As Introduced 1
122nd General Assembly 4
Regular Session H. B. No. 695 5
1997-1998 6
REPRESENTATIVES STAPLETON-THOMAS-WILLAMOWSKI-HARRIS- 8
GARCIA-OLMAN-VAN VYVEN 9
11
A B I L L
To amend sections 1707.01, 1707.03, 1707.11, 13
1707.14, 1707.17, 1707.18, 1707.19, 1707.20, 14
1707.22, 1707.23, 1707.25, 1707.27, 1707.391, 15
1707.42, 1707.431, 1707.44, 1707.46, and 1707.48, 16
and to enact sections 1707.092, 1707.093, 17
1707.141, 1707.151, and 1707.161 of the Revised 18
Code to modify the Securities Law, including 19
modifications to the list of securities 20
transactions exempt from registration, 21
provisions for notice filings by investment 22
companies and in connection with covered security 23
offerings, provisions for electronic filing, 24
provisions for the registration and regulation of 25
investment advisers and investment adviser 27
representatives, and other provisions for 28
related changes. 29
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 31
Section 1. That sections 1707.01, 1707.03, 1707.11, 33
1707.14, 1707.17, 1707.18, 1707.19, 1707.20, 1707.22, 1707.23, 35
1707.25, 1707.27, 1707.391, 1707.42, 1707.431, 1707.44, 1707.46,
and 1707.48 be amended and sections 1707.092, 1707.093, 1707.141, 37
1707.151, and 1707.161 of the Revised Code be enacted to read as 39
follows:
Sec. 1707.01. As used in this chapter: 48
(A) Whenever the context requires it, "division" or 50
2
"division of securities" may be read as "director of commerce" or 51
as "commissioner of securities." 52
(B) "Security" means any certificate or instrument that 54
represents title to or interest in, or is secured by any lien or 55
charge upon, the capital, assets, profits, property, or credit of 56
any person or of any public or governmental body, subdivision, or 57
agency. It includes shares of stock, certificates for shares of 58
stock, membership interests in limited liability companies, 59
voting-trust certificates, warrants and options to purchase 60
securities, subscription rights, interim receipts, interim 61
certificates, promissory notes, all forms of commercial paper, 62
evidences of indebtedness, bonds, debentures, land trust 63
certificates, fee certificates, leasehold certificates, syndicate 64
certificates, endowment certificates, certificates or written 65
instruments in or under profit-sharing or participation 66
agreements or in or under oil, gas, or mining leases, or 67
certificates or written instruments of any interest in or under 68
the same, receipts evidencing preorganization or reorganization 69
subscriptions, preorganization certificates, reorganization 70
certificates, certificates evidencing an interest in any trust or 71
pretended trust, any investment contract, any instrument 72
evidencing a promise or an agreement to pay money, warehouse 73
receipts for intoxicating liquor, and the currency of any 74
government other than those of the United States and Canada, but 75
sections 1707.01 to 1707.45 of the Revised Code do not apply to 76
bond investment companies or to the sale of real estate. 77
(C)(1) "Sale" has the full meaning of "sale" as applied by 79
or accepted in courts of law or equity, and includes every 80
disposition, or attempt to dispose, of a security or of an 81
interest in a security. "Sale" also includes a contract to sell, 82
an exchange, an attempt to sell, an option of sale, a 83
solicitation of a sale, a solicitation of an offer to buy, a 84
subscription, or an offer to sell, directly or indirectly, by 85
agent, circular, pamphlet, advertisement, or otherwise. 86
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(2) "Sell" means any act by which a sale is made. 88
(3) The use of advertisements, circulars, or pamphlets in 90
connection with the sale of securities in this state exclusively 91
to the purchasers specified in division (D) of section 1707.03 of 92
the Revised Code is not a sale when the advertisements, 93
circulars, and pamphlets describing and offering those securities 94
bear a readily legible legend in substance as follows: "This 95
offer is made on behalf of dealers licensed under sections 96
1707.01 to 1707.45 of the Revised Code, and is confined in this 97
state exclusively to institutional investors and licensed 98
dealers." 99
(4) The offering of securities by any person in 101
conjunction with a licensed dealer by use of advertisement, 102
circular, or pamphlet is not a sale if that person does not 103
otherwise attempt to sell securities in this state. 104
(5) Any security given with, or as a bonus on account of, 106
any purchase of securities is conclusively presumed to constitute 107
a part of the subject of that purchase and has been "sold." 108
(6) "Sale" by an owner, pledgee, or mortgagee, or by a 110
person acting in a representative capacity, includes sale on 111
behalf of such party by an agent, including a licensed dealer or 112
salesman SALESPERSON. 113
(D) "Person"," EXCEPT AS OTHERWISE PROVIDED IN THIS 115
CHAPTER, means a natural person, firm, partnership, limited 117
partnership, partnership association, syndicate, joint-stock 118
company, unincorporated association, trust or trustee except 119
where the trust was created or the trustee designated by law or 120
judicial authority or by a will, and a corporation or limited 121
liability company organized under the laws of any state, any 122
foreign government, or any political subdivision of a state or 123
foreign government.
(E)(1) "Dealer," except as otherwise provided in this 125
chapter, means every person, other than a salesman SALESPERSON, 126
who engages or professes to engage, in this state, for either all 127
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or part of the person's time, directly or indirectly, either in 128
the business of the sale of securities for the person's own 129
account, or in the business of the purchase or sale of securities 130
for the account of others in the reasonable expectation of 131
receiving a commission, fee, or other remuneration as a result of 132
engaging in the purchase and sale of securities. "Dealer" does 133
not mean any of the following:
(a) Any issuer, including any officer, director, employee, 135
or trustee of, OR MEMBER OR MANAGER OF, or partner in, or any 136
general partner of, any issuer, that sells, offers for sale, or 138
does any act in furtherance of the sale of a security that 139
represents an economic interest in that issuer, provided no 140
commission, fee, or other similar remuneration is paid to or 141
received by the issuer for the sale; 142
(b) Any licensed attorney, public accountant, or firm of 144
such attorneys or accountants, whose activities are incidental to 145
the practice of the attorney's, accountant's or firm's 146
profession;
(c) Any person that, for the account of others, engages in 148
the purchase or sale of securities that are issued and 149
outstanding before such purchase and sale, if a majority or more 150
of the equity interest of an issuer is sold in that transaction, 151
and if, in the case of a corporation, the securities sold in that 152
transaction represent a majority or more of the voting power of 153
the corporation in the election of directors; 154
(d) Any person that brings an issuer together with a 156
potential investor and whose compensation is not directly or 157
indirectly based on the sale of any securities by the issuer to 158
the investor; 159
(e) Any bank, savings and loan association, savings bank, 161
or credit union chartered under the laws of the United States or 162
any state thereof, provided that all transactions are consummated 163
by or through a person licensed pursuant to section 1707.14 of 164
the Revised Code; 165
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(f) Any person that the division of securities by rule 167
exempts from the definition of "dealer" under division (E)(1) of 168
this section. 169
(2) "Licensed dealer" means a dealer licensed under this 172
chapter.
(F)(1) "Salesman" OR "SALESPERSON" means every natural 174
person, other than a dealer, employed, authorized, or appointed 177
by a dealer to sell securities within this state. 178
(2) The general partners of a partnership, and the 180
executive officers of a corporation or unincorporated 181
association, licensed as a dealer are not salesmen SALESPERSONS 182
within the meaning of this definition, nor are such clerical or 183
other employees of an issuer or dealer as are employed for work 184
to which the sale of securities is secondary and incidental; but 185
the division of securities may require a license from any such 186
partner, executive officer, or employee if it determines that 187
protection of the public necessitates the licensing. 188
(3) "Licensed salesman SALESPERSON" means a salesman 190
SALESPERSON licensed under this chapter. 191
(G) "Issuer" means every person who has issued, proposes 193
to issue, or issues any security. 194
(H) "Director" means each director or trustee of a 196
corporation, each trustee of a trust, each general partner of a 197
partnership, except a partnership association, each manager of a 198
partnership association, and any person vested with managerial or 199
directory power over an issuer not having a board of directors or 200
trustees. 201
(I) "Incorporator" means any incorporator of a corporation 203
and any organizer of, or any person participating, other than in 204
a representative or professional capacity, in the organization of 205
an unincorporated issuer. 206
(J) "Fraud," "fraudulent acts," "fraudulent practices," or 208
"fraudulent transactions" means anything recognized on or after 209
July 22, 1929, as such in courts of law or equity; any device, 210
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scheme, or artifice to defraud or to obtain money or property by 211
means of any false pretense, representation, or promise; any 212
fictitious or pretended purchase or sale of securities; and any 213
act, practice, transaction, or course of business relating to the 214
sale of securities that is fraudulent or that has operated or 215
would operate as a fraud upon the purchaser. 216
(K) Except as otherwise specifically provided, whenever 218
any classification or computation is based upon "par value," as 219
applied to securities without par value, the average of the 220
aggregate consideration received or to be received by the issuer 221
for each class of those securities shall be used as the basis for 222
that classification or computation. 223
(L)(1) "Intangible property" means patents, copyrights, 225
secret processes, formulas, services, good will, promotion and 226
organization fees and expenses, trademarks, trade brands, trade 227
names, licenses, franchises, any other assets treated as 228
intangible according to generally accepted accounting principles, 229
and securities, accounts receivable, or contract rights having no 230
readily determinable value. 231
(2) "Tangible property" means all property other than 233
intangible property and includes securities, accounts receivable, 234
and contract rights, when the securities, accounts receivable, or 235
contract rights have a readily determinable value. 236
(M) "Public utilities" means those utilities defined in 238
sections 4905.02, 4905.03, 4907.02, and 4907.03 of the Revised 239
Code; in the case of a foreign corporation, it means those 240
utilities defined as public utilities by the laws of its 241
domicile; and in the case of any other foreign issuer, it means 242
those utilities defined as public utilities by the laws of the 243
situs of its principal place of business. The term always 244
includes railroads whether or not they are so defined as public 245
utilities. 246
(N) "State" means any state of the United States, any 248
territory or possession of the United States, the District of 249
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Columbia, and any province of Canada. 250
(O) "Bank" means any bank, trust company, savings and loan 252
association, or savings bank, OR CREDIT UNION that is 253
incorporated or organized under the laws of the United States, 255
any state of the United States, Canada, or any province of Canada 256
and that is subject to regulation or supervision by that country, 257
state, or province.
(P) "Include," when used in a definition, does not exclude 259
other things or persons otherwise within the meaning of the term 260
defined. 261
(Q)(1) "Registration by description" means that the 263
requirements of section 1707.08 of the Revised Code have been 264
complied with. 265
(2) "Registration by qualification" means that the 267
requirements of sections 1707.09 and 1707.11 of the Revised Code 268
have been complied with. 269
(3) "Registration by coordination" means that there has 271
been compliance with section 1707.091 of the Revised Code. 272
Reference in this chapter to registration by qualification also 273
shall be deemed to include registration by coordination unless 274
the context otherwise indicates. 275
(R) "Intoxicating liquor" includes all liquids and 277
compounds that contain more than three and two-tenths per cent of 278
alcohol by weight and are fit for use for beverage purposes. 279
(S) "Institutional investor" means any corporation, bank, 281
insurance company, pension fund or pension fund trust, employees' 282
profit-sharing fund or employees' profit-sharing trust, any 283
association engaged, as a substantial part of its business or 284
operations, in purchasing or holding securities, or any trust in 285
respect of which a bank is trustee or cotrustee. "Institutional 286
investor" does not include any business entity formed for the 287
primary purpose of evading sections 1707.01 to 1707.45 of the 288
Revised Code. 289
(T) "Securities Act of 1933," 84 48 Stat. 74, 15 U.S.C. 291
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77a-77aa 77a, "Securities Exchange Act of 1934," 48 Stat. 881, 15 293
U.S.C. 78a-78jj, and "Internal Revenue Code of 1954 1986," 68a 295
100 Stat. 3 2085, 26 U.S.C. 1, "INVESTMENT ADVISERS ACT OF 1940," 297
54 STAT. 847, 15 U.S.C. 80b, AND "INVESTMENT COMPANY ACT OF 299
1940," 54 STAT. 789, 15 U.S.C. 80a mean the federal statutes of 301
those names as amended before or after July 20, 1978 THE 302
EFFECTIVE DATE OF THIS AMENDMENT. 303
(U) "Securities and exchange commission" means the 305
securities and exchange commission established by the Securities 306
Exchange Act of 1934. 307
(V)(1) "Control bid" means the purchase of or offer to 309
purchase any equity security of a subject company from a resident 310
of this state if either of the following applies: 311
(a) After the purchase of that security, the offeror would 313
be directly or indirectly the beneficial owner of more than ten 314
per cent of any class of the issued and outstanding equity 315
securities of the issuer. 316
(b) The offeror is the subject company, there is a pending 318
control bid by a person other than the issuer, and the number of 319
the issued and outstanding shares of the subject company would be 320
reduced by more than ten per cent. 321
(2) For purposes of division (V)(1) of this section, 323
"control bid" does not include any of the following: 324
(a) A bid made by a dealer for the dealer's own account in 326
the ordinary course of business of buying and selling securities; 327
(b) An offer to acquire any equity security solely in 329
exchange for any other security, or the acquisition of any equity 330
security pursuant to an offer, for the sole account of the 331
offeror, in good faith and not for the purpose of avoiding the 332
provisions of this chapter, and not involving any public offering 333
of the other security within the meaning of Section 4 of Title I 334
of the "Securities Act of 1933," 48 Stat. 77, 15 U.S.C.A. 77d(2), 335
as amended; 336
(c) Any other offer to acquire any equity security, or the 338
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acquisition of any equity security pursuant to an offer, for the 339
sole account of the offeror, from not more than fifty persons, in 340
good faith and not for the purpose of avoiding the provisions of 341
this chapter. 342
(W) "Offeror" means a person who makes, or in any way 344
participates or aids in making, a control bid and includes 345
persons acting jointly or in concert, or who intend to exercise 346
jointly or in concert any voting rights attached to the 347
securities for which the control bid is made and also includes 348
any subject company making a control bid for its own securities. 349
(X)(1) "Investment advisor ADVISER" means any person who, 352
for compensation, engages in the business of advising ADVISES 353
others, either directly or through publications or writings, as 354
to the value of securities or as to the advisability of investing 355
in, purchasing, or selling securities, or who, for compensation 356
and as a part of regular business, issues or promulgates analyses 357
or reports concerning securities. " 358
(2) "INVESTMENT ADVISER" ALSO INCLUDES A FINANCIAL 360
PLANNER, AND ANY OTHER PERSON WHO, AS AN INTEGRAL COMPONENT OF 361
OTHER FINANCIALLY RELATED SERVICES, PROVIDES THE INVESTMENT 362
ADVISORY SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS SECTION TO 363
OTHERS FOR COMPENSATION.
(3) "Investment advisor ADVISER" does not mean any of the 366
following:
(1)(a) Any licensed attorney, public accountant, or firm 369
of such attorneys or accountants, engineer, any bank, savings and 370
loan association, or savings bank, or any director, officer, or 371
employee of a bank, savings and loan association, or savings bank 373
OR TEACHER, whose activities are PERFORMANCE OF INVESTMENT 374
ADVISORY SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS SECTION IS 375
SOLELY incidental to the practice of the attorney's, 376
accountant's, engineer's, director's, officer's, employee's, 378
firm's, bank's, or association's TEACHER'S profession or 379
occupation;
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(2)(b) A publisher or bona fide employee of any bona fide 382
newspaper, news magazine, or business or financial publication of 383
general, regular, and paid REGULAR circulation; 384
(3) Any issuer, including any officer, director, employee, 386
or partner in, or trustee of, any issuer whose performance of 387
these services occurs in furtherance of the sale of a security 388
that represents an economic interest in that issuer, provided 389
that no commission, fee, or remuneration is paid to or received 390
by such person for such advisory services 391
(c) A PERSON WHO ACTS SOLELY AS AN INVESTMENT ADVISER 393
REPRESENTATIVE; 394
(d) A BANK HOLDING COMPANY, AS DEFINED IN THE "BANK 397
HOLDING COMPANY ACT OF 1956," 70 STAT. 133, 12 U.S.C. 1841, THAT 398
IS NOT AN INVESTMENT COMPANY; 399
(e) A BANK, OR ANY RECEIVER, CONSERVATOR, OR OTHER 401
LIQUIDATING AGENT OF A BANK; 402
(f) ANY LICENSED DEALER OR LICENSED SALESPERSON WHOSE 404
PERFORMANCE OF INVESTMENT ADVISORY SERVICES DESCRIBED IN DIVISION 405
(X)(1) OF THIS SECTION IS SOLELY INCIDENTAL TO THE CONDUCT OF THE 406
DEALER'S OR SALESPERSON'S BUSINESS AS A LICENSED DEALER OR 407
LICENSED SALESPERSON AND WHO RECEIVES NO SPECIAL COMPENSATION FOR 408
THE SERVICES;
(g) ANY PERSON, THE ADVICE, ANALYSES, OR REPORTS OF WHICH 410
DO NOT RELATE TO SECURITIES OTHER THAN SECURITIES THAT ARE DIRECT 411
OBLIGATIONS OF, OR OBLIGATIONS GUARANTEED AS TO PRINCIPAL OR 412
INTEREST BY, THE UNITED STATES, OR SECURITIES ISSUED OR 413
GUARANTEED BY CORPORATIONS IN WHICH THE UNITED STATES HAS A 414
DIRECT OR INDIRECT INTEREST, AND THAT HAVE BEEN DESIGNATED BY THE 415
SECRETARY OF THE TREASURY AS EXEMPT SECURITIES AS DEFINED IN THE 416
"SECURITIES EXCHANGE ACT OF 1934," 48 STAT. 881, 15 U.S.C. 78c; 418
(h) ANY OTHER PERSON THAT THE DIVISION DESIGNATES BY RULE, 420
IF THE DIVISION FINDS THAT THE DESIGNATION IS NECESSARY OR 421
APPROPRIATE IN THE PUBLIC INTEREST OR FOR THE PROTECTION OF 422
INVESTORS OR CLIENTS AND CONSISTENT WITH THE PURPOSES FAIRLY 423
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INTENDED BY THE POLICY AND PROVISIONS OF THIS CHAPTER.
(Y)(1) "Subject company" means an issuer that satisfies 425
both of the following: 426
(a) Its principal place of business or its principal 428
executive office is located in this state, or it owns or controls 429
assets located within this state that have a fair market value of 430
at least one million dollars. 431
(b) More than ten per cent of its beneficial or record 433
equity security holders are resident in this state, more than ten 434
per cent of its equity securities are owned beneficially or of 435
record by residents in this state, or more than one thousand of 436
its beneficial or record equity security holders are resident in 437
this state. 438
(2) The division of securities may adopt rules to 440
establish more specific application of the provisions set forth 441
in division (Y)(1) of this section. Notwithstanding the 442
provisions set forth in division (Y)(1) of this section and any 443
rules adopted under this division, the division, by rule or in an 444
adjudicatory proceeding, may make a determination that an issuer 445
does not constitute a "subject company" under division (Y)(1) of 446
this section if appropriate review of control bids involving the 447
issuer is to be made by any regulatory authority of another 448
jurisdiction. 449
(Z) "Beneficial owner" includes any person who directly or 451
indirectly through any contract, arrangement, understanding, or 452
relationship has or shares, or otherwise has or shares, the power 453
to vote or direct the voting of a security or the power to 454
dispose of, or direct the disposition of, the security. 455
"Beneficial ownership" includes the right, exercisable within 456
sixty days, to acquire any security through the exercise of any 457
option, warrant, or right, the conversion of any convertible 458
security, or otherwise. Any security subject to any such option, 459
warrant, right, or conversion privilege held by any person shall 460
be deemed to be outstanding for the purpose of computing the 461
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percentage of outstanding securities of the class owned by that 462
person, but shall not be deemed to be outstanding for the purpose 463
of computing the percentage of the class owned by any other 464
person. A person shall be deemed the beneficial owner of any 465
security beneficially owned by any relative or spouse or relative 466
of the spouse residing in the home of that person, any trust or 467
estate in which that person owns ten per cent or more of the 468
total beneficial interest or serves as trustee or executor, any 469
corporation or entity in which that person owns ten per cent or 470
more of the equity, and any affiliate or associate of that 471
person. 472
(AA) "Offeree" means the beneficial or record owner of any 474
security that an offeror acquires or offers to acquire in 475
connection with a control bid. 476
(BB) "Equity security" means any share or similar 478
security, or any security convertible into any such security, or 479
carrying any warrant or right to subscribe to or purchase any 480
such security, or any such warrant or right, or any other 481
security that, for the protection of security holders, is treated 482
as an equity security pursuant to rules of the division of 483
securities. 484
(CC) "Investment company" has the same meaning as in 486
section 3(A) of the "Investment Company Act of 1940," 54 Stat. 487
789, 15 U.S.C. 80a-1 to 80a-52. 488
(DD) "Penny stock" has the same meaning as in section 491
3(A)(51) of the "Securities Exchange Act of 1934," 48 Stat. 881, 492
15 U.S.C. 78a-78jj, and the rules, regulations, and orders issued 493
pursuant to that section. 494
(EE) "Going concern transaction" has the same meaning 497
given that term under the rules or regulations on the securities 498
and exchange commission issued pursuant to section 13(c) of the 499
"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C.
78a-78jj. 500
(FF) "Person acting on behalf of an issuer" means an 503
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officer, director, or employee of an issuer.
(GG) "Blank check company," "roll-up transaction," 506
"executive officer of an entity," and "direct participation
program" have the same meanings given those terms by rule or 507
regulation of the securities and exchange commission. 508
(HH) "Forward-looking statement" means any of the 510
following:
(1) A statement containing a projection of revenues, 512
income including income loss, earnings per share including 513
earnings loss per share, capital expenditures, dividends, capital 514
structure, or other financial items;
(2) A statement of the plans and objectives of the 516
management of the issuer for future operations, including plans 517
or objectives relating to the products or services of the issuer; 518
(3) A statement of future economic performance, including 520
any statement of that nature contained in a discussion and 521
analysis of financial conditions by the management or in the 522
results of operations included pursuant to the rules and 523
regulations of the securities and exchange commission;
(4) Any disclosed statement of the assumptions underlying 525
or relating to a statement described in division (B)(1), (2), or 527
(3) of section 1707.437 of the Revised Code; 528
(5) Any report issued by an outside reviewer retained by 530
an issuer to the extent that the report relates to a 531
forward-looking statement made by the issuer; 532
(6) A statement containing a projection or estimate of any 534
other items that may be specified by rule or regulation of the 535
securities and exchange commission. 536
(II)(1) "INVESTMENT ADVISER REPRESENTATIVE" MEANS A 538
SUPERVISED PERSON OF AN INVESTMENT ADVISER, PROVIDED THAT MORE 539
THAN TEN PER CENT OF THE SUPERVISED PERSON'S CLIENTS ARE NATURAL 540
PERSONS OTHER THAN EXCEPTED PERSONS DEFINED IN DIVISION (KK) OF 541
THIS SECTION. "INVESTMENT ADVISER REPRESENTATIVE" DOES NOT MEAN 542
EITHER OF THE FOLLOWING:
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(a) A SUPERVISED PERSON THAT DOES NOT ON A REGULAR BASIS 544
SOLICIT, MEET WITH, OR OTHERWISE COMMUNICATE WITH CLIENTS OF THE 545
INVESTMENT ADVISER;
(b) A SUPERVISED PERSON THAT PROVIDES ONLY INVESTMENT 547
ADVISORY SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS SECTION BY 548
MEANS OF WRITTEN MATERIALS OR ORAL STATEMENTS THAT DO NOT PURPORT 549
TO MEET THE OBJECTIVES OR NEEDS OF SPECIFIC INDIVIDUALS OR 550
ACCOUNTS.
(2) CLIENTS WHO ARE NOT RESIDENTS OF THE UNITED STATES 552
NEED NOT BE INCLUDED IN THE CALCULATION OF THE PERCENTAGE OF 553
REQUIRED CLIENTS UNDER DIVISION (II)(1) OF THIS SECTION. 554
(JJ) "SUPERVISED PERSON" MEANS ANY OF THE FOLLOWING: 556
(1) A PARTNER, OFFICER, OR DIRECTOR OF AN INVESTMENT 558
ADVISER, OR OTHER PERSON OCCUPYING A SIMILAR STATUS OR PERFORMING 559
SIMILAR FUNCTIONS WITH RESPECT TO AN INVESTMENT ADVISER; 560
(2) AN EMPLOYEE OF AN INVESTMENT ADVISER; 562
(3) A PERSON WHO PROVIDES INVESTMENT ADVISORY SERVICES 564
DESCRIBED IN DIVISION (X)(1) OF THIS SECTION ON BEHALF OF THE 565
INVESTMENT ADVISER AND IS SUBJECT TO THE SUPERVISION AND CONTROL 566
OF THE INVESTMENT ADVISER.
(KK) "EXCEPTED PERSON" MEANS A NATURAL PERSON TO WHOM 568
EITHER OF THE FOLLOWING APPLIES: 569
(1) IMMEDIATELY AFTER ENTERING INTO THE INVESTMENT 571
ADVISORY CONTRACT WITH THE INVESTMENT ADVISER, THE PERSON HAS AT 572
LEAST FIVE HUNDRED THOUSAND DOLLARS UNDER MANAGEMENT WITH THE 573
INVESTMENT ADVISER.
(2) THE INVESTMENT ADVISER REASONABLY BELIEVES, 575
IMMEDIATELY PRIOR TO ENTERING INTO AN ADVISORY CONTRACT WITH THE 576
PERSON, THE PERSON HAS A NET WORTH, TOGETHER WITH ASSETS HELD 577
JOINTLY WITH A SPOUSE, OF MORE THAN ONE MILLION DOLLARS. 578
Sec. 1707.03. (A) As used in this section, "exempt" means 587
that, except in the case of securities the right to buy, sell, or 588
deal in which has been suspended or revoked under an existing 589
order of the division of securities under section 1707.13 of the 590
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Revised Code or under a cease and desist order under division (H) 591
of section 1707.23 of the Revised Code, transactions in 592
securities may be carried on and completed without compliance 593
with sections 1707.08 to 1707.11 of the Revised Code. 594
(B) A sale of securities made by or on behalf of a bona 596
fide owner, neither the issuer nor a dealer, is exempt if the 597
sale is made in good faith and not for the purpose of avoiding 598
this chapter and is not made in the course of repeated and 599
successive transactions of a similar character. Any sale of 600
securities over a stock exchange that is lawfully conducted in 601
this state and regularly open for public patronage and that has 602
been established and operated for a period of at least five years 603
prior to the sale at a commission not exceeding the commission 604
regularly charged in such transactions also is exempt. 605
(C) The sale of securities by executors, administrators, 607
receivers, trustees, or anyone acting in a fiduciary capacity is 608
exempt, where such relationship was created by law, by a will, or 609
by judicial authority, and where such sales are subject to 610
approval by, or are made in pursuance to authority granted by, 611
any court of competent jurisdiction or are otherwise authorized 612
and lawfully made by such fiduciary. 613
(D) A sale to the issuer, to a dealer, or to an 615
institutional investor is exempt. 616
(E) A sale in good faith, and not for the purpose of 618
avoiding this chapter, by a pledgee of a security pledged for a 619
bona fide debt is exempt. 620
(F) The sale at public auction by a corporation of shares 622
of its stock because of delinquency in payment for the shares is 623
exempt. 624
(G)(1) The giving of any conversion right with, or on 626
account of the purchase of, any security that is exempt, is the 627
subject matter of an exempt transaction, has been registered by 628
description, by coordination, or by qualification, or is the 629
subject matter of a transaction that has been registered by 630
16
description is exempt. 631
(2) The giving of any subscription right, warrant, or 633
option to purchase a security or right to receive a security upon 634
exchange, which security is exempt at the time the right, 635
warrant, or option to purchase or right to receive is given, is 636
the subject matter of an exempt transaction, is registered by 637
description, by coordination, or by qualification, or is the 638
subject matter of a transaction that has been registered by 639
description is exempt. 640
(3) The giving of any subscription right or any warrant or 642
option to purchase a security, which right, warrant, or option 643
expressly provides that it shall not be exercisable except for a 644
security that at the time of the exercise is exempt, is the 645
subject matter of an exempt transaction, is registered by 646
description, by coordination, or by qualification, or at such 647
time is the subject matter of a transaction that has been 648
registered by description is exempt. 649
(H) The sale of notes, bonds, or other evidences of 651
indebtedness that are secured by a mortgage lien upon real 652
estate, leasehold estate other than oil, gas, or mining 653
leasehold, or tangible personal property, or which evidence of 654
indebtedness is due under or based upon a conditional-sale 655
contract, if all such notes, bonds, or other evidences of 656
indebtedness are sold to a single purchaser at a single sale, is 657
exempt. 658
(I) The delivery of securities by the issuer on the 660
exercise of conversion rights, the sale of securities by the 661
issuer on exercise of subscription rights or of warrants or 662
options to purchase securities, the delivery of voting-trust 663
certificates for securities deposited under a voting-trust 664
agreement, the delivery of deposited securities on surrender of 665
voting-trust certificates, and the delivery of final certificates 666
on surrender of interim certificates are exempt; but the sale of 667
securities on exercise of subscription rights, warrants, or 668
17
options is not an exempt transaction unless those rights, 669
warrants, or options when granted were the subject matter of an 670
exempt transaction under division (G) of this section or were 671
registered by description, by coordination, or by qualification. 672
(J) The sale of securities by a bank, savings and loan 674
association, savings bank, or credit union organized under the 675
laws of the United States or of this state is exempt if at a 676
profit to that seller of not more than two per cent of the total 677
sale price of the securities. 678
(K)(1) The distribution by a corporation of its securities 680
to its security holders as a share dividend or other distribution 681
out of earnings or surplus is exempt. 682
(2) The exchange or distribution by the issuer of any of 684
its securities or of the securities of any of the issuer's wholly 685
owned subsidiaries exclusively with or to its existing security 686
holders, if no commission or other remuneration is given directly 687
or indirectly for soliciting the exchange, is exempt. 688
(3) The sale of preorganization subscriptions for shares 690
of stock of a corporation prior to the incorporation of the 691
corporation is exempt, when the sale is evidenced by a written 692
agreement, no remuneration is given, or promised, directly or 693
indirectly, for or in connection with the sale of those 694
securities, and no consideration is received, directly or 695
indirectly, by any person from the purchasers of those securities 696
until registration by qualification, by coordination, or by 697
description of those securities is made under this chapter. 698
(L) The issuance of securities in exchange for one or more 700
bona fide outstanding securities, claims, or property interests, 701
not including securities sold for a consideration payable in 702
whole or in part in cash, under a plan of reorganization, 703
recapitalization, or refinancing approved by a court pursuant to 704
the Bankruptcy Act of the United States or to any other federal 705
act giving any federal court jurisdiction over such plan of 706
reorganization, or under a plan of reorganization approved by a 707
18
court of competent jurisdiction of any state of the United States 708
is exempt. As used in this division, "reorganization," 709
"recapitalization," and "refinancing" have the same meanings as 710
in section 1707.04 of the Revised Code. 711
(M) A sale by a licensed dealer, acting either as 713
principal or as agent, of securities issued and outstanding 714
before the sale is exempt, unless the sale is of one or more of 715
the following: 716
(1) Securities constituting the whole or a part of an 718
unsold allotment to or subscription by a dealer as an underwriter 719
or other participant in the distribution of those securities by 720
the issuer, whether that distribution is direct or through an 721
underwriter, provided that, if the issuer is such by reason of 722
owning one-fourth or more of those securities, such THE dealer 723
has knowledge of such THIS fact or reasonable cause to believe 725
such THIS fact; 726
(2) Any class of shares issued by a corporation when the 728
number of beneficial owners of that class is less than 729
twenty-five, with the record owner of securities being deemed the 730
beneficial owner for this purpose, in the absence of actual 731
knowledge to the contrary; 732
(3) Securities that within one year were purchased outside 734
this state or within one year were transported into this state, 735
if the dealer has knowledge or reasonable cause to believe, 736
before the sale of those securities, that within one year they 737
were purchased outside this state or within one year were 738
transported into this state; but such a sale of those securities 739
is exempt if any of the following occurs: 740
(a) A recognized securities manual contains the names of 742
the issuer's officers and directors, a balance sheet of the 743
issuer as of a date within eighteen months, and a profit and loss 744
statement for either the fiscal year preceding that date or the 745
most recent year of operations; 746
(b) Those securities, or securities of the same class, 748
19
were registered within one year on the basis provided in section 749
1707.05 of the Revised Code, or within one year were qualified 750
under section 1707.09 or 1707.091 of the Revised Code, and that 751
registration or qualification is in full force and effect; 752
(c) Those securities at the time of sale could be 754
registered on the basis provided in section 1707.05 of the 755
Revised Code; 756
(d) The sale is made by a licensed dealer on behalf of the 758
bona fide owner of those securities in accordance with division 759
(B) of this section; 760
(e) Those securities were transported into Ohio in a 762
transaction of the type described in division (L), (K), or (I) of 763
this section, or in a transaction registered under division (A) 764
of section 1707.06 of the Revised Code. 765
(N) For the purpose of this division and division (M) of 767
this section, "underwriter" means any person who has purchased 768
from an issuer with a view to, or sells for an issuer in 769
connection with, the distribution of any security, or who 770
participates directly or indirectly in any such undertaking or in 771
the underwriting thereof, but "underwriter" does not include a 772
person whose interest is limited to a discount, commission, or 773
profit from the underwriter or from a dealer that is not in 774
excess of the customary distributors' or sellers' discount, 775
commission, or profit; and "issuer" includes any person or any 776
group of persons acting in concert in the sale of such 777
securities, owning beneficially one-fourth or more of the 778
outstanding securities of the class involved in the transactions 779
in question, with the record owner of securities being deemed the 780
beneficial owner for this purpose, in the absence of actual 781
knowledge to the contrary. 782
(O)(1) The sale of any equity security is exempt if all 784
the following conditions are satisfied: 785
(a) The sale is by the issuer of the security. 787
(b) The total number of purchasers in this state of all 789
20
securities issued or sold by the issuer in reliance upon this 790
exemption during the period of one year ending with the date of 791
the sale does not exceed ten. A sale of securities registered 792
under this chapter or sold pursuant to an exemption under this 793
chapter other than this exemption shall not be integrated with a 794
sale pursuant to this exemption in computing the number of 795
purchasers under this exemption. 796
(c) No advertisement, article, notice, or other 798
communication published in any newspaper, magazine, or similar 799
medium or broadcast over television or radio is used in 800
connection with the sale, but the use of an offering circular or 801
other communication delivered by the issuer to selected 802
individuals does not destroy this exemption. 803
(d) The issuer reasonably believes after reasonable 805
investigation that the purchaser is purchasing for investment. 806
(e) The aggregate commission, discount, and other 808
remuneration, excluding legal, accounting, and printing fees, 809
paid or given directly or indirectly does not exceed ten per cent 810
of the initial offering price. 811
(f) Any such commission, discount, or other remuneration 813
for sales in this state is paid or given only to dealers or 814
salesmen SALESPERSONS registered pursuant to this chapter. 815
(2) For the purposes of division (O)(1) of this section, 817
each of the following is deemed to be a single purchaser of a 818
security: husband and wife, a child and its parent or guardian 819
when the parent or guardian holds the security for the benefit of 820
the child, a corporation, a limited liability company, a 821
partnership, an association or other unincorporated entity, a 822
joint-stock company, or a trust, but only if the corporation, 823
limited liability company, partnership, association, entity, 824
joint-stock company, or trust was not formed for the purpose of 825
purchasing the security. 826
(3) As used in division (O)(1) of this section, "equity 828
security" means any stock or similar security of a corporation or 829
21
any membership interest in a limited liability company; or any 830
security convertible, with or without consideration, into such a 831
security, or carrying any warrant or right to subscribe to or 832
purchase such a security; or any such warrant or right; or any 833
other security that the division considers necessary or 834
appropriate, by such rules as it may prescribe in the public 835
interest or for the protection of investors, to treat as an 836
equity security. 837
(P) The sale of securities representing interests in or 839
under profit-sharing or participation agreements relating to oil 840
or gas wells located in this state, or representing interests in 841
or under oil or gas leases of real estate situated in this state, 842
is exempt if the securities are issued by an individual, 843
partnership, limited partnership, partnership association, 844
syndicate, pool, trust or trust fund, or other unincorporated 845
association and if each of the following conditions is complied 846
with: 847
(1) The beneficial owners of the securities do not, and 849
will not after the sale, exceed five natural persons; 850
(2) The securities constitute or represent interests in 852
not more than one oil or gas well; 853
(3) A certificate or other instrument in writing is 855
furnished to each purchaser of the securities at or before the 856
consummation of the sale, disclosing the maximum commission, 857
compensation for services, cost of lease, and expenses with 858
respect to the sale of such interests and with respect to the 859
promotion, development, and management of the oil or gas well, 860
and the total of that commission, compensation, costs, and 861
expenses does not exceed twenty-five per cent of the aggregate 862
interests in the oil or gas well, exclusive of any landowner's 863
rental or royalty; 864
(4) The sale is made in good faith and not for the purpose 866
of avoiding this chapter. 867
(Q) The sale of any security is exempt if all of the 869
22
following conditions are satisfied: 870
(1) The provisions of section 5 of the Securities Act of 872
1933 do not apply to the sale by reason of an exemption under 873
either section 4 (2) of that act or any rule of the securities 874
and exchange commission made to carry out section 4 (2) of that 875
act in effect at the time of the sale. 876
(2) The aggregate commission, discount, and other 878
remuneration, excluding legal, accounting, and printing fees, 879
paid or given directly or indirectly does not exceed ten per cent 880
of the initial offering price. 881
(3) Any such commission, discount, or other remuneration 883
for sales in this state is paid or given only to dealers or 884
salesmen SALESPERSONS registered under this chapter. 885
(4) The issuer or dealer files with the division of 887
securities, not later than sixty days after the sale, a report 888
setting forth the name and address of the issuer, the total 889
amount of the securities sold under this division, the number of 890
persons to whom the securities were sold, the price at which the 891
securities were sold, and the commissions or discounts paid or 892
given. 893
(5) The issuer pays a filing fee of one hundred dollars 895
for the first filing and fifty dollars for every subsequent 896
filing during each calendar year. 897
(R) A sale of a money order, travelers' check, or other 899
instrument for the transmission of money by a person qualified to 900
engage in such business under section 1109.60 or Chapter 1315. of 902
the Revised Code is exempt. 903
(S) A sale by a licensed dealer of securities that are in 905
the process of registration under the "Securities Act of 1933," 906
48 Stat. 74, 15 U.S.C. 77a, as amended, unless exempt under that 907
act, and that are in the process of registration, if registration 908
is required under this chapter, is exempt, provided that no sale 909
of that nature shall be consummated prior to the registration by 910
description or qualification of the securities. 911
23
(T) The execution by a licensed dealer of orders for the 913
purchase of any security is exempt, provided that the dealer acts 914
only as agent for the purchaser, has made no solicitation of the 915
order to purchase the security, has no interest in the 916
distribution of the security, and delivers to the purchaser 917
written confirmation of the transaction that clearly itemizes his 918
commission. "Solicitation," as used in this division, means 919
solicitation of the order for the specific security purchased and 920
does not include general solicitations or advertisements of any 921
kind. 922
(U) The sale insofar as the security holders of a person 924
are concerned, where, pursuant to statutory provisions of the 925
jurisdiction under which that person is organized or pursuant to 926
provisions contained in its articles of incorporation, 927
certificate of incorporation, partnership agreement, declaration 928
of trust, trust indenture, or similar controlling instrument, 929
there is submitted to the security holders, for their vote or 930
consent, (1) a plan or agreement for a reclassification of 931
securities of that person that involves the substitution of a 932
security of that person for another security of that person, (2) 933
a plan or agreement of merger or consolidation or a similar plan 934
or agreement of acquisition in which the securities of that 935
person held by the security holders will become or be exchanged 936
for securities of any other person, or (3) a plan or agreement 937
for a combination as defined in division (Q) of section 1701.01 938
of the Revised Code or a similar plan or agreement for the 939
transfer of assets of that person to another person in 940
consideration of the issuance of securities of any person, is 941
exempt if, with respect to any of the foregoing transactions, 942
either of the following conditions is satisfied: 943
(a) The securities to be issued to the security holders 945
are effectively registered under sections 6 to 8 of the 946
Securities Act of 1933 and offered and sold in compliance with 947
section 5 of that act; 948
24
(b) At least twenty days prior to the date on which a 950
meeting of the security holders is held or the earliest date on 951
which corporate action may be taken when no meeting is held, 952
there is submitted to the security holders, by that person, or by 953
the person whose securities are to be issued in the transaction, 954
information substantially equivalent to the information that 955
would be required to be included in a proxy statement or 956
information statement prepared by or on behalf of the management 957
of an issuer subject to section 14(a) or 14(c) of the Securities 959
Exchange Act of 1934.
(V) The sale of any security is exempt if the division by 961
rule finds that registration is not necessary or appropriate in 962
the public interest or for the protection of investors. 963
(W) Any offer or sale of securities made in reliance on 965
the exemptions provided by Rule 505 of Regulation D made pursuant 966
to the Securities Act of 1933 and the conditions and definitions 967
provided by Rules 501 to 503 thereunder is exempt if the offer or 968
sale satisfies all of the following conditions: 969
(1) No commission or other remuneration is given, directly 971
or indirectly, to any person for soliciting or selling to any 972
person in this state in reliance on the exemption under this 973
division, except to dealers licensed in this state. 974
(2)(a) Unless the cause for disqualification is waived 976
under division (W)(2)(b) of this section, no exemption under this 977
section is available for the securities of an issuer unless the 978
issuer did not know and in the exercise of reasonable care could 979
not have known that any of the following applies to any of the 980
persons described in Rule 252(c) 262(a) to (f)(c) of Regulation A 982
under the Securities Act of 1933: 983
(i) The person has filed an application for registration 985
or qualification that is the subject of an effective order 986
entered against the issuer, its officers, directors, general 987
partners, controlling persons or affiliates thereof, pursuant to 988
the law of any state within five years before the filing of a 989
25
notice required under division (W)(3) of this section denying 990
effectiveness to, or suspending or revoking the effectiveness of, 991
the registration statement. 992
(ii) The person has been convicted of any offense in 994
connection with the offer, sale, or purchase of any security or 995
franchise, or any felony involving fraud or deceit, including, 996
but not limited to, forgery, embezzlement, fraud, theft, or 997
conspiracy to defraud. 998
(iii) The person is subject to an effective administrative 1,000
order or judgment that was entered by a state securities 1,001
administrator within five years before the filing of a notice 1,002
required under division (W)(3) of this section and that 1,003
prohibits, denies, or revokes the use of any exemption from 1,004
securities registration, prohibits the transaction of business by 1,005
the person as a dealer, or is based on fraud, deceit, an untrue 1,006
statement of a material fact, or an omission to state a material 1,007
fact. 1,008
(iv) The person is subject to any order, judgment, or 1,010
decree of any court entered within five years before the filing 1,011
of a notice required under division (W)(3) of this section, 1,012
temporarily, preliminarily, or permanently restraining or 1,013
enjoining the person from engaging in or continuing any conduct 1,014
or practice in connection with the offer, sale, or purchase of 1,015
any security, or the making of any false filing with any state. 1,016
(b)(i) Any disqualification under this division involving 1,018
a dealer may be waived if the dealer is or continues to be 1,019
licensed in this state as a dealer after notifying the 1,020
commissioner of the act or event causing disqualification. 1,021
(ii) The commissioner may waive any disqualification under 1,023
this paragraph upon a showing of good cause that it is not 1,024
necessary under the circumstances that use of the exemption be 1,025
denied. 1,026
(3) Not later than five business days before the earlier 1,028
of the date on which the first use of an offering document or the 1,029
26
first sale is made in this state in reliance on the exemption 1,030
under this division, there is filed with the commissioner a 1,031
notice comprised of offering material in compliance with the 1,032
requirements of Rule 502 of Regulation D under the Securities Act 1,033
of 1933 and a fee of one hundred dollars. Material amendments to 1,034
the offering document shall be filed with the commissioner not 1,035
later than the date of their first use in this state. 1,036
(4) The aggregate commission, discount, and other 1,038
remuneration paid or given, directly or indirectly, does not 1,039
exceed twelve per cent of the initial offering price, excluding 1,040
legal, accounting, and printing fees. 1,041
(5) The commissioner, by rule, may increase the number of 1,043
purchasers or waive any other conditions of the exemption under 1,044
this division for a particular offering. The commissioner may 1,045
require the filing of advertising used in connection with offers 1,046
or sales in reliance on the exemption. 1,047
(X) ANY OFFER OR SALE OF SECURITIES MADE IN RELIANCE ON 1,050
THE EXEMPTION PROVIDED IN RULE 506 OF REGULATION D UNDER THE 1,054
SECURITIES ACT OF 1933, AND IN ACCORDANCE WITH RULES 501 TO 503 1,056
OF REGULATION D UNDER THE SECURITIES ACT OF 1933, IS EXEMPT 1,060
PROVIDED THAT ALL OF THE FOLLOWING APPLY: 1,061
(1) THE ISSUER MAKES A NOTICE FILING WITH THE DIVISION ON 1,063
FORM D OF THE SECURITIES AND EXCHANGE COMMISSION WITHIN FIFTEEN 1,065
DAYS OF THE FIRST SALE IN THIS STATE; 1,066
(2) ANY COMMISSION, DISCOUNT, OR OTHER REMUNERATION FOR 1,068
SALES OF SECURITIES IN THIS STATE IS PAID OR GIVEN ONLY TO 1,069
DEALERS OR SALESPERSONS LICENSED UNDER THIS CHAPTER; 1,070
(3) THE ISSUER PAYS A FILING FEE OF ONE HUNDRED DOLLARS TO 1,072
THE DIVISION; HOWEVER, NO FILING FEE SHALL BE REQUIRED TO FILE 1,073
AMENDMENTS TO THE FORM D OF THE SECURITIES AND EXCHANGE 1,075
COMMISSION.
(Y) THE OFFER OR SALE OF SECURITIES IS EXEMPT PROVIDED THAT 1,078
ALL OF THE FOLLOWING APPLY:
(1) THE SALE OF SECURITIES IS MADE ONLY TO PERSONS WHO ARE, 1,081
27
OR WHO THE ISSUER REASONABLY BELIEVES ARE, ACCREDITED INVESTORS 1,082
AS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT 1,086
OF 1933.
(2) THE ISSUER REASONABLY BELIEVES THAT ALL PURCHASERS ARE 1,088
PURCHASING FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN 1,089
CONNECTION WITH A DISTRIBUTION OF THE SECURITY. ANY RESALE OF A 1,090
SECURITY SOLD IN RELIANCE ON THIS EXEMPTION WITHIN TWELVE MONTHS 1,091
OF SALE SHALL BE PRESUMED TO BE WITH A VIEW TO DISTRIBUTION AND 1,092
NOT FOR INVESTMENT, EXCEPT A RESALE TO WHICH ANY OF THE FOLLOWING 1,094
APPLIES:
(a) THE RESALE IS PURSUANT TO A REGISTRATION STATEMENT 1,097
EFFECTIVE UNDER SECTION 1707.09 OR 1707.091 OF THE REVISED CODE. 1,099
(b) THE RESALE IS TO AN ACCREDITED INVESTOR, AS DEFINED IN 1,102
RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933. 1,106
(c) THE RESALE IS TO AN INSTITUTIONAL INVESTOR PURSUANT TO 1,109
THE EXEMPTIONS UNDER DIVISION (B) OR (D) OF THIS SECTION. 1,111
(3) THE EXEMPTION UNDER THIS DIVISION IS NOT AVAILABLE TO 1,113
AN ISSUER THAT IS IN THE DEVELOPMENT STAGE AND THAT EITHER HAS NO 1,115
SPECIFIC BUSINESS PLAN OR PURPOSE OR HAS INDICATED THAT ITS
BUSINESS PLAN IS TO ENGAGE IN A MERGER OR ACQUISITION WITH AN 1,116
UNIDENTIFIED COMPANY OR COMPANIES, OR OTHER ENTITIES OR PERSONS. 1,118
(4) THE EXEMPTION UNDER THIS DIVISION IS NOT AVAILABLE TO 1,120
AN ISSUER, IF THE ISSUER, ANY OF THE ISSUER'S PREDECESSORS, ANY 1,121
AFFILIATED ISSUER, ANY OF THE ISSUER'S DIRECTORS, OFFICERS, 1,122
GENERAL PARTNERS, OR BENEFICIAL OWNERS OF TEN PER CENT OR MORE OF 1,124
ANY CLASS OF ITS EQUITY SECURITIES, ANY OF THE ISSUER'S PROMOTERS 1,125
PRESENTLY CONNECTED WITH THE ISSUER IN ANY CAPACITY, ANY 1,126
UNDERWRITER OF THE SECURITIES TO BE OFFERED, OR ANY PARTNER,
DIRECTOR, OR OFFICER OF SUCH UNDERWRITER: 1,127
(a) WITHIN THE PAST FIVE YEARS, HAS FILED A REGISTRATION 1,130
STATEMENT THAT IS THE SUBJECT OF A CURRENTLY EFFECTIVE 1,131
REGISTRATION STOP ORDER ENTERED BY ANY STATE SECURITIES 1,132
ADMINISTRATOR OR THE SECURITIES AND EXCHANGE COMMISSION; 1,133
(b) WITHIN THE PAST FIVE YEARS, HAS BEEN CONVICTED OF ANY 1,136
28
CRIMINAL OFFENSE IN CONNECTION WITH THE OFFER, PURCHASE, OR SALE 1,137
OF ANY SECURITY, OR INVOLVING FRAUD OR DECEIT; 1,138
(c) IS CURRENTLY SUBJECT TO ANY STATE OR FEDERAL 1,141
ADMINISTRATIVE ENFORCEMENT ORDER OR JUDGMENT, ENTERED WITHIN THE 1,142
PAST FIVE YEARS, FINDING FRAUD OR DECEIT IN CONNECTION WITH THE 1,143
PURCHASE OR SALE OF ANY SECURITY;
(d) IS CURRENTLY SUBJECT TO ANY ORDER, JUDGMENT, OR DECREE 1,146
OF ANY COURT OF COMPETENT JURISDICTION, ENTERED WITHIN THE PAST 1,147
FIVE YEARS, THAT TEMPORARILY, PRELIMINARILY, OR PERMANENTLY 1,148
RESTRAINS OR ENJOINS THE PARTY FROM ENGAGING IN OR CONTINUING TO 1,149
ENGAGE IN ANY CONDUCT OR PRACTICE INVOLVING FRAUD OR DECEIT IN 1,150
CONNECTION WITH THE PURCHASE OR SALE OF ANY SECURITY. 1,151
(5) DIVISION (Y)(4) OF THIS SECTION IS INAPPLICABLE IF ANY 1,154
OF THE FOLLOWING APPLIES: 1,155
(a) THE PARTY SUBJECT TO THE DISQUALIFICATION IS LICENSED 1,158
OR REGISTERED TO CONDUCT SECURITIES BUSINESS IN THE STATE IN 1,159
WHICH THE ORDER, JUDGMENT, OR DECREE CREATING THE 1,160
DISQUALIFICATION WAS ENTERED AGAINST THE PARTY DESCRIBED IN 1,161
DIVISION (Y)(4) OF THIS SECTION. 1,162
(b) BEFORE THE FIRST OFFER IS MADE UNDER THIS EXEMPTION, 1,166
THE STATE SECURITIES ADMINISTRATOR, OR THE COURT OR REGULATORY 1,167
AUTHORITY THAT ENTERED THE ORDER, JUDGMENT, OR DECREE, WAIVES THE 1,168
DISQUALIFICATION.
(c) THE ISSUER DID NOT KNOW AND, IN THE EXERCISE OF 1,171
REASONABLE CARE BASED ON REASONABLE INVESTIGATION, COULD NOT HAVE 1,172
KNOWN THAT A DISQUALIFICATION FROM THE EXEMPTION EXISTED UNDER 1,173
DIVISION (Y)(4) OF THIS SECTION. 1,174
(6) A GENERAL ANNOUNCEMENT OF THE PROPOSED OFFERING MAY BE 1,176
MADE BY ANY MEANS; HOWEVER, THE GENERAL ANNOUNCEMENT SHALL 1,177
INCLUDE ONLY THE FOLLOWING INFORMATION, UNLESS ADDITIONAL 1,178
INFORMATION IS SPECIFICALLY PERMITTED BY THE DIVISION BY RULE: 1,180
(a) THE NAME, ADDRESS, AND TELEPHONE NUMBER OF THE ISSUER 1,183
OF THE SECURITIES;
(b) THE NAME, A BRIEF DESCRIPTION, AND PRICE OF ANY 1,186
29
SECURITY TO BE ISSUED;
(c) A BRIEF DESCRIPTION OF THE BUSINESS OF THE ISSUER; 1,189
(d) THE TYPE, NUMBER, AND AGGREGATE AMOUNT OF SECURITIES 1,192
BEING OFFERED;
(e) THE NAME, ADDRESS, AND TELEPHONE NUMBER OF THE PERSON 1,195
TO CONTACT FOR ADDITIONAL INFORMATION; AND
(f) A STATEMENT INDICATING ALL OF THE FOLLOWING: 1,198
(i) SALES WILL ONLY BE MADE TO ACCREDITED INVESTORS AS 1,201
DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1,206
1933;
(ii) NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED OR 1,209
WILL BE ACCEPTED BY WAY OF THIS GENERAL ANNOUNCEMENT; 1,210
(iii) THE SECURITIES HAVE NOT BEEN REGISTERED WITH OR 1,213
APPROVED BY ANY STATE SECURITIES ADMINISTRATOR OR THE SECURITIES 1,214
AND EXCHANGE COMMISSION AND ARE BEING OFFERED AND SOLD PURSUANT 1,215
TO AN EXEMPTION FROM REGISTRATION. 1,216
(7) THE ISSUER, IN CONNECTION WITH AN OFFER, MAY PROVIDE 1,218
INFORMATION IN ADDITION TO THE GENERAL ANNOUNCEMENT DESCRIBED IN 1,219
DIVISION (Y)(6) OF THIS SECTION, PROVIDED THAT EITHER OF THE 1,221
FOLLOWING APPLIES:
(a) THE INFORMATION IS DELIVERED THROUGH AN ELECTRONIC 1,224
DATABASE THAT IS RESTRICTED TO PERSONS THAT ARE ACCREDITED 1,225
INVESTORS AS DEFINED IN RULE 501 OF REGULATION D UNDER THE 1,229
SECURITIES ACT OF 1933. 1,230
(b) THE INFORMATION IS DELIVERED AFTER THE ISSUER 1,233
REASONABLY BELIEVES THAT THE PROSPECTIVE PURCHASER IS AN 1,234
ACCREDITED INVESTOR AS DEFINED IN RULE 501 OF REGULATION D UNDER 1,237
THE SECURITIES ACT OF 1933. 1,239
(8) NO TELEPHONE SOLICITATION SHALL BE DONE, UNLESS PRIOR 1,241
TO PLACING THE TELEPHONE CALL, THE ISSUER REASONABLY BELIEVES 1,242
THAT THE PROSPECTIVE PURCHASER TO BE SOLICITED IS AN ACCREDITED 1,243
INVESTOR AS DEFINED IN RULE 501 OF REGULATION D UNDER THE 1,247
SECURITIES ACT OF 1933. 1,248
(9) DISSEMINATION OF THE GENERAL ANNOUNCEMENT DESCRIBED IN 1,250
30
DIVISION (Y)(6) OF THIS SECTION TO PERSONS THAT ARE NOT 1,252
ACCREDITED INVESTORS, AS DEFINED IN RULE 501 OF REGULATION D 1,255
UNDER THE SECURITIES ACT OF 1933, DOES NOT DISQUALIFY THE ISSUER 1,258
FROM CLAIMING AN EXEMPTION UNDER THIS DIVISION. 1,259
(10) THE ISSUER SHALL FILE WITH THE DIVISION NOTICE OF THE 1,261
OFFERING OF SECURITIES WITHIN FIFTEEN DAYS AFTER NOTICE OF THE 1,262
OFFERING IS MADE TO THE PUBLIC OR A GENERAL ANNOUNCEMENT IS MADE 1,263
TO THE PUBLIC IN THIS STATE. THE FILING SHALL BE ON FORMS 1,264
ADOPTED BY THE DIVISION AND SHALL INCLUDE A COPY OF THE GENERAL 1,265
ANNOUNCEMENT, IF ONE IS MADE REGARDING THE PROPOSED OFFERING, AND 1,267
COPIES OF ANY OFFERING MATERIALS, CIRCULARS, OR PROSPECTUSES. A 1,268
FILING FEE OF ONE HUNDRED DOLLARS ALSO SHALL BE INCLUDED. 1,269
Sec. 1707.092. (A) FOR THE PURPOSES OF SELLING SECURITIES 1,272
IN THIS STATE, AN INVESTMENT COMPANY, AS DEFINED BY THE 1,274
INVESTMENT COMPANY ACT OF 1940, THAT IS REGISTERED OR HAS FILED A 1,277
REGISTRATION STATEMENT WITH THE SECURITIES AND EXCHANGE 1,278
COMMISSION UNDER THE INVESTMENT COMPANY ACT OF 1940, SHALL FILE 1,281
THE FOLLOWING WITH THE DIVISION OF SECURITIES: 1,282
(1) FOR THE PURPOSES OF THE SALE OF SECURITIES BY A 1,284
MANAGED INVESTMENT COMPANY, AS DEFINED IN THE INVESTMENT COMPANY 1,287
ACT OF 1940: 1,288
(a) A NOTICE FILING CONSISTING OF EITHER OF THE FOLLOWING: 1,291
(i) A COPY OF THE INVESTMENT COMPANY'S FEDERAL 1,294
REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE 1,295
COMMISSION;
(ii) A FORM U-1 OR FORM NF OF THE NORTH AMERICAN 1,301
SECURITIES ADMINISTRATORS ASSOCIATION AND A COPY OF THE 1,302
INVESTMENT COMPANY'S PROSPECTUS AND STATEMENT OF ADDITIONAL 1,303
INFORMATION. 1,304
(b) APPROPRIATE FILING FEES CONSISTING OF BOTH OF THE 1,307
FOLLOWING:
(i) A FLAT FEE OF ONE HUNDRED DOLLARS; 1,310
(ii) A FEE CALCULATED AT ONE-TENTH OF ONE PER CENT OF THE 1,313
AGGREGATE PRICE AT WHICH THE SECURITIES ARE TO BE SOLD TO THE 1,314
31
PUBLIC IN THIS STATE, WHICH CALCULATED FEE, HOWEVER, SHALL IN NO 1,315
CASE BE LESS THAN ONE HUNDRED OR MORE THAN ONE THOUSAND DOLLARS. 1,316
(c) UPON THE REGISTRATION OF THE SECURITIES WITH THE 1,319
SECURITIES AND EXCHANGE COMMISSION, A MANAGED INVESTMENT COMPANY 1,320
WITH AN INITIAL NOTICE FILING ON FILE WITH THE DIVISION SHALL 1,321
SUBMIT TO THE DIVISION A COPY OF ITS FINAL PROSPECTUS. 1,322
(2) FOR THE PURPOSES OF THE SALE OF SECURITIES BY A 1,324
NON-MANAGED INVESTMENT COMPANY, AS DEFINED IN THE INVESTMENT 1,327
COMPANY ACT OF 1940: 1,328
(a) A NOTICE FILING CONSISTING OF EITHER A COPY OF THE 1,331
INVESTMENT COMPANY'S FEDERAL REGISTRATION STATEMENT AS FILED WITH 1,332
THE SECURITIES AND EXCHANGE COMMISSION OR A FORM U-1 OR FORM NF 1,334
OF THE NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION. 1,337
(b) APPROPRIATE FILING FEES, AS PROVIDED IN DIVISION 1,341
(A)(1)(b) OF THIS SECTION. 1,342
(c) UPON THE EFFECTIVENESS OF THE REGISTRATION OF THE 1,345
SECURITIES WITH THE SECURITIES AND EXCHANGE COMMISSION, A 1,346
NON-MANAGED INVESTMENT COMPANY SHALL SUBMIT TO THE DIVISION A 1,347
COPY OF ITS FINAL PROSPECTUS.
(B)(1) UPON PAYMENT OF THE MAXIMUM FILING FEES AS PROVIDED 1,350
IN DIVISION (A)(1)(b) OR (2)(b) OF THIS SECTION, A MANAGED OR 1,353
NON-MANAGED INVESTMENT COMPANY MAY SELL AN INDEFINITE AMOUNT OF 1,354
SECURITIES IN THIS STATE.
(2) A MANAGED OR NON-MANAGED INVESTMENT COMPANY MAKING A 1,356
NOTICE FILING AS PROVIDED IN THIS SECTION SHALL COMPLY WITH 1,357
SECTION 1707.11 OF THE REVISED CODE. AN INVESTMENT COMPANY THAT 1,360
PREVIOUSLY FILED WITH THE DIVISION A VALID CONSENT TO SERVICE OF 1,361
PROCESS PURSUANT TO SECTION 1707.11 OF THE REVISED CODE MAY 1,363
INCORPORATE THAT CONSENT BY REFERENCE. 1,364
(C)(1) FOR OFFERINGS INVOLVING COVERED SECURITIES, AS 1,367
DEFINED IN SECTION 18 OF THE "SECURITIES ACT OF 1933," 15 U.S.C. 1,370
77r, THAT ARE NOT SUBJECT TO SECTION 1707.02, 1707.03, 1707.04, 1,372
1707.05, 1707.06, 1707.07, 1707.08, 1707.09, OR 1707.091 OF THE 1,373
REVISED CODE, OR DIVISION (A) OF THIS SECTION, A NOTICE FILING 1,375
32
SHALL BE SUBMITTED TO THE DIVISION TOGETHER WITH A CONSENT TO 1,376
SERVICE OF PROCESS PURSUANT TO SECTION 1707.11 OF THE REVISED 1,379
CODE AND A FILING FEE AS PROVIDED IN DIVISION (A)(1)(b) OF THIS 1,382
SECTION.
(2) THE NOTICE FILING DESCRIBED IN DIVISION (C)(1) OF THIS 1,385
SECTION SHALL CONSIST OF ANY DOCUMENT FILED WITH THE SECURITIES 1,386
AND EXCHANGE COMMISSION PURSUANT TO THE SECURITIES ACT OF 1933, 1,389
TOGETHER WITH ANNUAL OR PERIODIC REPORTS OF THE VALUE OF THE 1,390
SECURITIES SOLD OR OFFERED TO BE SOLD TO PERSONS LOCATED IN THIS 1,391
STATE.
(D) A NOTICE FILING SUBMITTED UNDER THIS SECTION SHALL BE 1,394
EFFECTIVE FOR THIRTEEN MONTHS. 1,395
Sec. 1707.093. NOTWITHSTANDING ANY PROVISION OF CHAPTER 1,398
1707. OF THE REVISED CODE, OR ANY RULE ADOPTED BY THE DIVISION OF 1,401
SECURITIES UNDER THAT CHAPTER, REQUIRING A SIGNATURE OR 1,402
VERIFICATION, THE DIVISION MAY PROVIDE BY RULE FOR THE ELECTRONIC 1,403
FILING OR SUBMISSION OF ANY FORM, DOCUMENT, MATERIAL, OR 1,404
INFORMATION THAT IS REQUIRED OR PERMITTED TO BE FILED WITH OR 1,405
SUBMITTED TO THE DIVISION.
Sec. 1707.11. For the purposes of this section, A 1,414
"PERSON," OR an "applicant" for registration or claim of 1,415
exemption, means every issuer. 1,416
Every applicant for registration, or for claim of exemption 1,418
pursuant to division (O) or (Q), (W), (X), OR (Y) of section 1,420
1707.03 of the Revised Code, AND EVERY PERSON SUBMITTING A NOTICE 1,422
FILING PURSUANT TO SECTION 1707.092 OF THE REVISED CODE, for the 1,425
sale of securities pursuant to this chapter, which is an 1,426
incorporated applicant OR PERSON not domiciled in this state or
NOT LICENSED UNDER SECTION 1703.03 OF THE REVISED CODE, OR IS an 1,430
unincorporated applicant OR PERSON having the situs of its 1,431
principal place of business outside this state, shall file with 1,433
its application OR NOTICE FILING its irrevocable written consent, 1,435
executed and acknowledged by an individual duly authorized to 1,436
give such THE consent, that actions growing out of the sale of 1,438
33
such securities or fraud committed by an applicant in this state 1,439
may be commenced against it, in the proper court of any county in 1,440
this state in which a cause of action for such fraud may arise or 1,441
in which the plaintiff in such THE action may reside, by serving 1,443
on the secretary of state any proper process or pleading 1,444
authorized by the laws of this state. Such consent shall 1,445
stipulate that such service of such process or pleading on the 1,447
secretary of state shall be taken in all courts to be as valid 1,448
and binding as if service had been made upon the applicant 1,449
itself.
Service of any process or pleadings may be made on the 1,451
secretary of state by duplicate copies, of which one shall be 1,452
filed in the office of the secretary of state, and the other 1,453
immediately forwarded by the secretary of state by certified mail 1,454
to the principal place of business of such THE applicant, or the 1,455
last known address as shown on the application form filed with 1,457
the division, or if it has a principal office in this state, then 1,458
to such THE principal office; but failure to mail such copy shall 1,459
not invalidate such THE service. 1,461
Sec. 1707.14. (A)(1) No person shall act as a dealer, 1,470
unless the person is licensed as a dealer by the division of 1,471
securities, except in the following cases: 1,472
(a) When the person is transacting business through or 1,474
with a licensed dealer; 1,475
(b) When the securities are the subject matter of one or 1,477
more transactions enumerated in divisions (B) to (L), (O) to (R), 1,478
and (U) to (W)(Y) of section 1707.03, or in section 1707.06 of 1,479
the Revised Code, except when a commission, discount, or other 1,481
remuneration is paid or given in consideration with transactions 1,482
enumerated in divisions (O), (Q), and (W), (X), AND (Y) of 1,484
section 1707.03, or in section 1707.06 of the Revised Code; 1,485
(c) When the person is an issuer selling securities issued 1,487
by it or by its subsidiary, if such securities are specified 1,488
under division (G) or (I) of section 1707.02, or under section 1,489
34
1707.04 of the Revised Code; 1,490
(d) When the person is participating in transactions 1,492
exempt, under section 1707.34 of the Revised Code, from this 1,493
chapter. 1,494
(2) Notwithstanding the exceptions to licensure set forth 1,496
in divisions (A)(1)(a) to (d) of this section, no person other 1,497
than an issuer selling its own securities shall engage in the 1,498
business of selling securities to an institutional investor 1,499
unless such THE person is licensed as a dealer or the division, 1,500
by rule, finds that such licensure is not necessary for the 1,502
protection of investors or in the public interest. 1,503
(B) Each dealer that in any twelve-month or shorter 1,505
period, alone or with any other dealer with which it is 1,506
affiliated, has total revenues of one hundred fifty thousand 1,507
dollars or more derived from the business of buying, selling, or 1,508
otherwise dealing in securities, and that at any time during such 1,509
period has one hundred or more retail securities customers, shall 1,510
be registered as a broker or dealer with the securities and 1,511
exchange commission under the Securities Exchange Act of 1934, 1,512
except the following entities: 1,513
(1) A bank, savings and loan association, savings bank, or 1,515
credit union chartered under the laws of the United States or any 1,516
state thereof; 1,517
(2) A dealer that enters into and is in compliance with an 1,519
undertaking accepted by the division, in which the dealer agrees 1,520
that it will not engage in any transaction involving the buying, 1,521
selling, or otherwise dealing in securities with any natural 1,522
person in this state, except for transactions involving either of 1,523
the following: 1,524
(a) Securities of corporations or associations that have 1,526
qualified for treatment as nonprofit organizations pursuant to 1,527
section 501(c)(3) of the "Internal Revenue Code of 1986," 100 1,528
Stat. 2085, 26 U.S.C.A. 501, as amended; 1,529
(b) Securities or transactions that are described in 1,531
35
divisions (A)(1)(a) to (d) of this section. 1,532
(C) Every dealer that must be registered as a broker or 1,534
dealer with the securities and exchange commission pursuant to 1,535
division (B) of this section shall become so registered no later 1,536
than ninety days after the date on which the dealer meets the 1,537
requirements for such registration. 1,538
(D) The division by rule may exempt any dealer from 1,540
complying with the licensing or registration requirements of this 1,541
section, if the division finds that such licensing or 1,542
registration is not necessary for the protection of investors or 1,543
in the public interest. 1,544
(E) As used in division (B) of this section, "retail 1,546
securities customer" means a person that purchases from or 1,547
through or sells securities to or through a dealer, and that is 1,548
not an officer, a director, a principal, a general partner, or an 1,549
employee of, the dealer. Each of the following is deemed to be a 1,550
single retail securities customer: 1,551
(1) A husband and wife; 1,553
(2) A minor child and his or her parent or legal guardian; 1,555
(3) A corporation, a partnership, an association or other 1,557
unincorporated entity, a joint stock company, or a trust. 1,558
Sec. 1707.141. (A) NO PERSON SHALL ACT AS AN INVESTMENT 1,560
ADVISER, UNLESS ONE OF THE FOLLOWING APPLIES: 1,561
(1) THE PERSON IS LICENSED AS AN INVESTMENT ADVISER BY THE 1,563
DIVISION OF SECURITIES. 1,564
(2) THE PERSON IS REGISTERED UNDER SECTION 203 OF THE 1,566
"INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, AS AN 1,568
INVESTMENT ADVISER AND IS IN COMPLIANCE WITH THE NOTICE FILING 1,569
REQUIREMENTS OF DIVISION (B) OF THIS SECTION. 1,570
(3) THE PERSON HAS NO PLACE OF BUSINESS IN THIS STATE, AND 1,572
THE PERSON'S ONLY CLIENTS IN THIS STATE ARE ANY OF THE FOLLOWING: 1,573
(a) INVESTMENT COMPANIES AS DEFINED IN THE INVESTMENT 1,576
COMPANY ACT OF 1940;
(b) OTHER INVESTMENT ADVISERS; 1,578
36
(c) LICENSED DEALERS; 1,580
(d) BANKS; 1,582
(e) INSURANCE COMPANIES SUBJECT TO REGULATION UNDER TITLE 1,585
XXXIX OF THE REVISED CODE AND HEALTH INSURING CORPORATIONS
REGULATED UNDER CHAPTER 1751. OF THE REVISED CODE; 1,586
(f) EMPLOYEE BENEFIT PLANS WITH ASSETS OF NOT LESS THAN 1,588
ONE MILLION DOLLARS; 1,589
(g) GOVERNMENT AGENCIES OR INSTRUMENTALITIES, WHETHER 1,591
ACTING FOR THEMSELVES OR TRUSTEES WITH INVESTMENT CONTROL; 1,592
(h) OTHER INSTITUTIONAL INVESTORS AS THE DIVISION MAY 1,594
DESIGNATE BY RULE. 1,595
(4) THE PERSON HAS NO PLACE OF BUSINESS IN THIS STATE, AND 1,597
DURING THE PRECEDING TWELVE-MONTH PERIOD, THE PERSON HAS HAD NOT 1,598
MORE THAN FIVE CLIENTS, OTHER THAN THOSE DESCRIBED IN DIVISION 1,599
(A)(3) OF THIS SECTION, THAT ARE RESIDENTS OF THIS STATE. 1,600
(B)(1) NO PERSON WHO IS REGISTERED UNDER SECTION 203 OF 1,602
THE "INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, AS AN 1,605
INVESTMENT ADVISER SHALL ACT AS AN INVESTMENT ADVISER, UNLESS THE 1,606
PERSON HAS DONE BOTH OF THE FOLLOWING: 1,607
(a) FILED WITH THE DIVISION A CONSENT TO SERVICE OF 1,610
PROCESS TOGETHER WITH EITHER A NOTICE FILING FORM AS SPECIFIED IN 1,611
RULES ADOPTED BY THE DIVISION OR A COPY OF THOSE DOCUMENTS THAT 1,612
HAVE BEEN FILED BY THE INVESTMENT ADVISER WITH THE SECURITIES AND 1,613
EXCHANGE COMMISSION AS SPECIFIED IN RULES ADOPTED BY THE 1,614
DIVISION; 1,615
(b) PAID THE NOTICE FILING FEE SPECIFIED IN DIVISION (B) 1,617
OF SECTION 1707.17 OF THE REVISED CODE. 1,618
(2) UPON COMPLIANCE WITH DIVISION (B)(1) OF THIS SECTION, 1,620
THE DIVISION SHALL ISSUE TO THE PERSON AN ACKNOWLEDGMENT OF 1,621
NOTICE FILING.
(3) THE NOTICE FILING AND FEE REQUIREMENTS OF DIVISION 1,623
(B)(1) OF THIS SECTION DO NOT APPLY TO A PERSON DESCRIBED IN 1,624
DIVISION (A)(3) OR (4) OF THIS SECTION. 1,625
Sec. 1707.151. (A) APPLICATION FOR AN INVESTMENT 1,627
37
ADVISER'S LICENSE SHALL BE MADE IN ACCORDANCE WITH THIS SECTION 1,628
AND BY FILING WITH THE DIVISION OF SECURITIES THE INFORMATION, 1,629
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION. 1,630
(B) EVERY APPLICANT NOT A RESIDENT OF THIS STATE SHALL 1,632
NAME A PERSON WITHIN THIS STATE UPON WHOM PROCESS AGAINST SUCH 1,633
APPLICANT MAY BE SERVED AND SHALL GIVE THE COMPLETE RESIDENCE AND 1,634
BUSINESS ADDRESS OR ADDRESSES OF THE PERSON DESIGNATED. 1,635
(C) EVERY APPLICANT SHALL FILE AN IRREVOCABLE CONSENT TO 1,637
SERVICE OF PROCESS WITH THE SECRETARY OF STATE IN THE EVENT THAT 1,638
THE APPLICANT, IF A RESIDENT OF THIS STATE, OR THE PERSON 1,639
DESIGNATED PURSUANT TO DIVISION (B) OF THIS SECTION, CANNOT BE 1,640
FOUND AT THE ADDRESS GIVEN ON THE APPLICATION. THE CONSENT SHALL 1,641
BE GIVEN AND SERVICE OF PROCESS SHALL BE MADE AS PROVIDED IN 1,642
SECTION 1707.11 OF THE REVISED CODE.
(D)(1) THE DIVISION MAY INVESTIGATE ANY APPLICANT FOR A 1,644
LICENSE AND MAY REQUIRE ANY ADDITIONAL INFORMATION AS IT 1,645
CONSIDERS NECESSARY TO DETERMINE THE APPLICANT'S BUSINESS REPUTE 1,646
AND QUALIFICATIONS TO ACT AS AN INVESTMENT ADVISER. 1,647
(2) IF THE APPLICATION FOR ANY LICENSE INVOLVES 1,649
INVESTIGATION OUTSIDE OF THIS STATE, THE APPLICANT MAY BE 1,650
REQUIRED BY THE DIVISION TO ADVANCE SUFFICIENT FUNDS TO PAY ANY 1,651
OF THE ACTUAL EXPENSES OF THE EXAMINATION. THE DIVISION SHALL 1,652
FURNISH THE APPLICANT WITH AN ITEMIZED STATEMENT OF SUCH EXPENSES 1,653
THAT THE APPLICANT IS REQUIRED TO PAY.
(E) THE DIVISION SHALL BY RULE REQUIRE ONE NATURAL PERSON 1,655
WHO IS A PRINCIPAL, OFFICER, DIRECTOR, GENERAL PARTNER, MANAGER, 1,656
OR EMPLOYEE OF AN INVESTMENT ADVISER TO PASS AN EXAMINATION 1,657
DESIGNATED BY THE DIVISION OR ACHIEVE A SPECIFIED PROFESSIONAL 1,659
DESIGNATION. EVERY INVESTMENT ADVISER THAT IS NOT A NATURAL 1,660
PERSON SHALL NOTIFY THE DIVISION OF THE NAME AND RELATIONSHIP TO 1,661
THE INVESTMENT ADVISER OF THE NATURAL PERSON WHO HAS PASSED THE 1,662
EXAMINATION OR ACHIEVED THE SPECIFIED PROFESSIONAL DESIGNATION ON 1,663
BEHALF OF THE INVESTMENT ADVISER AND WHO WILL SERVE AS THE
DESIGNATED PRINCIPAL ON BEHALF OF THE INVESTMENT ADVISER. 1,664
38
(F) AN INVESTMENT ADVISER LICENSED UNDER SECTION 1707.141 1,666
OF THE REVISED CODE SHALL EMPLOY ONLY INVESTMENT ADVISER 1,667
REPRESENTATIVES LICENSED, OR EXEMPTED FROM LICENSURE, UNDER 1,668
SECTION 1707.161 OF THE REVISED CODE.
(G) IF THE DIVISION FINDS THAT THE APPLICANT IS OF GOOD 1,670
BUSINESS REPUTE, APPEARS TO BE QUALIFIED TO ACT AS AN INVESTMENT 1,671
ADVISER, AND HAS COMPLIED WITH SECTIONS 1707.01 TO 1707.45 OF THE 1,672
REVISED CODE AND RULES ADOPTED UNDER THOSE SECTIONS BY THE 1,673
DIVISION, THE DIVISION, UPON PAYMENT OF THE FEES PRESCRIBED BY
DIVISION (B) OF SECTION 1707.17 OF THE REVISED CODE, SHALL ISSUE 1,674
TO THE APPLICANT A LICENSE AUTHORIZING THE APPLICANT TO ACT AS AN 1,675
INVESTMENT ADVISER.
Sec. 1707.161. (A) NO PERSON SHALL ACT AS AN INVESTMENT 1,677
ADVISER REPRESENTATIVE, UNLESS ONE OF THE FOLLOWING APPLIES: 1,678
(1) THE PERSON IS LICENSED AS AN INVESTMENT ADVISER 1,680
REPRESENTATIVE BY THE DIVISION OF SECURITIES. 1,681
(2) THE PERSON IS A NATURAL PERSON WHO IS LICENSED AS AN 1,683
INVESTMENT ADVISER BY THE DIVISION, AND DOES NOT ACT AS AN 1,684
INVESTMENT ADVISER REPRESENTATIVE FOR ANOTHER INVESTMENT ADVISER. 1,685
(3) THE PERSON IS EMPLOYED BY OR ASSOCIATED WITH AN 1,687
INVESTMENT ADVISER REGISTERED UNDER SECTION 203 OF THE 1,688
"INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, AND DOES NOT 1,690
HAVE A PLACE OF BUSINESS IN THIS STATE. 1,691
(4) THE PERSON IS EMPLOYED BY OR ASSOCIATED WITH AN 1,693
INVESTMENT ADVISER THAT IS EXEMPTED FROM LICENSURE PURSUANT TO 1,694
DIVISION (A)(3) OR (4) OF SECTION 1707.141 OF THE REVISED CODE. 1,695
(B) NO INVESTMENT ADVISER REPRESENTATIVE REQUIRED TO BE 1,697
LICENSED UNDER THIS SECTION SHALL BE EMPLOYED BY OR ASSOCIATED 1,699
WITH MORE THAN ONE INVESTMENT ADVISER, UNLESS EACH INVESTMENT 1,700
ADVISER WITH WHICH THE INVESTMENT ADVISER REPRESENTATIVE IS 1,701
EMPLOYED OR ASSOCIATED IS UNDER COMMON OWNERSHIP OR CONTROL.
HOWEVER, NOTHING IN THIS SECTION SHALL BE CONSTRUED TO PROHIBIT A 1,702
PERSON FROM BEING LICENSED BY THE DIVISION AS BOTH AN INVESTMENT 1,703
ADVISER AND AN INVESTMENT ADVISER REPRESENTATIVE. 1,704
39
(C) AN INVESTMENT ADVISER REPRESENTATIVE'S LICENSE ISSUED 1,706
UNDER THIS SECTION SHALL NOT BE EFFECTIVE DURING ANY PERIOD WHEN 1,707
THE INVESTMENT ADVISER REPRESENTATIVE IS NOT EMPLOYED BY OR 1,708
ASSOCIATED WITH AN INVESTMENT ADVISER THAT IS LICENSED BY THE 1,709
DIVISION OR THAT IS IN COMPLIANCE WITH THE NOTICE FILING 1,710
REQUIREMENTS OF DIVISION (B) OF SECTION 1707.141 OF THE REVISED
CODE. NOTICE OF THE COMMENCEMENT AND TERMINATION OF THE 1,711
EMPLOYMENT OR ASSOCIATION OF AN INVESTMENT ADVISER REPRESENTATIVE 1,713
LICENSED UNDER THIS SECTION SHALL BE GIVEN TO THE DIVISION WITHIN 1,714
THIRTY DAYS AFTER THE COMMENCEMENT OR TERMINATION BY EITHER OF
THE FOLLOWING: 1,715
(1) THE INVESTMENT ADVISER, IN THE CASE OF AN INVESTMENT 1,717
ADVISER REPRESENTATIVE LICENSED UNDER THIS SECTION AND EMPLOYED 1,718
BY OR ASSOCIATED WITH, OR FORMERLY EMPLOYED BY OR ASSOCIATED 1,720
WITH, AN INVESTMENT ADVISER LICENSED UNDER SECTION 1707.141 OF 1,721
THE REVISED CODE;
(2) THE INVESTMENT ADVISER REPRESENTATIVE, IN THE CASE OF 1,723
AN INVESTMENT ADVISER REPRESENTATIVE LICENSED UNDER THIS SECTION 1,724
AND EMPLOYED BY OR ASSOCIATED WITH, OR FORMERLY EMPLOYED BY OR 1,726
ASSOCIATED WITH, AN INVESTMENT ADVISER THAT IS SUBJECT TO THE
NOTICE FILINGS REQUIREMENTS OF DIVISION (B) OF SECTION 1707.141 1,728
OF THE REVISED CODE.
(D)(1) APPLICATION FOR AN INVESTMENT ADVISER 1,730
REPRESENTATIVE LICENSE SHALL BE MADE IN ACCORDANCE WITH THIS 1,731
SECTION AND BY FILING WITH THE DIVISION THE INFORMATION, 1,732
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION. 1,733
(2) THE DIVISION SHALL BY RULE REQUIRE AN APPLICANT TO 1,735
PASS AN EXAMINATION DESIGNATED BY THE DIVISION OR ACHIEVE A 1,736
SPECIFIED PROFESSIONAL DESIGNATION.
(3) PRIOR TO ISSUING THE INVESTMENT ADVISER REPRESENTATIVE 1,739
LICENSE, THE DIVISION MAY REQUIRE THE APPLICANT TO REIMBURSE THE 1,740
DIVISION FOR THE ACTUAL EXPENSES INCURRED IN INVESTIGATING THE 1,741
APPLICANT. AN ITEMIZED STATEMENT OF ANY SUCH EXPENSES THAT THE 1,743
APPLICANT IS REQUIRED TO PAY SHALL BE FURNISHED TO THE APPLICANT
40
BY THE DIVISION. 1,744
(E) IF THE DIVISION FINDS THAT THE APPLICANT IS OF GOOD 1,746
BUSINESS REPUTE, APPEARS TO BE QUALIFIED TO ACT AS AN INVESTMENT 1,747
ADVISER REPRESENTATIVE, AND HAS COMPLIED WITH SECTIONS 1707.01 TO 1,748
1707.45 OF THE REVISED CODE AND THE RULES ADOPTED UNDER THOSE 1,749
SECTIONS BY THE DIVISION, THE DIVISION, UPON PAYMENT OF THE FEES 1,750
PRESCRIBED BY DIVISION (B) OF SECTION 1707.17 OF THE REVISED
CODE, SHALL ISSUE TO THE APPLICANT A LICENSE AUTHORIZING THE 1,751
APPLICANT TO ACT AS AN INVESTMENT ADVISER REPRESENTATIVE FOR THE 1,752
INVESTMENT ADVISER, OR INVESTMENT ADVISERS THAT ARE UNDER COMMON 1,753
OWNERSHIP OR CONTROL, NAMED IN THE APPLICATION.
Sec. 1707.17. (A)(1) The license of every dealer in and 1,762
salesman SALESPERSON of securities shall expire on the 1,764
thirty-first day of December of each year, and may be renewed 1,765
upon the filing with the division of securities of an application 1,766
for renewal, and the payment of the fee prescribed in this 1,767
section, not less than fifteen nor more than sixty days before 1,768
the expiration of the old license. The division may accept an 1,769
application for renewal less than fifteen days before the 1,770
expiration of any calendar year. It THE DIVISION ALSO MAY ACCEPT 1,771
AN APPLICATION FOR RENEWAL UP TO TEN DAYS AFTER EXPIRATION OF A 1,772
LICENSE, PROVIDED THAT THE APPLICATION FOR RENEWAL IS ACCOMPANIED 1,773
BY THE LICENSE RENEWAL FEE AND THE ADDITIONAL FEE PRESCRIBED IN 1,774
DIVISION (B) OF THIS SECTION. THE DIVISION shall give notice, 1,777
without unreasonable delay, of its action on any application for 1,778
renewal of a dealer's or salesman's SALESPERSON'S license. 1,779
(2) THE LICENSE OF EVERY INVESTMENT ADVISER AND INVESTMENT 1,782
ADVISER REPRESENTATIVE LICENSED UNDER SECTION 1707.141 OR 1,783
1707.161 OF THE REVISED CODE SHALL EXPIRE ON THE THIRTY-FIRST DAY 1,784
OF DECEMBER OF EACH YEAR. THE LICENSES MAY BE RENEWED UPON THE 1,785
FILING WITH THE DIVISION OF A COMPLETED LICENSE RENEWAL 1,786
APPLICATION, AND THE PAYMENT OF THE FEE PRESCRIBED IN DIVISION 1,787
(B) OF THIS SECTION, NOT LESS THAN THIRTY NOR MORE THAN 1,789
SEVENTY-FIVE DAYS BEFORE THE EXPIRATION OF THE OLD LICENSE. THE 1,790
41
DIVISION MAY ACCEPT A LICENSE RENEWAL APPLICATION FILED LESS THAN 1,791
THIRTY DAYS BEFORE THE EXPIRATION OF ANY CALENDAR YEAR. THE 1,792
DIVISION ALSO MAY ACCEPT A LICENSE RENEWAL APPLICATION UP TO TEN 1,794
DAYS AFTER EXPIRATION OF A LICENSE, PROVIDED THAT THE LICENSE 1,795
RENEWAL APPLICATION IS ACCOMPANIED BY THE LICENSE RENEWAL FEE AND 1,796
THE ADDITIONAL FEE PRESCRIBED IN DIVISION (B) OF THIS SECTION. 1,798
THE DIVISION SHALL GIVE NOTICE, WITHOUT UNREASONABLE DELAY, OF 1,799
ITS ACTION ON ANY LICENSE RENEWAL APPLICATION. 1,800
(3) AN INVESTMENT ADVISER REQUIRED TO MAKE A NOTICE FILING 1,802
UNDER DIVISION (B) OF SECTION 1707.141 OF THE REVISED CODE 1,804
ANNUALLY SHALL FILE WITH THE DIVISION THE NOTICE FILING AND THE 1,805
FEE PRESCRIBED IN DIVISION (B) OF THIS SECTION, NO LATER THAN THE 1,806
THIRTY-FIRST DAY OF DECEMBER OF EACH YEAR. THE DIVISION MAY 1,807
ACCEPT A NOTICE FILING UP TO TEN DAYS AFTER THE THIRTY-FIRST DAY 1,808
OF DECEMBER OF EACH YEAR, PROVIDED THAT THE NOTICE FILING IS 1,809
ACCOMPANIED BY THE NOTICE FILING FEE AND THE ADDITIONAL FEE 1,810
PRESCRIBED IN DIVISION (B) OF THIS SECTION. 1,811
(B)(1) The fee for each dealer's license, and for each 1,813
annual renewal thereof, shall be, thirty dollars per salesman 1,814
SALESPERSON, but not less than one hundred fifty nor more than 1,815
five thousand dollars. UPON PAYMENT OF AN ADDITIONAL FEE OF 1,816
ONE-HALF OF THE LICENSE RENEWAL FEE, THE DIVISION MAY ACCEPT AN 1,817
APPLICATION FOR RENEWAL FILED UP TO TEN DAYS AFTER THE EXPIRATION 1,818
OF A LICENSE ON THE THIRTY-FIRST DAY OF DECEMBER. The fee for 1,820
the examination of applicant dealers, when administered by the 1,822
division, shall be seventy-five dollars.
A dealer's license may be issued at any time for the 1,824
remainder of the calendar year. In such event, the annual fee 1,825
shall not be reduced. 1,826
(2) The fee for each salesman's SALESPERSON'S license, and 1,829
for each annual renewal thereof, shall be fifty dollars. The fee 1,831
for the examination of an applicant salesman SALESPERSON, when 1,832
administered by the division, shall be fifty dollars. 1,833
(3) THE FEE FOR EACH INVESTMENT ADVISER'S LICENSE, AND FOR 1,836
42
EACH ANNUAL RENEWAL THEREOF, SHALL BE TWO HUNDRED DOLLARS. UPON 1,837
THE PAYMENT OF AN ADDITIONAL FEE OF ONE-HALF OF THE LICENSE FEE,
THE DIVISION MAY ACCEPT A LICENSE RENEWAL APPLICATION FILED UP TO 1,839
TEN DAYS AFTER EXPIRATION OF A LICENSE ON THE THIRTY-FIRST DAY OF 1,840
DECEMBER.
(4) THE FEE FOR EACH INVESTMENT ADVISER NOTICE FILING 1,842
REQUIRED BY DIVISION (B) OF SECTION 1707.141 OF THE REVISED CODE 1,844
SHALL BE TWO HUNDRED DOLLARS. UPON THE PAYMENT OF AN ADDITIONAL 1,845
FEE OF ONE-HALF OF THE NOTICE FILING FEE, THE DIVISION MAY ACCEPT 1,846
A NOTICE FILING FILED UP TO TEN DAYS AFTER THE THIRTY-FIRST DAY 1,847
OF DECEMBER. A NOTICE FILING MAY BE MADE AT ANY TIME DURING THE 1,848
CALENDAR YEAR. IN THAT EVENT, THE NOTICE FILING FEE SHALL NOT BE 1,849
REDUCED.
(5) THE FEE FOR EACH INVESTMENT ADVISER REPRESENTATIVE'S 1,851
LICENSE, AND FOR EACH ANNUAL RENEWAL THEREOF, SHALL BE FIFTY 1,852
DOLLARS. UPON THE PAYMENT OF AN ADDITIONAL FEE OF ONE-HALF OF 1,853
THE LICENSE FEE, THE DIVISION MAY ACCEPT A LICENSE RENEWAL 1,854
APPLICATION FILED UP TO TEN DAYS AFTER EXPIRATION OF A LICENSE ON 1,855
THE THIRTY-FIRST DAY OF DECEMBER. 1,856
(C) A DEALER'S, SALESPERSON'S, INVESTMENT ADVISER'S, OR 1,858
INVESTMENT ADVISER REPRESENTATIVE'S LICENSE MAY BE ISSUED AT ANY 1,860
TIME FOR THE REMAINDER OF THE CALENDAR YEAR. IN THAT EVENT, THE 1,861
ANNUAL FEE SHALL NOT BE REDUCED. 1,862
Sec. 1707.18. (A)(1) If a partnership licensed as a 1,871
dealer is terminated under the laws of the state where such THE 1,872
partnership is organized, or by death, resignation, withdrawal, 1,874
or addition of a general partner, the license of the partnership 1,875
shall be automatically extended for a period of thirty days after 1,876
such THE termination. The license of such THE partnership and 1,878
the licenses of its salesmen SALESPERSONS may be transferred to 1,880
the successor partnership within such THAT period if the division 1,882
of securities finds that the successor partnership is 1,884
substantially similar to its predecessor partnership, and if an 1,885
application for transfer of license has been filed. The fee for 1,886
43
such a transfer shall be fifty dollars, plus ten dollars for 1,887
every salesman's SALESPERSON'S license which THAT is transferred. 1,889
(2) IF A PARTNERSHIP LICENSED AS AN INVESTMENT ADVISER IS 1,892
TERMINATED UNDER THE LAWS OF THE STATE WHERE THE PARTNERSHIP IS 1,893
ORGANIZED, OR BY DEATH, RESIGNATION, WITHDRAWAL, OR ADDITION OF A 1,894
GENERAL PARTNER, THE LICENSE OF THE PARTNERSHIP SHALL BE 1,895
AUTOMATICALLY EXTENDED FOR A PERIOD OF THIRTY DAYS AFTER THE 1,896
TERMINATION. THE LICENSE OF THE PARTNERSHIP SHALL, AND THE 1,897
LICENSES OF ITS INVESTMENT ADVISER REPRESENTATIVES MAY, BE 1,898
TRANSFERRED TO THE SUCCESSOR PARTNERSHIP WITHIN THAT PERIOD IF 1,899
THE DIVISION FINDS THAT THE SUCCESSOR PARTNERSHIP IS
SUBSTANTIALLY SIMILAR TO ITS PREDECESSOR PARTNERSHIP, AND IF AN 1,900
APPLICATION FOR TRANSFER OF LICENSE HAS BEEN FILED. THE FEE FOR 1,901
SUCH TRANSFER SHALL BE FIFTY DOLLARS, PLUS TEN DOLLARS FOR EVERY 1,902
INVESTMENT ADVISER REPRESENTATIVE'S LICENSE THAT IS TRANSFERRED. 1,903
(B)(1) If a licensed dealer changes its business form, 1,905
reincorporates, or by merger or otherwise becomes a different 1,906
person, as person is defined in section 1707.01 of the Revised 1,907
Code, upon application the division of securities may transfer 1,908
the dealer's license and the licenses of its salesmen 1,909
SALESPERSONS to the successor entity, if the division of 1,911
securities finds that the successor entity is substantially 1,912
similar to the predecessor entity. The fee for such a transfer 1,913
shall be fifty dollars plus ten dollars for every salesman's 1,914
SALESPERSON'S license transferred. 1,915
(2) IF A LICENSED INVESTMENT ADVISER CHANGES ITS BUSINESS 1,918
FORM, REINCORPORATES, OR BY MERGER OR OTHERWISE BECOMES A 1,919
DIFFERENT PERSON, AS PERSON IS DEFINED IN SECTION 1707.01 OF THE 1,920
REVISED CODE, UPON APPLICATION, THE DIVISION MAY TRANSFER THE 1,921
INVESTMENT ADVISER LICENSE AND THE LICENSES OF ITS INVESTMENT 1,922
ADVISER REPRESENTATIVES TO THE SUCCESSOR ENTITY, IF THE DIVISION 1,923
FINDS THAT THE SUCCESSOR ENTITY IS SUBSTANTIALLY SIMILAR TO THE 1,924
PREDECESSOR ENTITY. THE FEE FOR THE TRANSFER SHALL BE FIFTY 1,925
DOLLARS PLUS TEN DOLLARS FOR EVERY INVESTMENT ADVISER 1,926
44
REPRESENTATIVE'S LICENSE TRANSFERRED.
Sec. 1707.19. (A) An original license, or a renewal 1,935
thereof, applied for by a dealer or salesman SALESPERSON of 1,936
securities, OR BY AN INVESTMENT ADVISER OR AN INVESTMENT ADVISER 1,937
REPRESENTATIVE, may be refused, and any such license granted may 1,939
be suspended and, after notice and hearing in accordance with 1,940
sections 119.01 to 119.13, inclusive, CHAPTER 119. of the Revised 1,941
Code, may be revoked, by the division of securities, if the 1,943
division determines that such THE applicant or such THE licensed 1,945
dealer or salesman, SALESPERSON, INVESTMENT ADVISER, OR 1,946
INVESTMENT ADVISER REPRESENTATIVE:
(A)(1) Is not of good business repute; 1,948
(B)(2) Is conducting an illegitimate or fraudulent 1,950
business;
(C)(3) Is, in the case of a dealer OR INVESTMENT ADVISER, 1,953
insolvent;
(D)(4) Has intentionally violated any provision of 1,955
sections 1707.01 to 1707.45, inclusive, of the Revised Code, or 1,956
any regulation or order made thereunder; 1,957
(E)(5) Has knowingly and intentionally made a false 1,959
statement of a material fact in an application for a license, in 1,960
a description or application that has been filed, or in any 1,961
statement made to the division under such sections; 1,962
(F)(6) Has refused to comply with any lawful order or 1,964
requirement of the division under section 1707.23 of the Revised 1,965
Code; 1,966
(G)(7) Has been guilty of any fraudulent act in connection 1,968
with the sale of any securities OR IN CONNECTION WITH ACTING AS 1,969
AN INVESTMENT ADVISER OR INVESTMENT ADVISER REPRESENTATIVE; 1,970
(H)(8) Conducts business in purchasing or selling 1,972
securities at such variations from the existing market as in the 1,973
light of all the circumstances are unconscionable; 1,974
(I)(9) Conducts business in violation of such rules and 1,976
regulations as the division prescribes for the protection of 1,977
45
investors, CLIENTS, OR POTENTIAL CLIENTS; 1,978
(J)(10)(a) Has failed to furnish to the division any 1,980
information with respect to his THE purchases or sales of 1,983
securities within this state in his capacity as a licensed dealer 1,984
or salesman which THAT may be reasonably requested by the 1,986
division as pertinent to the protection of investors in this 1,987
state.
(b) HAS FAILED TO FURNISH TO THE DIVISION ANY INFORMATION 1,990
WITH RESPECT TO ACTING AS AN INVESTMENT ADVISER OR AN INVESTMENT 1,991
ADVISER REPRESENTATIVE WITHIN THIS STATE THAT MAY BE REASONABLY 1,992
REQUESTED BY THE DIVISION.
(B) For the protection of investors the division may 1,994
prescribe reasonable rules defining fraudulent, evasive, 1,995
deceptive, or grossly unfair practices or devices in the purchase 1,996
or sale of securities. 1,997
(C) FOR THE PROTECTION OF INVESTORS, CLIENTS, OR POTENTIAL 2,000
CLIENTS, THE DIVISION MAY PRESCRIBE REASONABLE RULES REGARDING 2,001
THE ACTS AND PRACTICES OF AN INVESTMENT ADVISER OR AN INVESTMENT 2,002
ADVISER REPRESENTATIVE.
(D) Pending any investigation or hearing provided for in 2,004
sections 1707.01 to 1707.45, inclusive, of the Revised Code, the 2,005
division may order the suspension of any dealer's or salesman's, 2,006
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER 2,007
REPRESENTATIVE'S license by notifying the party concerned of such 2,009
suspension and the cause for it. If it is a salesman SALESPERSON 2,010
whose license is suspended, the division shall also notify the 2,012
dealer employing him THE SALESPERSON. IF IT IS AN INVESTMENT 2,013
ADVISER REPRESENTATIVE WHOSE LICENSE IS SUSPENDED, THE DIVISION 2,014
ALSO SHALL NOTIFY THE INVESTMENT ADVISER WITH WHOM THE INVESTMENT 2,015
ADVISER REPRESENTATIVE IS EMPLOYED OR ASSOCIATED. 2,016
(E)(1) The suspension or revocation of the dealer's 2,018
license suspends those THE LICENSES of all his salesmen THE 2,019
DEALER'S SALESPERSONS. 2,020
(2) THE SUSPENSION OR REVOCATION OF THE INVESTMENT 2,022
46
ADVISER'S LICENSE SUSPENDS THE LICENSES OF ALL THE INVESTMENT 2,023
ADVISER'S INVESTMENT ADVISER REPRESENTATIVES. THE SUSPENSION OR 2,024
REVOCATION OF AN INVESTMENT ADVISER'S REGISTRATION UNDER SECTION 2,026
203 OF THE "INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, 2,028
SUSPENDS THE LICENSES OF ALL THE INVESTMENT ADVISER'S INVESTMENT 2,029
ADVISER REPRESENTATIVES.
(F) It is sufficient cause for refusal, revocation, or 2,031
suspension of the license in case of a partnership, partnership 2,032
association, corporation, or unincorporated association if any 2,033
general partner of such THE partnership, manager of such THE 2,035
partnership association, or executive officer of such THE 2,036
corporation or unincorporated association is not of good business 2,037
repute or has been guilty of any act or omission which would be 2,038
cause for refusing or revoking the license of an individual 2,039
dealer or salesman, SALESPERSON, INVESTMENT ADVISER, OR 2,040
INVESTMENT ADVISER REPRESENTATIVE. 2,041
Sec. 1707.20. (A) The division of securities may adopt, 2,050
amend, and rescind such rules, forms, and orders as are necessary 2,051
to carry out sections 1707.01 to 1707.45 of the Revised Code, 2,052
including rules and forms governing registration statements, 2,053
applications, and reports, and defining any terms, whether or not 2,054
used in sections 1707.01 to 1707.45 of the Revised Code, insofar 2,055
as the definitions are not inconsistent with said THESE sections. 2,057
For the purpose of rules and forms, the division of securities 2,058
may classify securities, persons, and matters within its 2,059
jurisdiction, and prescribe different requirements for different 2,060
classes. 2,061
(B) No rule, form, or order may be made, amended, or 2,063
rescinded unless the division of securities finds that the action 2,064
is necessary or appropriate in the public interest or for the 2,065
protection of investors, CLIENTS, OR PROSPECTIVE CLIENTS and 2,066
consistent with the purposes fairly intended by the policy and 2,068
provisions of sections 1707.01 to 1707.45 of the Revised Code. 2,069
In prescribing rules and forms and in otherwise administering 2,070
47
sections 1707.01 to 1707.45 of the Revised Code, the division of 2,071
securities may cooperate with the securities administrators of 2,072
the other states and the securities and exchange commission with 2,073
a view of effectuating the policy of this section to achieve 2,074
maximum uniformity in the form and content of registration 2,075
statements, applications, reports, and overall securities 2,076
regulation wherever practicable.
(C) The division of securities may by rule or order 2,078
prescribe: 2,079
(1) The form and content of financial statements required 2,081
under sections 1707.01 to 1707.45 of the Revised Code; 2,082
(2) The circumstances under which consolidated financial 2,084
statements shall be filed; 2,085
(3) Whether any required financial statements shall be 2,087
certified by independent or certified public accountants. All 2,088
financial statements shall be prepared in accordance with 2,089
generally accepted accounting practices. 2,090
(D) All rules and forms of the division of securities 2,092
shall be published; and in addition to fulfilling the 2,093
requirements of sections 119.01 to 119.13 CHAPTER 119. of the 2,095
Revised Code, the division shall prescribe, and shall publish and 2,096
make available its rules regarding the sale of securities, the 2,097
administration of sections 1707.01 to 1707.45 of the Revised 2,098
Code, and the procedure and practice before the division. 2,099
The division may also publish and distribute annually a 2,101
list of licensed dealers and salesmen. 2,102
(E) No provision of sections 1707.01 to 1707.45 of the 2,104
Revised Code imposing any liability applies to any act done or 2,105
omitted in good faith in conformity with any rule, form, or order 2,106
of the division of securities, notwithstanding that the rule, 2,107
form, or order may later be amended or rescinded or be determined 2,108
by judicial or other authority to be invalid for any reason, 2,109
except that the issuance of an order granting effectiveness to a 2,110
registration under section 1707.09 or 1707.091 of the Revised 2,111
48
Code for the purposes of this division shall not be deemed an 2,112
order other than as the establishment of the fact of 2,113
registration. 2,114
Sec. 1707.22. Whenever a dealer's or salesman's, 2,123
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER 2,124
REPRESENTATIVE'S license has been refused, suspended, or revoked, 2,127
or a renewal thereof has been denied, by the division of 2,128
securities, or whenever the division has refused to qualify
securities or has suspended or revoked the registration of any 2,129
particular security by description or by qualification, or the 2,130
right to buy, sell, or deal in any particular security whether it 2,131
is registered or qualified or exempt, or whether the transactions 2,132
in it are registered or exempt, the aggrieved party may appeal in 2,133
accordance with sections 119.01 to 119.13, inclusive, CHAPTER 2,134
119. of the Revised Code. 2,135
An order sustaining the refusal of the division to grant or 2,137
renew a dealer's or salesman's, SALESPERSON'S, INVESTMENT 2,138
ADVISER'S, OR INVESTMENT ADVISER REPRESENTATIVE'S license or to 2,139
grant qualification of securities, or AN ORDER sustaining the 2,141
division in suspending or revoking a dealer's or salesman's,
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER 2,142
REPRESENTATIVE'S license, the registration of any particular 2,144
security by description or by qualification, or the right to buy, 2,145
sell, or deal in any particular security, shall not bar, after 2,146
ten days from such THE order, a new registration by description, 2,147
or a new application of the plaintiff for such a license or 2,148
qualification or for a withdrawal of such A revocation or 2,149
suspension; nor shall an order in favor of the plaintiff prevent 2,151
the division, after proper notice and hearing, from thereafter 2,152
revoking or suspending such license, registration, or right to
buy, sell, or deal in a particular security, for any proper cause 2,153
which may, after such THE order, accrue or be discovered. 2,154
Sec. 1707.23. Whenever it appears to the division of 2,163
securities, from its files, upon complaint, or otherwise, that 2,164
49
any person has engaged in, is engaged in, or is about to engage 2,165
in any practice declared to be illegal or prohibited by Chapter 2,166
1707. of the Revised Code, or defined as fraudulent in such 2,167
chapter OR CONSIDERED A DISHONEST OR UNETHICAL PRACTICE, or any 2,169
other deceptive scheme or practice in connection with the sale of 2,170
securities, OR ACTING AS AN INVESTMENT ADVISER OR INVESTMENT 2,171
ADVISER REPRESENTATIVE, or when the division believes it to be in 2,173
the best interests of the public and necessary for the protection 2,174
of investors, the division may DO ANY OF THE FOLLOWING:
(A) Require any person to file with it, on such forms as 2,176
it prescribes, an original or additional statement or report in 2,177
writing, under oath or otherwise, as to any facts or 2,178
circumstances concerning the issuance, sale, or offer for sale of 2,179
securities within this state by said THE person, AS TO THE 2,181
PERSON'S ACTS OR PRACTICES AS AN INVESTMENT ADVISER OR INVESTMENT
ADVISER REPRESENTATIVE WITHIN THIS STATE, and as to such other 2,183
information as it deems material or relevant thereto. 2,184
(B) Examine any INVESTMENT ADVISER, INVESTMENT ADVISER 2,186
REPRESENTATIVE, OR ANY seller, dealer, salesman SALESPERSON, or 2,188
issuer of any such securities, and any of their agents, 2,190
employees, partners, officers, directors, members, or 2,191
shareholders, wherever located, under oath; and examine such 2,192
records, books, documents, accounts, and papers as the division 2,193
deems material or relevant to the inquiry. 2,194
(C) Require the attendance of such witnesses, and the 2,196
production of such books, records, and papers, as are required 2,197
either by the division or by any party to a hearing before the 2,198
division, and for that purpose issue a subpoena for any witness, 2,199
or a subpoena duces tecum to compel the production of any books, 2,200
records, or papers. Such THE subpoena shall be served by 2,201
certified mail, return receipt requested. If the subpoena is 2,203
returned because of inability to deliver, or if no return is 2,204
received within thirty days of the date of mailing, the subpoena 2,205
may be served by ordinary mail. If no return of ordinary mail is 2,206
50
received within thirty days after the date of mailing, service 2,207
shall be deemed to have been made. If the subpoena is returned 2,208
because of inability to deliver, the division may designate a 2,209
person or persons to effect either personal or residence service 2,210
upon such THE witness. Such THE person may be the sheriff of the 2,212
county in which the witness resides or may be found or any other 2,213
duly designated person. The fees and mileage of such THE person 2,214
serving such THE subpoena shall be the same as those allowed by 2,216
the courts of common pleas in criminal cases, and shall be paid 2,218
from the funds of the division. Fees and mileage for such THE 2,219
witness shall be the same as those allowed for witnesses by the 2,221
courts of common pleas in criminal cases, and shall be paid from 2,222
the funds of the division upon request of such THE witness 2,223
following the hearing.
(D) Proceed under section 1707.19 of the Revised Code to 2,225
suspend the license of any licensed dealer or salesman, LICENSED 2,227
SALESPERSON, LICENSED INVESTMENT ADVISER, OR LICENSED INVESTMENT
ADVISER REPRESENTATIVE and ultimately, if the division 2,229
determines, revoke such license under such sections. 2,230
(E) Initiate criminal proceedings under section 1707.042 2,232
or 1707.44 of the Revised Code by laying before the prosecuting 2,233
attorney of the proper county any evidence of criminality which 2,234
shall come COMES to its knowledge; and in the event of the 2,235
neglect or refusal of the prosecuting attorney to prosecute such 2,237
violations, or at the request of the prosecuting attorney, the 2,238
division shall submit such THE evidence to the attorney general, 2,239
who may proceed in the prosecution with all the rights, 2,241
privileges, and powers conferred by law on prosecuting attorneys, 2,242
including the power to appear before grand juries and to 2,243
interrogate witnesses before such grand juries. 2,244
(F) Require any dealers forthwith to furnish to the 2,246
division copies of prospectuses, circulars, or advertisements 2,247
respecting securities, which THAT they publish or generally 2,248
distribute, OR REQUIRE ANY INVESTMENT ADVISERS IMMEDIATELY TO 2,249
51
FURNISH TO THE DIVISION COPIES OF BROCHURES, ADVERTISEMENTS, 2,250
PUBLICATIONS, ANALYSES, REPORTS, OR OTHER WRITINGS THAT THEY 2,251
PUBLISH OR DISTRIBUTE. 2,252
(G) Require any dealers to mail to the division, prior to 2,254
sale, notices of intention to sell, in respect to all securities 2,255
which are not exempt under section 1707.02 of the Revised Code, 2,256
or which are sold in transactions not exempt under section 2,257
1707.03 or 1707.04 of the Revised Code. 2,258
(H) Issue and cause to be served by certified mail upon 2,260
all persons affected an order requiring the person or persons to 2,261
cease and desist from the acts or practices appearing to the 2,262
division of securities to constitute violations of Chapter 1707. 2,263
of the Revised Code OR RULES ADOPTED UNDER THAT CHAPTER BY THE 2,264
DIVISION. The order shall state specifically the section or 2,266
sections of Chapter 1707. of the Revised Code OR THE RULE OR
RULES ADOPTED UNDER THAT CHAPTER BY THE DIVISION that appear to 2,268
the division of securities to have been violated and the facts 2,269
constituting the violation. If after the issuance of the order 2,270
it appears to the division of securities that any person or 2,271
persons affected by the order have engaged in any act or practice 2,272
from which the person or persons shall have been required, by the 2,273
order, to cease and desist, the director of commerce may apply to 2,274
the court of common pleas of any county for, and upon proof of 2,275
the validity of the order of the division of securities, the 2,276
delivery of the order to the person or persons affected, and of 2,277
the illegality and the continuation of the acts or practices that 2,278
are the subject of the order, the court may grant an injunction 2,279
implementing the order of the division of securities. 2,280
(I) ISSUE AND INITIATE CONTEMPT PROCEEDINGS IN THIS STATE 2,282
REGARDING SUBPOENAS AND SUBPOENAS DUCES TECUM AT THE REQUEST OF 2,284
THE SECURITIES ADMINISTRATOR OF ANOTHER STATE, IF IT APPEARS TO 2,285
THE DIVISION THAT THE ACTIVITIES FOR WHICH THE INFORMATION IS 2,286
SOUGHT WOULD VIOLATE CHAPTER 1707. OF THE REVISED CODE IF THE 2,288
ACTIVITIES HAD OCCURRED IN THIS STATE.
52
Sec. 1707.25. In case any person fails to file any 2,297
statement or report required by sections 1707.01 to 1707.45, 2,298
inclusive, of the Revised Code, to obey any subpoena the issuance 2,299
of which is provided for in such THOSE sections, or to produce 2,300
books, records, or papers, give testimony, or answer questions, 2,302
as required by such THOSE sections, the director of commerce may 2,303
apply to a court of common pleas of any county for, and upon 2,305
proof of such failure such THE court may grant an injunction 2,306
restraining the ACTING AS AN INVESTMENT ADVISER OR INVESTMENT 2,307
ADVISER REPRESENTATIVE, OR THE issuance, sale, or offer for sale 2,308
of any securities by such THE person or by its agents, employees, 2,310
partners, officers, directors, or shareholders, until such 2,311
failure has been remedied and such other relief as the facts may 2,312
warrant has been had. Such injunctive relief is available in 2,313
addition to the other remedies provided for in such sections 2,314
1707.01 TO 1707.45 OF THE REVISED CODE. 2,315
Where the person refusing to comply with such order of 2,317
court is an issuer of securities, the court may enjoin the sale 2,318
by any dealer of any securities of said THE issuer, and the 2,319
division of securities may revoke the qualification of the 2,321
securities of said THE issuer, or suspend or revoke the sale of 2,322
any securities of said THE issuer which have been registered by 2,324
description, and such securities shall not thereafter be sold by 2,326
any dealer until such THE order of the court or of the division 2,327
is withdrawn.
Sec. 1707.27. If the court of common pleas is satisfied 2,336
with the sufficiency of the application for a receivership, and 2,337
of the sufficiency of the proof of substantial violation of 2,338
sections 1707.01 to 1707.45, inclusive, of the Revised Code, or 2,339
of the use of any act, practice, or transaction declared to be 2,340
illegal, OR prohibited, or declared DEFINED AS fraudulent, OR 2,341
CONSIDERED TO BE DISHONEST OR UNETHICAL, by such THOSE sections, 2,342
to the material prejudice of a purchaser or holder of securities, 2,343
such OR CLIENT OF AN INVESTMENT ADVISER OR INVESTMENT ADVISER 2,344
53
REPRESENTATIVE, THE court may appoint a receiver, for any person 2,346
so violating sections 1707.01 to 1707.45, inclusive, of the 2,348
Revised Code, with power to sue for, collect, receive, and take 2,350
into his THE RECEIVER'S possession all the books, records, and 2,351
papers of such THE person and all rights, credits, property, and 2,352
choses in action acquired by such THE person by means of any such 2,354
act, practice, or transaction, and also all property with which 2,355
such THE property has been mingled, if such THE property cannot 2,356
be identified in kind because of such THE commingling, and with 2,357
power to sell, convey, and assign such THE property, and to hold 2,359
and dispose of the proceeds under the direction of the court of 2,361
common pleas. Such THE court shall have jurisdiction of all 2,362
questions arising in said THE proceedings and may make such 2,364
orders and decrees therein as justice and equity require. 2,365
Sec. 1707.391. When any securities have been sold in 2,374
reliance upon division (O) or, (Q), (W), (X), OR (Y) of section 2,376
1707.03 of the Revised Code, section 1707.08 of the Revised Code, 2,377
or any other section of Chapter 1707. of the Revised Code that 2,378
the division of securities may specify by rule, but such reliance 2,379
was improper because the required filings were not timely or 2,380
properly made due to excusable neglect, upon the effective date 2,381
of an application, made to the division and payment of the 2,382
required fee, if not already paid, plus a penalty fee equal to 2,383
such THE required fee, the sale of the securities shall be deemed 2,385
exempt, qualified, or registered, as though timely and properly 2,386
filed. Such application shall become effective upon the 2,387
expiration of fourteen days after the date of the filing in 2,388
question if prior thereto the division did not give notice to the 2,389
applicant that the application was denied based on a finding of 2,390
lack of excusable neglect. The division shall promptly adopt and 2,391
promulgate rules establishing provisions defining excusable 2,392
neglect and otherwise establishing reasonable standards for 2,393
determining excusable neglect. 2,394
The effectiveness of an application under this section does 2,396
54
not relieve anyone who has, other than for excusable neglect, 2,397
violated sections 1707.01 to 1707.45 of the Revised Code, or any 2,398
previous law in force at the time of sale, from prosecution 2,399
thereunder. 2,400
Sec. 1707.42. (A) Whoever, with intent to secure 2,409
financial gain to himself SELF, advises and procures any person 2,411
to purchase any security, and receives any commission or reward 2,412
for such THE advice or services without disclosing to the 2,413
purchaser the fact of his THE PERSON'S agency or his interest in 2,415
such sales, shall be liable to such THE purchaser for the amount 2,416
of such THE purchaser's damage thereby, upon tender of such THE 2,418
security to, and suit brought against, such THE adviser, by such 2,420
THE purchaser. No such suit shall be brought more than one year 2,421
subsequent to such THE purchase. 2,422
(B) WHOEVER ACTS AS AN INVESTMENT ADVISER OR INVESTMENT 2,424
ADVISER REPRESENTATIVE IN VIOLATION OF CHAPTER 1707. OF THE 2,425
REVISED CODE SHALL BE LIABLE FOR DAMAGES RESULTING FROM THE 2,426
VIOLATION IN AN ACTION AT LAW IN A COURT OF COMPETENT 2,427
JURISDICTION. DAMAGES MAY INCLUDE CONSIDERATION PAID FOR THE
ADVICE, ANY LOSS DUE TO THE ADVICE, AND ALL COURT COSTS, LESS THE 2,428
AMOUNT OF ANY INCOME RECEIVED FROM THE ADVICE. NO PERSON MAY 2,429
BRING AN ACTION UNDER THIS DIVISION MORE THAN FOUR YEARS AFTER 2,430
THE RENDERING OF INVESTMENT ADVICE OR TWO YEARS AFTER DISCOVERY 2,431
OF FACTS CONSTITUTING THE VIOLATION, WHICHEVER IS THE SHORTER 2,432
PERIOD.
Sec. 1707.431. For purposes of this section, the following 2,441
persons shall not be deemed to have effected, participated in, or 2,442
aided the seller in any way in making, a sale or contract of sale 2,443
in violation of sections 1707.01 to 1707.45 of the Revised Code: 2,444
(A) Any attorney, accountant, or engineer whose 2,446
performance is incidental to the practice of his THE PERSON'S 2,447
profession; 2,448
(B) Any person, OTHER THAN AN INVESTMENT ADVISER OR AN 2,450
INVESTMENT ADVISER REPRESENTATIVE, who brings any issuer together 2,451
55
with any potential investor, without receiving, directly or 2,452
indirectly, a commission, fee, or other remuneration based on the 2,453
sale of any securities by any such THE issuer to any such THE 2,454
investor. Remuneration received by such THE person solely for 2,456
the purpose of offsetting the reasonable out-of-pocket costs 2,458
incurred by the person shall not be deemed such a commission, 2,459
fee, or other remuneration.
Any person claiming exemption under this division for a 2,461
publicly advertised meeting shall file a notice with the division 2,462
of securities indicating an intent to cause or hold such a 2,463
meeting at least twenty-one days prior to the meeting. The 2,464
division may, upon receipt of such notice, issue an order denying 2,465
the availability of an exemption under this division not more 2,466
than fourteen days after receipt of such THE notice based on a 2,467
finding that the applicant is not entitled to the exemption. 2,468
Notwithstanding the notice described in this section, a failure 2,469
to file such a THE notice does not create a presumption that a 2,470
person was participating in or aiding in the making of a sale or 2,472
contract of sale in violation of this chapter. 2,473
(C) Any person whom the division exempts from this 2,475
provision by rule. 2,476
Sec. 1707.44. (A)(1) No person shall engage in any act or 2,485
practice that violates division (A), (B), or (C) of section 2,487
1707.14 of the Revised Code, and no salesperson shall sell 2,488
securities in this state without being licensed pursuant to 2,489
section 1707.16 of the Revised Code.
(2) NO PERSON SHALL ENGAGE IN ANY ACT OR PRACTICE THAT 2,491
VIOLATES DIVISION (A) OF SECTION 1707.141 OR SECTION 1707.161 OF 2,492
THE REVISED CODE.
(B) No person shall knowingly make or cause to be made any 2,494
false representation concerning a material and relevant fact, in 2,495
any oral statement or in any prospectus, circular, description, 2,496
application, or written statement, for any of the following 2,497
purposes: 2,498
56
(1) Complying with this chapter, in regard to registering 2,500
securities by description; 2,501
(2) Securing the qualification of any securities under 2,503
this chapter; 2,504
(3) Procuring the licensing of any dealer or, salesperson, 2,507
INVESTMENT ADVISER, OR INVESTMENT ADVISER REPRESENTATIVE under 2,509
this chapter;
(4) Selling any securities in this state; 2,511
(5) ADVISING FOR COMPENSATION, AS TO THE VALUE OF 2,513
SECURITIES OR AS TO THE ADVISABILITY OF INVESTING IN, PURCHASING, 2,514
OR SELLING SECURITIES.
(C) No person shall knowingly and intentionally sell, 2,516
cause to be sold, offer for sale, or cause to be offered for 2,517
sale, any security which comes under any of the following 2,518
descriptions: 2,519
(1) Is not exempt under section 1707.02 of the Revised 2,521
Code, nor the subject matter of one of the transactions exempted 2,522
in sections 1707.03, 1707.04, and 1707.34 of the Revised Code, 2,523
has not been registered by description, coordination, or 2,524
qualification, and is not the subject matter of a transaction 2,525
that has been registered by description; 2,526
(2) The prescribed fees for registering by description, by 2,528
coordination, or by qualification have not been paid in respect 2,529
to such security; 2,530
(3) Such person has been notified by the division, or has 2,532
knowledge of the notice, that the right to buy, sell, or deal in 2,534
such security has been suspended or revoked, or that the 2,535
registration by description, by coordination, or by qualification 2,536
under which it may be sold has been suspended or revoked; 2,537
(4) The offer or sale is accompanied by a statement that 2,539
the security offered or sold has been or is to be in any manner 2,540
indorsed by the division. 2,541
(D) No person who is an officer, director, or trustee of, 2,543
or a dealer for, any issuer, and who knows such issuer to be 2,544
57
insolvent in that the liabilities of such issuer exceed its 2,545
assets, shall sell any securities of or for any such issuer, 2,546
without disclosing the fact of the insolvency to the purchaser. 2,548
(E) No person with intent to aid in the sale of any 2,550
securities on behalf of the issuer, shall knowingly make any 2,551
representation not authorized by such issuer or at material 2,552
variance with statements and documents filed with the division by 2,553
such issuer. 2,554
(F) No person, with intent to deceive, shall sell, cause 2,556
to be sold, offer for sale, or cause to be offered for sale, any 2,557
securities of an insolvent issuer, with knowledge that such 2,558
issuer is insolvent in that the liabilities of such issuer exceed 2,559
its assets, taken at their fair market value. 2,560
(G) No person in selling securities shall knowingly engage 2,562
in any act or practice which is, in this chapter, declared 2,563
illegal, defined as fraudulent, or prohibited. 2,565
(H) No licensed dealer shall refuse to buy from, sell to, 2,567
or trade with any person because the person appears on a 2,568
blacklist issued by, or is being boycotted by, any foreign 2,569
corporate or governmental entity, nor sell any securities of or 2,570
for any issuer who is known in relation to the issuance or sale 2,571
of such securities to have engaged in such practices. 2,572
(I) No dealer in securities, knowing that the dealer's 2,574
liabilities exceed the reasonable value of the dealer's assets, 2,576
shall accept money or securities, except in payment of or as 2,577
security for an existing debt, from a customer who is ignorant of 2,578
the dealer's insolvency, and thereby cause the customer to lose 2,581
any part of the customer's securities or the value thereof, by 2,582
doing either of the following without the customer's consent: 2,583
(1) Pledging, selling, or otherwise disposing of such 2,585
securities, when the dealer has no lien on or any special 2,587
property in such securities;
(2) Pledging such securities for more than the amount due, 2,589
or otherwise disposing of such securities for the dealer's own 2,591
58
benefit, when the dealer has a lien or indebtedness on such 2,592
securities. 2,593
It is an affirmative defense to a charge under this 2,595
division that, at the time the securities involved were pledged, 2,596
sold, or disposed of, the dealer had in the dealer's possession 2,598
or control, and available for delivery, securities of the same 2,599
kinds and in amounts sufficient to satisfy all customers entitled 2,600
thereto, upon demand and tender of any amount due thereon. 2,601
(J) No person, with purpose to deceive, shall make, issue, 2,603
publish, or cause to be made, issued, or published any statement 2,604
or advertisement as to the value of securities, or as to alleged 2,605
facts affecting the value of securities, or as to the financial 2,606
condition of any issuer of securities, when the person knows that 2,609
such statement or advertisement is false in any material respect. 2,610
(K) No person, with purpose to deceive, shall make, 2,612
record, or publish or cause to be made, recorded, or published, a 2,613
report of any transaction in securities which is false in any 2,614
material respect. 2,615
(L) No dealer shall engage in any act that violates the 2,617
provisions of section 15(c) or 15(g) of the "Securities Exchange 2,618
Act of 1934," 48 Stat. 881, 15 U.S.C.A. 78o(c) or (g), or any 2,619
rule or regulation promulgated by the securities and exchange 2,620
commission thereunder. If, subsequent to October 11, 1994, 2,621
additional amendments to section 15(c) or 15(g) are adopted, or 2,622
additional rules or regulations are promulgated pursuant to such 2,623
sections, the division of securities shall, by rule, adopt the 2,624
amendments, rules, or regulations, unless the division finds that 2,625
the amendments, rules, or regulations are not necessary for the 2,626
protection of investors or in the public interest.
(M)(1) NO INVESTMENT ADVISER OR INVESTMENT ADVISER 2,628
REPRESENTATIVE SHALL DO ANY OF THE FOLLOWING: 2,629
(a) EMPLOY ANY DEVICE, SCHEME, OR ARTIFICE TO DEFRAUD ANY 2,632
PERSON;
(b) ENGAGE IN ANY ACT, PRACTICE, OR COURSE OF BUSINESS 2,634
59
THAT OPERATES OR WOULD OPERATE AS A FRAUD OR DECEIT UPON ANY 2,635
PERSON; 2,636
(c) ENGAGE IN DISHONEST OR UNETHICAL PRACTICES IN 2,638
VIOLATION OF RULES ADOPTED BY THE DIVISION. 2,639
(2) NO INVESTMENT ADVISER OR INVESTMENT ADVISER 2,641
REPRESENTATIVE LICENSED OR REQUIRED TO BE LICENSED UNDER THIS 2,642
CHAPTER SHALL TAKE OR HAVE CUSTODY OF ANY SECURITIES OR FUNDS OF 2,643
ANY PERSON, EXCEPT AS PROVIDED IN RULES ADOPTED BY THE DIVISION. 2,644
(3) IN THE SOLICITATION OF CLIENTS OR PROSPECTIVE CLIENTS, 2,646
NO PERSON SHALL MAKE ANY UNTRUE STATEMENT OF A MATERIAL FACT OR 2,647
OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE 2,648
STATEMENTS MADE NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES 2,649
UNDER WHICH THE STATEMENTS WERE MADE. 2,650
Sec. 1707.46. The principal executive officer of the 2,659
division of securities shall be the commissioner of securities, 2,660
who shall be appointed by the director of commerce. The 2,661
commissioner of securities shall enforce all the laws and 2,662
administrative rules enacted OR ADOPTED to regulate the sale of 2,663
bonds, stocks, and other securities and to prevent fraud in such 2,664
sales. THE COMMISSIONER ALSO SHALL ENFORCE ALL THE LAWS AND 2,665
ADMINISTRATIVE RULES ENACTED OR ADOPTED TO REGULATE INVESTMENT 2,666
ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES AND TO PREVENT 2,667
FRAUD IN THEIR ACTS, PRACTICES, AND TRANSACTIONS. 2,668
The commissioner shall be paid at a rate not less than pay 2,670
range 47 set out in schedule E-2 of section 124.152 of the 2,671
Revised Code, to be paid as other operating expenses of the 2,672
division.
Sec. 1707.48. The division of securities shall retain the 2,681
originals or copies of all documents filed with the division 2,682
pertaining to registration by description, qualification, or 2,683
coordination and all filings for claims of exemption for eight 2,684
years from the date of the initial filing. For purposes of this 2,685
section, the date of the initial filing shall be the date upon
which the first fee for such filing was received by the division. 2,686
60
The division shall retain all documents, testimony 2,688
transcripts, investigative reports, and investigative notes that 2,689
the division has compiled in original or copy form for five years 2,690
from the date of the alleged or suspected violation of any 2,691
provision of this chapter.
All other documents filed with the division shall be 2,693
retained in original or copy form for five years. 2,694
THE DIVISION MAY BY RULE EXEMPT ANY DOCUMENT OR RECORD FROM 2,696
THIS SECTION, PROVIDED THAT ANY DOCUMENT OR RECORD EXEMPTED IS 2,697
RETAINED BY THE DIVISION FOR AT LEAST AS LONG AS IT WOULD HAVE 2,698
BEEN RETAINED HAD IT BEEN SUBJECT TO THIS SECTION. 2,699
Section 2. That existing sections 1707.01, 1707.03, 2,701
1707.11, 1707.14, 1707.17, 1707.18, 1707.19, 1707.20, 1707.22, 2,703
1707.23, 1707.25, 1707.27, 1707.391, 1707.42, 1707.431, 1707.44,
1707.46, and 1707.48 of the Revised Code are hereby repealed. 2,705
Section 3. It is the intent of the General Assembly that 2,707
the Commissioner of Securities take action reasonably necessary 2,708
to provide for the timely and orderly licensure of investment 2,709
advisers and investment adviser representatives consistent with 2,710
sections 1707.141, 1707.161, and 1707.17 of the Revised Code. 2,711