PRINTER'S NO. 655
No. 553 Session of 2003
INTRODUCED BY TURZAI, HASAY, BOYES, BLAUM, GANNON, BROWNE,
HANNA, HARPER, HUTCHINSON, JAMES, LEWIS, MANDERINO, NICKOL,
PALLONE, STETLER AND WALKO, MARCH 3, 2003
REFERRED TO COMMITTEE ON COMMERCE, MARCH 3, 2003
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," authorizing the commission to petition for the
7 escrow of extraordinary payments by issuers in certain
8 circumstances.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 Section 1. The act of December 5, 1972 (P.L.1280, No.284),
12 known as the Pennsylvania Securities Act of 1972, is amended by
13 adding a section to read:
14 Section 515. Temporary Freeze Authority.--(a) Whenever,
15 during the course of a lawful investigation involving possible
16 violations of this act or rule or order issued thereunder by an
17 issuer that is not subject to the reporting requirements of
18 section 13 or 15(d) of the Securities Exchange Act of 1934 (15
19 U.S.C. §§ 78m and 78o(d)), or any of its directors, officers,
20 partners, controlling persons, agents or employes, it shall
1 appear to the commission that it is likely that the issuer will
2 make extraordinary payments, whether compensation or otherwise,
3 to any such persons, the commission may petition the
4 Commonwealth Court or any court of common pleas for a temporary
5 order requiring the issuer to escrow, subject to court
6 supervision, those payments in an interest-bearing account for
7 forty-five days. A temporary order may be issued and entered
8 under this subsection only after notice and opportunity for
9 hearing, unless the court determines that notice and hearing
10 prior to entry of the order would be impracticable or contrary
11 to the public interest.
12 (b) A temporary order issued under subsection (a) shall:
13 (i) become effective immediately;
14 (ii) be served upon the parties subject to it; and
15 (iii) be effective and enforceable for forty-five days
16 unless set aside, limited or suspended by a court of competent
17 jurisdiction and may be extended by the court upon good cause
18 shown for not longer than forty-five additional days, provided
19 that the combined period of the order shall not exceed ninety
20 days.
21 (c) If the issuer or other person described in subsection
22 (a) is charged with a violation of this act or rule or order
23 issued under this act before the expiration of the effective
24 period of a temporary order as set forth in subsection (b),
25 including any applicable extension period, the order shall
26 remain in effect, subject to court approval, until the
27 conclusion of any legal proceedings related thereto and the
28 affected issuer or other person shall have the right to petition
29 the court for review of the order.
30 (d) If the issuer or other person described in subsection
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1 (a) is not charged with a violation of this act or rule or order
2 issued under this act before the expiration of the effective
3 period of a temporary order as set forth in subsection (b),
4 including any applicable extension period, the escrow shall
5 terminate at the expiration of the forty-five-day effective
6 period or the expiration of any extension period, as applicable,
7 and the disputed payments with accrued interest shall be
8 returned to the issuer or other affected person.
9 (e) This section shall not apply to an issuer or director,
10 officer, partner, controlling person, agent or employe of an
11 issuer that has not more than one hundred equity security
12 holders.
13 Section 2. This act shall take effect in 60 days.
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