HOUSE AMENDED PRIOR PRINTER'S NOS. 1054, 1805, 2036 PRINTER'S NO. 2160
No. 893 Session of 2001
INTRODUCED BY HOLL, WAGNER, COSTA, PUNT, THOMPSON, TILGHMAN, BELL, LEMMOND, MUSTO AND SCHWARTZ, MAY 25, 2001
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES, JUNE 26, 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 20010S0893B2160 - 2 -
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) or (E) and 5(B) or (C)); 13 (iv) An executor, administrator, guardian, conservator or 14 pledgee; 15 (v) A person who has no place of business in this State if 16 he effects transactions in this State exclusively with or 17 through (A) the issuers of the securities involved in the 18 transactions, (B) broker-dealers or institutional investors; 19 (vi) A person licensed as a real estate broker or agent 20 under the act of February 19, 1980 (P.L.15, No.9), known as the 21 Real Estate Licensing and Registration Act, and whose 22 transactions in securities are isolated transactions incidental 23 to that business; or 24 (vii) Other persons not within the intent of this subsection 25 whom the commission by regulation designates. 26 * * * 27 (k.1) "Knowing and knowingly" as used in sections 511(a) and 28 512(a) shall have the same meaning as the term "knowingly" is 29 defined in 18 Pa.C.S. § 302(b)(2) (relating to general 30 requirements of culpability). 20010S0893B2160 - 3 -
1 * * * 2 (p) "Publish" means publicly to issue or circulate by 3 newspaper, mail, radio, [or] television, Internet or other media 4 or otherwise to disseminate to the public. 5 * * * 6 (w) "Wilful and wilfully" mean the following: 7 (1) As used in all sections of the act, except section 511 8 with respect to a wilful violation of section 401(a) of the act, 9 and notwithstanding any law or statute to the contrary, wilful 10 means that the person acted intentionally in the sense that the 11 person intended to do the act and was aware of what the person 12 was doing. Proof of evil motive or intent to violate the act or 13 knowledge that the person's conduct violated the act is not 14 required. 15 (2) For purposes of section 511 with respect to a wilful 16 violation of section 401(a) of the act, wilful means that the 17 person acted intentionally, knowingly, recklessly or negligently 18 as those terms are defined in 18 Pa.C.S. § 302 (relating to 19 general requirements of culpability). 20 Section 2. Section 202 (f) of the act, amended May 9, 1984 21 (P.L.235, No.52) and November 24, 1998 (P.L.829, No.109), is 22 amended to read: 23 Section 202. Exempt Securities.--The following securities 24 are exempted from sections 201 and 211: 25 * * * 26 (f) Any security listed, or approved for listing upon notice 27 of issuance, on the New York, American, or Philadelphia stock 28 exchange [or any other securities exchange] or quoted on [any 29 national quotation service designated by regulation of the 30 commission and any security (except securities of an open-end or 20010S0893B2160 - 4 -
1 closed-end investment company, face amount certificate company 2 or unit investment trust, as such persons are classified in the 3 Investment Company Act of 1940) which satisfies the margin 4 requirements of the Board of Governors of the Federal Reserve 5 System under Regulation T and any supplement or any successor 6 regulation thereto] the National Market System of the Nasdaq 7 Stock Market; any other security of the same issuer which is of 8 senior or substantially equal rank; any security called for by 9 subscription rights or warrants so listed, approved or quoted; 10 and any warrant or right to purchase or subscribe to any of the 11 foregoing. 12 * * * 13 Section 3. Section 203(i.1) and (p) of the act, amended 14 December 7, 1994 (P.L.869, No.126) and November 24, 1998 15 (P.L.829, No.109), are amended to read: 16 Section 203. Exempt Transactions.--The following 17 transactions are exempted from sections 201 and 211: 18 * * * 19 (i.1) Any sale of an equity security, except securities of 20 an open-end or closed-end investment company, face amount 21 certificate company or unit investment trust, as such persons 22 are classified in the Investment Company Act of 1940 (54 Stat. 23 789, 15 U.S.C. § 80a-1 et seq.), if: (i) the securities are 24 proposed to be registered under section 5 of the Securities Act 25 of 1933 (15 U.S.C. § 77e) [or exempted under Regulation A 26 promulgated under section 3(b) thereof (15 U.S.C. § 77c(b))] 27 and, in fact, become registered under section 5 of the 28 Securities Act of 1933 (15 U.S.C. § 77e) [or exempted from 29 registration pursuant to Regulation A promulgated under section 30 3(b) of such act; (ii) a copy of any final prospectus or final 20010S0893B2160 - 5 -
1 offering circular utilized or proposed to be utilized in 2 connection therewith is filed with the commission at the time 3 the notice required by clause (viii) is filed; (iii) the 4 applicable filing fee specified in section 602(b.1) is paid with 5 respect to such offering]; (iv) the issuer of the security is a 6 reporting company as defined in section 102(q); (v) no stop 7 order or refusal order is in effect and no public proceeding or 8 investigation looking toward such an order is pending under the 9 Securities Act of 1933 or this act; (vi) the equity security is 10 listed on a national securities exchange registered under the 11 Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. § 78a 12 et seq.) or quoted on the [National Association of Securities 13 Dealers Automated Quotation System] National Market System or 14 Small Cap Market of the Nasdaq Stock Market; (vii) the issuer, 15 at the time [it files the notice required in clause (viii) with 16 the commission] the registration statement becomes effective 17 under section 5 of the Securities Act of 1933, has not received 18 an auditor's report for the immediately preceding fiscal year 19 expressing substantial doubt about the issuer's ability to 20 continue as a going concern unless the securities being sold in 21 reliance upon this subsection are the subject of an offering 22 that is being underwritten on a firm commitment basis by a 23 broker-dealer registered under section 301[; and (viii) the 24 issuer has filed a notice with the commission in the form and 25 manner which the commission, by regulation, may prescribe. As a 26 condition of the continuing effectiveness of this exemption, 27 copies of any post-effective amendment or sticker to such 28 prospectus or offering circular must be filed with the 29 commission within two business days after the same is filed with 30 the Securities and Exchange Commission]. An exemption under this 20010S0893B2160 - 6 -
1 section shall terminate upon the termination of the registration 2 statement under section 5 [(15 U.S.C. § 77e) or the exemption 3 from registration pursuant to Regulation A promulgated under 4 section 3(b) (15 U.S.C. § 77c(b))] of the Securities Act of 5 1933. For purposes of this subsection, the commission, by 6 regulation, may define the term "equity security." 7 * * * 8 (p) Any offer or sale of an evidence of indebtedness of an 9 issuer either: organized exclusively for educational, 10 benevolent, fraternal, religious, charitable, social, athletic 11 or reformatory purposes and not for pecuniary profit, if no part 12 of the net earnings of the issuer inures to the benefit of any 13 private shareholder or individual; or organized as a chamber of 14 commerce or trade or professional association if [there has been 15 filed with the commission a notice identifying the security and 16 the basis of its qualification under this exemption together 17 with such further information as the commission may by 18 regulation require, and if the commission does not by order 19 disallow the exemption within ten days or such shorter period as 20 it may permit. The security qualifies under this exemption if: 21 (i) the issuer and any predecessor have not defaulted within the 22 current fiscal year and the three preceding fiscal years in any 23 fixed interest or principal obligation; (ii) the issuer complies 24 with regulations of the commission with respect to trust 25 indentures and the use of a prospectus; (iii) the securities 26 proposed to be sold are secured by a mortgage or deed of trust 27 upon land and buildings, which mortgage or deed of trust is or 28 will become a first lien at or prior to the issuance of such 29 evidences of indebtedness, or provision satisfactory to the 30 commission is made for escrowing the proceeds from their sale 20010S0893B2160 - 7 -
1 until such first lien is established, and the total amount of 2 such securities does not exceed seventy-five per cent of the 3 then fair market value of the land and buildings included in 4 such mortgage or deed of trust, less the amount of any unpaid 5 special assessment taxes; and (iv) any person who accepts an 6 offer to purchase securities under this subsection has received 7 a written notice of his right to withdraw his acceptance as 8 provided by section 207(m)(2). This exemption shall not apply to 9 the securities of any nonprofit organization if any promoter 10 thereof expects or intends to make a profit directly or 11 indirectly from any business or activity associated with the 12 organization or operation of such nonprofit organization.] all 13 the 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 and the three preceding 20010S0893B2160 - 8 -
1 fiscal years with respect to any debt security previously sold 2 by the issuer or its predecessor. 3 (5) The total amount of securities proposed to be offered 4 under this subsection are secured by a mortgage or deed of trust 5 upon the existing land and buildings owned by the issuer which 6 mortgage or deed of trust is or will become a first lien at or 7 prior to the issuance of the securities or there exists a 8 provision satisfactory to the commission for escrowing of the 9 proceeds from the sale of the securities until such first lien 10 is established. 11 (6) The total amount of securities proposed to be offered 12 under this subsection does not exceed, as of the time the form 13 required by this subsection is filed with the commission, 14 seventy-five per cent of the fair market value of the land and 15 buildings to be included in the mortgage or deed of trust. 16 (7) No promoter of the issuer expects or intends to make a 17 profit directly or indirectly from any business activity 18 associated with the organization or operation of the issuer. 19 (8) The issuer complies with regulations of the commission 20 with respect to trust indentures and the use of an offering 21 document. 22 * * * 23 Section 4. Section 204 of the act is amended to read: 24 Section 204. Exemption Proceedings.--(a) The commission may 25 by regulation as to any type of security or transaction, or by 26 order in a particular case, as to any security or transaction 27 increase the number of purchasers or offerees permitted, or 28 waive the conditions in either of sections 202 or 203. 29 (b) The commission may by order deny or revoke any exemption 30 specified in section 202 or 203 with respect to a specific 20010S0893B2160 - 9 -
1 security or transaction. [No such order may be entered without 2 appropriate prior notice to all interested parties, opportunity 3 for hearing, and written findings of fact and conclusions of 4 law, except that the commission may by order summarily deny or 5 revoke any of the specified exemptions pending final 6 determination of any proceeding under this section. Upon the 7 entry of a summary order, the commission shall promptly notify 8 all interested parties that it has been entered and reasons 9 therefor and that within fifteen days of the receipt of a 10 written request the matter will be set down for hearing. If no 11 hearing is requested and none is ordered by the commission, the 12 order will remain in effect until it is modified or vacated by 13 the commission. If a hearing is requested or ordered, the 14 commission, after notice of and opportunity for hearing to all 15 interested persons, may modify or vacate the order or extend it 16 until final determination.] The order shall be issued summarily 17 without notice or hearing. Upon issuance of a summary order, the 18 commission shall promptly provide the order to the person 19 against whom it is issued. The order shall contain findings of 20 fact and conclusions of law and include a notice affording the 21 person an opportunity for a hearing under section 607(a). No 22 order under this section [may] shall operate retroactively. No 23 person [may] shall be considered to have violated section 201 by 24 reason of any offer or sale effected after the entry of an order 25 under this section if he sustains the burden of proof that he 26 did not know, and in the exercise of reasonable care could not 27 have known, of the order. 28 [(c) In any proceeding under this act, the burden of proving 29 an exemption or an exception from a definition is upon the 30 person claiming it.] 20010S0893B2160 - 10 -
1 Section 5. Section 205(c) of the act, amended November 24, 2 1998 (P.L.829, No.109), is amended to read: 3 Section 205. Registration by Coordination.--* * * 4 (c) [(1) A registration statement filed under this section 5 for the offering of securities by an open-end or closed-end 6 investment company, face amount certificate company or unit 7 investment trust, as such persons are classified in the 8 Investment Company Act of 1940, automatically becomes effective 9 if (i) the Federal registration statement or notification is 10 effective with the Securities and Exchange Commission; (ii) no 11 stop order is in effect in this State and no proceeding is 12 pending under section 208; (iii) the registration statement or a 13 predecessor registration statement has been on file with the 14 commission for at least five days; and (iv) the fee specified in 15 section 602(b.1) has been paid. 16 (2) All other registration statements] A registration 17 statement or notification of any proposed sale filed under this 18 section automatically become effective at the moment the Federal 19 registration statement or notification becomes effective if (i) 20 no stop order is in effect in this State and no proceeding is 21 pending under section 208; and (ii) the registration statement 22 or notification has been on file with the commission for at 23 least ten days[; and (iv) the offering is made within these 24 limitations]. 25 * * * 26 Section 6. Section 207(j.1) and (l) of the act, amended 27 December 18, 1990 (P.L.755, No.190) and November 24, 1998 28 (P.L.829, No.109), are amended to read: 29 Section 207. General Registration Provisions.--* * * 30 (j.1) [Except for a registration by coordination for an 20010S0893B2160 - 11 -
1 open-end or closed-end investment company, face amount
2 certificate company or unit investment trust, as such persons
3 are classified in the Investment Company Act of 1940 (54 Stat.
4 789, 15 U.S.C. § 80a-1 et seq.), a] A registration by
5 coordination is effective for one year from its effective date.
6 The effectiveness of a registration by coordination may be
7 extended beyond the initial one-year effectiveness period in
8 increments of one-year periods up to a maximum of three years
9 from the initial effectiveness date, provided that the security
10 is being offered or distributed in a nonexempted transaction by
11 or for the account of the issuer or other person on whose behalf
12 the offering is being made, or by any underwriter or broker-
13 dealer who is still offering part of an unsold allotment or
14 subscription taken by him as a participant in the distribution
15 and the commission has been notified of such continued offering
16 and the period thereof. [A registration by coordination for an
17 open-end or closed-end investment company or face amount
18 certificate company, as such persons are classified in the
19 Investment Company Act of 1940, is effective for the period
20 beginning with its effective date and ending sixty days after
21 the registrant's fiscal year end for the year in which the
22 filing under section 205 became effective. A registration by
23 coordination for a unit investment trust, as such a person is
24 classified in the Investment Company Act of 1940, is effective
25 for the period beginning with its effective date in this State
26 and ending one year after the date the registration statement
27 for the same securities became effective with the Securities and
28 Exchange Commission.] A registration by qualification is
29 effective for one year from its effective date. The fact that a
30 registration statement has been effective in this State with
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1 respect to any security does not permit sales of securities of 2 the same class by the issuer or an affiliate of the issuer if 3 such person did not file the registration statement, unless a 4 separate registration statement is filed and declared effective 5 with respect thereto, or an exemption from registration is 6 available. A registration statement may not be withdrawn after 7 its effective date if any of the securities registered have been 8 sold in this State, unless permitted by regulation or order of 9 the commission. No registration statement is effective during 10 the time a stop order is in effect under section 208. [The 11 effectiveness of a registration statement filed by an open-end 12 or closed-end investment company, face amount certificate 13 company or unit investment trust, as such persons are classified 14 in the Investment Company Act of 1940, shall not be terminated 15 as a result of a post-effective amendment seeking to register an 16 additional amount of securities which becomes effective under 17 the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a et 18 seq.).] 19 * * * 20 (l) [(1) Except as provided in paragraph (2), a] A 21 registration statement relating to any offering of securities 22 may be amended after its effective date so as to increase the 23 specified amount of securities proposed to be offered in this 24 State. The amendment becomes effective upon the payment of the 25 required filing fee, if any, and when the commission so orders. 26 [(2) Amendments to a registration statement of an open-end 27 or closed-end investment company, face amount certificate 28 company or unit investment trust, as such persons are classified 29 in the Investment Company Act of 1940, so as to increase the 30 specified amount of securities proposed to be offered in this 20010S0893B2160 - 13 -
1 State are effective upon filing with the commission provided 2 that the aggregate fee specified in section 602(b.1) has been 3 paid.] 4 * * * 5 Section 7. Section 208(c), 211(c) and (d), 302(c) and (e.1) 6 and 303(a)(iii) and (iv) of the act, amended November 24, 1998 7 (P.L.829, No.109), are amended to read: 8 Section 208. Denial, Suspension, and Revocation of 9 Registrations.--* * * 10 (c) The commission may by order deny, postpone, suspend or 11 revoke the effectiveness of a registration statement. [No order 12 may be entered without prior notice to the applicant or 13 registrant, opportunity for hearing and written findings of fact 14 and conclusions of law, except that the commission may by order 15 summarily deny, postpone, suspend or revoke the effectiveness of 16 a registration statement pending final determination of any 17 proceeding under this subsection. Upon the entry of the order, 18 the commission shall promptly notify the applicant or registrant 19 that it has been entered and the reasons therefor and that, 20 within fifteen days after the receipt of a written request, the 21 matter will be set down for hearing. If no hearing is requested 22 and none is ordered by the commission, the order will remain in 23 effect until it is modified or vacated by the commission. If a 24 hearing is requested or ordered, the commission, after notice of 25 and opportunity for hearing to the applicant or registrant, may 26 modify or vacate the order or make it permanent.] The order may 27 be issued summarily without notice or hearing. Upon issuance of 28 a summary order, the commission shall promptly provide the order 29 to the applicant or registrant. The order shall contain findings 30 of fact and conclusions of law and include a notice affording 20010S0893B2160 - 14 -
1 the applicant or registrant an opportunity for a hearing under 2 section 607(a). No order shall operate retroactively. No person 3 [may] shall be considered to have violated section 201 solely by 4 reason of an order entered under this section for any offer or 5 sale effected after the entry of an order under this section if 6 the person sustains the burden of proof that the person did not 7 know, and in the exercise of reasonable care could not have 8 known, of the order. 9 Section 211. Federally Covered Securities.--* * * 10 (c) (1) The commission may issue a stop order suspending 11 the offer or sale of a security described in subsection (a) or 12 (b) upon finding that: 13 [(1)] (i) The order is necessary or appropriate in the 14 public interest for protection of investors; and 15 [(2)] (ii) There is a failure to comply with any condition 16 established under this section. 17 (2) A stop order under this section may 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 person shall be considered to have violated section 201 solely 24 by reason of an order entered under this section for an offer or 25 sale effected after the entry of an order under this section if 26 the person sustains the burden of proof that the person did not 27 know, and in the exercise of reasonable care could not have 28 known, of the order. 29 [(d) Notwithstanding the provisions of subsections (a) and 30 (b), for the period ending October 10, 1999, the commission may 20010S0893B2160 - 15 -
1 require the registration of a security described in subsection 2 (a) or (b) pursuant to section 201 if the issuer has not paid 3 the correct fee and, if applicable, the correct assessment and 4 the nonpayment or underpayment of the fee or assessment has not 5 been remedied by the commission receiving the amount due from 6 the issuer within ten calendar days following receipt by the 7 issuer of a written notice from the commission concerning the 8 nonpayment or underpayment of the fee or assessment required by 9 this section or section 602(b.1) or 602.1(a)(5).] 10 Section 302. Exemptions.--The following persons shall be 11 exempted from the registration provisions of section 301: 12 * * * 13 (c) [A bank not registered as a broker-dealer under this act 14 executing orders for the purchase or sale of securities for the 15 account of the purchaser or seller thereof.] A person who 16 represents an issuer in effecting transactions in securities 17 registered under section 205 or 206 who: 18 (1) Is a bona fide officer, director, partner or employe of 19 the issuer or an individual occupying similar status or 20 performing similar functions; and 21 (2) Does not receive any compensation, directly or 22 indirectly, for effecting the transactions. 23 * * * 24 [(e.1) Any person who represents an issuer in effecting 25 transactions in securities registered under section 205 or 206 26 who: 27 (1) Is a bona fide officer, director, partner or employe of 28 the issuer or an individual occupying similar status or 29 performing similar functions; and 30 (2) Does not receive any compensation, directly or 20010S0893B2160 - 16 -
1 indirectly, for effecting the transactions.] 2 * * * 3 Section 303. Registration and Notice Filing Procedure.--(a) 4 * * * 5 (iii) A federally covered adviser shall file with the 6 commission, prior to acting as a federally covered adviser in 7 this State, a copy of such documents as have been filed with the 8 Securities and Exchange Commission which the commission by 9 regulation may require, together with the fee specified in 10 section 602(d.1). This requirement shall not apply to a 11 federally covered adviser that: 12 (A) Has [its principal] a place of business in this State 13 and whose only clients in this State are investment advisers, 14 federally covered advisers, broker-dealers or institutional 15 investors; 16 (B) Does not have a place of business in this State and 17 during the preceding twelve-month period has had not more than 18 five clients who are residents of this State, exclusive of other 19 investment advisers, federally covered advisers, broker-dealers 20 or institutional investors; or 21 (C) Meets the definition of any person described in section 22 102(j)(i) through (viii) [or (x) and (xi).], (x) or (xi), except 23 a federally covered adviser that is also a broker-dealer 24 registered under section 301, that has an individual employed by 25 or associated with such person who meets the definition of 26 investment adviser representative in section 102(j.1)(ii). 27 [(iv) Notwithstanding the provisions of clause (iii), until 28 October 10, 1999, the commission may require the registration of 29 a federally covered adviser under section 301 if the federally 30 covered adviser has not paid the correct fee and the nonpayment 20010S0893B2160 - 17 -
1 or underpayment of the fee has not been remedied by the 2 commission receiving the amount due within ten calendar days 3 following receipt by the federally covered adviser of written 4 notice from the commission concerning the nonpayment or 5 underpayment of the fee required by this section and section 6 602(d.1).] 7 * * * 8 Section 8. Section 305(a)(i) and (xiv) and (d) of the act, 9 amended or added December 18, 1990 (P.L.755, No.190) and 10 November 24, 1998 (P.L.829, No.190), are amended and the section 11 is amended by adding a subsection and a clause to read: 12 Section 305. Denial, Suspension, Revocation and Conditioning 13 of Registration. 14 (a) The commission may, by order, deny, suspend, revoke or 15 condition any registration or may censure any registrant if it 16 finds that such order is in the public interest and that such 17 registrant or applicant, or in the case of any broker-dealer or 18 investment adviser, any affiliate thereof, whether prior or 19 subsequent to becoming associated with such person: 20 (i) Has[, in any application for registration or in any 21 report required to be filed with the commission under this act, 22 or in any proceeding before the commission, wilfully made or 23 caused to be made any statement which was at the time and in the 24 light of the circumstances under which it was made false or 25 misleading with respect to any material fact, or has wilfully 26 omitted to state in any such application, report or proceeding, 27 any material fact which is required to be stated therein or 28 necessary in order to make the statements made, in the light of 29 the circumstances under which they are made, not misleading, or 30 has wilfully failed to amend or supplement such an application, 20010S0893B2160 - 18 -
1 report or statement in a timely manner in accordance with rules 2 which may be adopted by the commission; or] filed an application 3 for registration or a document in connection with an application 4 for registration which as of its effective date, or as of a date 5 after filing in the case of an order denying effectiveness, was 6 incomplete in a material respect or contained a statement which 7 was, in light of the circumstances under which it was made, 8 false or misleading with respect to a material fact; or 9 * * * 10 (xiv) Is subject to any currently effective order or orders 11 entered within the past five years [of any securities] by any 12 regulator of another country: 13 (A) denying registration to, or revoking or suspending the 14 registration of, such person as a broker-dealer, agent, 15 investment adviser, [associated person] investment adviser 16 representative, futures commission merchant, commodity pool 17 operator, commodity trading adviser or a person associated with 18 a futures commission merchant, commodity pool operator or 19 commodity trading adviser; or [is] 20 (B) denying, revoking or suspending the person's legal 21 authorization to engage in the business of banking or insurance; 22 or 23 (xv) Is subject to any currently effective order of any 24 securities exchange or self-regulatory organization operating 25 under the authority of the securities regulator of another 26 country suspending or expelling such person from membership in 27 such exchange or self-regulatory association[.]; or 28 (xvi) Is subject to a currently effective order or orders 29 entered within the past five years by a state insurance 30 regulator or Federal or state banking regulator denying 20010S0893B2160 - 19 -
1 registration, articles of incorporation or association, 2 certificate of organization or authorization to do business, 3 charter or license, or revoking or suspending the registration, 4 articles of incorporation or association, certificate of 5 organization or authorization to do business, charter or license 6 of such person to engage in the insurance, banking, or other 7 financial services industry, or finding that such person has 8 engaged in fraudulent, unethical, dishonest or abusive practices 9 in connection with any aspect of the business of insurance, 10 banking or other financial services. 11 (a.1) The commission, by order, may deny the application of: 12 (i) an agent or investment adviser representative if the 13 individual is obligated, pursuant to an award of an arbitration 14 panel, to pay compensation to purchasers of securities and, as 15 of the date the application is filed with the commission, has 16 not paid the awarded compensation to the purchasers in full and 17 within the time period specified by the arbitration panel; or 18 (ii) a broker-dealer or investment adviser if a promoter, 19 director, chief executive officer, chief financial officer, 20 chief operations officer, chief legal officer, chief compliance 21 officer or general partner (or person occupying a similar status 22 or performing similar functions) of the applicant held a similar 23 position with another broker-dealer, investment adviser or 24 federally covered adviser which entity, pursuant to an award of 25 an arbitration panel, is obligated to pay compensation to 26 purchasers of securities and, as of the date the application is 27 filed with the commission, has not paid the awarded compensation 28 to the purchasers in full within the time period specified by 29 the arbitration panel. 30 The commission may issue an order prospectively rescinding a 20010S0893B2160 - 20 -
1 denial order issued under this subsection if the person whose 2 application has been denied under this subsection provides 3 credible evidence that the compensation awarded by the 4 arbitration panel which was the basis for denial of the 5 application under this subsection has been paid in full and in 6 cash. 7 * * * 8 (d) The commission may by order summarily deny, postpone or 9 suspend an application [for] or registration pending final 10 determination of any proceeding under this section. [Upon the 11 entry of the order, the commission shall promptly notify the 12 applicant or registrant, as well as the employer or prospective 13 employer if the applicant or registrant is an agent, that it has 14 been entered and of the reasons therefor and that within fifteen 15 days after the receipt of a written request the matter will be 16 set down for hearing. If no hearing is requested and none is 17 ordered by the commission, the order will remain in effect until 18 it is modified or vacated by the commission. If a hearing is 19 requested or ordered, the commission, after notice of and 20 opportunity for hearing, may modify or vacate the order or 21 extend it until final determination.] The order may be issued 22 summarily without notice or hearing. Upon issuance of a summary 23 order, the commission shall promptly provide the order to the 24 applicant or registrant and the employer or prospective employer 25 if the applicant or registrant is an agent or investment adviser 26 representative. The order shall contain findings of fact and 27 conclusions of law and include a notice affording the applicant 28 or registrant an opportunity for a hearing in accordance with 29 section 607(a). 30 * * * 20010S0893B2160 - 21 -
1 Section 9. The act is amended by adding a section to read: 2 Section 410. Prearranged Trading Programs.--In connection 3 with the offer, sale or purchase of any security in this State, 4 no person shall be deemed to have violated section 401 or 406 or 5 otherwise to have made an untrue statement of a material fact or 6 omitted to state a material fact necessary in order to make the 7 statements made, in the light of the circumstances under which 8 they were made, not misleading if such person demonstrates that 9 the offer, sale or purchase was prearranged in accordance with 10 17 C.F.R. § 240.10b5-1(c) (relating to trading "on the basis of" 11 material nonpublic information in insider trading cases), or any 12 successor thereto, promulgated under section 10(b) of the 13 Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. § 79a 14 et seq.). 15 Section 10. Section 504(d) of the act is amended to read: 16 Section 504. Time Limitations on Rights of Action.--* * * 17 (d) No purchaser may commence an action under section 501, 18 502 or 503 if, before suit is commenced, the purchaser has 19 received a written offer: (i) stating the respect in which 20 liability under such section may have arisen and fairly advising 21 the purchaser of his rights; offering to repurchase the security 22 for cash, payable on delivery of the security, equal to the 23 consideration paid, together with interest at the legal rate 24 from the date of payment, less the amount of any income or 25 distributions, in cash or in kind, received thereon or, if the 26 purchaser no longer owns the security, offering to pay the 27 purchaser upon acceptance of the offer an amount in cash equal 28 to the damages computed in accordance with section 501(a); and 29 (ii) stating that the offer may be accepted by the purchaser at 30 any time within a specified period of not less than thirty days 20010S0893B2160 - 22 -
1 after the date of receipt thereof, or such shorter period as the 2 commission may by rule prescribe; and the purchaser has failed 3 to accept such offer in writing within the specified period. The 4 limitations on a purchaser commencing an action under this 5 subsection shall not apply if the purchaser has accepted an 6 offer to repurchase made under this subsection within the time 7 period specified under this subsection and has complied with all 8 the terms of this subsection but has not received the cash 9 payment specified by this subsection within ninety days of the 10 date of acceptance of the offer to repurchase. 11 * * * 12 Section 11. Section 509(c) of the act, amended November 24, 13 1998 (P.L.829, No.109), is amended to read: 14 Section 509. Right of Commission to Bring Actions for 15 Injunction and Equitable Relief; Class Actions; Contempt of 16 Commission Orders.--* * * 17 (c) Any person violating any (i) stop order issued under 18 section 208, (ii) cease advertising order issued under section 19 606(c), (iii) cease and desist order issued under section 20 606(c.1), (iv) order of the commission requiring a rescission 21 pursuant to section 513 [or], (v) order of the commission 22 imposing any bar described in section 512, (vi) order of the 23 commission requiring return of sales compensation under section 24 514(a), or (vii) any order of the commission imposing an 25 administrative assessment under section 602.1(b) or (c) from 26 which no appeal of such an order has been taken pursuant to 27 section 607(d) of the act or which has been sustained on appeal, 28 or which has been appealed but where no supersedeas has been 29 granted for the period [in] during which the order has been 30 violated, shall be deemed to be in contempt of such order. Upon 20010S0893B2160 - 23 -
1 petition and certification of such order by the commission, the 2 Commonwealth Court or any of the courts of common pleas if it 3 finds after hearing or otherwise that the person is not in 4 compliance with the order shall adjudge the person in contempt 5 of the order and shall assess such civil penalties of an amount 6 not less than [three] five thousand dollars [($3,000)] ($5,000) 7 nor greater than [ten] fifteen thousand dollars [($10,000)] 8 ($15,000) per violation and [issue such further orders] grant 9 such equitable relief as it may deem appropriate. 10 Section 12. Section 510 of the act is amended by adding a 11 subsection to read: 12 Section 510. Investigations and Subpoenas.--* * * 13 (e) At the request of the securities regulatory authority of 14 another jurisdiction, the commission may provide assistance if 15 the requesting authority states that it is conducting an 16 investigation which it deems necessary to determine whether a 17 person has violated, is violating or is about to violate laws or 18 rules relating to securities matters that the requesting 19 authority administers or enforces. The commission may, in its 20 sole discretion, conduct such investigation and use the powers 21 conferred under this section as the commission deems necessary 22 to collect information and evidence pertinent to the request for 23 assistance. The assistance may be provided without regard to 24 whether the facts stated in the request would constitute a 25 violation of this act or the laws of this Commonwealth. In 26 deciding whether to provide such assistance, the commission 27 shall consider whether: 28 (i) the requesting authority is permitted and has agreed to 29 provide reciprocal assistance in securities matters to the 30 commission; and 20010S0893B2160 - 24 -
1 (ii) compliance with the request would prejudice the public 2 interest. 3 Section 13. Section 511(b) of the act, amended November 24, 4 1998 (P.L.829, No.109), is amended to read: 5 Section 511. Criminal Penalties.--* * * 6 (b) A person who wilfully violates section 401, 408 or 409 7 commits a felony of the third degree and may be fined not more 8 than [ten thousand dollars ($10,000)] twenty thousand dollars 9 ($20,000) if none of the victims of the person's violative 10 conduct were individuals aged [65] 60 or more and not more than 11 [fifty thousand dollars ($50,000)] one hundred thousand dollars 12 ($100,000) if any of the victims of the person's violative 13 conduct were individuals aged [65] 60 or more, or imprisoned for 14 not more than seven years, or both. In addition to fine or 15 imprisonment, or both, the person may be sentenced to make 16 restitution. 17 * * * 18 Section 14. The act is amended by adding a section to read: 19 Section 514. Return of Sales Compensation.--(a) After 20 giving notice and opportunity for hearing, the commission, where 21 it has determined that a person who represented an issuer in 22 effecting transactions in securities in this Commonwealth while 23 in willful violation of section 301(a) and received compensation 24 in connection with these transactions, may issue an order, 25 accompanied by written findings of fact and conclusions of law, 26 which requires the person to return to purchasers of securities 27 in this Commonwealth, in cash, the amount of compensation 28 received for effecting those securities transactions. 29 (b) No order shall be issued under this section if the 30 transactions in securities meet any of the following criteria: 20010S0893B2160 - 25 -
1 (1) The transactions involved securities which were the 2 subject of an effective registration statement filed with the 3 United States Securities and Exchange Commission under section 5 4 of the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77(a) et 5 seq.). 6 (2) The transactions involved securities which are exempted 7 securities under section 3(a) of the Securities Act of 1933 8 except sections 3(a)(4) and 3(a)(11). 9 (3) The transactions are exempt from registration under 10 section 5 of the Securities Act of 1933 pursuant to section 4 11 thereof except a transaction for which the issuer is relying on 12 any rule or regulation promulgated by the United States 13 Securities and Exchange Commission under section 4(2) of the 14 Securities Act of 1933. 15 (c) The commission may issue more than one order under this 16 section against the same person involving the same security. 17 (d) An order issued under this section shall not be deemed 18 conclusive as to the total number of purchasers in this 19 Commonwealth of any particular security or the total dollar 20 amount of sales compensation received by a person for 21 transactions effected in a particular security with purchasers 22 in this Commonwealth for which liability may be imposed under 23 subsection (a). 24 Section 15. Section 601(c) of the act is amended and the 25 section is amended by adding a subsection to read: 26 Section 601. Administration.--* * * 27 (c) It is unlawful for the commission or any of its officers 28 or employes to use for personal benefit any information which is 29 filed with or obtained by the commission and which is not 30 generally available to the public. Nothing in this act 20010S0893B2160 - 26 -
1 authorizes the commission or any of its officers or employes to 2 disclose such confidential information except among themselves 3 or to other securities administrators, regulatory authorities or 4 governmental agencies, or when necessary or appropriate in a 5 proceeding or investigation under this act or any other law of 6 this State. [No provision of this act either creates or 7 derogates from any privilege which exists at common law or 8 otherwise when documentary or other evidence is sought under a 9 subpoena directed to the commission or any of its officers or 10 employes.] 11 (c.1) Except for the privileges created in this subsection, 12 no provision of this act either creates or derogates from any 13 privilege which exists at common law or otherwise when 14 documentary or other evidence is sought under a subpoena 15 directed to the commission or any of its officers or employes. 16 (1) The documents described in clause (2) and any testimony 17 sought concerning information in those documents are privileged 18 from disclosure under a subpoena directed to the commission or 19 any of its officers or employes if the documents relate to: 20 (i) An investigation authorized under section 510 which has 21 not been closed. 22 (ii) An action in which neither the commission nor any of 23 its officers or employes is a party. 24 (2) The documents which are the subject of the privilege 25 created in clause (1) include: 26 (i) Documents relating to an investigation conducted under 27 section 510, including, but not limited to, statements made or 28 taken in accordance with section 510(a) or (b) and documents in 29 possession of the commission under section 510(a)(ii). 30 (ii) Documents received in connection with a subpoena issued 20010S0893B2160 - 27 -
1 under section 510. 2 (iii) Documents relating to an examination conducted under 3 section 304(d). 4 (iv) Documents obtained from a securities administrator, 5 regulatory authority or law enforcement or governmental agency 6 relating to an investigation authorized under section 510 or an 7 examination conducted in accordance with section 304(d). 8 (v) Documents deemed confidential by order of the commission 9 under section 603(c). 10 (3) Complaints filed with the commission and testimony 11 concerning information in the complaints are privileged 12 absolutely from disclosure under a subpoena directed to the 13 commission or its officers or employes. 14 (4) No privilege is created under clause (1) or (3) if 15 document sought under a subpoena directed to the commission or 16 its officers or employees is otherwise publicly available. 17 * * * 18 Section 16. Section 601.1 of the act, added May 7, 1998 <-- 19 (P.L.342, No.51), is amended to read: 20 Section 601.1. Salaries of Commissioners.--(a) The chairman 21 of the commission shall receive a salary at the rate of [twenty- 22 eight thousand five hundred dollars ($28,500)] thirty-eight 23 thousand five hundred dollars ($38,500) per annum. Each other 24 member of the commission shall receive a salary at the rate of 25 [twenty-six thousand dollars ($26,000)] thirty-six thousand 26 dollars ($36,000) per annum. 27 (b) The commissioners shall receive annual cost-of-living 28 increases under section 3(e) of the act of September 30, 1983 29 (P.L.160, No.39), known as the "Public Official Compensation 30 Law." 20010S0893B2160 - 28 -
1 Section 17 16. Section 602(b.1)(i) and (v) of the act, <-- 2 amended or added December 18, 1990 (P.L.755, No.190) and 3 December 7, 1994 (P.L.869, No.126) are amended to read: 4 Section 602. Fees.--* * * 5 (b.1) Filing fees for sales of securities: 6 [(i) Exemption filings under section 203(i)... $250] 7 * * * 8 (v) Exemption filings under section 9 203(o)[(ii)] shall be:............................ 250 10 * * * 11 Section 18 17. Sections 602.1(a)(1) and (2), (c)(1), 603 and <-- 12 606 of the act, amended November 24, 1998 (P.L.829, No.109), are 13 amended to read: 14 Section 602.1. Assessments.--(a) (1) Each agent and 15 investment adviser representative, when applying for an initial 16 license under section 301 or changing employers, shall pay a 17 compliance assessment in accordance with the following schedule: 18 [twenty-seven dollars ($27) for the period July 1, 1995, through 19 June 30, 1998, thirty dollars ($30) for the period July 1, 1998, 20 through June 30, 2001,] thirty-two dollars ($32) for the period 21 July 1, 2001, through June 30, 2004, [and] thirty-five dollars 22 ($35) for the period July 1, 2004, through June 30, 2007, 23 thirty-seven dollars ($37) for the period July 1, 2007, through 24 June 30, 2010, and forty dollars ($40) thereafter. 25 (2) Each agent and investment adviser representative, when 26 applying for a renewal license under section 301, shall pay a 27 compliance assessment in accordance with the following schedule: 28 [twelve dollars ($12) for the period July 1, 1995, through June 29 30, 1998, fifteen dollars ($15) for the period July 1, 1998, 30 through June 30, 2001,] seventeen dollars ($17) for the period 20010S0893B2160 - 29 -
1 July 1, 2001, through June 30, 2004, [and] twenty ($20) for the 2 period July 1, 2004, through June 30, 2007, twenty-two dollars 3 ($22) for the period July 1, 2007, through June 30, 2010, and 4 twenty-five ($25) thereafter. 5 * * * 6 (c) After giving notice and opportunity for a hearing, the 7 commission may issue an order accompanied by written findings of 8 fact and conclusions of law which imposes an administrative 9 assessment in the amounts provided in paragraph (1) against a 10 broker-dealer, agent, investment adviser or investment adviser 11 representative registered under section 301 or an affiliate of 12 any broker-dealer or investment adviser where the commission 13 determines that the person willfully has violated this act or a 14 rule or order of the commission under this act or has engaged in 15 dishonest or unethical practices in the securities business; has 16 taken unfair advantage of a customer; or has failed reasonably 17 to supervise its agents or employes or against any other person 18 if the commission determines that the person wilfully violated 19 section [401(a) or (c), 406, 408, 409 or 512(d); section 401(b) 20 or 407;] 301, 401, 404, 406 through 409 or 512(d) or a cease and 21 desist order issued by the commission under section 606(c.1). 22 (1) The commission, in issuing an order under this 23 subsection, may impose the administrative assessments set forth 24 below. Each act or omission that provides a basis for issuing an 25 order under this subsection shall constitute a separate 26 violation. 27 (i) In issuing an order against any broker-dealer, agent, 28 investment adviser or investment adviser representative 29 registered under section 301 or an affiliate of any broker- 30 dealer or investment adviser, the commission may impose an 20010S0893B2160 - 30 -
1 administrative assessment of up to [twenty-five thousand dollars 2 ($25,000)] fifty thousand dollars ($50,000) for a single 3 violation or up to [two hundred fifty thousand dollars 4 ($250,000)] five hundred thousand dollars ($500,000) for 5 multiple violations in a single proceeding or a series of 6 related proceedings. If any of the victims of the person's 7 violative conduct were individuals aged [65] 60 or more, the 8 commission also may impose a special administrative assessment 9 in addition to the foregoing amounts of up to [twenty-five 10 thousand dollars ($25,000)] fifty thousand dollars ($50,000). 11 (ii) In issuing an order against a person for wilful 12 violation of section 401(a) or (c), 404, 406, 408, 409 or 512(d) 13 or for wilful violation of a cease and desist order issued under 14 section 606(c.1), the commission may impose an administrative 15 assessment of up to [twenty-five thousand dollars ($25,000)] 16 fifty thousand dollars ($50,000) for a single violation or up to 17 [one hundred fifty thousand dollars ($150,000)] three hundred 18 thousand dollars ($300,000) for multiple violations in a single 19 proceeding or a series of related proceedings. In addition to 20 the foregoing assessment, the commission also may impose a 21 special administrative assessment of up to [twenty-five thousand 22 dollars ($25,000)] fifty thousand dollars ($50,000) for each of 23 the provisions described as follows that the commission 24 determines are applicable: 25 (A) The person, within seven years [of] prior to the 26 commission taking action under this subsection [has been], was 27 the subject of: a criminal felony conviction[,]; an injunction 28 issued by any court of competent jurisdiction; or an order of 29 the Securities and Exchange Commission, the Commodity Futures 30 Trading Commission, the securities [administrator], banking or 20010S0893B2160 - 31 -
1 insurance regulator of another state, a Federal banking 2 regulator or the securities, banking or insurance regulatory 3 authority of another country which found that the person 4 wilfully had violated any provision of the Federal or state 5 securities, banking, insurance, or commodities laws or the 6 securities, commodities, insurance or banking laws of another 7 country[, provided that the foregoing convictions occurred or 8 the injunctions or orders were entered prior to the violation 9 for which this special administrative assessment is being 10 imposed]. 11 (B) The person's violative conduct involved individuals aged 12 [65] 60 or more. 13 (C) The person's violative conduct involved use of the 14 Internet or boiler room tactics which included, without 15 limitation, use of any high-pressure sales tactics designed to 16 create an artificially short time period for which the person 17 being solicited is pressured to make an investment decision or 18 overcome the person's reluctance to commit to the investment 19 being offered, use of scripts designed to allay any objections 20 or concerns expressed by the person being solicited or making 21 repeated telephone calls or sending multiple e-mail messages to 22 the same person pressuring the person to make an immediate 23 investment decision. 24 (iii) In issuing an order against [persons] a person for 25 wilful violation of section 401(b) or 407, the commission may 26 impose an administrative assessment of up to twenty-five 27 thousand dollars ($25,000) for each of the criteria described in 28 subclause (ii)(A) and (C) that the commission determines are 29 applicable. No assessment shall be imposed under this subclause 30 if the person is subject to an administrative assessment imposed 20010S0893B2160 - 32 -
1 under any other provision of this subsection. 2 (iv) In issuing an order against a person, other than a 3 federally covered adviser, for wilful violation of section 301, 4 the commission may impose the following administrative 5 assessments unless the person is subject to an administrative 6 assessment imposed under any other provision of this subsection 7 or the public proceeding to which the assessment relates was 8 instituted prior to the date of enactment of this subclause: 9 (A) For a person who, at the time of the wilful violation, 10 was not registered under section 301, was not registered as a 11 broker or dealer with the United States Securities and Exchange 12 Commission under the Securities Exchange Act of 1934 (948 Stat. 13 881, 15 U.S.C. § 78(a) et seq.) and was not a member of a 14 national securities association registered under that act, the 15 commission may impose an administrative assessment of up to 16 fifty thousand dollars ($50,000) for a single violation or up to 17 two hundred fifty thousand dollars ($250,000) for multiple 18 violations in a single proceeding or series of related 19 proceedings. 20 (B) For a person (not an individual) that, at the time of 21 the wilful violation, was not registered under section 301 but 22 was registered as a broker or dealer with the United States 23 Securities and Exchange Commission under the Securities Exchange 24 Act of 1934 and was a member of a national securities 25 association registered under that act, the commission may impose 26 an administrative assessment of up to fifty thousand dollars 27 ($50,000) for a single violation or up to three hundred thousand 28 dollars ($300,000) for multiple violations in a single 29 proceeding or series of related proceedings. 30 An assessment imposed under this subclause shall be in addition 20010S0893B2160 - 33 -
1 to any liability a person may have under an order issued under 2 section 514. 3 (v) In issuing an order for wilful violation of section 4 301(c.1)(1)(ii) against a person that is a federally covered 5 adviser, the commission may impose the following administrative 6 assessments: 7 (A) Up to one hundred thousand dollars ($100,000) if the 8 number of investment adviser representatives involved in the 9 violation was less than five. 10 (B) Up to two hundred thousand dollars ($200,000) if the 11 number of investment adviser representatives involved in the 12 violation was five or more. 13 (vi) In issuing an order for a wilful violation of section 14 301(f) against a person that is a federally covered adviser, the 15 commission may impose an administrative assessment of two 16 thousand dollars ($2,000). 17 * * * 18 Section 603. Administrative Files.--(a) A document is filed 19 when it is received by the commission or by any other person 20 which the commission by regulation or order may designate. 21 (b) The commission shall keep a register of all registrants, 22 registration statements and notice filings which are or have 23 ever been effective under this act [and predecessor laws] and 24 all denial, suspension or revocation orders which have been 25 entered under this act [and predecessor laws]. The register 26 shall be open for public inspection [except with respect to 27 summary suspensions under sections 208(c) and 305(d)]. 28 (c) The information contained in or filed with any 29 registration statement, application, notice filing or report 30 shall be made available to the public in accordance with 20010S0893B2160 - 34 -
1 regulations prescribed by the commission; [provided that, upon 2 proper showing of the registrant or issuer, the commission shall 3 treat certain filings as confidential.] except that the 4 commission may make the following orders or regulations: 5 (1) Upon proper showing of the registrant or issuer, the 6 commission may order certain filings or parts of filings 7 nonpublic. 8 (2) The commission, by rule or order, may deem certain 9 categories of information filed with the commission as 10 nonpublic. 11 (d) The commission upon request shall furnish to any person, 12 at a reasonable charge, [photostatic or other copies, certified 13 under seal of the commission if certification is requested, of 14 any entry in the register or any order or other document made 15 available to the public under subsection (c) above.] a copy of 16 any document described in subsection (c) in any medium available 17 to the commission. Upon request and payment of a reasonable 18 charge, the document may be certified under the seal of the 19 commission. 20 (e) The commission, by order, may subsequently make public 21 information contained in the documents described in subsection 22 (c)(1) and (2) and the order may limit the amount of information 23 made public or place conditions on its use. Prior to issuing an 24 order under this subsection, the commission shall notify in 25 writing the person who originally requested confidentiality at 26 the person's last known address in the commission's files at 27 least thirty days before the commission may issue an order under 28 this subsection. 29 Section 606. Miscellaneous Powers of Commission.--(a) The 30 commission may, by regulation, require any issuer of securities 20010S0893B2160 - 35 -
1 registered under this act or exempted from registration under 2 section 203(d) or (p), which issuer has not filed reports with 3 the Securities and Exchange Commission pursuant to sections 13 4 or 15(d) of the Securities Exchange Act of 1934 (48 Stat. 881, 5 15 U.S.C. §§ 78m or 78o(d)), to distribute financial information 6 to its security holders at least annually. 7 (b) If, in its opinion, the public interest and the 8 protection of investors[,] so require, the commission may apply 9 to a court of competent jurisdiction for an order[,] suspending 10 all trading in this [State] Commonwealth by broker-dealers and 11 agents in any security for any period. 12 (c) No person shall publish in this State any advertisement 13 concerning any security (other than advertisements relating to 14 federally covered securities, tombstone advertisements permitted 15 under the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a 16 et seq.) and the Investment Company Act of 1940 (54 Stat. 789, 17 15 U.S.C. § 80a-1 et seq.) and the rules and regulations 18 promulgated thereunder) except in accordance with such rules as 19 the commission may promulgate from time to time. No person shall 20 publish any advertisement concerning any security in this State 21 after the commission issues a cease advertising order in which 22 it finds that the advertisement [contains any statement that is 23 false or misleading in any material respect or omits to make 24 any] contained an untrue statement of a material fact or omitted 25 to state a material [statement] fact necessary in order to make 26 the statements made, in the light of the circumstances under 27 which they [are] were made, not misleading [and so notifies the 28 person in writing. Such notification may be given]. The order 29 may be issued summarily without notice or hearing. [Within 30 thirty days after the receipt of a notification under this 20010S0893B2160 - 36 -
1 section, the person desiring to use the advertisement may 2 request in writing that the order be rescinded. Upon the receipt 3 of such a written request, the matter shall be set down for 4 hearing to commence within thirty days after such receipt unless 5 the person making the request consents to a later date. After 6 such hearing, the commission shall determine whether to affirm 7 and continue or to rescind such order.] Upon issuance of a 8 summary order, the commission shall promptly provide the order 9 to the person against whom it is issued. The order shall contain 10 findings of fact and conclusions of law and include a notice 11 affording the person an opportunity for a hearing under section 12 607(a). 13 (c.1) Whenever the commission finds that any person has 14 engaged or is about to engage in any act or practice 15 constituting a violation of any provision of this act or any 16 rule or order thereunder, the commission may order such person 17 to cease and desist from such act or practice. [and shall notify 18 the person in writing. Notification may be given summarily 19 without notice or hearing. Within thirty days after receipt of a 20 notification under this section, the person desiring to engage 21 in such act or practice may file a written request that the 22 order be rescinded. Upon receipt of the written request, the 23 matter will be set down for a hearing to commence within thirty 24 days after such receipt unless the person making the request 25 consents to a later date. After such hearing, the commission 26 shall determine whether to affirm and continue, modify or 27 rescind such order.] The order may be issued summarily without 28 notice or hearing. Upon issuance of a summary order, the 29 commission shall promptly provide the order to the person 30 against whom it is issued. The order shall contain findings of 20010S0893B2160 - 37 -
1 fact and conclusions of law and include a notice affording the 2 person an opportunity for a hearing under section 607(a). 3 (d) The commission may, by regulation, delegate any powers 4 specified in this act to be exercised by the commission to 5 members of the commission's staff, except for powers related to 6 hearings. 7 Section 19 18. Section 607 of the act is amended to read: <-- 8 Section 607. Hearings and Judicial Review.--(a) Within 9 thirty days after [any order has become effective without a 10 hearing, any interested party may apply to] receipt of a summary 11 order issued under section 204(b), 208(c), 211(c), 305(d), 12 606(c) or 606(c.1), the person against whom the order was issued 13 and entered may file with the commission a written request for a 14 hearing in respect to any matters determined by the order.[, and 15 a hearing shall be held within thirty days after the application 16 is filed. After the hearing the commission may modify the order 17 as it deems appropriate.] Upon receipt of the written request, 18 the matter shall be set down for a hearing to commence within 19 thirty days after receipt of the request unless the person 20 making the request consents to a later date. If the person 21 making the request consents to a later date for the hearing but 22 fails, after notification by first class mail, to the person's 23 last known address in the commission's files, to consent to a 24 hearing date that is within one hundred eighty days of the date 25 the written request for a hearing was filed with the commission 26 under this subsection, the request for hearing shall be deemed 27 abandoned and the summary order shall be deemed a final order. 28 After hearing, the commission may determine to rescind, modify 29 or vacate the summary order or make it a final order. If no 30 hearing is requested or a request for a hearing is filed 20010S0893B2160 - 38 -
1 untimely, the summary order shall be deemed to be a final order. 2 (b) Within thirty days after [any order has become effective 3 after a hearing, any interested party] receipt of an order 4 issued and entered by the commission after a hearing, the person 5 against whom the order was issued and entered may apply to the 6 commission for a rehearing. The commission, in its sole 7 discretion, may grant the application and hold a rehearing. [if 8 in its judgment sufficient reasons therefor appear. After 9 rehearing, the commission may vacate or modify the order, and 10 any order vacating the original order shall have the same effect 11 as an original order. Failure to grant an application for 12 rehearing within thirty days from the date of the filing shall 13 constitute a denial; and failure, within fifteen days after the 14 conclusion of a rehearing, to issue an order affirming, vacating 15 or modifying the original order shall constitute an affirmation 16 of the original order.] Failure of the commission to grant a 17 rehearing within thirty days of receipt of an application shall 18 constitute a denial. After rehearing, the commission may issue 19 an order affirming, vacating or modifying the original order. 20 (c) [Disciplinary hearings] Hearings and rehearings shall be 21 public. [unless the commission grants a request joined in by all 22 parties that the hearing be conducted privately. Investigatory 23 hearings shall not be open to members of the general public 24 unless all parties to the hearing agree otherwise.] 25 (d) Orders of the commission shall be subject to judicial 26 review in accordance with law, but orders originally entered 27 without a hearing may be reviewed only if the party seeking 28 review has [requested] filed a request for a hearing within the 29 time provided [by] under subsection (a). Filing for judicial 30 review of a commission order shall not operate as a stay of the 20010S0893B2160 - 39 -
1 commission's order unless specifically ordered by the court. 2 Section 20 19. Section 609(f) of the act, amended November <-- 3 24, 1998 (P.L.829, No.109), is amended to read: 4 Section 609. Regulations, Forms and Orders.--* * * 5 (f) (1) An application for registration of securities [or 6 registration of a broker-dealer, agent, investment adviser or 7 investment adviser representative] shall be deemed abandoned if 8 the application has been on file with the commission for a 9 minimum of twelve consecutive months and the applicant has 10 failed to respond to the commission's notice [of warning] of 11 abandonment sent by first class mail to the applicant's last 12 known address in the commission's files within sixty calendar 13 days [of the date of the warning.] after the date the 14 notification was mailed by the commission. There shall be no 15 refund of any fees [or assessments] paid by the applicant. 16 (2) An application for registration as a broker-dealer, 17 agent, investment advisor or investment adviser representative 18 shall be deemed abandoned if the application has been on file 19 with the commission for a minimum of six consecutive months and 20 the applicant has failed to respond to the commission's notice 21 of abandonment sent by first class mail to the applicant's last 22 known address in the commission's files within sixty calendar 23 days after the date the notification was mailed by the 24 commission. There shall be no refund of any fees or assessments 25 paid by the applicant. 26 Section 21 20. The act is amended by adding a section to <-- 27 read: 28 Section 612. Burden of Proof.--(a) In a civil action or 29 administrative proceeding under this act, a person claiming 30 status as a federally covered security or adviser or an 20010S0893B2160 - 40 -
1 exemption, exception or exclusion from a definition has the 2 burden of proving the availability of the status, exemption, 3 exception or exclusion. 4 (b) In a proceeding for a criminal violation of this act, a 5 person claiming status as a federally covered security adviser 6 or an exemption, exception or exclusion from a definition has 7 the burden of going forward with evidence of the claim, 8 exemption, exception or exclusion. 9 Section 22 21. Section 704 of the act is repealed. <-- 10 Section 23 22. This act shall take effect in 60 days. <-- E22L70MRD/20010S0893B2160 - 41 -