Senate Bill No. 638
(By Senators Wooton, Snyder and Love)
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[Introduced February 22, 1999;
referred to the Committee on the Judiciary.]
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A BILL to amend the code of West Virginia, one thousand nine
hundred thirty-one, as amended, by adding thereto a new
chapter, designated chapter thirty-two-b, relating to the
adoption of the model state commodity code as the West
Virginia commodities act to enable the state commissioner of
securities to have such jurisdiction, enforcement and
prosecutorial power as is not preempted by federal law and
is necessary to protect the public from fraud and assure the
soundness of the commodities markets in the state of West
Virginia; and to grant jurisdiction to the courts of
competent jurisdiction of the state of West Virginia to hear
all matters and claims arising from violations of this
chapter.
Be it enacted by the Legislature of West Virginia:
That the code of West Virginia, one thousand nine hundred
thirty-one, as amended, be amended by adding thereto a new
chapter, designated chapter thirty-two-a, to read as follows:
CHAPTER 32B. THE WEST VIRGINIA COMMODITIES ACT.
ARTICLE 1. GENERAL PROVISIONS.
§32B-1-1. Definitions.
(a) "Commissioner" means the auditor of the state of West
Virginia.
(b) "Board of trade" means any person or group of persons
engaged in buying or selling any commodity or receiving the same
for sale on consignment, whether such person or group of persons
is characterized as a board of trade, exchange or other form of
marketplace.
(c) "CFTC rule" means any rule, regulation or order of the
commodity futures trading commission in effect on the effective
date of this chapter (and all subsequent amendments, additions or
other revisions thereto, unless the commissioner, within ten days
following the effective date of any such amendment, addition or
revision, disallows the application thereof to this part or to
any provision thereof by rule, regulation or order).
(d) "Commodity" means, except as otherwise specified by the
commissioner by rule, regulation or order, any agricultural,
grain or livestock product or byproduct, any metal or mineral
(including a precious metal defined in subsection (m) of this
section), any gem or gemstone (whether characterized as precious,
semi-precious or otherwise), any fuel (whether liquid, gaseous or
otherwise), any foreign currency, and all other goods, articles,
products or items of any kind. The term commodity does not
include: (1) A numismatic coin whose fair market value is at
least fifteen percent higher than the value of the metal it
contains; (2) real property or any timber, agricultural or
livestock product grown or raised on real property and offered or
sold by the owner or lessee of the real property; or (3) any work
of art offered or sold by art dealers, at public auction or
offered or sold through a private sale by the owner thereof.
(e) "Commodity contract" means any account, agreement or
contract for the purchase or sale, primarily for speculation or
investment purposes and not for use or consumption by the offeree
or purchaser, of one or more commodities, whether for immediate
or subsequent delivery or whether delivery is intended by the
parties, and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures
contract, installment or margin contract, leverage contract or
otherwise. Any commodity contract offered or sold, in the
absence of evidence to the contrary, is presumed to be offered or
sold for speculation or investment purposes. A commodity
contract does not include any contract or agreement which
requires, and under which the purchaser receives, within
twenty-eight calendar days from the payment in good funds of any
portion of the purchase price, physical delivery of the total
amount of each commodity to be purchased under the contract or
agreement.
(f) "Commodity Exchange Act" means the act of Congress known
as the Commodity Exchange Act, as amended to the effective date
of this chapter, codified at 7 U.S.C. 1, et seq. (and all
subsequent amendments, additions or other revisions thereto,
unless the commissioner, within ten days following the effective
date of any such amendment, addition or revision, disallows the
application thereof to this part or to any provision thereof by
rule, regulation or order.)
(g) "Commodity futures trading commission" means the
independent regulatory agency established by Congress to administer the Commodity Exchange Act.
(h) "Commodity merchant" means any of the following as
defined or described in the Commodity Exchange Act or by CFTC
Rule:
(1) Futures commission merchant;
(2) Commodity pool operator;
(3) Commodity trading advisor;
(4) Introducing broker;
(5) Leverage transaction merchant;
(6) An associated person of any of the foregoing;
(7) Floor broker; and
(8) Any other person (other than a futures association)
required to register with the commodity futures trading
commission.
(i) Commodity option" means any account, agreement or
contract giving a party thereto the right but not the obligation
to purchase or sell one or more commodities or one or more
commodity contracts, or both commodities and commodity contracts,
whether characterized as an option, privilege, indemnity, bid,
offer, put, call, advance guaranty, decline guaranty or
otherwise, but does not include an option traded on a national securities exchange registered with the United States securities
and exchange commission.
(j) "Financial institution" means a bank, savings
institution or trust company organized under, or supervised
pursuant to, the laws of the United States or of any state.
(k) "Offer" includes every offer to sell, offer to purchase,
or offer to enter into a commodity contract or commodity option.
(l) "Person" means an individual, a corporation, a
partnership, 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, but does not include a contract
market designated by the commodity futures trading commission or
any clearinghouse of that commission or a national securities
exchange registered with the securities and exchange commission
(or any employee, officer or director of such contract market,
clearinghouse or exchange acting solely in that capacity).
(m) "Precious metal" means the following in either coin,
bullion or other form: Silver; gold; platinum; palladium;
copper; and any other items as the commissioner may specify by
rule, regulation or order.
(n) "Sale" or "sell" includes every sale, contract of sale,
contract to sell, or disposition for value.
§32B-1-2. Unlawful commodity transactions.
Except as otherwise provided in section three or four of
this article, a person may not sell or purchase or offer to sell
or purchase any commodity under any commodity contract or under
any commodity option or offer to enter into or enter into as
seller or purchaser any commodity contract or any commodity
option.
§32B-1-3. Exempt person transactions.
The prohibitions in section two of this article do not apply
to any transaction offered by and in which any of the following
persons (or any employee, officer or director thereof acting
solely in that capacity) is the purchaser or seller:
(a) A person registered with the commodity futures trading
commission as a futures commission merchant or as a leverage
transaction merchant whose activities require such registration;
(b) A person registered with the securities and exchange
commission as a broker-dealer whose activities require such
registration;
(c) A person affiliated with, and whose obligations and liabilities under the transaction are guaranteed by, a person
referred to in subdivision (a) or (b) of this section;
(d) A person who is a member of a contract market designated
by the commodity futures trading commission (or any clearinghouse
thereof);
(e) A financial institution; or
(f) A person registered under the laws of this state as a
securities broker-dealer whose activities require such
registration.
The exemption provided by this section three does not apply
to any transaction or activity which is prohibited by the
Commodity Exchange Act or CFTC Rule.
§32B-1-4. Exempt transactions.
(a) The prohibitions in section two of this article do not
apply to the following:
(1) An account, agreement or transaction within the
exclusive jurisdiction of the commodity futures trading
commission as granted under the Commodity Exchange Act;
(2) A commodity contract for the purchase of one or more
precious metals which requires, and under which the purchaser
receives, within twenty-eight calendar days from the payment in good funds of any portion of the purchase price, physical
delivery of the quantity of the precious metals purchased by the
payment: Provided, That for purposes of this paragraph, physical
delivery occurs if, within the twenty-eight day period. The
quantity of precious metals purchased by the payment is delivered
(whether in specifically segregated or fungible bulk form) into
the possession of a depository (other than the seller) which is
either:
(i) A financial institution;
(ii) A depository the warehouse receipts of which are
recognized for delivery purposes for any commodity on a contract
market designated by the commodity futures trading commission;
(iii) A storage facility licensed or regulated by the United
States or any agency thereof; or
(iv) A depository designated by the commissioner; and the
depository (or other person which itself qualifies as a
depository as aforesaid) or a qualified seller issues and the
purchaser receives, a certificate, document of title,
confirmation or other instrument evidencing that the quantity of
precious metals has been delivered to the depository and is being
and will continue to be held by the depository on the purchaser's behalf, free and clear of all liens and encumbrances, other than
liens of the purchaser, tax liens, liens agreed to by the
purchaser or liens of the depository for fees and expenses, which
have previously been disclosed to the purchaser;
(3) A commodity contract solely between persons engaged in
producing, processing, using commercially or handling as
merchants, each commodity subject to the contract, or any
by-product of the commodity; or
(4) A commodity contract under which the offeree or the
purchaser is a person referred to in section three of this
article, an insurance company, an investment company as defined
in the Investment Company Act of 1940, (or an employee pension
and profit sharing or benefit plan other than a self-employed
individual retirement plan, or individual retirement account).
(b) For the purposes of subdivision (2), subsection (a) of
this section, a qualified seller is a person who:
(1) Is a seller of precious metals and has a tangible net
worth of at least five million dollars (or has an affiliate who
has unconditionally guaranteed the obligations and liabilities of
the seller and the affiliate has a tangible net worth of at least
five million dollars);
(2) Has stored precious metals with one or more depositories
on behalf of customers for at least the previous three years;
(3) Prior to any offer, and annually thereafter, files with
the commissioner a sworn notice of intent to act as a qualified
seller under subdivision (2), subsection (a) of this section,
containing:
(A) The seller's name and address, names of its directors,
officers, controlling shareholders, partners, principals and
other controlling persons;
(B) The address of its principal place of business, state
and date of incorporation or organization, and the name and
address of seller's registered agent in this state;
(C) A statement that the seller (or a person affiliated with
the seller who has guaranteed the obligations and liabilities of
the seller) has a tangible net worth of at least five million
dollars;
(D) Depository information including: (i) The name and
address of the depository or depositories that the seller intends
to use; (ii) the name and address of each depository where the
seller has stored precious metals on behalf of customers for the
previous three years; and (iii) independent verification from each and every depository named in this paragraph that the seller
has in fact stored precious metals on behalf of the seller's
customers for the previous three years and a statement of total
deposits made during this period;
(E) Financial statements for the seller (or the person
affiliated with the seller who has guaranteed the obligations and
liabilities of the seller) for the past three years, audited by
an independent certified public accountant, together with the
accountant's report;
(F) A statement describing the details of all civil,
criminal or administrative proceedings currently pending or
adversely resolved against the seller or its directors, officers,
controlling shareholders, partners, principals or other
controlling persons during the past ten years including: (i)
Civil litigation and administrative proceedings involving
securities or commodities violations or fraud; (ii) criminal
proceedings; (iii) denials, suspensions or revocations of
securities or commodities, licenses or registrations; and (iv)
suspensions or expulsions from membership in, or associations
with, self-regulatory organizations registered under the
Securities Exchange Act of 1934, or the Commodities Exchange Act; or (v) a statement that there were no such proceedings;
(4) Notifies the commissioner within fifteen days of any
material changes in the information provided in the notice of
intent; and
(5) Annually furnishes to each purchaser for whom the seller
is then storing precious metals, and to the commissioner, a
report by an independent certified public accountant of the
accountant's examination of the seller's precious metals storage
program.
(c) The commissioner may, upon request by the seller, waive
any of the exemption requirements in subsection (b) of this
section, conditionally or unconditionally.
(d) The commissioner may, by order, deny, suspend, revoke or
place limitations on the authority to engage in business as a
qualified seller under the provisions of subdivision (2),
subsection (a) of this section, if the commissioner finds that
the order is in the public interest and that the person, the
person's officers, directors, partners, agents, servants or
employees, any person occupying a similar status or performing
similar functions, any person who directly or indirectly controls
or is controlled by the seller, or any of them, the seller's affiliates or subsidiaries:
(1) Has filed a notice of intention under the provisions of
subsection (c) of this section with the commissioner or the
designee of the commissioner which was incomplete in any material
respect or contained any statement which was, in light of the
circumstances under which it was made, false or misleading with
respect to any material fact;
(2) Has, within the last ten years, pled guilty or nolo
contendere to, or has been convicted of any crime indicating a
lack of fitness to engage in the investment commodity business;
(3) Has been permanently or temporarily enjoined by any
court of competent jurisdiction from engaging in, or continuing,
any conduct or practice which injunction indicates a lack of
fitness to engage in the investment commodities business;
(4) Is the subject of an order of the commissioner denying,
suspending or revoking the person's license as a securities
broker-dealer, sales representative or investment advisor;
(5) Is the subject of any of the following orders which are
currently effective and which were issued within the last five
years:
(A) An order by the securities agency or commissioner of another state, Canadian province or territory, the securities and
exchange commission, or the commodity futures trading commission,
entered after notice and opportunity for hearing, denying,
suspending or revoking the person's registration as a futures
commission merchant, commodity trading adviser, commodity pool
operator, securities broker-dealer, sales representative or
investment adviser or the substantial equivalent of those terms;
(B) Suspension or expulsion from membership in, or
association with, a self-regulatory organization registered under
the Securities Exchange Act of 1934 or the Commodity Exchange
Act;
(C) A United States postal service fraud order;
(D) A cease and desist order entered after notice and
opportunity of hearing by the commissioner or the securities
agency or commissioner of any other state, Canadian province or
territory, the securities and exchange commission, or the
commodity futures trading commission;
(E) An order entered by the commodity futures trading
commission denying, suspending or revoking registration under the
Commodity Exchange Act;
(6) Has engaged in an unethical or dishonest act or practice in the investment commodities or securities business; or
(7) Has failed reasonably to supervise sales representatives
or employees.
(e) If the public interest or the protection of investors so
requires, the commissioner may, by order, summarily deny or
suspend the exemption for a qualified seller. Upon the entry of
the order, the commissioner must promptly notify the person
claiming this status that an order has been entered and the
reasons for the order and that within thirty days after the
receipt of a written request the matter will be set for hearing.
The provisions of section ten, article two of this chapter apply
with respect to all subsequent proceedings.
(f) If the commissioner finds that any applicant or
qualified seller is no longer in existence or has ceased to do
business or is subject to an adjudication of mental incompetence
or to the control of a committee, conservator or guardian or
cannot be located after reasonable search, the commissioner may,
by order, deny or revoke the exemption for a qualified seller.
(g) The commissioner may issue rules or orders prescribing
the terms and conditions of all transactions and contracts
covered by the provisions of this chapter which are not within the exclusive jurisdiction of the commodity futures trading
commission as granted by the Commodity Exchange Act, exempting
and conditionally or unconditionally and otherwise implementing
the provisions of this chapter for the protection of purchasers
and sellers of commodities.
§32B-1-5. Unlawful commodity activities.
(a) A person may not engage in a trade or business or
otherwise act as a commodity merchant unless the person: (1) Is
registered or temporarily licensed with the commodity futures
trading commission for each activity constituting the person as
a commodity merchant and the registration or temporary license
has not expired, been suspended or revoked; or (2) is exempt from
registration by virtue of the Commodity Exchange Act or of a CFTC
rule.
(b) A board of trade must not trade, or provide a place for
the trading of, any commodity contract or commodity option
required to be traded on or subject to the rules of a contract
market designated by the commodity futures trading commission
unless the board of trade has been so designated for the
commodity contract or commodity option and the designation has
not been vacated, suspended or revoked.
§32B-1-6. Fraudulent conduct.
A person may not directly or indirectly:
(a) Cheat or defraud, or attempt to cheat or defraud any
other person or employ any device, scheme or artifice to defraud
any other person;
(b) Make any false report, enter any false record, or make
any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not
misleading;
(c) Engage in any transaction, act, practice or course of
business, including, without limitation, any form of advertising
or solicitation, which operates or would operate as a fraud or
deceit upon any person; or
(d) Misappropriate or convert the funds, security or
property of any other person in or in connection with the
purchase or sale of, the offer to sell, the offer to purchase,
the offer to enter into, or the entry into of, any commodity
contract or commodity option subject to the provisions of
subdivision (2), (3) or (4), subsection (a), section four of this
article.
§32B-1-7. Liability of principals, controlling persons and
others.
(a) The act, omission or failure of any official, agent or
other person acting for any individual, association, partnership,
corporation or trust within the scope of his or her employment or
office is considered the act, omission or failure of the
individual, association, partnership, corporation or trust, as
well as of such official, agent or other person.
(b) Every person who directly or indirectly controls another
person liable under any provision of this chapter, every partner,
officer or director of the other person, every person occupying
a similar status or performing similar functions, every employee
of such other person who materially aids in the violation is also
liable jointly and severally with and to the same extent as the
other person, unless the person who is also liable by virtue of
this provision sustains the burden of proof that he or she did
not know, and in exercise of reasonable care could not have
known, of the existence of the facts by reason of which the
liability is alleged to exist.
§32B-1-8. Securities laws unaffected.
Nothing in this chapter impairs, derogates or otherwise
affects the authority or powers of the commissioner under the West Virginia Uniform Securities Act, or the application of any
provision of chapter thirty-two of this code to any person or
transaction subject to its provisions.
§32B-1-9. Purpose.
This chapter may be construed and implemented to effectuate
its general purpose to protect investors, to prevent and
prosecute illegal and fraudulent schemes involving commodity
contracts and to maximize coordination with federal and other
states' laws and the administration and enforcement thereof.
This chapter is not intended to create any rights or remedies
upon which actions may be brought by private persons against
persons who violate the provisions of this chapter.
ARTICLE 2. ADMINISTRATION AND ENFORCEMENT.
§32B-2-1. Investigations.
(a) The commissioner may make investigations, within or
without this state, as it finds necessary or appropriate to:
(1) Determine whether any person has violated, or is about
to violate, any provision of this chapter or any rule or order of
the commissioner; or
(2) Aid in enforcement of this chapter.
(b) The commissioner may publish information concerning any violation of this chapter or any rule or order of the
commissioner.
(c) For purposes of any investigation or proceeding under
this chapter, the commissioner or any officer or employee
designated by rule or order, may administer oaths and
affirmations, subpoena witnesses, compel their attendance, take
evidence and require the production of any books, papers,
correspondence, memoranda, agreements or other documents or
records which the commissioner finds to be relevant or material
to the inquiry.
(d)(1) If a person does not give testimony or produce the
documents required by the commissioner or a designated employee
pursuant to an administrative subpoena, the commissioner or
designated employee may apply for a court order compelling
compliance with the subpoena or the giving of the required
testimony.
(2) The request for order of compliance may be addressed to
either:
(i) The Kanawha County circuit court located in the thirtieth
judicial circuit, Charleston, WV, or the circuit court for the
respective judicial circuit where service may be obtained on the person refusing to testify or produce, if the person is within
this state; or
(ii) The appropriate court of the state having jurisdiction
over the person refusing to testify or produce, if the person is
outside this state.
§32B-2-2. Enforcement of chapter.
(a) If the commissioner believes, whether or not based upon
an investigation conducted under the provisions of section one of
this article, 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 under the provisions of this
chapter, the commissioner may:
(1) Issue a cease and desist order;
(2) Issue an order imposing a civil penalty in amount which
may not exceed ten thousand dollars for any single violation or
one hundred thousand dollars for multiple violations in a single
proceeding or a series or related proceedings;
(3) Initiate any of the actions specified in subsection (b)
of this section; or
(4) Take disciplinary action against a licensed person as
specified in section eight, article three of this chapter.
(b) The commissioner may institute any of the following
actions in the appropriate courts of this state, or in the
appropriate courts of another state, in addition to any legal or
equitable remedies otherwise available:
(1) A declaratory judgment;
(2) An action for a prohibitory or mandatory injunction to
enjoin the violation and to ensure compliance with this chapter
or any rule or order of the commissioner;
(3) An action for disgorgement; or
(4) An action for appointment of a receiver or conservator
for the defendant or the defendant's assets; or
(5) An action to enjoin permanently any person from acting
as a commodity broker-dealer or a commodity sales representative,
as defined in subsection (a) or (b), section one of article three
of this chapter.
§32B-2-3. Power of court to grant relief.
(a)(1) Upon a proper showing by the commissioner that a
person has violated, or is about to violate, any provision of
this chapter or any rule or order of the commissioner, the
circuit court may grant appropriate legal or equitable remedies.
(2) Upon showing of violation of this chapter or a rule or order of the commissioner, the court, in addition to traditional
legal and equitable remedies, including temporary restraining
orders, permanent or temporary prohibitory or mandatory
injunctions, and writs of prohibition or mandamus, may grant the
following special remedies:
(i) Imposition of a civil penalty in amount which may not
exceed ten thousand dollars for any single violation or one
hundred thousand dollars for multiple violations in a single
proceeding or a series of related proceedings;
(ii) Disgorgement;
(iii) Declaratory judgment;
(iv) Restitution to investors wishing restitution; and
(v) Appointment of a receiver or conservator for the
defendant or the defendant's assets; and
(vi) An injunction permanently enjoining the defendant or
defendants from acting as a commodity broker-dealer or a
commodity sales representative, as defined in section one-a or
one-b of article three of this chapter.
(3) Appropriate remedies when the defendant is shown only
about to violate this chapter or a rule or order of the
commissioner shall be limited to:
(i) A temporary restraining order;
(ii) A temporary or permanent injunction;
(iii) A writ of prohibition or mandamus; or
(iv) An order appointing a receiver or conservator for the
defendant or the defendant's assets.
(b) The court may not require the commissioner to post a bond
in any official action under this chapter.
(c)(1) Upon a proper showing by the commissioner or
securities or commodity agency of another state that a person
(other than a government or governmental agency or
instrumentality) has violated, or is about to violate, any
provision of the commodity code of that state or any rule or
order of the commissioner or securities or commodity agency of
that state, the circuit court may grant appropriate legal and
equitable remedies.
(2) Upon showing of a violation of the securities or
commodity act of the foreign state or a rule or order of the
commissioner or securities or commodity agency of the foreign
state, the court, in addition to traditional legal or equitable
remedies including temporary restraining orders, permanent or
temporary prohibitory or mandatory injunctions and writs of prohibition or mandamus, may grant the following special
remedies:
(i) Disgorgement; and
(ii) Appointment of a receiver, conservator, or ancillary
receiver or conservator for the defendant or the defendant's
assets located in this state.
(3) Appropriate remedies when the defendant is shown only
about to violate the securities or commodity act of the foreign
state or a rule or order of the commissioner or securities or
commodity agency of the foreign state are limited to:
(i) A temporary restraining order;
(ii) A temporary or permanent injunction;
(iii) A writ of prohibition or mandamus; or
(iv) An order appointing a receiver, conservator or ancillary
receiver or conservator for the defendant or the defendant's
assets located in this state.
§32B-2-4. Criminal penalties.
(a) Any person who willfully violates:
(1) Any provision of this chapter; or
(2) Any rule or order of the commissioner under this chapter
shall, upon conviction, be fined not more than twenty thousand dollars or imprisoned as a state correctional facility more than
ten years, or both fined and imprisoned, for each violation.
(b) Any person convicted of violating a rule or order under
this chapter may be fined, but may not be imprisoned, if the
person proves he or she had no knowledge of the rule or order.
(c) The commissioner may refer such evidence as is available
concerning violations of this chapter or any rule or order of the
commissioner to the United States district attorney or the
attorney general for the state of West Virginia, who may, with or
without a reference from the commissioner, institute the
appropriate criminal proceedings under this chapter.
§32B-2-5. Administration of chapter.
(a) This chapter must be administered by the auditor of the
state of West Virginia.
(b) Neither the commissioner nor any employees of the
commissioner may use any information which is filed with or
obtained by the commissioner which is not public information for
personal gain or benefit, nor may the commissioner nor any
employees of the commissioner conduct any securities or commodity
dealings whatsoever based upon any such information, even though
public, if there has not been a sufficient period of time for the securities or commodity markets to assimilate the information.
(c)(1) Except as provided in subsection (2) of this section,
all information collected, assembled or maintained by the
commissioner is public information and is available for the
examination of the public as provided by the Freedom of
Information Act in chapter twenty-nine-b of this code.
(2) The following are exceptions to subdivision (1) above
which are considered to be confidential:
(A) Information obtained in private investigations pursuant
to section one of this article;
(B) Information made confidential by the provisions of the
Freedom of Information Act; and
(C) Information obtained from federal agencies which may not
be disclosed under federal law.
(3) The commissioner may disclose any information made
confidential under paragraph (A), subdivision (2), subsection (c)
of this section to persons identified in section six, subsection
(a) of this article.
(4) No provision of this chapter either creates or derogates
any privilege which exists at common law, by statute or otherwise
when any documentary or other evidence is sought under subpoena directed to the commissioner or any employee of the commissioner.
§32B-2-6. Cooperation with other agencies.
(a) To encourage uniform application and interpretation of
this chapter and securities regulation and enforcement in
general, the commissioner and the employees of the commissioner
may cooperate, including bearing the expense of the cooperation,
with the securities agencies or commissioner of another
jurisdiction, Canadian province or territory or any other
agencies administering this chapter, the commodity futures
trading commission, the securities and exchange commission, any
self-regulatory organization established under the Commodity
Exchange Act or the Securities Exchange Act of 1934, any national
or international organization of commodities or securities
officials or agencies and any governmental law-enforcement
agency.
(b) The cooperation authorized by subsection (a) of this
section includes, but need not be limited to, the following:
(1) Making joint examinations or investigations;
(2) Holding joint administrative hearings;
(3) Filing and prosecuting joint litigation;
(4) Sharing and exchanging personnel;
(5) Sharing and exchanging information and documents;
(6) Formulating and adopting mutual regulations, statements
of policy, guidelines, proposed statutory changes and releases;
and
(7) Issuing and enforcing subpoenas at the request of the
agency administering this chapter in another jurisdiction, the
securities agency of another jurisdiction, the commodity futures
trading commission or the securities and exchange commission if
the information sought would also be subject to lawful subpoena
for conduct occurring in this state.
§32B-2-7. General authority to adopt rules, forms and orders.
(a) In addition to specific authority granted elsewhere in
this chapter, the commissioner may make, amend and rescind rules,
forms and orders as are necessary to carry out the provisions of
this chapter. The rules or forms include, but need not be
limited to, the following:
(1) Rules defining any terms, whether or not used in this
chapter, insofar as the definitions are not inconsistent with the
provisions of this chapter.
(2) For the purpose of rules or forms, the commissioner may
classify commodities and commodity contracts, persons and matters within the commissioner's jurisdiction.
(b) Unless specifically provided in this chapter, no rule,
form or order may be adopted, amended or rescinded unless the
commissioner finds that the action is:
(1) Necessary or appropriate in the public interest or for
the protection of investors; and
(2) Consistent with the purposes fairly intended by the
policy and provisions of this chapter.
(c) All rules and forms of the commissioner must be
published.
(d) A provision of this chapter imposing any liability does
not apply to any act done or omitted in good faith in conformity
with a rule, order or form adopted by the commissioner,
notwithstanding that the rule, order or form may later be
amended, or rescinded or be determined by judicial or other
authority to be invalid for any reason.
§32B-2-8. Consent to service of process.
When a person, including a nonresident of this state, engages
in conduct prohibited or made actionable by the chapter or any
rule or order of the commissioner, the engaging in the conduct
constitutes the appointment of the commissioner as the person's attorney to receive service of any lawful process in a
noncriminal proceeding against the person, a successor or
personal representative, which grows out of that conduct and
which is brought under the chapter or any rule or order of the
commissioner with the same force and validity as if served
personally.
§32B-2-9. Scope of the chapter.
(a) Sections two, five and six of article one of this chapter
apply to persons who sell or offer to sell when:
(1) An offer to sell is made in this state; or
(2) An offer to buy is made and accepted in this state.
(b) Sections two, five and six of article one of this chapter
apply to persons who buy or offer to buy when:
(1) An offer to buy is made in this state; or
(2) An offer to sell is made and accepted in this state.
(c) For the purposes of this section, an offer to sell or to
buy is made in this state, whether or not either party is then
present in this state, when the offer:
(1) Originates from this state; or
(2) Is directed by the offeror to this state and received at
the place to which it is directed (or at any post office in this state in the case of a mailed offer).
(d) For the purposes of this section, an offer to buy or to
sell is accepted in this state when acceptance:
(1) Is communicated to the offeror in this state; and
(2) Has not previously been communicated to the offeror,
orally or in writing, outside this state; and acceptance is
communicated to the offeror in this state, whether or not either
party is then present in this state, when the offeree directs it
to the offeror in this state, reasonably believing the offeror to
be in this state and it is received at the place to which it is
directed (or at any post office in this state in the case of a
mailed acceptance).
(e) An offer to sell or to buy is not made in this state
when:
(1) The publisher circulates or there is circulated on his
or her behalf in this state any bona fide newspaper or other
publication of general, regular, and paid circulation which is
not published in this state, or which is published in this state
but has had more than two thirds of its circulation outside this
state during the past twelve months; or
(2) A radio or television program originating outside this state is received in this state.
§32B-2-10. Procedure for entry of an order.
(a) The commissioner may commence an administrative
proceeding under this chapter, by entering either a notice of
intent to do a contemplated act or a summary order. The notice
of intent or summary order may be entered without notice, without
opportunity for hearing, and need not be supported by findings of
fact or conclusions of law, but must be in writing.
(b) Upon entry of a notice of intent or summary order, the
commissioner must promptly notify all interested parties that the
notice or summary order has been entered and the reasons
therefor. If the proceeding is pursuant to a notice of intent,
the commissioner must inform all interested parties of the date,
time and place set for the hearing on the notice. If the
proceeding is pursuant to a summary order, the commissioner must
inform all interested parties that they have thirty business days
from the entry of the order to file a written request for a
hearing on the matter with the commissioner and that the hearing
will be scheduled to commence within thirty business days after
the receipt of the written request.
(c) If the proceeding is pursuant to a summary order, the commissioner, whether or not a written request for a hearing is
received from any interested party, may set the matter down for
hearing on the commissioner's own motion.
(d) If no hearing is requested and none is ordered by the
commissioner, the summary order will automatically become a final
order after thirty business days.
(e) If a hearing is requested or ordered, the commissioner,
after notice of, and opportunity for, hearing to all interested
persons, may modify or vacate the order or extend it until final
determination.
(f) No final order or order after hearing may be returned
without:
(1) Appropriate notice to all interested persons;
(2) Opportunity for hearing by all interested persons; and
(3) Entry of written findings of fact and conclusions of law.
Every hearing in an administrative proceeding under this
chapter must be public unless the commissioner grants a request
joined in by all the respondents that the hearing be conducted
privately.
§32B-2-11. Judicial review of orders.
(a) Any person aggrieved by a final order of the commissioner may obtain a review of the order in the Kanawha County circuit
court by filing in court, within sixty days after the entry of
the order, a written petition praying that the order be modified
or set aside, in whole or in part. A copy of the petition for
review must be served upon the commissioner.
(b) Upon the filing of a petition for review, except where
the taking of additional evidence is ordered by the court
pursuant to the provisions of subsection (e) or (f) of this
section, the court has exclusive jurisdiction of the matter, and
the commissioner may not modify or set aside the order, in whole
or part.
(c) The filing of a petition for review under the provisions
of subsection (a) of this section, does not, unless specifically
ordered by the court, operate as a stay of the commissioner's
order, and the commissioner may enforce or ask the court to
enforce the order pending the outcome of the review proceedings.
(d) Upon receipt of the petition for review, the commissioner
must certify and file in the court a copy of the order and the
transcript or record of the evidence upon which it was based. If
the order became final by operation of law under the provisions
of subsection (d), section ten of this article, the commissioner must certify and file in court the summary order and evidence of
its service upon the parties to it and an affidavit certifying
that no hearing has been held and the order became final
pursuant to the provisions of subsection (d), section ten of this
article.
(e) If either the aggrieved party or the commissioner applies
to the court for leave to adduce additional evidence, and shows
to the satisfaction of the court, that there were reasonable
grounds for failure to adduce the evidence in the hearing before
the commissioner or other good cause, the court may order the
additional evidence to be taken by the commissioner under such
conditions as the court considers proper.
(f) If new evidence is ordered taken by the court, the
commissioner may modify the findings and order by reason of the
additional evidence and shall file in the court the additional
evidence together with any modified or new findings or order.
(g) The court must review the petition based upon the
original record before the commissioner as amended under the
provisions of subsections (e) and (f) of this section. The
findings of the commissioner as to the facts, if supported by
competent, material and substantive evidence, are conclusive. Based upon this review, the court may affirm, modify, enforce or
set aside the order, in whole or in part.
(h) The judgment of the circuit court is subject to review
by the West Virginia supreme court of appeals.
§32B-2-12. Pleading exemptions.
It is not necessary to negate any of the exemptions of this
chapter in any complaint, information or indictment or any writ
or proceeding brought under this chapter; and the burden of proof
of any such exemption is upon the party claiming the same.
§32B-2-13. Affirmative defense.
It is a defense in any complaint, information, indictment,
any writ or proceeding brought under this chapter alleging a
violation of the provisions of section two, article one of this
chapter, based solely on the failure in an individual case to
make physical delivery within the applicable time period under
the provisions of subsection (e), section one or subdivision (2),
subsection (a), section four, article one of this chapter if:
(a) Failure to make physical delivery was due solely to
factors beyond the control of the seller, the seller's officers,
directors, partners, agents, servants or employees, every person
occupying a similar status or performing similar functions, every person who directly or indirectly controls or is controlled by
the seller, or any of them, the sellers affiliate's, subsidiaries
or successors; and
(b) Physical delivery was completed within a reasonable time
under the applicable circumstances.
ARTICLE 3. NOTICE FILING.
§32B-3-1. Definitions.
(a) "Commodity broker-dealer" means any person engaged in the
business of effecting transactions in commodity contracts or
commodity options, as defined in article one of this chapter, for
the account of others or for the person's own account.
(b) "Commodity sales representative" means any person
authorized to act and acting for a commodity broker-dealer in
effecting or attempting to effect a transaction in a commodity
contract or a commodity option.
(c) All commodity broker dealers and commodity sales
representatives must provide notice to the commissioner of
securities on a form prescribed by the commissioner of securities
that they are doing business in the sales, offers or other
nonexempt transactions involving the sales of commodities. All
notices must contain such information as the commissioner of
securities determines necessary or appropriate to facilitate the administration of this chapter.
(d) The notice does not constitute the granting of a license,
registration or other authorization to do business under this
chapter but is to be maintained as a compilation of those engaged
in commodities transactions in the state.
ARTICLE 4. SEVERABILITY AND SAVING PROVISIONS.
§32B-4-1. Severability of provisions.
If any provision of this chapter or the application thereof
to any person or circumstance is held invalid, the invalidity
does not affect other provisions or applications of the chapter
which can be given effect without the invalid provision or
application, and to this end the provisions of this chapter are
severable.
§32B-4-2. Saving provisions.
(a) Prior law exclusively governs all suits, actions,
prosecutions or proceedings which are pending or may be initiated
on the basis of facts or circumstances occurring before the
effective date of this chapter, except that no civil suit or
action may be maintained to enforce any liability under prior law
unless brought within any period of limitation which applied when
the cause of action accrued and in any event within three years
after the effective date of this chapter.
(b) All administrative orders applicable to this chapter
remain in effect so long as they would have remained in effect if
this chapter had not been enacted. They are considered to have
been filed, entered or imposed under this chapter, but are
governed by prior law.
(c) Prior law applies in respect of any offer or sale made
prior to the effective date of this chapter pursuant to an
offering begun in good faith before its effective date on the
basis of an exemption available under prior law. Fraudulent
transactions, or transactions in violation of the federal
commodities trading laws are expressly not exempted from the
effects of this chapter regardless of whether they were
undertaken prior to the effective date of this chapter.
(d) Judicial review of all administrative orders as to which
review proceedings have not been instituted by the effective date
of this chapter are governed by section eleven of this article,
except that no review proceeding may be instituted unless the
petition is filed within any period of limitation which applied
to a review proceeding when the order was entered and in any
event within sixty days after the effective date of this chapter.
NOTE: The purpose of this bill is to enable to the West
Virginia securities commission to comply with federal law
regarding commodities and establish jurisdiction over commodities
transactions in the state of West Virginia and provide for
enforcement and prosecutorial actions of violators of this
chapter.
This chapter is new; therefore, strike-throughs and
underscoring have been omitted.