Chapter 32 Oregon Laws 2001

AN ACT

SB 306

Relating to securities; creating new provisions; amending ORS 59.035, 59.175, 59.205 and 59.215; and declaring an emergency.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 59.035 is amended to read:

59.035. The following transactions are exempt from ORS 59.049 and 59.055 if they are not part of an attempt to evade fraudulently any provision of the Oregon Securities Law:

(1) Any transaction by a sheriff, marshal or court appointed fiduciary.

(2) An isolated nonissuer transaction in this state, whether effected through a broker-dealer or not.

(3) Any transaction by an issuer in its securities pursuant to a pro rata offering to its existing security holders, if:

(a) No commission or remuneration, other than a standby fee, is paid or given directly or indirectly in connection with the transaction; and

(b) The issuer has not had an effective registration under the Oregon Securities Law nor has used this exemption within one year prior to the date of the offering or sale.

(4) Any offer, sale, transfer or delivery of securities to a bank, savings institution, trust company, insurance company, investment company, pension or profit-sharing trust, or other financial institution or institutional buyer (including but not limited to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Housing Administration, the United States Department of Veterans Affairs and the Government National Mortgage Association), or to a broker-dealer, mortgage broker or mortgage banker, whether the purchaser is acting for itself or in a fiduciary capacity when the purchaser has discretionary authority to make investment decisions.

(5) Any transaction by an offeror with an accredited investor as defined in section 2 (15)(i) or (ii) of the Securities Act of 1933, as amended, or rules of the Director of the Department of Consumer and Business Services, but only if there is no public advertising or general solicitation in connection with the transaction.

(6) The issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion entitling the holder of the security surrendered in exchange to make the conversion without the payment of additional consideration, if the security surrendered was, when issued, convertible and registered or exempt from registration.

(7) Any transaction in a vendor's interest in a land sale contract, or a bond or note secured by a mortgage or trust deed upon real estate, so long as the entire vendor's interest or mortgage or trust deed, with all the bonds or notes secured thereby, are sold to a single purchaser, in a single sale.

(8) Agency or principal sales by licensed broker-dealers, executed upon customers' orders on any exchange or on the over-the-counter market, but not the solicitation of such orders, where there is no intent to avoid the provisions of the Oregon Securities Law and a public offering is not involved. Such broker-dealers shall keep and maintain, for two years from the date of the order, a record of all the sales executed upon customers' orders, giving the name and address of each customer, the name and identity of the security involved, the dates of the sales, the price paid or received for the security, and the commission or other expenses charged to the customer.

(9) The offer or sale by a licensed broker-dealer of any security acquired in the ordinary and usual course of business, when such security is a part of an issue which has been registered in whole or in part, if the offer or sale is made in good faith and not directly or indirectly for the benefit of the issuer or for the promotion of any scheme or enterprise effecting a violation or an evasion of any provisions of the Oregon Securities Law, unless:

(a) The registration has been revoked or suspended; or

(b) The continued sale of the security has been enjoined.

(10) The offer or sale by licensed broker-dealer, acting either as principal or agent, of securities theretofore sold and distributed to the public, if the sale meets the requirements of paragraphs (a), (b) and (c) or (a), (b) and (d) of this subsection:

(a) Such securities are sold at prices reasonably related to the current market price thereof at the time of sale, and, if such licensed broker-dealer is acting as agent, the commission collected by such licensed broker-dealer on account of the sale thereof is not in excess of usual and customary commissions collected with respect to securities and transactions having comparable characteristics;

(b) Such securities do not constitute an unsold allotment to or subscription by such broker-dealer as a participant in the distribution of such securities by the issuer or by or through an underwriter;

(c) [Either Moody's or Standard and Poor's securities manuals, or any other] The issuer is listed in any recognized securities [manuals] manual approved by rule by the director, and the listing contains the names of the issuer's officers and directors, a balance sheet of the issuer as of a date not more than 18 months prior to the date of such sale, and a profit and loss statement for either the fiscal year preceding the date of the balance sheet or the most recent year of operations; and

(d) The securities are authorized for quotation on a nationwide automated quotations system approved by rule or order of the director.

(11) An offer, but not the sale, of a security meeting either of the following descriptions:

(a) A security for which registration statements have been filed under both the Oregon Securities Law and the Securities Act of 1933, as amended, if no stop or refusal order or order under ORS 59.105 is in effect and no public proceeding or examination looking toward such an order is pending. However, an offer for such a security may not be accepted until the securities have been registered as provided in the Oregon Securities Law.

(b) A security for which a registration statement has been filed under the Oregon Securities Law and the offer is allowed by the director. However, an offer for such a security may not be accepted until the securities have been registered as provided in the Oregon Securities Law.

(12)(a) Any transactions in securities by an offeror within or without this state that meet all of the requirements of subparagraph (A) or (B) of this paragraph and all of the requirements of subparagraphs (C), (D) and (E) of this paragraph:

(A) When the offeror is an issuer, the transactions result in not more than 10 purchasers within this state of securities of the issuer during any 12 consecutive months.

(B) When the offeror is a nonissuer the securities must have been bought and held for at least 12 consecutive months and the transactions result in not more than 10 purchasers within this state of securities from the nonissuer during any 12 consecutive months.

(C) No commission or other remuneration is paid or given directly or indirectly in connection with the offer or sale of the securities.

(D) No public advertising or general solicitation is used in connection with any transaction under this exemption.

(E) At the time of any transaction under this exemption the offeror does not have under the Oregon Securities Law an application for registration or an effective registration of securities which are part of the same offering.

(b) In connection with transactions under paragraph (a) of this subsection:

(A) Purchasers of securities of the offeror registered under ORS 59.065, exempt under ORS 59.025, exempt under any other subsection of this section, or for which a notice has been filed under ORS 59.049, are not counted as purchasers under this exemption.

(B) Repeat transactions with persons who are counted as purchasers within Oregon under paragraph (a) of this subsection do not increase the number of purchasers. However, a purchaser remains a purchaser for 12 months following the month of the last sale to that purchaser.

(C) No limitations are placed on the number of transactions or purchasers without this state. No limitations are placed on the number of offers under this exemption.

(13) A transaction with security holders, pursuant to a statutory vote by such security holders on a merger, consolidation, partial or complete liquidation, reclassification of securities, plan of exchange or sale of assets, in consideration of the issuance of securities of another issuer.

(14) Capital stock issued by a professional corporation organized under ORS chapter 58.

(15) Any other transaction exempted by rule of the director.

SECTION 2. ORS 59.175 is amended to read:

59.175. (1) The Director of the Department of Consumer and Business Services by rule shall establish procedures for notice filings required of federal covered investment advisers as well as procedures for licensing broker-dealers, state investment advisers, investment adviser representatives and salespersons. The director may coordinate notice filings or licensing with any national registration, licensing or notice filing system.

(2) The director may require an applicant for a license as a broker-dealer, state investment adviser or federal covered investment adviser for whom a license is required under ORS 59.165 (8), including the applicant's partners, directors, officers or any person occupying a similar status or performing similar functions, and any person directly or indirectly controlling such applicant and a person for whom application for a license as a salesperson or investment adviser representative is made, to pass an examination on such person's knowledge and understanding of the Oregon Securities Law and the securities business. The director may establish by rule a fee for the examination.

(3) The director may make such further examination of the applicant and the applicant's affairs as the director deems advisable and may require by rule or order that the applicant publish an announcement of the application in such manner as the director may specify.

(4)(a) Except as otherwise provided in paragraph (b) or (c) of this subsection, every applicant for a license as a broker-dealer or state investment adviser shall file with the director a corporate surety bond or irrevocable letter of credit issued by an insured institution as defined in ORS 706.008 or such other security as the director may approve by rule running to the State of Oregon in a sum to be established by rule of the director, but in no event more than $100,000.

(b) Licensed broker-dealers subject to section 15 of the Securities Exchange Act of 1934, as amended, are not required to comply with paragraph (a) of this subsection, nor are such licensed broker-dealers required to comply with any net capital requirements imposed by the director by rule or otherwise.

(c) A licensed state investment adviser who has its principal place of business in a state other than this state shall be exempt from the requirements of paragraph (a) of this subsection and shall be further exempt from any net capital requirements imposed by the director by rule or otherwise, provided that any such licensed state investment adviser is registered or licensed as a state investment adviser in the state where it maintains its principal place of business and is in compliance with such state's bonding or net capital requirements.

(5)(a) Subject to paragraph (b) of this subsection, if the application, surety bond, irrevocable letter of credit or other security and fees are in order and the director is satisfied that the application should not be denied upon one or more of the grounds specified in ORS 59.205 to 59.225, the director shall license the broker-dealer, state investment adviser, salesperson or investment adviser representative.

(b) If the director determines under ORS 59.205 or 59.215 that a condition or restriction should apply to the license, the director, at the time the license is issued, shall specify in writing to the licensee the condition or restriction applicable to the license.

(6) A licensee under ORS 59.165 shall amend the license application when there are material changes in the information contained in the original application.

(7) An applicant for or a person holding a license issued under ORS 59.005 to 59.370 may file with the director a trade name, as defined in ORS 647.005, or an assumed business name, as defined in ORS 648.005. The trade name or assumed business name shall be filed in a form and manner established by rule by the director. If the application is complete and the fee set forth in subsection (8) of this section is paid, the director shall issue an order authorizing the licensee to operate under the trade name or assumed business name. The order shall remain in effect until canceled, suspended or revoked.

(8) The director shall charge and collect for:

(a) An application for a license as a broker-dealer or state investment adviser, a fee of $100;

(b) An application to renew a license as a broker-dealer or state investment adviser, a fee of $50;

(d) An application to renew a license as a salesperson, a fee of $15;

(e) An application for a license as an investment adviser representative, a fee of $15;

(f) An application to renew a license as an investment adviser representative, a fee of $15;

(g) A notice filing for a federal covered investment adviser, a fee of $100;

(h) A notice filing renewal for a federal covered investment adviser, a fee of $50; and

(i) A filing for use of a trade name or an assumed business name, a fee of $50.

(9) Except as provided in this subsection, the fees under this section are not refundable. The director may provide for a method of equitably adjusting the payment of fees for broker-dealers, federal covered investment advisers, state investment advisers, salespersons and investment adviser representatives when the director determines that the changes in filing periods and expiration dates under ORS 59.185 are not equitable for the person making the payment.

SECTION 3. ORS 59.205 is amended to read:

59.205. Except as provided in ORS 59.215, the Director of the Department of Consumer and Business Services may by order deny, suspend or revoke, or impose conditions or restrictions on, a license of a person as a broker-dealer, federal covered investment adviser that has failed to comply with the provisions of ORS 59.165, state investment adviser, investment adviser representative or salesperson if the director finds that the applicant or licensee:

(1) Is insolvent, either in the sense that the liabilities of the applicant or licensee exceed the assets of the applicant or licensee or that the applicant or licensee cannot meet the obligations of the applicant or licensee as they mature, or is in such financial condition that the applicant or licensee cannot continue in business with safety to the customers of the applicant or licensee.

(2) Has engaged in dishonest, fraudulent or illegal practices or conduct in any business or profession or unfair or unethical practices or conduct in connection with the purchase or sale of any security.

(3) Has willfully or repeatedly violated or failed to comply with any provision of the Oregon Securities Law, any condition or restriction imposed on a license or any rule or order of the director.

(4) Has been convicted of a misdemeanor an essential element of which is fraud or of a felony.

(5) Is not qualified to conduct a securities business on the basis of such factors as training, experience and knowledge of the securities business.

(6) Has filed an application for a license which as of the date the license was issued, or as of the date of an order conditioning, restricting, denying, suspending or revoking a license, 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.

(7) Has failed to account to persons interested for all money or property received.

(8) Has not delivered after a reasonable time, to persons entitled thereto, securities held or to be delivered.

(9) Is permanently or temporarily enjoined by a court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities business.

(10) Is the subject of an order of the director conditioning, restricting, denying, suspending or revoking a license as a broker-dealer, federal covered investment adviser, state investment adviser, investment adviser representative or salesperson.

(11) Is the subject of an order of the director under:

(a) ORS chapter 645 involving a violation of any provision of the Oregon Commodity Code or any rule or order of the director adopted or entered under ORS chapter 645; or

(b) ORS 59.840 to 59.965 involving a violation of any provision of ORS 59.840 to 59.965 or any rule or order of the director adopted or entered under ORS 59.840 to 59.965.

(12) Is the subject of any of the following orders that are currently effective and were issued within the last five years:

(a) An order by the securities agency or administrator of another state or Canadian province or territory, or by the Securities and Exchange Commission, entered after notice and opportunity for hearing, denying, suspending or revoking the person's registration or license as a broker-dealer, federal covered investment adviser, state investment adviser, investment adviser representative or salesperson, or the substantial equivalent of those terms as defined in the Oregon Securities Law;

(b) A suspension or expulsion from membership in or association with a member of a self-regulatory organization registered under the Securities Exchange Act of 1934, as amended, the Commodity Exchange Act or the Investment Advisers Act of 1940, as amended;

(d) A cease and desist order entered after notice and opportunity for hearing by the director, the securities agency or administrator of another state or a Canadian province or territory, the Securities and Exchange Commission or the Commodity Futures Trading Commission; or

(e) An order by the Commodity Futures Trading Commission denying, suspending or revoking registration under the Commodity Exchange Act.

(13) Has failed, reasonably to supervise the salespersons or investment adviser representatives of the applicant or licensee.

(14) Has failed to comply with the requirements of ORS 59.195 to make and keep records prescribed by rule or order of the director, to produce such records required by the director or to file any financial reports or other information the director by rule or order may require.

SECTION 4. ORS 59.215 is amended to read:

59.215. The Director of the Department of Consumer and Business Services may enter an order against the applicant or licensee under ORS 59.205 if any partner, officer or director of a broker-dealer or state investment adviser, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer or state investment adviser has been guilty of any act or omission which would be cause for conditioning, restricting, denying, suspending or revoking the license of an individual broker-dealer, state investment adviser or salesperson, except as follows:

(1) This section shall not apply to any issuer of a federal covered security, a federal covered investment adviser or to ORS 59.205 (1).

(2) The director may not enter an order against a broker-dealer or state investment adviser on the basis of the lack of qualification under ORS 59.205 (5) of any person other than:

(a) The broker-dealer or state investment adviser if the broker-dealer or state investment adviser is an individual; or

(b) A salesperson of the broker-dealer or investment adviser representative of the state investment adviser.

(3) The director may not enter an order solely on the basis of lack of experience if the applicant or licensee is qualified by training or knowledge or both.

(4) If the director finds that an applicant for an initial license or a license renewal as a broker-dealer is not qualified as a state investment adviser, the director may condition the applicant's license as a broker-dealer upon its not transacting business in this state as a state investment adviser.

SECTION 5. ORS 59.451 is added to and made a part of ORS 59.005 to 59.370.

SECTION 6. This 2001 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 2001 Act takes effect on its passage.

Approved by the Governor April 6, 2001

Filed in the office of Secretary of State April 6, 2001

Effective date April 6, 2001

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