71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
Enrolled
Senate Bill 306
Printed pursuant to Senate Interim Rule 213.28 by order of the
President of the Senate in conformance with presession filing
rules, indicating neither advocacy nor opposition on the part
of the President (at the request of Governor John A. Kitzhaber,
M.D., for Department of Consumer and Business Services)
CHAPTER ................
AN ACT
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.
Enrolled Senate Bill 306 (SB 306-INTRO) Page 1
(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.
Enrolled Senate Bill 306 (SB 306-INTRO) Page 2
(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:
Enrolled Senate Bill 306 (SB 306-INTRO) Page 3
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. + }
Enrolled Senate Bill 306 (SB 306-INTRO) Page 4
(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;
(c) An application for a license as a salesperson, a fee of
$15;
(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.
Enrolled Senate Bill 306 (SB 306-INTRO) Page 5
(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;
(c) A United States Postal Service fraud order;
(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.
Enrolled Senate Bill 306 (SB 306-INTRO) Page 6
(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. + }
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Enrolled Senate Bill 306 (SB 306-INTRO) Page 7
Passed by Senate February 12, 2001
...........................................................
Secretary of Senate
...........................................................
President of Senate
Passed by House March 13, 2001
...........................................................
Speaker of House
Enrolled Senate Bill 306 (SB 306-INTRO) Page 8
Received by Governor:
......M.,............., 2001
Approved:
......M.,............., 2001
...........................................................
Governor
Filed in Office of Secretary of State:
......M.,............., 2001
...........................................................
Secretary of State
Enrolled Senate Bill 306 (SB 306-INTRO) Page 9