20 concerning any security (other than advertisements relating to
21 federally covered securities, tombstone advertisements permitted
22 under the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a
23 et seq.) and the Investment Company Act of 1940 (54 Stat. 789,
24 15 U.S.C. § 80a-1 et seq.) and the rules and regulations
25 promulgated thereunder) except in accordance with such rules as
26 the commission may promulgate from time to time. No person shall
27 publish any advertisement concerning any security in this State
28 after the commission issues a cease advertising order in which
29 it finds that the advertisement [contains any statement that is
30 false or misleading in any material respect or omits to make
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1 any] contained an untrue statement of a material fact or omitted
2 to state a material [statement] fact necessary in order to make
3 the statements made, in the light of the circumstances under
4 which they [are] were made, not misleading [and so notifies the
5 person in writing. Such notification may be given]. The order
6 may be issued summarily without notice or hearing. [Within
7 thirty days after the receipt of a notification under this
8 section, the person desiring to use the advertisement may
9 request in writing that the order be rescinded. Upon the receipt
10 of such a written request, the matter shall be set down for
11 hearing to commence within thirty days after such receipt unless
12 the person making the request consents to a later date. After
13 such hearing, the commission shall determine whether to affirm
14 and continue or to rescind such order.] Upon issuance of a
15 summary order, the commission shall promptly provide the order
16 to the person against whom it is issued. The order shall contain
17 findings of fact and conclusions of law and include a notice
18 affording the person an opportunity for a hearing under section
19 607(a).
20 (c.1) Whenever the commission finds that any person has
21 engaged or is about to engage in any act or practice
22 constituting a violation of any provision of this act or any
23 rule or order thereunder, the commission may order such person
24 to cease and desist from such act or practice. [and shall notify
25 the person in writing. Notification may be given summarily
26 without notice or hearing. Within thirty days after receipt of a
27 notification under this section, the person desiring to engage
28 in such act or practice may file a written request that the
29 order be rescinded. Upon receipt of the written request, the
30 matter will be set down for a hearing to commence within thirty
20010S0893B2036 - 37 -
1 days after such receipt unless the person making the request
2 consents to a later date. After such hearing, the commission
3 shall determine whether to affirm and continue, modify or
4 rescind such order.] The order may be issued summarily without
5 notice or hearing. Upon issuance of a summary order, the
6 commission shall promptly provide the order to the person
7 against whom it is issued. The order shall contain findings of
8 fact and conclusions of law and include a notice affording the
9 person an opportunity for a hearing under section 607(a).
10 (d) The commission may, by regulation, delegate any powers
11 specified in this act to be exercised by the commission to
12 members of the commission's staff, except for powers related to
13 hearings.
14 Section 18 19. Section 607 of the act is amended to read: <--
15 Section 607. Hearings and Judicial Review.--(a) Within
16 thirty days after [any order has become effective without a
17 hearing, any interested party may apply to] receipt of a summary
18 order issued under section 204(b), 208(c), 211(c), 305(d),
19 606(c) or 606(c.1), the person against whom the order was issued
20 and entered may file with the commission a written request for a
21 hearing in respect to any matters determined by the order.[, and
22 a hearing shall be held within thirty days after the application
23 is filed. After the hearing the commission may modify the order
24 as it deems appropriate.] Upon receipt of the written request,
25 the matter shall be set down for a hearing to commence within
26 thirty days after receipt of the request unless the person
27 making the request consents to a later date. If the person
28 making the request consents to a later date for the hearing but
29 fails, after notification by first class mail, to the person's
30 last known address in the commission's files, to consent to a
20010S0893B2036 - 38 -
1 hearing date that is within one hundred eighty days of the date
2 the written request for a hearing was filed with the commission
3 under this subsection, the request for hearing shall be deemed
4 abandoned and the summary order shall be deemed a final order.
5 After hearing, the commission may determine to rescind, modify
6 or vacate the summary order or make it a final order. If no
7 hearing is requested or a request for a hearing is filed
8 untimely, the summary order shall be deemed to be a final order.
9 (b) Within thirty days after [any order has become effective
10 after a hearing, any interested party] receipt of an order
11 issued and entered by the commission after a hearing, the person
12 against whom the order was issued and entered may apply to the
13 commission for a rehearing. The commission, in its sole
14 discretion, may grant the application and hold a rehearing. [if
15 in its judgment sufficient reasons therefor appear. After
16 rehearing, the commission may vacate or modify the order, and
17 any order vacating the original order shall have the same effect
18 as an original order. Failure to grant an application for
19 rehearing within thirty days from the date of the filing shall
20 constitute a denial; and failure, within fifteen days after the
21 conclusion of a rehearing, to issue an order affirming, vacating
22 or modifying the original order shall constitute an affirmation
23 of the original order.] Failure of the commission to grant a
24 rehearing within thirty days of receipt of an application shall
25 constitute a denial. After rehearing, the commission may issue
26 an order affirming, vacating or modifying the original order.
27 (c) [Disciplinary hearings] Hearings and rehearings shall be
28 public. [unless the commission grants a request joined in by all
29 parties that the hearing be conducted privately. Investigatory
30 hearings shall not be open to members of the general public
20010S0893B2036 - 39 -
1 unless all parties to the hearing agree otherwise.]
2 (d) Orders of the commission shall be subject to judicial
3 review in accordance with law, but orders originally entered
4 without a hearing may be reviewed only if the party seeking
5 review has [requested] filed a request for a hearing within the
6 time provided [by] under subsection (a). Filing for judicial
7 review of a commission order shall not operate as a stay of the
8 commission's order unless specifically ordered by the court.
9 Section 19 20. Section 609(f) of the act, amended November <--
10 24, 1998 (P.L.829, No.109), is amended to read:
11 Section 609. Regulations, Forms and Orders.--* * *
12 (f) (1) An application for registration of securities [or
13 registration of a broker-dealer, agent, investment adviser or
14 investment adviser representative] shall be deemed abandoned if
15 the application has been on file with the commission for a
16 minimum of twelve consecutive months and the applicant has
17 failed to respond to the commission's notice [of warning] of
18 abandonment sent by first class mail to the applicant's last
19 known address in the commission's files within sixty calendar
20 days [of the date of the warning.] after the date the
21 notification was mailed by the commission. There shall be no
22 refund of any fees [or assessments] paid by the applicant.
23 (2) An application for registration as a broker-dealer,
24 agent, investment advisor or investment adviser representative
25 shall be deemed abandoned if the application has been on file
26 with the commission for a minimum of six consecutive months and
27 the applicant has failed to respond to the commission's notice
28 of abandonment sent by first class mail to the applicant's last
29 known address in the commission's files within sixty calendar
30 days after the date the notification was mailed by the
20010S0893B2036 - 40 -
1 commission. There shall be no refund of any fees or assessments
2 paid by the applicant.
3 Section 20 21. The act is amended by adding a section to <--
4 read:
5 Section 612. Burden of Proof.--(a) In a civil action or
6 administrative proceeding under this act, a person claiming
7 status as a federally covered security or adviser or an
8 exemption, exception or exclusion from a definition has the
9 burden of proving the availability of the status, exemption,
10 exception or exclusion.
11 (b) In a proceeding for a criminal violation of this act, a
12 person claiming status as a federally covered security adviser
13 or an exemption, exception or exclusion from a definition has
14 the burden of going forward with evidence of the claim,
15 exemption, exception or exclusion.
16 Section 21 22. Section 704 of the act is repealed. <--
17 Section 22 23. This act shall take effect in 60 days. <--
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