Senate Bill No. 2003
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
[Introduced June 10, 2003; referred to the Committee on Finance.]
A BILL to amend and reenact section two hundred two, article two,
chapter thirty-two of the code of West Virginia, one thousand
nine hundred thirty-one, as amended; to amend and reenact
section three hundred five, article three of said chapter; and
to amend and reenact section four hundred six, article four of
said chapter, all relating to updating fee structure
provisions for certain broker-dealers and agents; providing
for annual sales report and filing fee by certain issuers of
securities; and providing for disposition of special revenue.
Be it enacted by the Legislature of West Virginia:
That section two hundred two, article two, chapter thirty-two
of the code of West Virginia, one thousand nine hundred thirty-one,
as amended, be amended and reenacted; that section three hundred
five, article three of said chapter be amended and reenacted; and
that section four hundred six, article four of said chapter be amended and reenacted, all to read as follows:
ARTICLE 2. REGISTRATION OF BROKER-DEALERS AND AGENTS; REGISTRATION
AND NOTICE FILING FOR INVESTMENT ADVISERS.
§32-2-202. Registration and notice filing procedure.
(a) A broker-dealer, 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
(b) Except with respect to federal-covered advisers whose only
clients are those described in paragraphs (A) and (B), subdivision
(3), 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 and the agent of an issuer, fifty-five dollars in the
case of an agent,
one two hundred seventy dollars in the case of an
investment adviser and fifty seventy-five 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 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, 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, 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 ten,
article four of this chapter and, if the commissioner by rule or
order requires, by any person who has a cause of action not arising
under this chapter. Every bond shall provide that no suit may be maintained to enforce any liability on the bond unless brought
within the time limitations set forth in subsection (e), section
four hundred ten, 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 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, representative and associated person of a
broker-dealer 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. The West
Virginia state Legislature reserves the right to adjust the fees
set forth in this section once every four years in an amount
reflecting the percentage increase in the cost of administering
this article from the amount of such costs on the effective date of
ARTICLE 3. REGISTRATION OF SECURITIES.
§32-3-305. Provisions applicable to registration and notice filing
(a) A registration or notice filing statement may be filed by
the issuer, any other person on whose behalf the offering is to be
made, or a registered broker-dealer. A registration or notice
filing statement filed under this chapter registering or noticing
investment company shares shall cover only one class, series or
portfolio of investment company shares.
(b) Every person filing a registration or notice filing
statement shall pay a filing fee of one twentieth of one percent of
the maximum aggregate offering price at which the registered or
noticed securities are to be offered in this state, but the fee
shall in no case be less than fifty dollars or more than fifteen
hundred dollars. When a registration or notice filing statement is
withdrawn before the effective date or a preeffective stop order is
entered under section three hundred six of this article, the
commissioner shall retain all of the fee.
(c) Every registration statement and notice filing shall
specify: (1) The amount of securities to be offered in this state;
(2) the states in which a registration statement or similar
document in connection with the offering has been or is to be
filed; and (3) any adverse order, judgment or decree entered in
connection with the offering by the regulatory authorities in each
state or by any court or the securities and exchange commission.
(d) In any case where securities sold in this state are in excess of the aggregate amount of securities specified under
subsection (c) of this section, the commissioner may require
payment of an oversale assessment which shall be three times an
amount which equals the difference between the filing fee that
would have been payable under subsection (b) of this section based
upon the total amount of securities sold in this state and the
total filing fees previously paid to the commissioner with respect
to such registration or notice filing, but in no case shall the
oversale assessment be less than three hundred fifty dollars or be
more than fifteen hundred dollars.
(e) Any document filed under this chapter or a predecessor act
within five years preceding the filing of a registration statement
may be incorporated by reference in the registration statement to
the extent that the document is currently accurate.
(f) The commissioner may by rule or otherwise permit the
omission of any item of information or document from any
registration or notice filing statement.
(g) In the case of a nonissuer distribution, information may
not be required under section three hundred four of this article or
subsection (k) of this section unless it is known to the person
filing the registration statement or to the persons on whose behalf
the distribution is to be made, or can be furnished by them without
unreasonable effort or expense.
(h) The commissioner may by rule or order require as a
condition of registration by qualification or coordination: (1)
That any security issued within the past three years or to be
issued to a promoter for a consideration substantially different
from the public offering price, or to any person for a
consideration other than cash, be deposited in escrow; and (2) that
the proceeds from the sale of the registered security in this state
be impounded until the issuer receives a specified amount from the
sale of the security either in this state or elsewhere. The
commissioner may by rule or order determine the conditions of any
escrow or impounding required under this subsection, but he or she
may not reject a depository solely because of location in another
(i) The commissioner may by rule or order require as a
condition of registration that any security registered by
qualification or coordination be sold only on a specified form of
subscription or sale contract, and that a signed or conformed copy
of each contract be filed with the commissioner or preserved for
any period up to three years specified in the rule or order.
(j) Every registration statement is effective for one year
from its effective date, or any longer period during which the
security is being offered or distributed in a nonexempted
transaction by or for the account of the issuer or other person on whose behalf the offering is being made or by any underwriter or
broker-dealer who is still offering part of an unsold allotment or
subscription taken by him or her as a participant in the
distribution, except during the time a stop order is in effect
under section three hundred six of this article. All outstanding
securities of the same class as a registered security are
considered to be registered for the purpose of any nonissuer
transaction: (1) So long as the registration statement is
effective; and (2) between the thirtieth day after the entry of any
stop order suspending or revoking the effectiveness of the
registration statement under section three hundred six of this
article (if the registration statement did not relate, in whole or
in part, to a nonissuer distribution) and one year from the
effective date of the registration statement. A registration
statement may not be withdrawn for one year from its effective date
if any securities of the same class are outstanding. A
registration statement may be withdrawn otherwise only in the
discretion of the commissioner.
(k) So long as a registration statement is effective, the
commissioner may by rule or order require the person who filed the
registration statement to file reports, not more often than
quarterly, to keep reasonably current the information contained in
the registration statement and to disclose the progress of the offering.
(l) A registration statement relating to a security issued by
a face amount certificate company or a redeemable security issued
by an open-end management company or unit investment trust, as
those terms are defined in the Investment Company Act of 1940, may
be amended after its effective date so as to increase the
securities specified as proposed to be offered. The amendment
becomes effective when the commissioner so orders. Every person
filing an amendment shall pay a filing fee, calculated in the
manner specified in subsection (b) of this section, with respect to
the additional securities proposed to be offered.
(m) Every person changing the name or address of a securities
registration or notice filing shall pay a fifty-dollar fee for
(n) Every person amending a registration statement or notice
filing or offering a document without increasing the dollar amount
registered shall pay a fifty-dollar fee for each amended statement,
notice filing or document.
(o) Every registered issuer or notice filing shall annually
file a sales report and shall pay a filing fee for that report of
one tenth of one percent of the maximum offering price at which the
registered or noticed securities are offered in this state but the
fee shall in no case be less than two hundred dollars nor more than fifteen hundred dollars.
ARTICLE 4. GENERAL PROVISIONS.
(a) This chapter shall be administered by the auditor of this
state and he or she is hereby designated, and shall be, the
commissioner of securities of this state. He or she has the power
and authority to appoint or employ such assistants as are necessary
for the administration of this chapter.
§32-4-406. Administration of chapter; operating fund for
(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
three hundred fifty thousand dollars
half of the prior fiscal year's appropriation, the excess shall be
withdrawn from the special fund and transferred to the general
The special operating fund shall be used by the auditor to
fund the operation of the securities division
located in his or her
office and the general operations of the auditor's office. The
special operating fund shall be appropriated by line item by the
(c) Moneys payable for assessments established by section four hundred seven-a of this article shall be collected by the
commissioner and deposited into the general revenue 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.
NOTE: The purpose of this bill is to increase fees payable by
certain dealer-brokers and provide for payment into the general
revenue fund of a portion of those special revenues generated. The
bill also requires certain issuers of securities to file an annual
sales report and pay a filing fee.
Strike-throughs indicate language that would be stricken
from present law, and underscoring indicates new language that
would be added.