H. B. 2968
(By Delegates Ennis and Facemyer)
[Introduced February 26, 1999; referred to the
Committee on the Judiciary then Finance.]
A BILL to repeal article four, chapter thirty-two of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended; and to enact in lieu thereof a new article four; to
amend and reenact section twelve, article two, chapter
fifteen of said code; and to amend and reenact sections two
hundred one, two hundred two, two hundred three and two
hundred four, article two, chapter thirty-two of said code,
all relating to providing that the state police are subject
to the call of the commissioner of securities to aid in
arresting persons; making it unlawful for a "viatical
settlement broker" from transacting business in the state
unless being registered under the uniform securities act
and, therefore, providing that "viatical settlement brokers"
are subject to all provisions related to registration under the act, including suspension, cancellation, application,
payment of fees, etc; providing that if a security is a
federal covered security it is legal to offer to sell;
providing definitions; providing exemptions from
registration by coordination under section three hundred
three, article three, chapter thirty-two; requiring filing
of sales and advertising literature with commissioner;
providing that it is unlawful to make misleading filings;
authorizing commissioner to employ assistants; directing
auditor to set up a special operating fund for the
securities commission; enumerating the mission of the
securities commissioner; empowering the commission and its
members to make warrantless and other arrests, and to detain
persons suspected of securities violations; providing for
the commission to work in tandem with other law-enforcement
authorities in detecting crimes and apprehending persons
suspected of the crimes, including alleged violations of
securities laws or ordinances of any municipality in the
state; authorizing commission to require submission of
affidavits by applicants for securities licenses; providing
members of securities commission may apprehend anyone
violating any provision of this chapter; authorizing
commission members to execute arrest and search warrants; providing commission members, in certain circumstances, have
full power to command police officers or able bodied
citizens to assist and aid in accomplishing the commission's
investigatory and prosecutorial functions; requiring an oath
for the commission members; providing for the disposition of
detainees of the commission by jailers and making it a
misdemeanor for jailers to fail or refuse to receive and
detain the prisoners; providing criminal offenses for
interference with officers or members of commissions and
giving false information, while providing penalties
therefor; making a crime for the unauthorized use of
commission uniforms, badges or insignias, or for the
impersonation of a member, and providing a penalty therefor;
creating the felony offense for bribing a member;
authorizing the commissioner to employ lawyers on an "ad
hoc" or full-time basis; allowing attorney general to
provide lawyers to assist commission; providing the
commissioner may authorize a member to employ the lawyer of
choice when charged with a crime that results from the
member's official activities; authorizing the commissioner
to gather statistics and hold public meetings, while
charging the commissioner with providing continuing legal
education for prosecutors and state police in investigation and prosecution of securities violations; empowering the
commissioner to conduct public or private investigations
within or outside the state; authorizing the commissioner to
publish information concerning any violation of the
securities act; authorizing the commissioner to administer
oaths, subpoena witnesses, compel the attendance of
witnesses, take evidence and require production of evidence;
providing circuit court of Kanawha County has contempt
powers to facilitate cooperation with the commission's
investigations; providing that no person can be excused from
attending, testifying and providing evidence, upon command
of the commissioner, even while asserting the fifth
amendment claim against self-incrimination; providing that
no person may be prosecuted on information gained when
compelled to testify; authorizing the commission and
commissioner to swear out warrants and providing immunity
from liability for damages that may arise for causing the
arrest of persons; providing for administrative assessments,
administrative reimbursements and other remedies;
authorizing fines of fifty thousand dollars against
individuals and ten million dollars against corporations for
violations; setting forth criteria to determine the
imposition of fines; authorizing the commissioner to seek injunctions against perceived unlawful activities; providing
criminal and civil penalties for violators; providing for
judicial review of orders; authorizing the commissioner to
rescind or amend rules, forms or orders, while providing for
the mandatory publication of forms and orders and requiring
all administrative proceedings by the commissioner are
public; addressing administrative files and opinions;
addressing the scope of the securities act and service of
process; allowing commission to issue warnings to the
public; authorizing commissioner to appoint "ad hoc" hearing
officers and providing for the compensation of the hearing
officers; providing additional duties of commission;
creating the securities advisory committee and setting
compensation to be paid to committee members; authorizing
commissioner to propose rules and to issue "emergency
rules"; and providing for the severability of provisions and
saving provisions.
Be it enacted by the Legislature of West Virginia:
That article four, chapter thirty-two of the code of West
Virginia, one thousand nine hundred thirty-one, as amended, be
repealed; and that a new article four be enacted in lieu thereof;
that section twelve, article two, chapter fifteen of said code be
amended and reenacted; and that sections two hundred one, two hundred two, two hundred three and two hundred four be amended
and reenacted, all to read as follows:
CHAPTER 15. PUBLIC SAFETY.
ARTICLE 2. WEST VIRGINIA STATE POLICE.
§15-2-12. Mission of the division; powers of superintendent,
officers and members; patrol of turnpike.
(a) The West Virginia division of public safety state police
shall have the mission of statewide enforcement of criminal and
traffic laws with emphasis on providing basic enforcement and
citizen protection from criminal depredation throughout the state
and maintaining the safety of the state's public streets, roads
and highways.
(b) The superintendent and each of the officers and members
of the division are hereby empowered:
(1) To make arrests anywhere within the state of any persons
charged with the violation of any law of this state, or of the
United States, and when a witness to the perpetration of any
offense or crime, or to the violation of any law of this state,
or of the United States, to make arrests without warrant; to
arrest and detain any persons suspected of the commission of any
felony or misdemeanor whenever a complaint is made and a warrant
is issued thereon for the arrest, and the person arrested shall
be immediately brought before the proper tribunal for examination and trial in the county where the offense for which the arrest
has been made was committed;
(2) To serve criminal process issued by any court or
magistrate anywhere within this state: Provided, That they may
not serve civil process; and
(3) To cooperate with local authorities in detecting crime
and in apprehending any person or persons engaged in or suspected
of the commission of any crime, misdemeanor or offense against
the law of this state, or of the United States, or of any
ordinance of any municipality in this state; and to take
affidavits in connection with any application to the division of
highways, division of motor vehicles and division of public
safety of West Virginia state police for any license, permit or
certificate that may be lawfully issued by these divisions of
state government.
(c) Members of the division of public safety West Virginia
state police are hereby designated as forest patrolmen and game
and fish wardens throughout the state to do and perform any
duties and exercise any powers of forest patrolmen and game and
fish wardens, and may apprehend and bring before any court or
magistrate having jurisdiction of these matters, anyone violating
any of the provisions of chapters twenty, sixty and sixty-one of
this code. The division of public safety West Virginia state police is at any time subject to the call of the West Virginia
alcohol beverage control commissioner to aid in apprehending any
person violating any of the provisions of chapter sixty of this
code; and the commissioner of securities to aid in the
apprehending of any person violating chapter thirty-two and any
other chapter of this code administered by the state auditor.
They shall serve and execute warrants for the arrest of any
person and warrants for the search of any premises issued by any
properly constituted authority, and shall exercise all of the
powers conferred by law upon a sheriff. They may not serve any
civil process or exercise any of the powers of such officer in
civil matters.
(d) Any member of the division of public safety West
Virginia state police knowing or having reason to believe that
any person has violated the law may make complaint in writing
before any court or officer having jurisdiction and procure a
warrant for the offender, execute the warrant and bring the
person before the proper tribunal having jurisdiction. The
member shall make return on all warrants to the tribunals and his
or her official title shall be "member of the division of public
safety West Virginia state police." Members of the division of
public safety West Virginia state police may execute any summons
or process issued by any tribunal having jurisdiction requiring the attendance of any person as a witness before the tribunal and
make return thereon as provided by law. Any return by a member
of the division of public safety West Virginia state police
showing the manner of executing the warrant or process has the
same force and effect as if made by a sheriff.
(e) Each member of the division of public safety West
Virginia state police, when called by the sheriff of any county,
or when directed by the governor by proclamation, has full power
and authority within the county, or within the territory defined
by the governor, to direct and command absolutely the assistance
of any sheriff, deputy sheriff, chief of police, policeman, game
and fish warden and peace officer of the state, or of any county
or municipality therein, or of any able-bodied citizen of the
United States, to assist and aid in accomplishing the purposes
expressed in this article. When called, any officer or person
is, during the time his or her assistance is required, for all
purposes a member of the division of public safety West Virginia
state police and subject to all the provisions of this article.
(f) The superintendent may also assign members of the
division to perform police duties on any turnpike or toll road,
or any section of any turnpike or toll road, operated by the West
Virginia parkways, economic development and tourism authority:
Provided, That the authority shall reimburse the division of public safety West Virginia state police for salaries paid to the
members and shall either pay directly or reimburse the division
for all other expenses of the group of members in accordance with
actual or estimated costs determined by the superintendent.
(g) The division of public safety West Virginia state police
may develop proposals for a comprehensive county or multicounty
plan on the implementation of an enhanced emergency service
telephone system and may cause a public meeting on the proposals,
all as set forth in section six-a, article six, chapter
twenty-four of this code.
(h) The superintendent may also assign members of the
division to administer tests for the issuance of commercial
drivers' licenses, operator and junior operator licenses as
provided for in section seven, article two, chapter seventeen-b
of this code: Provided, That the division of motor vehicles
shall reimburse the division of public safety West Virginia state
police for salaries and employee benefits paid to the members,
and shall either pay directly or reimburse the division for all
other expenses of the group of members in accordance with actual
costs determined by the superintendent.
(i) The superintendent shall be reimbursed by the division
of motor vehicles for salaries and employee benefits paid to
members of the division of public safety West Virginia state police and shall either be paid directly or reimbursed by the
division of motor vehicles for all other expenses of the group of
members in accordance with actual costs determined by the
superintendent, for services performed by the members relating to
the duties and obligations of the division of motor vehicles set
forth in chapters seventeen, seventeen-a, seventeen-b,
seventeen-c and seventeen-d of this code.
(j) By the first day of July, one thousand nine hundred
ninety-three, the superintendent shall establish a network to
implement reports of the disappearance of children by local
law-enforcement agencies to local school division superintendents
and the state registrar of vital statistics. The network shall
be designed to establish cooperative arrangements between local
law-enforcement agencies and local school divisions concerning
reports of missing children and notices to law-enforcement
agencies of requests for copies of the cumulative records and
birth certificates of missing children. The network shall also
establish a mechanism for reporting the identities of all missing
children to the state registrar of vital statistics.
(k) The superintendent may at his or her discretion and upon
the written request of the West Virginia alcohol beverage control
commissioner assist the commissioner in the coordination and
enforcement of article sixteen, chapter eleven of this code and chapter sixty of this code.
(l) Notwithstanding the provisions of article one-a, chapter
twenty of this code, the superintendent of the division of public
safety West Virginia state police may sell any surplus real
property to which the division of public safety West Virginia
state police or its predecessors retain title, and deposit the
net proceeds into a special revenue account to be utilized for
the purchase of additional real property and for repairs to or
construction of detachment offices or other facilities required
by the division of public safety West Virginia state police.
There is hereby created a special revolving fund in the state
treasury which shall be designated as the "surplus real property
proceeds fund". The fund shall consist of all money received
from the sale of surplus real property owned by the division of
public safety West Virginia state police. Moneys deposited in
the fund shall only be available for expenditure upon
appropriation by the Legislature: Provided, That amounts
collected which are found from time to time to exceed the funds
needed for the purposes set forth in this subsection may be
transferred to other accounts or funds and redesignated for other
purposes by appropriation of the Legislature.
(m) Notwithstanding any other provision of this code, the
agency for surplus property is hereby empowered to transfer funds generated from the sale of vehicles, other equipment and
commodities belonging to the division of public safety West
Virginia state police to a special revenue account within the
division of public safety West Virginia state police entitled the
division of public safety West Virginia state police surplus
transfer account. Moneys deposited in the fund shall only be
available for expenditure upon appropriation by the Legislature:
Provided, That amounts collected which are found from time to
time to exceed the funds needed for the purposes set forth in
this subsection may be transferred to other accounts or funds and
redesignated for other purposes by appropriation of the
Legislature. Any funds transferred to this account may be
utilized by the superintendent to defray the cost of normal
operating needs of the division.
ARTICLE 2. REGISTRATION OF BROKER-DEALERS AND AGENTS;
REGISTRATION AND NOTICE FILING FOR INVESTMENT
ADVISERS.
§32-2-201. Registration requirement.
(a) It is unlawful for any person to transact business in
this state as a broker-dealer or agent, or viatical settlement
broker unless he or she is registered under this chapter.
(b) It is unlawful for any broker-dealer, or issuer, or
viatical settlement broker to employ an agent unless the agent is registered. The registration of an agent is not effective during
any period when he or she is not associated with a particular
broker-dealer registered under this chapter or a particular
issuer. When an agent begins or terminates a connection with a
broker-dealer or issuer, or begins or terminates those activities
which make him or her an agent, the agent as well as the
broker-dealer or issuer shall promptly notify the commissioner.
(c) It is unlawful for any person to transact business in
this state as an investment adviser unless: (1) He or she is so
registered under this chapter; (2) he or she is registered as a
broker-dealer or viatical settlement broker without the
imposition of a condition under subdivision (5), subsection (b),
section two hundred four of this article; (3) he or she is a
federal covered adviser except that, until the tenth day of
October, one thousand nine hundred ninety-nine, a federal covered
adviser for which a nonpayment or underpayment of a fee has not
been promptly remedied following written notification to the
adviser of such nonpayment or underpayment shall be required to
register under this article; or (4) he or she has no place of
business in this state and: (A) His or her only clients in this
state are investment companies as defined in the Investment
Company Act of 1940, other investment advisers, federal covered
advisers, broker-dealers, banks, trust companies, savings and loan associations, insurance companies, employee benefit plans
with assets of not less than one million dollars, and
governmental agencies or instrumentalities, whether acting for
themselves or as trustees with investment control, or other
institutional investors as are designated by rule or order of the
commissioner; or (B) during any period of twelve consecutive
months he or she does not have more than five clients who are
residents of this state, other than those specified in this
subsection, whether or not he or she or any of the clients who
are residents of this state is then present in the state.
(d) Every registration or notice filing expires one year
from its effective date unless renewed. The commissioner by rule
or order may prepare an initial schedule for renewals of
registrations or notice filings so that subsequent renewals of
registrations or notice filings effective on the effective date
of this chapter may be staggered by calendar months. For this
purpose the commissioner by rule may reduce the registration or
notice filing fee proportionately.
(e) It is unlawful for any:
(1) Person required to be registered as an investment
adviser under this article to employ an investment adviser
representative unless the investment adviser representative is
registered under this article: Provided, That the registration of an investment adviser representative is not effective during
any period when he or she is not employed by an investment
adviser registered under this article; or
(2) Federal covered adviser to employ, supervise, or
associate with an investment adviser representative having a
place of business located in this state, unless such investment
adviser representative is registered under this article, or is
exempt from registration. When an investment adviser
representative begins or terminates employment with an investment
adviser, the investment adviser (in the case of 210 (f) (i)), or
the investment adviser representative (in the case of 201 (f)
(ii)), shall promptly notify the commissioner.
(f) Except with respect to advisers whose only clients are
those described in subdivision (4), subsection (c) of this
section, it is unlawful for any federal covered adviser to
conduct advisory business in this state unless such person
complies with the provisions of subsection (b), section two
hundred two of this article.
§32-2-202. Registration and notice filing procedure.
(a) A broker-dealer, viatical settlement broker, agent or
investment adviser may obtain an 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 matters such 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 and 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) subject to the limitations of
§15(h)(1) of the Securities Exchange Act of 1934, 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
the 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 he or she may by order defer the effective
date until noon of the thirtieth day after the filing of any
amendment to an application. 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. Registration of an investment
adviser automatically constitutes registration of any investment
adviser representative who is a partner, officer, or director or
a person occupying a similar status or performing similar
functions as designated by the investment adviser in writing to
the commissioner and approved in writing by the commissioner.
(b) Except with respect to federal covered advisers whose
only clients are those described in paragraph (A), subdivision
(4), subsection (c), section two hundred one of this article, a
federal covered adviser shall file with the commissioner, prior
to acting as a federal covered adviser in this state, such
documents as have been filed with the securities and exchange
commissioner as the commissioner, by rule or order, may require along with notice filing fees under subsection (c) of this
section.
(c) Every applicant for initial or renewal registration
shall pay a filing fee of two hundred fifty dollars in the case
of a broker-dealer, viatical settlement broker and the agent of
an issuer, fifty-five dollars in the case of an agent, one
hundred seventy dollars in the case of an investment adviser, and
fifty dollars for each investment advisor representative. When
an application is denied or withdrawn, the commissioner shall
retain all of the fee.
(d) A registered broker-dealer, viatical settlement broker
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.
(e) The commissioner may, by rule or order, require a
minimum capital for registered broker-dealers and viatical
settlement brokers, subject to the limitations of section fifteen
of the Securities Exchange Act of 1934, and establish minimum
financial requirements for investment advisers, subject to the
limitations of section 222 of the Investment Advisers Act of
1940, which may include different requirements for those
investment advisers who maintain custody of clients' funds or securities or who have discretionary authority over same and
those investment advisers who do not.
(f) The commissioner may, by rule or order, require
registered broker-dealers, viatical settlement brokers, agents
and investment advisers who have custody of or discretionary
authority over client funds or securities, to post surety bonds
in amounts as the commissioner may prescribe, by rule or order,
subject to the limitations of section fifteen of the Securities
Exchange Act of 1934 (for broker-dealers) and section 222 of the
Investment Advisers Act of 1940 (for investment advisers), up to
twenty-five 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, or, in the case of an investment
adviser, whose minimum financial requirements, which may be
defined by rule, exceeds the amounts required by the
commissioner. Every bond shall provide for suit thereon by any
person who has a cause of action under section four hundred nine,
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 the time limitations of subsection (f), section four hundred nine, article four of this chapter.
(g) Every applicant, whether registered under this chapter
or not, shall pay a fifty-dollar fee for each name or address
change.
(h) Every broker-dealer, viatical settlement broker, federal
covered advisor and investment advisor registered under this
chapter shall pay an annual fifty-dollar fee for each branch
office located in West Virginia.
(i) Each agent, federal covered advisor, federal covered
representative, representative and associated person of a
broker-dealer, viatical settlement broker or investment advisor
when applying for an initial license under section two hundred
two of this article or changing employers shall pay a compliance
assessment of twenty-five dollars. Each agent, representative
and associated person, when applying for a renewal license under
section two hundred two of this article, shall pay a compliance
assessment of ten dollars.
§32-2-203. Postregistration provisions.
(a) Every registered broker-dealer, viatical settlement
broker, and investment adviser shall make and keep such accounts,
correspondence, memoranda, papers, books and other records as the
commissioner prescribes by rule or order, except as provided by
section fifteen of the Securities Exchange Act of 1934 (in the case of a broker-dealer) and section 222 of the Investment
Advisers Act of 1940 (in the case of an investment adviser). All
records so required, with respect to an investment adviser, shall
be preserved for three years unless the commissioner prescribes
by rule or order otherwise for particular types of records.
(b) With respect to investment advisers, the commissioner
may require that certain information be furnished or disseminated
as necessary or appropriate in the public interest or for the
protection of investors and advisory clients. To the extent
determined by the commissioner, in his or her discretion,
information furnished to clients or prospective clients of an
investment adviser that would be in compliance with the
Investment Advisers Act of 1940 and the rules thereunder may be
used in whole or partial satisfaction of this requirement.
(c) Every registered broker-dealer, viatical settlement
broker, and investment advisor shall file such financial reports
as the commissioner may prescribe by rule or order, except as
provided by section fifteen of the Securities Exchange Act of
1934 (in the case of a broker-dealer) and section 222 of the
Investment Advisers Act of 1940 (in the case of an investment
adviser).
(d) If the information contained in any document filed with
the commissioner is or becomes inaccurate or incomplete in any material respect, the registrant or federal covered adviser shall
promptly file a correcting amendment with the commissioner.
(e) All the records referred to in subsection (a) of this
section are subject at any time or from time to time to such
reasonable periodic, special or other examinations by
representatives of the commissioner, within or without this
state, as the commissioner deems necessary or appropriate in the
public interest or for the protection of investors. For the
purpose of avoiding unnecessary duplication of examinations, the
commissioner, insofar as he or she deems it practicable in
administering this subsection, may cooperate with the securities
administrators of other states, the securities and exchange
commission, and any national securities exchange or national
securities association registered under the Securities Exchange
Act of 1934.
§32-2-204. Denial, revocation, suspension, cancellation and
withdrawal of registration.
(a) The commissioner may by order deny, suspend or revoke
any registration if he or she finds: (1) That the order is in
the public interest; and (2) that the applicant or registrant or,
in the case of a broker-dealer, viatical settlement broker or
investment adviser, 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,
viatical settlement broker, or investment adviser:
(A) Has filed an application for registration which as of
its effective date, or as of any date after filing in the case of
an order denying effectiveness, 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;
(B) Has willfully violated or willfully failed to comply
with any provision of this chapter or a predecessor act or any
rule or order under this chapter or a predecessor act;
(C) Has been convicted, within the past ten years, of any
misdemeanor involving a security or any aspect of the securities
business, or any felony;
(D) Is permanently or temporarily enjoined by any court of
competent jurisdiction from engaging in or continuing any conduct
or practice involving any aspect of the securities business;
(E) Is the subject of an order of the commissioner denying,
suspending or revoking registration as a broker-dealer, agent or
investment adviser;
(F) Is the subject of an order entered within the past five
years by the securities administrator of any other state or by
the securities and exchange commission denying or revoking registration as a broker-dealer, agent or investment adviser, or
the substantial equivalent of those terms as defined in this
chapter, or is the subject of an order of the securities and
exchange commission suspending or expelling him or her from a
national securities exchange or national securities association
registered under the Securities Exchange Act of 1934, or is the
subject of a United States post-office-fraud order; but (i) the
commissioner may not institute a revocation or suspension
proceeding under subdivision (F) more than one year from the date
of the order relied on, and (ii) he or she may not enter an order
under subdivision (F) on the basis of an order under another
state act unless that order was based on facts which would
currently constitute a ground for an order under this section;
(G) Has engaged in dishonest or unethical practices in the
securities business;
(H) Is insolvent, either in the sense that his or her
liabilities exceed his or her assets or in the sense that he or
she cannot meet his or her obligations as they mature; but the
commissioner may not enter an order against a broker-dealer,
viatical settlement broker or investment adviser under this
subdivision without a finding of insolvency as to the
broker-dealer, viatical settlement broker or investment adviser;
or
(I) Is not qualified on the basis of such factors as
training, experience and knowledge of the securities business,
except as otherwise provided in subsection (b).
The commissioner may by order deny, suspend or revoke any
registration if he or she finds: (1) That the order is in the
public interest; and (2) that the applicant or registrant:
(J) Has failed reasonably to supervise his or her agents if
he or she is a broker-dealer or his or her employees if he or she
is an investment adviser; or
(K) Has failed to pay the proper filing fee; but the
commissioner may enter only a denial order under this
subdivision, and he or she shall vacate any such order when the
deficiency has been corrected.
The commissioner may not institute a suspension or
revocation proceeding on the basis of a fact or transaction known
to him or her when registration became effective unless the
proceeding is instituted within the next thirty days.
(b) The following provisions govern the application of
section 204(a) (2) (I):
(1) The commissioner may not enter an order against a
broker-dealer or viatical settlement broker on the basis of the
lack of qualification of any person other than: (A) The
broker-dealer or viatical settlement broker himself or herself if he or she is an individual; or (B) an agent of the broker-dealer
or viatical settlement broker.
(2) The commissioner may not enter an order against an
investment adviser on the basis of the lack of qualification of
any person other than: (A) The investment adviser himself or
herself if he or she is an individual; or (B) any other person
who represents the investment adviser in doing any of the acts
which may make him or her an investment adviser.
(3) The commissioner may not enter an order solely on the
basis of lack of experience if the applicant or registrant is
qualified by training or knowledge or both.
(4) The commissioner shall consider that an agent who will
work under the supervision of a registered broker-dealer need not
have the same qualifications as a broker-dealer.
(5) The commissioner shall consider that an investment
adviser is not necessarily qualified solely on the basis of
experience as a broker-dealer, viatical settlement broker or
agent. When he or she finds that an applicant for initial or
renewal registration as a broker-dealer or viatical settlement
broker is not qualified as an investment adviser, he or she may
by order condition the applicant's registration as a
broker-dealer or viatical settlement broker upon his or her not
transacting business in this state as an investment adviser.
(6) The commissioner may by rule provide for an examination,
which may be written or oral or both, to be taken by any class of
or all applicants, as well as persons who represent or will
represent an investment adviser in doing any of the acts which
make him or her an investment adviser.
(c) The commissioner may by order summarily postpone or
suspend registration pending final determination of any
proceeding under this section. Upon the entry of the order, the
commissioner shall promptly notify the applicant or registrant,
as well as the employer or prospective employer if the applicant
or registrant is an agent, that it has been entered and of the
reasons therefor and that within fifteen days after the receipt
of a written request the matter will be set down for hearing. If
no hearing is requested and none is ordered by the commissioner,
the order will remain in effect until it is modified or vacated
by the commissioner. If a hearing is requested or ordered, the
commissioner, after notice of and opportunity for hearing, may
modify or vacate the order or extend it until final
determination.
(d) If the commissioner finds that any registrant or
applicant for registration is no longer in existence or has
ceased to do business as a broker-dealer, viatical settlement
broker, agent or investment adviser, 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 cancel the
registration or application.
(e) Withdrawal from registration as a broker-dealer,
viatical settlement broker, agent or investment adviser becomes
effective thirty days after receipt of an application to withdraw
or within such shorter period of time as the commissioner may
determine, unless a revocation or suspension proceeding is
pending when the application is filed or a proceeding to revoke
or suspend or to impose conditions upon the withdrawal is
instituted within thirty days after the application is filed. If
a proceeding is pending or instituted, withdrawal becomes
effective at such time and upon such conditions as the
commissioner by order determines. If no proceeding is pending or
instituted and withdrawal automatically becomes effective, the
commissioner may nevertheless institute a revocation or
suspension proceeding under section 204(a) (2) (B) within one
year after withdrawal became effective and enter a revocation or
suspension order as of the last date on which registration was
effective.
(f) No order may be entered under any part of this section
except the first sentence of subsection (c) without: (1) Appropriate prior notice to the applicant or registrant (as well
as the employer or prospective employer if the applicant or
registrant is an agent); (2) opportunity for hearing; and (3)
written findings of fact and conclusions of law.
ARTICLE 4. GENERAL PROVISIONS.
§32-4-401. Definitions.
When used in this chapter, unless the context otherwise
requires:
(a) "Commissioner" means the auditor of the state of West
Virginia.
(b) "Agent" means any individual other than a broker-dealer
or viatical settlement broker who represents a broker-dealer,
viatical settlement broker or issuer in effecting or attempting
to effect purchases or sales of securities. "Agent" does not
include an individual who represents an issuer in: (1) Effecting
transactions in a security exempted by subdivision (1), (2), (3),
(10) or (11) of subsection (a), section four hundred two of this
article; (2) effecting transactions exempted by subsection (b),
section four hundred two of this article; (3) effecting
transactions in a covered security as described in section
18(b)(3) and section 18(b)(4)(d) of the Securities Act of 1933;
(4) 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 (5) 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, viatical settlement broker or
issuer, or a person occupying a similar status or performing
similar functions, is an agent only if he or she otherwise comes
within this definition.
(c)
"Applicant" means a person, natural or otherwise,
executing or submitting an application for registration.
(d) "Broker-dealer" means any person engaged in the business
of effecting transactions in securities for the account of others
or for his or her 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 or she 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 consecutive months he or she does not direct more than fifteen
offers to sell or buy into this state in any manner to persons
other than those specified in clause (A), whether or not the
offeror or any of the offerees is then present in this state.
(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) "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
advisor" under section two hundred two-a (11) of the Investment
Advisers Act of 1940.
(h) "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" also includes
financial planners and other persons who, as an integral
component of other financially related services, provide the
foregoing investment advisory services to others for compensation and as part of a business or who hold themselves out as providing
the foregoing investment advisory services to others for
compensation. "Investment adviser" does not include: (1) A
bank, savings institution or trust company; (2) a lawyer,
accountant, engineer or teacher whose performance of those
services is solely incidental to the practice of his or her
profession; (3) a broker-dealer whose performance of these
services is solely incidental to the conduct of his or her
business as a broker-dealer and who receives no special
compensation for them; (4) a publisher, employee or columnist of
a newspaper, news magazine or business or financial publication,
or an owner, operator, producer, or employee of a cable, radio,
or television network, station, or production facility if, in
either case, the financial or business news published or
disseminated is made available to the general public and the
content does not consist of rendering advice on the basis of the
specific investment situation of each client; (5) a person whose
advice, analyses or reports relate only to securities exempted by
subdivision (1), subsection (a), section four hundred two of this
article; (6) a person who has no place of business in this state
if: (A) His or her only clients in this state are other
investment advisers, broker-dealers, 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 consecutive months
he or she does not have more than five clients who are residents
of this state other than those specified in clause (A), whether
or not he or she or any of the persons to whom the communications
are directed is then present in this state; (7) an investment
adviser representative; (8) a "federal covered adviser"; or (9)
such other persons not within the intent of this paragraph as the
commissioner may by rule or order designate.
(i) "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 including clerical
or ministerial personnel, 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 unless such person is
registered as an agent pursuant to this article; or (5)
supervises employees who perform any of the foregoing unless such
person is registered as an agent pursuant to this article.
(j) "Issuer" means any person who issues or proposes to
issue any security, creates a fractional or pooled interest in a
viatical settlement contract for the purpose of sale, 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."
(k) "Nonissuer" means not, for the benefit of the issuer.
(l) "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.
(m)
"Registrant" means an applicant for whom a
registration has been declared effective by the commission.
(n) "Sale" or "sell" includes every contract of sale of,
contract to sell, or disposition of, a security or interest in a
security or viatical for value.
(o) "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 or viatical for value.
(1) 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.
(2) A purported gift of assessable stock is considered to
involve an offer and sale.
(3) 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.
(4) The terms defined in this subdivision 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.
(p) "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 the effective date of this chapter.
The National Securities Markets Improvement Act of 1996 ("NSMIA")
means the federal statute which makes certain amendments to the
Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Investment Advisers Act
of 1940.
(q) "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; viatical settlement contracts; 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 money
either in a lump sum or periodically for life or some other
specified period.
(r) "Federal covered security" means any security that is a
covered security under section 18(b) of the Securities Act of
1933, as amended by the National Securities Markets Improvement
Act of 1996, or rules promulgated thereunder.
(s) "State" means any state, territory or possession of the
United States, the District of Columbia and Puerto Rico.
(t) "Viatical settlement broker" means persons (other than
licensed broker-dealers) engaged in the business of: (1) Selling
viatical settlement contracts, either as issuer, agent or
principal; or (2) accepting funds from a person or persons for
investment in viatical settlement contracts.
(u) "Viatical settlement contract" means an agreement for
the purchase, assignment, transfer or sale of any portion of the
death benefit or ownership of either a life insurance policy or
a certificate of insurance.
§32-4-402. Exemptions.
(a) The following securities are exempt from section three
hundred one, article three of this chapter and section four
hundred three of this article:
(1) Any security (including a revenue obligation) issued or
guaranteed by the United States, any state, any political
subdivision of a state, or any agency or corporate or other
instrumentality of one or more of the foregoing; or any
certificate of deposit for any of the foregoing;
(2) Any security issued or guaranteed by Canada, any
Canadian province, any political subdivision of any such
province, any agency or corporate or other instrumentality of one or more of the foregoing, or any other foreign government with
which the United States currently maintains diplomatic relations,
if the security is recognized as a valid obligation by the issuer
or guarantor;
(3) Any security issued by and representing an interest in
or a debt of, or guaranteed by, any bank organized under the laws
of the United States, or any bank, savings institution or trust
company organized and supervised under the laws of any state;
(4) Any security issued by and representing an interest in
or a debt of, or guaranteed by, any federal savings and loan
association, or any building and loan or similar association
organized under the laws of any state and authorized to do
business in this state;
(5) Any security issued by and representing an interest in
or a debt of, or guaranteed by, any insurance company organized
under the laws of any state and authorized to do business in this
state;
(6) Any security issued or guaranteed by any federal credit
union or any credit union, industrial loan association or similar
association organized and supervised under the laws of this
state;
(7) Any security issued or guaranteed by any railroad, other
common carrier, public utility or holding company which is: (A) Subject to the jurisdiction of the interstate commerce
commission; (B) a registered holding company under the Public
Utility Holding Company Act of 1935, or a subsidiary of such a
company within the meaning of that act; (C) regulated in respect
of its rates and charges by a governmental authority of the
United States or any state; or (D) regulated in respect of the
issuance or guarantee of the security by a governmental authority
of the United States, any state, Canada, or any Canadian
province;
(8) Any security listed or approved for listing upon notice
of issuance on the New York Stock Exchange, the American Stock
Exchange, or the Midwest Stock Exchange, any other stock exchange
approved by the commissioner, the National Association of
Securities Dealers Automated Quotation/National Market System
(NASDAQ/NMS), or any other market system approved by the
commissioner, any other security of the same issuer which is of
senior or substantially equal rank, any security called for by
subscription rights or warrants so listed or approved, or any
warrant or right to purchase or subscribe to any of the
foregoing, except that the commissioner may adopt and promulgate
rules pursuant to chapter twenty-nine-a of this code which, after
notice to such exchange or market system and an opportunity to be
heard, remove any such exchange or market system from this exemption if the commissioner finds that the listing requirements
or market surveillance of such exchange or market system are such
that the continued availability of such exemption for such
exchange or market system is not in the public interest and that
removal is necessary for the protection of investors;
(9) Any security issued by any person organized and operated
not for private profit but exclusively for religious,
educational, benevolent, charitable, fraternal, social, athletic
or reformatory purposes, or as a chamber of commerce or trade or
professional association, and no part of the net earnings of
which inures to the benefit of any person, private stockholder or
individual;
(10) Any commercial paper which arises out of a current
transaction or the proceeds of which have been or are to be used
for current transactions, and which evidences an obligation to
pay cash within twelve months of the date of issuance, exclusive
of days of grace, or any renewal of such paper which is likewise
limited, or any guarantee of such paper or of any such renewal;
(11) Any investment contract issued in connection with an
employees' stock purchase, savings, pension, profit-sharing or
similar benefit plan if the commissioner is notified in writing
thirty days before the inception of the plan or, with respect to
plans which are in effect on the effective date of this chapter, within sixty days thereafter, or within thirty days before they
are reopened if they are closed on the effective date of this
chapter;
(12) Any security issued by an agricultural cooperative
association operating in this state and organized under article
four, chapter nineteen of this code, or by a foreign cooperative
association organized under the laws of another state and duly
qualified to transact business in this state.
(b) The following transactions are exempt from sections 301
and 403:
(1) Any isolated nonissuer transaction, whether effected
through a broker-dealer or not;
(2) Any nonissuer distribution of an outstanding security
if: (A) A recognized securities manual contains the names of the
issuer's officers and directors, a balance sheet of the issuer as
of a date within eighteen months, and a profit and loss statement
for either the fiscal year preceding that date or the most recent
year of operations; or (B) the security has a fixed maturity or
a fixed interest or dividend provision and there has been no
default during the current fiscal year or within the three
preceding fiscal years, or during the existence of the issuer and
any predecessors if less than three years, in the payment of
principal, interest or dividends on the security;
(3) Any nonissuer transaction effected by or through a
registered broker-dealer pursuant to an unsolicited order or
offer to buy; but the commissioner may by rule require that the
customer acknowledge upon a specified form that the sale was
unsolicited, and that a signed copy of each such form be
preserved by the broker-dealer for a specified period;
(4) Any transaction between the issuer or other person on
whose behalf the offering is made and an underwriter, or among
underwriters;
(5) Any transaction in a bond or other evidence of
indebtedness secured by a real or chattel mortgage or deed of
trust, or by an agreement for the sale of real estate or
chattels, if the entire mortgage, deed of trust, or agreement,
together with all the bonds or other evidences of indebtedness
secured thereby, is offered and sold as a unit;
(6) Any transaction by an executor, administrator, sheriff,
marshal, constable, receiver, trustee in bankruptcy, guardian or
conservator, and any transaction constituting a judicial sale;
(7) Any transaction executed by a bona fide pledgee without
any purpose of evading this chapter;
(8) Any offer or sale to a bank, savings institution, trust
company, insurance company, investment company as defined in the
Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional buyer, or to a
broker-dealer, whether the purchaser is acting for itself or in
some fiduciary capacity;
(9) Any transaction pursuant to an offer directed by the
offeror to not more than ten persons, other than those designated
in subdivision (8) above, in this state during any period of
twelve consecutive months, whether or not the offeror or any of
the offerees is then present in this state, if: (A) The seller
reasonably believes that all the buyers in this state, other than
those designated in subdivision (8) above, are purchasing for
investment; and (B) no commission or other remuneration is paid
or given, directly or indirectly, for soliciting any prospective
buyer in this state, other than those designated in subdivision
(8) above, but the commissioner may by rule or order, as to any
security or transaction or any type of security or transaction,
withdraw or further condition this exemption, or increase or
decrease the number of offerees permitted, or waive the
conditions in clauses (A) and (B) with or without the
substitution of a limitation on remuneration;
(10) Any offer or sale of a preorganization certificate or
subscription if: (A) No commission or other remuneration is paid
or given, directly or indirectly, for soliciting any prospective
subscriber; (B) the number of subscribers does not exceed ten; and (C) no payment is made by any subscriber;
(11) Any transaction pursuant to an offer to existing
security holders of the issuer, including persons who at the time
of the transaction are holders of convertible securities,
nontransferable warrants or transferable warrants exercisable
within not more than ninety days of their issuance, if: (A) No
commission or other remuneration, other than a standby
commission, is paid or given, for soliciting any security holder
in this state; or (B) the issuer first files a notice specifying
the terms of the offer and the commissioner does not disallow the
exemption within the next five full business days;
(12) Any offer of a security for which registration
statements have been filed under both this chapter and the
Securities Act of 1933 if no stop order or refusal order is in
effect and no public proceeding or examination looking of the
order is pending under either chapter.
(13) Any offer made to an accredited investor pursuant to an
offer made under the Angel Capital Electronic Network ("ACE-
Net"), to be administered under this chapter and in conjunction
with any other providers or agencies as designated by the
commissioner. The commissioner is authorized to propose
legislative rules under this subdivision to accommodate the
development of the "ACE-Net" project and other projects of a similar nature.
(c) The commissioner may, by order, deny or revoke any
exemption specified in subdivision (9) or (11) of subsection (a)
or in subsection (b) of this section with respect to a specific
security or transaction. No order may be entered without
appropriate prior notice to all interested parties, opportunity
for hearing, and written findings of fact and conclusions of law,
except that the commissioner may, by order, summarily deny or
revoke any of the specified exemptions pending final
determination of any proceeding under this subsection. Upon the
entry of a summary order, the commissioner shall promptly notify
all interested parties that it has been entered and of the
reasons therefor and that within fifteen days of the receipt of
a written request the matter will be set down for hearing. If no
hearing is requested and none is ordered by the commissioner, the
order will remain in effect until it is modified or vacated by
the commissioner. 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. No order under this subsection may
operate retroactively. No person may be considered to have
violated section three hundred one, article three of this chapter
or section four hundred three, article four of this chapter by reasons of any offer or sale effected after the entry of an order
under this subsection if he or she sustains the burden of proof
that he or she did not know, and in the exercise of reasonable
care could not have known, of the order.
(d) In any proceeding under this chapter, the burden of
proving an exemption or an exception from a definition is upon
the person claiming it.
§32-4-403. Filing of sales and advertising literature.
Any prospectus, pamphlet, circular, form letter,
advertisement or any other sales literature or advertising
communication addressed or intended for distribution to
prospective investors, including clients or prospective clients
of an investment adviser, shall be filed with the commissioner
before it is used, disseminated or distributed unless the
security or transaction is exempted by section four hundred two
of this article.
§32-4-404. Misleading filings.
It is unlawful for any person to make or cause to be made,
in any document filed with the commissioner or in any proceeding
under this chapter, any statement which is false or misleading.
§32-4-405. Unlawful representations concerning registration,
exemption or notice filing.
(a) Neither the fact that a notice filing or an application for registration under article two of this chapter or a
registration statement under article three of this chapter has
been filed nor the fact that a person or security is effectively
registered, constitutes a finding by the commissioner that any
document filed under this chapter is true, complete and not
misleading. Neither does any such fact or the fact that an
exemption or exception is available for a security or a
transaction mean that the commissioner has passed in any way upon
the merits or qualifications of, or recommended or given approval
to, any person, security or transaction.
(b) It is unlawful to make, or cause to be made, to any
prospective purchaser, customer or client any representation
inconsistent with subsection (a) of this section.
§32-4-406. Administration of chapter; operating fund for
securities department.
(a) This chapter shall be administered by the auditor of
this state, who is hereby designated as the commissioner of
securities of this state. The commissioner has the power and
authority to appoint or employ such assistants as are necessary
for the administration of this chapter.
(b) The auditor shall set up a special operating fund for
the securities division in his or her office. The auditor shall
pay into the fund twenty percent of all fees collected as provided for in this chapter. If, at the end of any fiscal year,
the balance in the operating fund exceeds two 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 or
her office. The special operating fund shall be appropriated by
line item by the Legislature.
(c) Moneys payable for administrative assessments
established by section four hundred nineteen-b of this article
shall be collected by the commissioner and deposited into the
general revenue fund. Moneys payable as administrative
reimbursements established by section four hundred nineteen-a of
this article shall be reimbursed to the special operating fund.
(d) It is unlawful for the commissioner or any of his or her
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 or her officers or employees to
disclose any information except among themselves or when
necessary or appropriate 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 or her
officers or employees.
§32-4-407. Mission of the division; powers of commissioner,
officers and members.
(a) The West Virginia securities shall have the mission of
statewide enforcement of the securities laws with emphasis on
providing basic enforcement and citizen protection from criminal
degradation of the securities markets, sales and all facets of
the securities industry.
(b) The commissioner and each of the officers and members of
the securities commission are hereby empowered:
(1) To make arrests anywhere within the state of any persons
charged with the violation of any of the securities laws of this
state, or of the United States, and when a witness to the
perpetration of any offense or crime, or to the violation of any
securities law of this state, or of the United States, to make
arrests without warrant; to arrest and detain any persons
suspected of the commission of any felony or misdemeanor related
to or committed in furtherance of the violation of the securities
laws of the state or of the United States whenever a complaint is
made and a warrant is issued thereon for the arrest, and the
person arrested shall be immediately brought before the proper tribunal for examination and trial in the county where the
offense for which the arrest has been made was allegedly
committed or in Kanawha County, the choice to be made at the
discretion of the commissioner or his or her deputy.
(2) To serve criminal process issued by any court or
magistrate anywhere within this state: Provided, That the
commissioner or his or her agents may not serve civil process;
and
(3) To cooperate with local authorities in detecting crime
and in apprehending any person or persons engaged in or suspected
of the commission of any crime, misdemeanor or offense against
the securities laws of this state, or of the United States, or of
any ordinance of any municipality in this state; and to take
affidavits in connection with any application to the securities
commission for any license, permit or certificate that may be
lawfully issued by these divisions of state government.
(c) Members of the securities commission may apprehend and
bring before any court or magistrate having jurisdiction of these
matters, anyone violating any of the provisions of this chapter
of this code. They shall serve and execute warrants for the
arrest of any person and warrants for the search of any premises
issued by any properly constituted authority, and shall exercise
all of the powers conferred by law upon a sheriff.
(d) Any member of the securities commission knowing or
having reason to believe that any person has violated the law may
make complaint in writing before any court or officer having
jurisdiction and procure a warrant for the offender, execute the
warrant and bring the person before the proper tribunal having
jurisdiction. The member shall make return on all warrants to
the tribunals and his or her official title shall be "member of
the securities commission." Members of the securities commission
may execute any summons or process issued by any tribunal having
jurisdiction requiring the attendance of any person as a witness
before the tribunal and make return thereon as provided by law.
Any return by a member of the securities commission showing the
manner of executing the warrant or process has the same force and
effect as if made by a sheriff.
(e) Each member of the securities commission, when called by
the sheriff of any county, or when directed by the governor by
proclamation, has full power and authority within the county, or
within the territory defined by the commissioner of securities,
to direct and command absolutely the assistance of any sheriff,
deputy sheriff, chief of police, policeman, game and fish warden
and peace officer of the state, or of any county or municipality
therein, or of any able-bodied citizen of the United States, to
assist and aid in accomplishing the purposes expressed in this article. When called, any officer or person is, during the time
his or her assistance is required, for all purposes a member of
the securities commission and subject to all the provisions of
this article.
§32-4-408. Oath of commissioner and members.
The commissioner and each of the other members of the
securities commission, before entering upon the discharge of his
or her duties, shall take and subscribe to an oath which shall be
in form and effect as follows, to wit: State of West Virginia,
County of ....................., to wit:
I, ......................, do solemnly swear that I will
support the Constitution of the United States, the Constitution
of the State of West Virginia, and I will honestly and faithfully
perform the duties imposed upon me under the provisions of law as
a member of the West Virginia Securities Commission to the best
of my skill and judgment.
............................
Taken, subscribed and sworn to before me, this the ......
day of ..................
áá............................
All such oaths, except that of the commissioner, shall be
filed and preserved in the office of the securities commission.
§32-4-409. Disposition of prisoners.
It shall be the duty of all officers of the state, or of any
county or municipality thereof, or jailers having the charge and
custody of any jail or place of detention, to receive any
prisoners arrested by any officer or member of the securities
commission or a member of the West Virginia state police acting
on behalf of the securities commission and to detain them in
custody until ordered released by a tribunal of competent
jurisdiction, and any such officer, jailer or person having
custody of any jail or place of detention who shall fail or
refuse so to receive and detain such prisoner shall be guilty of
a misdemeanor and, upon conviction thereof, shall be fined not
less than twenty-five dollars nor more than two hundred dollars,
or imprisoned in the county jail for not more than sixty days, or
both fined and imprisoned.
§32-4-410. Interference with officers or members; false
information; penalty.
Any person who shall at any time intercept, molest or
interfere with any officer or member of the securities commission
while on duty, or any state, county or municipal officer or
person then under the charge and direction of some officer or
member of the department of public safety while on duty, or who
knowingly gives false or misleading information to a member of
the securities commission, shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined not less than twenty-five
dollars nor more than two hundred dollars, or imprisoned in the
county jail for not more than sixty days, or both fined and
imprisoned.
§32-4-411. Unauthorized use of uniform, badge or other insignia;
impersonation of member; penalty.
Every person who is not a member of the securities
commission is hereby forbidden to wear, use, order to be used or
worn, copy or imitate in any respect or manner any uniform
prescribed for members of the securities commission, and any
person who shall violate the provisions of this article, for
which no other penalty is expressly provided, and any person who
shall falsely represent himself or herself to be an officer or
member of the securities commission, or to be under the order or
direction of any officer or member of said department, or who
shall, unless an officer or member thereof, wear the uniform
prescribed for members of the securities commission, or the badge
or other insignia adopted or used by the securities commission,
shall be guilty of a misdemeanor and, upon conviction thereof,
shall be fined not more than two hundred dollars, or imprisoned
in the county jail for not more than six months, or both fined
and imprisoned.
§32-4-412. Bribing, etc., officers or members; penalty.
If any person, firm or corporation shall give or offer to
give any money or other thing of value to any officer or member
of the securities commission as a consideration for the
performance of, or the failure to perform, any duty of such
officer or member of the securities commission under the rules of
the commissioner and the provisions of this article, he, she or
it shall be guilty of a felony, and if a person, upon conviction
thereof, be confined in the penitentiary for a term of not less
than one year nor more than five years and fined not less than
twenty-five thousand dollars nor more than fifty thousand
dollars, and if a firm or corporation, shall be fined not less
than fifty thousand dollars nor more than five hundred thousand
dollars.
§32-4-413. Legal counsel and assignment of assistant attorney
general; employment of legal counsel.
(a) The commissioner of securities is empowered to employ an
attorney or attorneys licensed to practice in the state of West
Virginia, or admitted pro hac vice for the administration,
implementation and prosecution of this chapter. The commissioner
may employ such attorneys as full time staff or employ them on an
ad hoc basis for a particular purpose. Attorneys employed
temporarily by the commissioner are not state employees, but
while serving as counsel under the auspices of the securities commission are subject to the requirements and limitations of
this chapter as if they were full time staff of the commissioner.
(b) Additionally, upon the request of the commissioner, the
attorney general may assign an assistant attorney general to the
securities commission.
(c) Notwithstanding the provisions of section one, article
three, chapter five of this code, the commissioner may authorize
any member of the securities commission to employ an attorney of
such member's choice to act in proceedings wherein criminal
charges are brought against the member because of action in the
line of duty. For the attorney's services an amount determined
by the judge in whose court the action is pending, not to exceed
one thousand dollars, may be expended in any one case.
§32-4-414. Duties of commissioner as to statistics and to other
public officers.
The commissioner is authorized from time to time to collect
statistics and distribute information throughout the state and
is authorized to hold public meetings at any point in the state
where, in his or her judgment, such meetings will be of advantage
to carry out the spirit of this law. Additionally, the
commissioner is charged with providing such continuing education
opportunities for county prosecutors and state police on the
investigation, prosecution, sentencing, developments in the law and prevention of securities laws violations. This section does
not impose upon any member of the West Virginia state police or
any other member of law enforcement or the judiciary a duty to
attend such continuing education.
§32-4-415. Investigations and subpoenas.
(a) The commissioner in his or her discretion: (1) May make
such public or private investigations within or outside of this
state as he or she considers necessary to determine whether any
person has violated any provision of this chapter or any rule or
order hereunder, or to aid in the enforcement of this chapter or
in the prescribing of rules and forms hereunder; (2) may require
or permit any person to file a statement in writing, under oath
or otherwise as the commissioner determines, as to all the facts
and circumstances concerning the matter to be investigated; and
(3) may publish information concerning any violation of this
chapter or any rule or order hereunder.
(b) For the purpose of any investigation or proceeding under
this chapter, the commissioner or any officer, agent or employee
designated by him or her 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 deems relevant or material to the inquiry.
(c) In case of a refusal to obey a subpoena by any person,
the circuit court of Kanawha County, upon application by the
commissioner, may issue to the person an order requiring him or
her to appear before the commissioner, or the officer designated
by him or her, to produce documentary evidence or give evidence
relating to the matter under investigation. Failure to obey the
order of the court may expose a person to the court's powers of
contempt.
(d) No person is excused from attending and testifying or
from producing any document or record before the commissioner
when subpoenaed to do so on the ground that he or she may
incriminate themselves or subject themselves to a penalty or
forfeiture: Provided, That no individual may be prosecuted or
subjected to any penalty or forfeiture for or on account of any
transaction, matter or thing concerning which he or she is
compelled, after claiming his or her privilege against
self-incrimination to testify or produce evidence, except that
the individual testifying is not exempt from prosecution and
punishment for perjury or contempt committed in testifying:
Provided, however, That a person may not be compelled to
testify under this section when claiming the privilege against
self-incrimination unless he or she receives the binding
assurance that he or she will, additionally, not be subject to federal prosecution or the prosecution of any other separate
sovereign for or on account of any transaction, matter or thing
concerning which he or she is compelled to testify or produce
evidence.
§32-4-416. Commission authorized to swear out warrants of
arrest; liability of commission for warrant.
The securities commission is authorized to swear out
warrants of arrest against any person violating the criminal
provisions of this article, and it is not liable for damages by
reason of swearing out warrants or for causing the arrest and
detention or imprisonment of any person or persons under such
warrant or warrants, unless its actions are perpetrated in a
malicious manner or with a reckless disregard for the law.
§32-4-417. Duties of commissioner or deputy commissioner
empowered to swear out warrants of arrest;
liability of commissioner or deputy commissioner
for warrant.
The commissioner or deputy commissioner of the securities
commission shall keep the records of the commission and generally
perform such duties as the commission may direct. When ordered
by the commission, he or she shall be authorized and empowered to
swear out warrants of arrest against any person violating the
criminal provisions of this article. He or she shall not be liable for damages by reason of swearing out such warrant or
warrants or for causing the arrest, detention, or imprisonment of
any person or persons under such warrant or warrants, unless his
or her actions are perpetrated in a malicious manner or with a
reckless disregard for the law.
§32-4-418. Liability for acts done or omitted in good faith
under rules, forms, or orders.
No provision of this article imposing any liability applies
to any act done or omitted in good faith in conformity with any
rule, form, or order of the securities commission,
notwithstanding that the rule or form may later be amended or
rescinded or be determined to be invalid for any reason.
§32-4-419. Administrative assessments, administrative
reimbursements, other remedies.
(a) A registrant, applicant for registration, issuer or
other person upon whom the commissioner has conducted an
examination, audit, investigation or prosecution may pay, as an
administrative reimbursement, for all the costs incurred in the
conduct of such examination, audit, investigation or prosecution.
These costs shall include, but not be limited to, the salaries
and other compensation paid to clerical, accounting,
administrative, investigative, examiner and legal personnel, the
actual amount of expenses reasonably incurred by such personnel and the commissioner in the conduct of such examination, audit,
investigation or prosecution, including a pro rata portion of the
commissioner's administrative expense.
(b) After giving notice and opportunity for a hearing, the
commissioner may issue an order accompanied by written findings
of fact and conclusions of law which imposes an administrative
assessment, an administrative reimbursement or both in an amount
provided in subdivision (1) against a broker-dealer, viatical
settlement broker, agent, investment adviser or investment
adviser representative registered under section two hundred one,
article two of this chapter, or an affiliate of the
broker-dealer, viatical settlement broker or investment adviser
where the commissioner finds that the person either has violated
this article or a rule or order of the commissioner under this
article or has engaged in dishonest or unethical practices in the
securities business or has taken unfair advantage of a customer.
(1) The commissioner, in issuing an order under this
subsection may impose an administrative assessment of up to fifty
thousand dollars for a single violation per individual or a fine
of up to ten million dollars per violation by a corporation in
a single proceeding or a series of related proceedings. Each act
or omission that provides a basis for issuing an order under this
subsection shall constitute a separate violation.
(2) For purposes of determining the amount of administrative
assessment to be imposed in an order issued under this
subsection, the commissioner shall consider:
(A) The circumstances, nature, frequency, seriousness,
magnitude, persistence and willfulness of the conduct
constituting the violation;
(B) The scope of the violation, including the number of
persons in and out of this state affected by the conduct
constituting the violation;
(C) The amount of restitution or compensation that the
violator has made and the number of persons in this state to whom
the restitution or compensation made voluntarily, per a civil
settlement or by order of the securities commission has been
made;
(D) Past and concurrent conduct of the violator that has
given rise to any sanctions or judgment imposed by, or plea of
guilty or nolo contendere or settlement with, the commissioner or
any securities administrator of any other state or other country,
any court of competent jurisdiction, the United States securities
and exchange commissioner, the commodity futures trading
commission, any other federal or state agency or any national
securities association or national securities exchange as defined
in the Securities Exchange Act of 1934 (48 Stat. 88a, 15 U.S.C. 78A et seq.);
(E) Any other factor that the commissioner finds appropriate
in the public interest or for the protection of investors and
consistent with the purposes fairly intended by the policy and
provisions of this article.
(3) An administrative assessment imposed by an order issued
under this subsection is not mutually exclusive of any other
remedy available under this article, any other statute or the
common law.
(4) The commissioner shall not impose an administrative
assessment with respect to any public proceeding which was
instituted prior to the date of enactment of this section.
(5) All administrative reimbursements assessed against
violators of this chapter for the costs to the commission for
investigations and prosecutions shall be deposited in the
operating fund of the securities commission as full or partial
reimbursements for the costs of such investigations and
prosecutions.
§32-4-420. Injunctions.
Whenever it appears to the commissioner that any person has
engaged in any act or practice constituting a violation of any
provision of this chapter or any rule or order hereunder, he or
she may in his or her discretion bring an action in the circuit court of Kanawha County or a court of competent jurisdiction in
the county where one or more of the defendants reside or have a
place of business to enjoin the acts or practices and 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. The court may not require the commissioner
to post a bond.
§32-4-421. Criminal penalties.
(a) Any person who willfully violates any provision of this
chapter, except section four hundred four, or who willfully
violates any rule or order under this chapter, or who willfully
violates section four hundred four knowing the statement made to
be false or misleading in any material respect, is guilty of a
felony and, upon conviction thereof, shall be fined not less than
one thousand dollars and not more than fifty thousand dollars, or
imprisoned in a state correctional facility not less than one nor
more than three years, or both fined and imprisoned. No
indictment may be returned under this chapter more than five
years after the alleged violation.
(b) The enforcement of the provisions of this article shall
be vested in the securities commission. It shall be the duty of the securities 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 thereof. The commission shall at once lay before the
prosecuting attorney of the proper county any evidence which
shall come to its knowledge of criminality under this article.
Should the prosecuting attorney so request, the securities
commission may assist the prosecuting attorney in the prosecution
of the violation of this chapter. In the event of the refusal or
neglect of the prosecuting attorney to institute and prosecute a
violation, the commission shall be authorized to proceed therein
with all the rights, privileges, and powers conferred by law upon
prosecuting attorneys including the power to appear before grand
juries and to interrogate witnesses before such grand juries. In
the event that the securities commission becomes the sole
prosecutor of the action, the securities commission may bring the
case in Kanawha County.
(c) In any proceeding under this article, scienter need not
be alleged and proved in prosecutions involving the sale of
unregistered securities or in the failure to register as a
dealer, agent, investment adviser, or investment adviser
representative under this article.
(d) In any action brought under this chapter, the commissioner of securities may seek, on behalf of a consumer,
restitution, civil penalties, forfeiture of bond, attachment of
property, costs, attorney's fees and other remedies available to
the securities commission under the provisions of this chapter or
otherwise provided by law.
(e) Nothing in this chapter limits the power of the state to
punish any person for any conduct which constitutes a crime by
statute or at common law.
§32-4-422. Civil liabilities.
(a) Any person who:
(1) Offers or sells a security in violation of section two
hundred one-a, article two of this chapter; section three hundred
one, article three of this chapter; sections four hundred three
or four hundred five-b, article four of this chapter; or of any
condition imposed under sections three hundred four-d, three
hundred five-g or three hundred five-h of article three of this
chapter; or
(2) Offers or sells a security by means of any untrue
statement of a material fact or any omission to state a material
fact, and who does not sustain the burden of proof that he or she
did not know, and in the exercise of reasonable care could not
have known, of the untruth or omission, is liable to the person
buying the security from him or her. The person may assert a claim to recover the amount paid for the security, together with
interest at nine percent per year from the date of payment, costs
and reasonable attorneys' fees, less the amount of any income
received on the security, upon the tender of the security, or for
damages if he or she no longer owns the security. Damages are
the amount that would be recoverable upon a tender less the value
of the security when the buyer disposed of it and interest at
nine percent per year from the date of disposition.
(b) Every person who directly or indirectly controls a
seller liable under subsection (a) of this section, every
partner, officer or director of the seller, every person
occupying a similar status or performing similar functions, every
employee of the seller who materially aids in the sale, and every
broker-dealer, viatical settlement broker or agent who materially
aids in the sale are also jointly and severally liable with the
seller, unless he or she sustains the burden of proof that they
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. Contribution shall exist among
the several liable persons.
(c) Any tender specified in this section may be made at any
time before entry of judgment.
(d) Every cause of action under this chapter survives the death of any person who might have been a plaintiff or defendant.
(e) No person may sue under this section more than three
years after the sale.
(f) No person who has made or engaged in the performance of
any contract in violation of any provision of this chapter or any
rule or order hereunder, or who has acquired any purported right
under any such contract with knowledge of the facts by reason of
which its making or performance was in violation, may base any
suit on the contract.
(g) Any condition, stipulation or provision binding any
person acquiring any security to waive compliance with any
provision of this chapter or any rule or order hereunder is void.
(h) The rights and remedies provided by this chapter are in
addition to any other rights or remedies that may exist at law or
in equity, but this chapter does not create any cause of action
not specified in this section or section two hundred two-e,
article two of this chapter.
§32-4-423. Judicial review of orders.
(a) Any person aggrieved by a final order of the
commissioner may obtain a review of the order in the circuit
court of Kanawha County 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 shall be forthwith served upon the commissioner and
thereupon the commissioner shall certify and file in court a copy
of the filing and evidence upon which the order was entered.
When these have been filed, the court has exclusive jurisdiction
to affirm, modify, enforce or set aside the order, in whole or in
part. The findings of the commissioner as to the facts, if
supported by competent, material and substantial evidence, are
conclusive. If either party applies to the court for leave to
adduce additional material 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, the court may order the additional evidence to be
taken before the commissioner and to be adduced upon the hearing
in such manner and upon such conditions as the court considers
proper. The commissioner may modify his or her findings and
order by reason of the additional evidence and shall file in
court the additional evidence together with any modified or new
findings or order. The judgment of the court shall be final,
subject to review by the supreme court of appeals.
(b) The commencement of proceedings under subsection (a) of
this section does not, unless specifically ordered by the court,
operate as a stay of the commissioner's order.
§32-4-424. Rules, forms, orders and hearings.
(a) The commissioner may from time to time make, amend and
rescind rules, forms and orders as are necessary to carry out the
provisions of this chapter, including rules and forms governing
registration statements, applications and reports, and defining
any terms, whether or not used in this chapter, insofar as the
definitions are not inconsistent with the provisions of this
chapter. For the purpose of rules and forms, the commissioner
may classify securities, persons and matters within his or her
jurisdiction, and prescribe different requirements for different
classes.
(b) No rule, form, or order may be made, amended or
rescinded unless the commissioner finds that the action is
necessary or appropriate in the public interest or for the
protection of investors and consistent with the purposes fairly
intended by the policy and provisions of this chapter. In
prescribing rules and forms the commissioner may cooperate with
the securities administrators of the other states and the
securities and exchange commission with a view to effectuating
the policy of this statute to achieve maximum uniformity in the
form and content of registration statements, applications and
reports wherever practicable.
(c) The commissioner may by rule or order prescribe: (1)
The form and content of financial statements required under this chapter; (2) the circumstances under which consolidated financial
statements shall be filed; and (3) whether any required financial
statements shall be certified by independent or certified public
accountants. All financial statements shall be prepared in
accordance with generally accepted accounting practices.
(d) All rules and forms of the commissioner shall be
published.
(e) No provision of this chapter imposing any liability
applies to any act done or omitted in good faith in conformity
with any rule, form or order of the commissioner, notwithstanding
that the rule, form or order may later be amended or rescinded or
be determined by judicial or other authority to be invalid for
any reason.
(f) Every hearing in an administrative proceeding shall be
public.
§32-4-425. 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 notice
filings and 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 rules prescribed by the
commissioner.
(d) Upon request and at such reasonable charges as he or she
prescribes, the commissioner shall furnish to any person
photostatic or other copies (certified under his or her 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 or her discretion may honor
requests from interested persons for interpretative opinions.
Copies of the opinions shall be filed in a special file
maintained for that purpose and are public records available for
public inspection. The commissioner shall charge a one
hundred-dollar fee for each interpretative opinion.
§32-4-426. Scope of the chapter and service of process.
(a) Section one hundred one, article one of this chapter,
section two hundred one-a, article two of this chapter, section
three hundred one, article three of this chapter, and sections four hundred five and four hundred ten, article four 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) Section one hundred one, article one of this chapter,
section two hundred one-a, article two of this chapter, and
section four hundred five, article four 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 purpose 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 purpose 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 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 the state during the past
twelve months; or (2) a radio or television program originating
outside this state is received in this state.
(f) Section one hundred two, article one of this chapter,
and section two hundred one-c, article two of this chapter, as
well as section four hundred five, article four of this chapter,
so far as investment advisers are concerned, apply when any act
instrumental in effecting prohibited conduct is done in this
state, whether or not either party is then present in this state.
(g) Every person making a notice filing and every applicant
for registration under this chapter and every issuer which
proposes to offer a security in this state through any person
acting on an agency basis in the common-law sense shall file with
the commissioner, in such form as he or she by rule prescribes, an irrevocable consent appointing the commissioner or his or her
successor in office to be his or her attorney to receive service
of any lawful process in any noncriminal suit, action or
proceeding against him or her or his or her successor, executor
or administrator which arises under this chapter or any rule or
order hereunder after the consent has been filed, with the same
force and validity as if served personally on the person filing
the consent. A person who has filed such a consent in connection
with a previous registration need not file another. Service may
be made by leaving a copy of the process in the office of the
commissioner, but it is not effective unless: (1) The plaintiff,
who may be the commissioner in a suit, action or proceeding
instituted by him, forthwith sends notice of the service and a
copy of the process by registered or certified mail to the
defendant or respondent at his or her last address on file with
the commissioner; and (2) the plaintiff's affidavit of compliance
with this subsection is filed in the case on or before the return
day of the process, if any, or within such further time as the
court allows.
(h) When any person, including any nonresident of this
state, engages in conduct prohibited or made actionable by this
chapter or any rule or order hereunder, and that person has not
filed a consent to service of process under subsection (g) of this section and personal jurisdiction over that person cannot
otherwise be obtained in this state, the conduct is considered
equivalent to that person's appointment of the commissioner or
that person's successor in office to be that person's attorney to
receive service of any lawful process in any noncriminal suit,
action or proceeding against that person or person's successor,
executor or administrator which grows out of that conduct and
which is brought under this chapter or any rule or order
hereunder, with the same force and validity as if served on that
person personally. Service may be made by leaving a copy of the
process in the office of the commissioner, and it is not
effective unless: (1) The plaintiff, who may be the commissioner
in a suit, action or proceeding instituted by him, forthwith
sends notice of the service and a copy of the process by
registered or certified mail to the defendant or respondent at
that person's last-known address or takes other steps which are
reasonably calculated to give actual notice; and (2) the
plaintiff's affidavit of compliance with this subsection is filed
in the case on or before the return day of the process, if any,
or within such further time as the court allows.
(i) When process is served under this section, the court, or
the commissioner in a proceeding before him or her, shall order
a continuance as may be necessary to afford the defendant or respondent reasonable opportunity to defend.
§32-4-427. Commission may issue warnings to public and publish
information regarding orders.
The securities commission may issue and give warnings to the
public concerning securities being sold in this state and may in
its discretion cause to be published information regarding any
orders or rules issued by the commission in the implementation of
its duties, including, without limitation, information pertaining
to specific orders denying registration or prohibiting the sale
of securities.
§32-4-428. Appointment of ad hoc Hearing Officers --
Qualifications; salary; interest in banks, etc.,
prohibited.
(a) The commissioner of securities may appoint ad hoc
hearing officers to assist the securities commission in the
hearing of cases before the securities commission. Additionally,
the commissioner of securities may appoint ad hoc hearing
officers to serve in cases where the commissioner of securities
recuses himself or herself from hearing the case. The judgements
rendered by the ad hoc hearing officers sitting by designation
have the same force of law as decisions rendered by the
securities commission when sitting with the securities
commissioner.
(b) All ad hoc appointed hearing officers shall be persons
of good moral character, at least thirty years of age, residents
of West Virginia, shall be familiar with corporate organization,
or investment banking, or sales of securities, and shall be one
or more of the following: A member of the West Virginia Bar; a
retired member of the judiciary; an employee or a manager from
the securities industry or other financial services industry; a
retired employee or manager of the securities, banking or other
financial services industry; a retired administrative law judge;
a former commissioner of securities; or a voting member of a
corporate board of a company registered to do business in the
United States. In addition, the securities commission, at the
direction of the commissioner or his or her deputy, may also
require additional qualifications.
(c) Appointed ad hoc hearing officers, while serving as
such, shall not be financially interested in or associated with
any securities firm or individual in the securities industry,
commercial bank, savings bank, trust company, industrial loan or
investment company, credit union, building and loan association,
or any other person appearing before the securities commission
or the commissioner thereof.
§32-4-429. Compensation of ad hoc members.
(a) Each ad hoc appointed member of the Securities Commission shall be paid one hundred dollars per day, for a
period not to exceed a total of sixty days in any one calendar
year, while engaged in the performance of his or her duties, and
shall be entitled to reimbursement for all actual and necessary
expenses in carrying out their official duties.
(b) Ex officio members shall not be entitled to any extra
compensation for performing their duties under this chapter. Ad
hoc hearing officers are not and shall not be considered public
employees of the state of West Virginia.
§32-4-430. Statutory policy.
This chapter shall be construed as to facilitate the
uniformity of the law of those states which enact the Uniform
Securities Act and to coordinate the interpretation and
administration of this chapter with related federal regulation.
§32-4-431. Financial literacy, investor education, industry and
consumer communications.
(a) The securities commission has the duty to provide
consumer education, financial literacy services, programs and
initiatives to improve consumer education and facilitate
communication among consumers, the investment industry and
regulators.
(b) There is created within the securities commission, the
West Virginia securities advisory committee comprised of members appointed by the state auditor which shall include: Members from
the financial services industry, such as stock brokers and
dealers, bankers, investment advisors, securities licensed
insurance companies; investors, both institutional and individual
and consumer groups; representatives of law enforcement and
regulatory agencies including the West Virginia insurance and
banking commissioners.
(1) The securities advisory committee shall serve as an
on-going forum for discussion of securities regulation issues.
(2) The securities advisory committee shall be charged with
reviewing and commenting on legislative and regulatory proposals
as well as new and existing programs.
(3) Members of the securities advisory committee shall be
paid seventy-five dollars per day for days actually engaged in
its duties and shall be reimbursed for actual and necessary
expenses incurred in the performance of their official duties.
(c) The securities commission shall create opportunities for
public discussion and informational exchange among the financial
services industry, the public and the regulatory establishment.
To this end, the securities commission may establish symposia,
newsletters, public service announcements, speakers bureaus,
conferences, and any other means of communicating to the public
about the issues facing them regarding protection against fraud, managing retirement funds, preparing for retirement, college
financing, raising capital and any other matters of public
interest regarding financial literacy and consumer education.
Additionally, the securities commission is hereby empowered to
institute and expend funds for grants in aid and the creation of
pilot programs with public and private, not-for-profit
institutions in order to develop financial literacy programs
applicable to large numbers of individuals in all age groups. As
part of the development and monitoring of these pilot programs,
the securities commissioner shall report back to the legislature
each year on the goals of these programs, the progress or
developments towards these goals and a recommendation for further
development or application of the programs.
(d) As banks and insurance companies are continually
evolving into the securities business, it is important that
investors receive the same level of quality service regardless of
where they purchase their securities. The Legislature,
recognizing that the modernization of the financial services
industry is gradually blurring the lines between the banking,
securities and insurance industries, has determined that consumer
protection and the protection of the financial services markets
requires that the members of this industry have some uniform
requirements for continuing education. To this end, the state auditor, as commissioner of securities and a constitutional
officer is hereby empowered to initiate and lead a dialogue among
the insurance and banking commissioners as well as
representatives throughout the financial services industry to
explore ways to move toward new and improved continuing education
requirements and curricula for all industries that provide
securities-related products or services. The state auditor as
securities commissioner, shall report back to the state
Legislature during the two thousand regular session with findings
and recommendations of the commissioners of banking, insurance,
and securities, and members of the affected industry as to how
best to implement the program.
(e) In order to facilitate the timely resolution of
complaints between West Virginia's citizens and members of the
financial services industry, the Legislature hereby directs that
the commissioner of securities develop a uniform customer
complaint resolution system to be utilized by West Virginia firms
dealing in securities. This requirement does not mandate a
specific process but rather a goal oriented approach that ensures
that consumers have access to an easy to follow process for
lodging complaints and having complaints addressed. The process
shall be developed and submitted as a Legislative rule and shall
include the creation of an ombudsman within the securities commission who would provide the customer with information on the
complaint resolution process. The ombudsman is not an advocate
for the consumer nor the industry but rather a facilitator of the
resolution process. This process shall further require that
customers be provided with written disclosures in plain English,
of the expectations, process and procedures involved in lodging
a complaint. Such disclosure should include instructions to the
customer on documenting events related to the complaint.
Additionally, the securities commissioner should consult with the
insurance and banking commissioners to develop a process that
could be utilized by all firms offering investment opportunities.
§32-4-432. Short title.
This chapter may be cited as the "Uniform Securities Act."
§32-4-433. Authority to propose rules, authority to issue
emergency rules.
The commissioner of securities, in order to carry out any
provisions of this code, may propose rules for legislative
approval in accordance with the provisions of article three,
chapter twenty-nine of this code. Additionally, the commissioner
of securities may promulgate emergency rules pursuant to the
provisions of section fifteen, article three, chapter twenty-
nine-a of this code whenever, in his or her discretion it is
determined that public safety is at risk, or when the integrity of the markets is so compromised as to undermine public
confidence in the financial services industry of the state.
§32-4-434. Severability of provisions.
If any provision of this chapter or the application thereof
to any person or circumstance is held invalid, the invalidity
shall 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.
§32-4-435. 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 effective registrations under prior law, all
administrative orders relating to such registrations, and all
conditions imposed upon such registrations 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
within one year after 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.
(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 four hundred 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 the West
Virginia securities commission to police and prosecute securities
fraud, work with other state and out of state agencies on
security matters, provide consumer and professional educational
opportunities related to securities fraud and enable the
commissioner of securities to appoint hearing officers and
lawyers to make administrative determinations, and provide for
assessments, penalties and restitution against violators of the
law. The bill empowers the securities commission and its
commissioner to obtain arrest warrants, make arrests of alleged
violators while providing the commission with civil immunity for
all but malicious or reckless acts. The bill also creates
misdemeanor offenses for jailers or other persons who refuse to
receive and detain securities fraud prisoners and for persons who
interfere with commission activities, and for unauthorized wearing of commission uniforms or badges. It creates a felony
offense for bribing commission officers or members. The bill
authorizes the commission to hire lawyers and to appoint
administrative hearing examiners indicating that both such
appointees are considered employees of the commission though they
may function on an "ad hoc" basis. The commissioner is given
subpoena power and investigatory power and is empowered to
compel testimony and the provision of evidence, to the extent, a
person can be prohibited from asserting the right against
self-incrimination by the commissioner by a promise not to
criminally prosecute for securities violations. The circuit
court is given powers of contempt to facilitate the submission of
persons to the commission's investigatory and prosecutory
demands. The commissioner is provided immunity from civil
liability for wrongful arrest, detention or imprisonment. The
bill provides that the commissioner may authorize commission
members to employ lawyers of their choice when they are charged
with crimes "in the line of duty" and that the lawyers may be
paid up to one thousand dollars of commission funds. It empowers
the commissioner to impose administrative assessments of up to
fifty thousand dollars for a single violation per individual or
a fine of up to ten thousand dollars per violation by a
corporation. It empowers the commissioner to enjoin persons from
acts the commissioner perceives are violations of the law. It
provides for an additional felony offense for "misleading
filings" under section 404. It authorizes the commission to
assist prosecuting attorneys in prosecuting violations of the
chapter while providing that the commission is authorized to
institute its own prosecution, including conducting grand jury
proceedings, as well as having "all the rights, privileges, and
powers conferred by law upon prosecuting attorneys" when
prosecutors refuse to prosecute a violation. It provides for a
cause of action for buyers against security dealers who fail to
provide material facts or otherwise mislead during the sale of a
security. It provides for judicial review of commission orders.
Other provisions authorize the commissioner to charge certain
fees and to seek reimbursement for the costs of administrative
actions against persons.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
§32-4 is repealed; and §32-4 is new; therefore, strike-
throughs and underscoring have been omitted