COMMITTEE SUBSTITUTE

FOR

H. B. 2304


(By Mr. Speaker, Mr. Chambers, and Delegate Burk)

[By Request of the Executive]

(Originating in the House Committee on Finance)

[March 25, 1993]


A BILL to amend and reenact section two hundred two, article two; section three hundred five, article three; sections four hundred six and four hundred thirteen, article four, all of chapter thirty-two of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to the increase of fees and addition of new fees for the securities division; and setting up an appropriated special revenue account to operate the securities division.

 Be it enacted by the Legislature of West Virginia:
That section two hundred two, article two; section three hundred five, article three; sections four hundred six and four hundred thirteen, article four, all of chapter thirty-two of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted, all to read as follows:
ARTICLE 2. REGISTRATION OF BROKER-DEALERS, AGENTS AND INVESTMENT ADVISERS.

§32-2-202. Registration procedure.

(a) A broker-dealer, agent or investment adviser may obtainan initial or renewal registration by filing with the commissioner an application together with a consent to service of process pursuant to subsection (g), section four hundred fourteen, article four of this chapter. The application shall contain whatever information the commissioner by rule requires concerning such matters as (1) the applicant's firm and place of organization; (2) the applicant's proposed method of doing business; (3) the qualifications and business history of the applicant; in the case of a broker-dealer or investment adviser, the qualifications and business history of any partner, officer or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer or investment adviser; and, in the case of an investment adviser, the qualifications and business history of any employee; (4) any injunction or administrative order or conviction of a misdemeanor involving a security or any aspect of the securities business and any conviction of a felony; and (5) the applicant's financial condition and history. The commissioner may by rule or order require an applicant for initial registration to publish an announcement of the application as a Class I legal advertisement in compliance with the provisions of article three, chapter fifty-nine of this code, and the publication area or areas for such publication shall be specified by the commissioner. If no denial order is in effect and no proceeding is pending under section two hundred four of this article, registration becomes effective at noon of the thirtieth day after an application is filed. The commissioner may by rule or order specify an earlier effective date, and hemay by order defer the effective date until noon of the thirtieth day after the filing of any amendment. Registration of a broker- dealer automatically constitutes registration of any agent who is a partner, officer or director, or a person occupying a similar status or performing similar functions, as designated by the broker-dealer in writing to the commissioner and approved in writing by the commissioner.
(b) Every applicant for initial or renewal registration shall pay a filing fee of one two hundred fifty dollars in the case of a broker-dealer and agent of issuer, thirty fifty-five dollars in the case of an agent, and one hundred seventy dollars in the case of an investment adviser, and fifty dollars for each investment advisor representative. When application is denied or withdrawn, the commissioner shall retain all of the fee.
(c) A registered broker-dealer or investment adviser may file an application for registration of a successor, whether or not the successor is then in existence, for the unexpired portion of the year. A filing fee of twenty dollars shall be paid.
(d) The commissioner may by rule require a minimum capital for registered broker-dealers and investment advisers.
(e) The commissioner may by rule require registered broker- dealers, agents and investment advisers to post surety bonds in amounts up to ten thousand dollars, and may determine their conditions. Any appropriate deposit of cash or securities shall be accepted in lieu of any bond so required. No bond may be required of any registrant whose net capital, which may be defined by rule, exceeds twenty-five thousand dollars. Every bond shall provide for suit thereon by any person who has a causeof action under section four hundred ten, article four of this chapter and, if the commissioner by rule or order requires, by any person who has a cause of action not arising under this chapter. Every bond shall provide that no suit may be maintained to enforce any liability on the bond unless brought within two years after the sale or other act upon which it is based.
(f) Every applicant, whether registered under this chapter or not, shall pay a fifty dollar fee for each name or address change.
(g) Every broker-dealer and investment advisor registered under this chapter shall pay an annual fifty dollar fee for each branch office located in West Virginia.
ARTICLE 3. REGISTRATION OF SECURITIES.

§32-3-305. Provisions applicable to registration generally.

(a) A registration statement may be filed by the issuer, any other person on whose behalf the offering is to be made, or a registered broker-dealer.
(b) Every person filing a registration statement shall pay a filing fee of one twentieth of one percent of the maximum aggregate offering price at which the registered securities are to be offered in this state, but the fee shall in no case be less than fifty dollars or more than fifteen hundred dollars. When a registration statement is withdrawn before the effective date or a preeffective stop order is entered under section 306, the commissioner shall retain all of the fee. A registration statement filed under this chapter registering investment company shares shall cover only one class, series or portfolio of investment company shares.
(c) Every registration statement shall specify (1) the amount of securities to be offered in this state; (2) the states in which a registration statement or similar document in connection with the offering has been or is to be filed; and (3) any adverse order, judgment or decree entered in connection with the offering by the regulatory authorities in each state or by any court or the securities and exchange commission.
(d) Any document filed under this chapter or a predecessor act within five years preceding the filing of a registration statement may be incorporated by reference in the registration statement to the extent that the document is currently accurate.
(e) The commissioner may by rule or otherwise permit the omission of any item of information or document from any registration statement.
(f) In the case of a nonissuer distribution, information may not be required under section 304 or 305(j) unless it is known to the person filing the registration statement or to the persons on whose behalf the distribution is to be made, or can be furnished by them without unreasonable effort or expense.
(g) The commissioner may by rule or order require as a condition of registration by qualification or coordination (1) that any security issued within the past three years or to be issued to a promoter for a consideration substantially different from the public offering price, or to any person for a consideration other than cash, be deposited in escrow; and (2) that the proceeds from the sale of the registered security in this state be impounded until the issuer receives a specified amount from the sale of the security either in this state orelsewhere. The commissioner may by rule or order determine the conditions of any escrow or impounding required hereunder, but he may not reject a depository solely because of location in another state.
(h) The commissioner may by rule or order require as a condition of registration that any security registered by qualification or coordination be sold only on a specified form of subscription or sale contract, and that a signed or conformed copy of each contract be filed with the commissioner or preserved for any period up to three years specified in the rule or order.
(i) Every registration statement is effective for one year from its effective date, or any longer period during which the security is being offered or distributed in a nonexempted transaction by or for the account of the issuer or other person on whose behalf the offering is being made or by any underwriter or broker-dealer who is still offering part of an unsold allotment or subscription taken by him as a participant in the distribution, except during the time a stop order is in effect under section 306. All outstanding securities of the same class as a registered security are considered to be registered for the purpose of any nonissuer transaction (1) so long as the registration statement is effective and (2) between the thirtieth day after the entry of any stop order suspending or revoking the effectiveness of the registration statement under section 306 (if the registration statement did not relate in whole or in part to a nonissuer distribution) and one year from the effective date of the registration statement. A registration statement may not be withdrawn for one year from its effective date if any securitiesof the same class are outstanding. A registration statement may be withdrawn otherwise only in the discretion of the commissioner.
(j) So long as a registration statement is effective, the commissioner may by rule or order require the person who filed the registration statement to file reports, not more often than quarterly, to keep reasonably current the information contained in the registration statement and to disclose the progress of the offering.
(k) A registration statement relating to a security issued by a face amount certificate company or a redeemable security issued by an open-end management company or unit investment trust, as those terms are defined in the Investment Company Act of 1940, may be amended after its effective date so as to increase the securities specified as proposed to be offered. Such an amendment becomes effective when the commissioner so orders. Every person filing such an amendment shall pay a filing fee, calculated in the manner specified in subsection (b), with respect to the additional securities proposed to be offered.
(l) Every person changing the name or address of a securities registration shall pay a fifty dollar fee for such change.
(m) Every person amending a registration statement or offering a document without increasing the dollar amount registered shall pay a twenty-five dollar fee per each amended statement or document.
ARTICLE 4. GENERAL PROVISIONS.

§32-4-406. Administration of chapter; operating fund for
securities department.
(a) This chapter shall be administered by the auditor of this state, and he is hereby designated, and shall be, the commissioner of securities of this state. He shall have power and authority to appoint or employ such assistants as are necessary for the administration of this chapter.
(b) All fees herein provided for shall be collected by the commissioner and shall be deposited in the state treasury and credited to the general revenue fund, and the commissioner shall keep a record of the receipts and expenditures incurred in carrying out the provisions of this chapter The auditor shall set up a special operating fund for the securities division in his office. He shall pay into such fund twenty percent of all fees collected as provided for in this chapter, not to exceed four hundred thousand dollars. If, at the end of any fiscal year, the balance in such operating fund exceeds one hundred fifty thousand dollars, the excess shall be withdrawn from the special fund and deposited in the general revenue fund.
The special operating fund shall be used by the auditor to fund the operation of the securities division located in his office. The special operating fund shall be appropriated by line item by the Legislature.
(c) It is unlawful for the commissioner or any of his officers or employees to use for personal benefit any information which is filed with or obtained by the commissioner and which is not made public. No provision of this chapter authorizes the commissioner or any of his officers or employees to disclose any such information except among themselves or when necessary orappropriate in a proceeding or investigation under this chapter. No provision of the chapter either creates or derogates from any privilege which exists at common law or otherwise when documentary or other evidence is sought under a subpoena directed to the commissioner or any of his officers or employees.
§32-4-413. Administrative files and opinions.

(a) A document is filed when it is received by the commissioner.
(b) The commissioner shall keep a register of all applications for registration and registration statements which are or have ever been effective under this chapter and all denial, suspension or revocation orders which have been entered under this chapter. The register shall be open for public inspection.
(c) The information contained in or filed with any registration statement, application or report may be made available to the public under such rules as the commissioner prescribes.
(d) Upon request and at such reasonable charges as he prescribes, the commissioner shall furnish to any person photostatic or other copies (certified under his seal of office if requested) of any entry in the register or any document which is a matter of public record. In any proceeding or prosecution under this chapter, any copy so certified is prima facie evidence of the contents of the entry or document certified.
(e) The commissioner in his discretion may honor requests from interested persons for interpretative opinions; copies of which opinions shall be filed in a special file maintained forthat purpose and shall be public records available for public inspection. and at such reasonable charges as he prescribes A one hundred dollar fee shall be charged for each interpretative opinion.