2007 Regular Session
To: Judiciary, Division A
By: Senator(s) Morgan, King, Fillingane, Albritton
AN ACT TO AMEND SECTION 75-71-105, MISSISSIPPI CODE OF 1972, TO REVISE DEFINITIONS UNDER THE UNIFORM SECURITIES LAW; TO AMEND SECTION 75-71-715, MISSISSIPPI CODE OF 1972, TO CLARIFY THE AUTHORITY OF THE SECRETARY OF STATE TO ORDER RESTITUTION FOR VIOLATIONS OF THE SECURITIES LAW; TO AMEND SECTION 75-71-735, MISSISSIPPI CODE OF 1972, TO REVISE THE AUTHORITY FOR PROSECUTION OF VIOLATIONS UNDER THE SECURITIES LAW; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 75-71-105, Mississippi Code of 1972, is amended as follows:
75-71-105. For the purposes of this chapter the following words shall have the following meanings unless the context shall prescribe otherwise:
(a) "Agent" means any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities. "Agent" does not include an individual who represents (1) an issuer in: (A) effecting transactions in a security exempted by clause (1), (2), (3), (10) or (11) of Section 75-71-201; (B) effecting transactions exempted by Section 75-71-203; (C) effecting transactions in a covered security as described in Sections 18(b)(3) and 18(b)(4)(D) of the Securities Act of 1933; or (D) effecting transactions with existing employees, partners or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state; or (2) a broker-dealer in effecting transactions in this state limited to those transactions described in Section 15(h)(2) of the Securities Exchange Act of 1934. A partner, officer or director of a broker-dealer or issuer, or a person occupying a similar status or performing similar functions, is an agent only if he otherwise comes within this definition.
(b) "Broker-dealer" means any person engaged in the business of effecting transactions in securities for the account of others or for his own account. "Broker-dealer" does not include (1) an agent, (2) an issuer, (3) a bank, savings institution, or trust company, or (4) a person who has no place of business in this state if (A) he effects transactions in this state exclusively with or through (i) the issuers of the securities involved in the transactions, (ii) other broker-dealers, or (iii) banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees, or (B) during any period of twelve (12) consecutive months he does not direct more than fifteen (15) offers to sell or buy into the State of Mississippi in any manner to persons other than those specified in clause (A) of this subsection, whether or not the offeror or any of the offerees is then present in this state.
(c) "Federal covered adviser" means a person who is (1) registered under Section 203 of the Investment Advisers Act of 1940; or (2) is excluded from the definition of "investment adviser" under Section 202(a)(11) of the Investment Advisers Act of 1940.
(d) "Federal covered security" means any security that is a covered security under Section 18(b) of the Securities Act of 1933 or rules or regulations promulgated thereunder.
(e) "Fraud," "deceit" and "defraud" are not limited to common-law deceit.
(f) "Guaranteed" means guaranteed as to payment of principal, interest or dividends.
(g) "Investment adviser" means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities. "Investment adviser" does not include (1) an investment adviser representative; (2) a bank, savings institution or trust company; (3) a lawyer, accountant, engineer or teacher whose performance of these services is solely incidental to the practice of his profession; (4) a broker-dealer or his agent whose performance of these services is solely incidental to the conduct of his business as a broker-dealer and who receives no special compensation for them; (5) a publisher of any bona fide newspaper, news magazine or business or financial publication of general, regular and paid circulation; (6) a person whose advice, analyses or reports relate only to securities exempted by Section 75-71-201(1); (7) a person who is a federal covered adviser; (8) a person who has no place of business in this state if (A) his only clients in this state are other investment advisers, federal covered advisers, broker-dealers, banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, employee benefit plans with assets of not less than One Million Dollars ($1,000,000.00), governmental agencies or instrumentalities, whether acting for themselves or as trustees with investment control, or other financial institutions or institutional buyers as are designated by rule or order of the Secretary of State, or (B) during the preceding twelve-month period he has had not more than five (5) clients, other than those specified in clause (A) of this subsection, who are residents of this state; or (8) such other persons not within the intent of this subsection as the Secretary of State may by rule or order designate.
(h) "Investment adviser representative" means any partner, officer, director of (or a person occupying a similar status or performing similar functions) or other individual, except clerical or ministerial personnel, who is employed by or associated with an investment adviser that is registered or required to be registered under this chapter, or who has a place of business located in this state and is employed by or associated with a federal covered adviser; and who does any of the following: (1) makes any recommendations or otherwise renders advice regarding securities, (2) manages accounts or portfolios of clients, (3) determines which recommendation or advice regarding securities should be given, (4) solicits, offers or negotiates for the sale of or sells investment advisory services, or (5) supervises employees who perform any of the foregoing.
(i) "Issuer" means any person who issues or proposes to issue any security, except that (1) with respect to certificates of deposit, voting-trust certificates, or collateral-trust certificates, or with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors or persons performing similar functions or of the fixed, restricted management or unit type, the term "issuer" means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which the security is issued; and (2) with respect to certificates of interest or participation in oil, gas or mining titles or leases or in payments out of production under such titles or leases, there is not considered to be any "issuer." With respect to a fractional or pooled interest in a viatical settlement investment contract, "issuer" means the person who creates, for the purpose of sale, the fractional or pooled interest. The issuer of a viatical settlement investment contract that is not fractionalized or pooled means the person effecting the transactions with the investors in such contracts.
(j) "Nonissuer" means not directly or indirectly for the benefit of the issuer.
(k) "Person" means an individual, a corporation, a partnership, an association, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government.
(l) (i) "Sale" or "sell" includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value.
(ii) "Offer" or "offer to sell" includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.
(iii) Any security given or delivered with, or as a bonus on account of, any purchase of, securities or any other thing is considered to constitute part of the subject of the purchase and to have been offered and sold for value.
(iv) A purported gift of assessable stock is considered to involve an offer and sale.
(v) Every sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert into another security of the same or another issuer, is considered to include an offer of the other security.
(vi) The terms defined in this subsection do not include (A) any bona fide pledge or loan; (B) any stock dividend, whether the corporation distributing the dividend is the issuer of the stock or not, if nothing of value is given by stockholders for the dividend other than the surrender of a right to a cash or property dividend when each stockholder may elect to take the dividend in cash or property or in stock; (C) any act incident to a class vote by stockholders, pursuant to the certificate of incorporation or the applicable corporation statute, on a merger, consolidation, reclassification of securities, or sale of corporate assets in consideration of the issuance of securities of another corporation; or (D) any act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding securities, claims or property interests, or partly in such exchange and partly for cash.
(m) "Securities Act of 1933," "Securities Exchange Act of 1934," "Public Utility Holding Company Act of 1935," and "Investment Company Act of 1940" mean the federal statutes of those names as amended before or after the effective date of this chapter.
(n) "Security" means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust certificate; preorganization certificate or subscription; transferable share; investment contract; voting-trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease; interest in a limited partnership; viatical settlement investment contract or a fractionalized or pooled interest therein; real property investment contract or interest therein; or, in general, any interest or instrument commonly known as a "security," or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. "Security" does not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed or variable sum of money, or both, either in a lump sum or periodically for life or some other specified period.
(o) "State" means any state, territory or possession of the United States, the District of Columbia and Puerto Rico.
(p) "Viatical settlement investment contract" means any agreement, regardless of title or caption, for the purchase, sale, assignment, transfer, devise or bequest of any portion of the death benefit or ownership of a life insurance policy or certificate for consideration that is less than the expected death benefit of the life insurance policy or certificate. "Viatical settlement investment contract" does not include:
(i) The assignment, transfer, sale, devise or bequest of a death benefit, life insurance policy or certificate of insurance by the viator to the viatical settlement provider under Sections 83-7-201 through 83-7-223;
(ii) The assignment of a life insurance policy to a bank, savings bank, savings and loan association, credit union or other licensed lending institution as collateral for a loan; or
(iii) The exercise of accelerated benefits under the terms of a life insurance policy issued in accordance with the insurance laws of this state.
SECTION 2. Section 75-71-715, Mississippi Code of 1972, is amended as follows:
75-71-715. Whenever it appears to the Secretary of State that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this chapter or any rule or order hereunder, he may, in his discretion, seek any or all of the following remedies:
(a) Issue a cease and desist order, with or without a prior hearing against the person or persons engaged in the prohibited activities, directing them to cease and desist from further illegal activity;
(b) (i) Issue an order in the case of an issuer of registered securities, broker-dealer, investment advisor, agent, investment adviser representative, or other person who violated this chapter, imposing an administrative penalty up to a maximum of Twenty-five Thousand Dollars ($25,000.00) for each offense and each violation shall be considered as a separate offense in a single proceeding or a series of related proceedings; to be paid to the Secretary of State and requiring reimbursement to the Secretary of State for all costs and expenses incurred in the investigation of the violation(s) and in the institution of administrative proceedings, if any, as a result thereof;
(ii) For the purpose of determining the amount or extent of a sanction, if any, to be imposed under subparagraph (2)(a) of this section, the Secretary of State shall consider, among other factors, the frequency, persistence, and willfulness of the conduct constituting a violation of this chapter or a rule promulgated thereunder or an order of the Secretary of State, the number of persons adversely affected by the conduct, and the resources of the person committing the violation; * * *
(c) Bring an action in chancery court to enjoin the acts or practices to enforce compliance with this chapter or any rule or order hereunder. Upon a proper showing a permanent or temporary injunction, restraining order or writ of mandamus shall be granted and a receiver or conservator may be appointed for the defendant or the defendant's assets. In addition, upon a proper showing by the Secretary of State the court may enter an order of rescission, restitution or disgorgement directed to any person who has engaged in any act constituting a violation of any provision of this chapter or any rule or order hereunder or the court may impose a civil penalty up to a maximum of Twenty-five Thousand Dollars ($25,000.00) for each offense and each violation shall be considered as a separate offense in a single proceeding or a series of related proceedings. The court may not require the Secretary of State to post a bond; or
(d) Require the person or persons engaged in the prohibited activities to provide restitution as prescribed by rules of the commission.
SECTION 3. Section 75-71-735, Mississippi Code of 1972, is amended as follows:
75-71-735. (1) Any person who willfully violates any provision of this chapter, except Section 75-71-115, or who willfully violates any rule or order under this chapter, or who willfully violates Section 75-71-115 knowing the statement made to be false or misleading in any material respect, shall upon conviction be fined not more than Twenty-five Thousand Dollars ($25,000.00) or imprisoned not more than five (5) years, or both; but no person may be imprisoned for the violation of any rule or order if he proves that he had no knowledge of the rule or order. No indictment or information may be returned under this chapter more than five (5) years after the alleged violation.
(2) The enforcement of the provisions of this Article 13 shall be vested in the Securities Commission. It shall be the duty of the commission to see that its provisions are at all times obeyed and to take such measures and to make such investigations as will prevent or detect the violation of any provision hereof. The commission shall at once lay before the district attorney of the proper county any evidence which shall come to its knowledge of criminality under this article. In the event of the neglect or refusal of the district attorney to institute and prosecute the violation, the commission shall be authorized to proceed thereon with all the rights, privileges and powers conferred by law upon district attorneys, including the power to appear before grand juries and to interrogate witnesses before grand juries.
SECTION 4. This act shall take effect and be in force from and after July 1, 2007.