As Passed by the House 1
122nd General Assembly 4
Regular Session Am. Sub. H. B. No. 695 5
1997-1998 6
REPRESENTATIVES STAPLETON-THOMAS-WILLAMOWSKI-HARRIS-GARCIA- 8
OLMAN-VAN VYVEN-SALERNO-TAYLOR-TIBERI-EVANS-HOUSEHOLDER- 9
JACOBSON-MYERS-WACHTMANN-BUCHY-TERWILLEGER-MOTTLEY- 10
VESPER-REID-BOYD-JONES 11
13
A B I L L
To amend sections 1707.01, 1707.03, 1707.11, 15
1707.14, 1707.17, 1707.18, 1707.19, 1707.20, 16
1707.22, 1707.23, 1707.25, 1707.27, 1707.36, 17
1707.391, 1707.42, 1707.431, 1707.44, 1707.46, 18
1707.48, and 1707.99, and to enact sections 20
1707.092, 1707.093, 1707.141, 1707.151, and 21
1707.161 of the Revised Code to modify the 23
Securities Law, including modifications to the 24
list of securities transactions exempt from 25
registration, provisions for notice filings by 27
investment companies and in connection with 28
covered security offerings, provisions for 29
electronic filing, provisions for the 31
registration and regulation of investment 32
advisers and investment adviser representatives, 33
provisions applying to investigation of alleged 34
violations of the Securities Law by the Office of 36
the Attorney-Inspector and increasing the 37
penalties that apply to violations of the 38
Securities Law, and other provisions for related 41
changes. 42
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 44
Section 1. That sections 1707.01, 1707.03, 1707.11, 46
2
1707.14, 1707.17, 1707.18, 1707.19, 1707.20, 1707.22, 1707.23, 48
1707.25, 1707.27, 1707.36, 1707.391, 1707.42, 1707.431, 1707.44,
1707.46, 1707.48, and 1707.99 be amended and sections 1707.092, 51
1707.093, 1707.141, 1707.151, and 1707.161 of the Revised Code be 52
enacted to read as follows: 53
Sec. 1707.01. As used in this chapter: 62
(A) Whenever the context requires it, "division" or 64
"division of securities" may be read as "director of commerce" or 65
as "commissioner of securities." 66
(B) "Security" means any certificate or instrument that 68
represents title to or interest in, or is secured by any lien or 69
charge upon, the capital, assets, profits, property, or credit of 70
any person or of any public or governmental body, subdivision, or 71
agency. It includes shares of stock, certificates for shares of 72
stock, membership interests in limited liability companies, 73
voting-trust certificates, warrants and options to purchase 74
securities, subscription rights, interim receipts, interim 75
certificates, promissory notes, all forms of commercial paper, 76
evidences of indebtedness, bonds, debentures, land trust 77
certificates, fee certificates, leasehold certificates, syndicate 78
certificates, endowment certificates, certificates or written 79
instruments in or under profit-sharing or participation 80
agreements or in or under oil, gas, or mining leases, or 81
certificates or written instruments of any interest in or under 82
the same, receipts evidencing preorganization or reorganization 83
subscriptions, preorganization certificates, reorganization 84
certificates, certificates evidencing an interest in any trust or 85
pretended trust, any investment contract, any instrument 86
evidencing a promise or an agreement to pay money, warehouse 87
receipts for intoxicating liquor, and the currency of any 88
government other than those of the United States and Canada, but 89
sections 1707.01 to 1707.45 of the Revised Code do not apply to 90
bond investment companies or to the sale of real estate. 91
(C)(1) "Sale" has the full meaning of "sale" as applied by 93
3
or accepted in courts of law or equity, and includes every 94
disposition, or attempt to dispose, of a security or of an 95
interest in a security. "Sale" also includes a contract to sell, 96
an exchange, an attempt to sell, an option of sale, a 97
solicitation of a sale, a solicitation of an offer to buy, a 98
subscription, or an offer to sell, directly or indirectly, by 99
agent, circular, pamphlet, advertisement, or otherwise. 100
(2) "Sell" means any act by which a sale is made. 102
(3) The use of advertisements, circulars, or pamphlets in 104
connection with the sale of securities in this state exclusively 105
to the purchasers specified in division (D) of section 1707.03 of 106
the Revised Code is not a sale when the advertisements, 107
circulars, and pamphlets describing and offering those securities 108
bear a readily legible legend in substance as follows: "This 109
offer is made on behalf of dealers licensed under sections 110
1707.01 to 1707.45 of the Revised Code, and is confined in this 111
state exclusively to institutional investors and licensed 112
dealers." 113
(4) The offering of securities by any person in 115
conjunction with a licensed dealer by use of advertisement, 116
circular, or pamphlet is not a sale if that person does not 117
otherwise attempt to sell securities in this state. 118
(5) Any security given with, or as a bonus on account of, 120
any purchase of securities is conclusively presumed to constitute 121
a part of the subject of that purchase and has been "sold." 122
(6) "Sale" by an owner, pledgee, or mortgagee, or by a 124
person acting in a representative capacity, includes sale on 125
behalf of such party by an agent, including a licensed dealer or 126
salesman SALESPERSON. 127
(D) "Person"," EXCEPT AS OTHERWISE PROVIDED IN THIS 129
CHAPTER, means a natural person, firm, partnership, limited 131
partnership, partnership association, syndicate, joint-stock 132
company, unincorporated association, trust or trustee except 133
where the trust was created or the trustee designated by law or 134
4
judicial authority or by a will, and a corporation or limited 135
liability company organized under the laws of any state, any 136
foreign government, or any political subdivision of a state or 137
foreign government.
(E)(1) "Dealer," except as otherwise provided in this 139
chapter, means every person, other than a salesman SALESPERSON, 140
who engages or professes to engage, in this state, for either all 141
or part of the person's time, directly or indirectly, either in 142
the business of the sale of securities for the person's own 143
account, or in the business of the purchase or sale of securities 144
for the account of others in the reasonable expectation of 145
receiving a commission, fee, or other remuneration as a result of 146
engaging in the purchase and sale of securities. "Dealer" does 147
not mean any of the following:
(a) Any issuer, including any officer, director, employee, 149
or trustee of, OR MEMBER OR MANAGER OF, or partner in, or any 150
general partner of, any issuer, that sells, offers for sale, or 152
does any act in furtherance of the sale of a security that 153
represents an economic interest in that issuer, provided no 154
commission, fee, or other similar remuneration is paid to or 155
received by the issuer for the sale; 156
(b) Any licensed attorney, public accountant, or firm of 158
such attorneys or accountants, whose activities are incidental to 159
the practice of the attorney's, accountant's or firm's 160
profession;
(c) Any person that, for the account of others, engages in 162
the purchase or sale of securities that are issued and 163
outstanding before such purchase and sale, if a majority or more 164
of the equity interest of an issuer is sold in that transaction, 165
and if, in the case of a corporation, the securities sold in that 166
transaction represent a majority or more of the voting power of 167
the corporation in the election of directors; 168
(d) Any person that brings an issuer together with a 170
potential investor and whose compensation is not directly or 171
5
indirectly based on the sale of any securities by the issuer to 172
the investor; 173
(e) Any bank, savings and loan association, savings bank, 175
or credit union chartered under the laws of the United States or 176
any state thereof, provided that all transactions are consummated 177
by or through a person licensed pursuant to section 1707.14 of 178
the Revised Code; 179
(f) Any person that the division of securities by rule 181
exempts from the definition of "dealer" under division (E)(1) of 182
this section. 183
(2) "Licensed dealer" means a dealer licensed under this 186
chapter.
(F)(1) "Salesman" OR "SALESPERSON" means every natural 188
person, other than a dealer, employed, authorized, or appointed 191
by a dealer to sell securities within this state. 192
(2) The general partners of a partnership, and the 194
executive officers of a corporation or unincorporated 195
association, licensed as a dealer are not salesmen SALESPERSONS 196
within the meaning of this definition, nor are such clerical or 197
other employees of an issuer or dealer as are employed for work 198
to which the sale of securities is secondary and incidental; but 199
the division of securities may require a license from any such 200
partner, executive officer, or employee if it determines that 201
protection of the public necessitates the licensing. 202
(3) "Licensed salesman SALESPERSON" means a salesman 204
SALESPERSON licensed under this chapter. 205
(G) "Issuer" means every person who has issued, proposes 207
to issue, or issues any security. 208
(H) "Director" means each director or trustee of a 210
corporation, each trustee of a trust, each general partner of a 211
partnership, except a partnership association, each manager of a 212
partnership association, and any person vested with managerial or 213
directory power over an issuer not having a board of directors or 214
trustees. 215
6
(I) "Incorporator" means any incorporator of a corporation 217
and any organizer of, or any person participating, other than in 218
a representative or professional capacity, in the organization of 219
an unincorporated issuer. 220
(J) "Fraud," "fraudulent acts," "fraudulent practices," or 222
"fraudulent transactions" means anything recognized on or after 223
July 22, 1929, as such in courts of law or equity; any device, 224
scheme, or artifice to defraud or to obtain money or property by 225
means of any false pretense, representation, or promise; any 226
fictitious or pretended purchase or sale of securities; and any 227
act, practice, transaction, or course of business relating to the 228
sale of securities that is fraudulent or that has operated or 229
would operate as a fraud upon the purchaser. 230
(K) Except as otherwise specifically provided, whenever 232
any classification or computation is based upon "par value," as 233
applied to securities without par value, the average of the 234
aggregate consideration received or to be received by the issuer 235
for each class of those securities shall be used as the basis for 236
that classification or computation. 237
(L)(1) "Intangible property" means patents, copyrights, 239
secret processes, formulas, services, good will, promotion and 240
organization fees and expenses, trademarks, trade brands, trade 241
names, licenses, franchises, any other assets treated as 242
intangible according to generally accepted accounting principles, 243
and securities, accounts receivable, or contract rights having no 244
readily determinable value. 245
(2) "Tangible property" means all property other than 247
intangible property and includes securities, accounts receivable, 248
and contract rights, when the securities, accounts receivable, or 249
contract rights have a readily determinable value. 250
(M) "Public utilities" means those utilities defined in 252
sections 4905.02, 4905.03, 4907.02, and 4907.03 of the Revised 253
Code; in the case of a foreign corporation, it means those 254
utilities defined as public utilities by the laws of its 255
7
domicile; and in the case of any other foreign issuer, it means 256
those utilities defined as public utilities by the laws of the 257
situs of its principal place of business. The term always 258
includes railroads whether or not they are so defined as public 259
utilities. 260
(N) "State" means any state of the United States, any 262
territory or possession of the United States, the District of 263
Columbia, and any province of Canada. 264
(O) "Bank" means any bank, trust company, savings and loan 266
association, or savings bank, OR CREDIT UNION that is 267
incorporated or organized under the laws of the United States, 269
any state of the United States, Canada, or any province of Canada 270
and that is subject to regulation or supervision by that country, 271
state, or province.
(P) "Include," when used in a definition, does not exclude 273
other things or persons otherwise within the meaning of the term 274
defined. 275
(Q)(1) "Registration by description" means that the 277
requirements of section 1707.08 of the Revised Code have been 278
complied with. 279
(2) "Registration by qualification" means that the 281
requirements of sections 1707.09 and 1707.11 of the Revised Code 282
have been complied with. 283
(3) "Registration by coordination" means that there has 285
been compliance with section 1707.091 of the Revised Code. 286
Reference in this chapter to registration by qualification also 287
shall be deemed to include registration by coordination unless 288
the context otherwise indicates. 289
(R) "Intoxicating liquor" includes all liquids and 291
compounds that contain more than three and two-tenths per cent of 292
alcohol by weight and are fit for use for beverage purposes. 293
(S) "Institutional investor" means any corporation, bank, 295
insurance company, pension fund or pension fund trust, employees' 296
profit-sharing fund or employees' profit-sharing trust, any 297
8
association engaged, as a substantial part of its business or 298
operations, in purchasing or holding securities, or any trust in 299
respect of which a bank is trustee or cotrustee. "Institutional 300
investor" does not include any business entity formed for the 301
primary purpose of evading sections 1707.01 to 1707.45 of the 302
Revised Code. 303
(T) "Securities Act of 1933," 84 48 Stat. 74, 15 U.S.C. 305
77a-77aa 77a, "Securities Exchange Act of 1934," 48 Stat. 881, 15 307
U.S.C. 78a-78jj, and "Internal Revenue Code of 1954 1986," 68a 309
100 Stat. 3 2085, 26 U.S.C. 1, "INVESTMENT ADVISERS ACT OF 1940," 311
54 STAT. 847, 15 U.S.C. 80b, AND "INVESTMENT COMPANY ACT OF 313
1940," 54 STAT. 789, 15 U.S.C. 80a mean the federal statutes of 315
those names as amended before or after July 20, 1978 THE 316
EFFECTIVE DATE OF THIS AMENDMENT. 317
(U) "Securities and exchange commission" means the 319
securities and exchange commission established by the Securities 320
Exchange Act of 1934. 321
(V)(1) "Control bid" means the purchase of or offer to 323
purchase any equity security of a subject company from a resident 324
of this state if either of the following applies: 325
(a) After the purchase of that security, the offeror would 327
be directly or indirectly the beneficial owner of more than ten 328
per cent of any class of the issued and outstanding equity 329
securities of the issuer. 330
(b) The offeror is the subject company, there is a pending 332
control bid by a person other than the issuer, and the number of 333
the issued and outstanding shares of the subject company would be 334
reduced by more than ten per cent. 335
(2) For purposes of division (V)(1) of this section, 337
"control bid" does not include any of the following: 338
(a) A bid made by a dealer for the dealer's own account in 340
the ordinary course of business of buying and selling securities; 341
(b) An offer to acquire any equity security solely in 343
exchange for any other security, or the acquisition of any equity 344
9
security pursuant to an offer, for the sole account of the 345
offeror, in good faith and not for the purpose of avoiding the 346
provisions of this chapter, and not involving any public offering 347
of the other security within the meaning of Section 4 of Title I 348
of the "Securities Act of 1933," 48 Stat. 77, 15 U.S.C.A. 77d(2), 349
as amended; 350
(c) Any other offer to acquire any equity security, or the 352
acquisition of any equity security pursuant to an offer, for the 353
sole account of the offeror, from not more than fifty persons, in 354
good faith and not for the purpose of avoiding the provisions of 355
this chapter. 356
(W) "Offeror" means a person who makes, or in any way 358
participates or aids in making, a control bid and includes 359
persons acting jointly or in concert, or who intend to exercise 360
jointly or in concert any voting rights attached to the 361
securities for which the control bid is made and also includes 362
any subject company making a control bid for its own securities. 363
(X)(1) "Investment advisor ADVISER" means any person who, 366
for compensation, engages in the business of advising others, 367
either directly or through publications or writings, as to the 368
value of securities or as to the advisability of investing in, 369
purchasing, or selling securities, or who, for compensation and 370
as a part of regular business, issues or promulgates analyses or 371
reports concerning securities. "
(2) "Investment advisor ADVISER" does not mean any of the 374
following:
(1)(a) Any licensed attorney, public accountant, or firm 377
of such attorneys or accountants, engineer, any bank, savings and 378
loan association, or savings bank, or any director, officer, or 379
employee of a bank, savings and loan association, or savings bank 381
OR TEACHER, whose activities are PERFORMANCE OF INVESTMENT 382
ADVISORY SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS SECTION IS 383
SOLELY incidental to the practice of the attorney's, 384
accountant's, engineer's, director's, officer's, employee's, 386
10
firm's, bank's, or association's TEACHER'S profession or 387
occupation;
(2)(b) A publisher or bona fide employee of any bona fide 390
newspaper, news magazine, or business or financial publication of 391
general, regular, and paid REGULAR circulation; 392
(3) Any issuer, including any officer, director, employee, 394
or partner in, or trustee of, any issuer whose performance of 395
these services occurs in furtherance of the sale of a security 396
that represents an economic interest in that issuer, provided 397
that no commission, fee, or remuneration is paid to or received 398
by such person for such advisory services 399
(c) A PERSON WHO ACTS SOLELY AS AN INVESTMENT ADVISER 401
REPRESENTATIVE; 402
(d) A BANK HOLDING COMPANY, AS DEFINED IN THE "BANK 405
HOLDING COMPANY ACT OF 1956," 70 STAT. 133, 12 U.S.C. 1841, THAT 406
IS NOT AN INVESTMENT COMPANY; 407
(e) A BANK, OR ANY RECEIVER, CONSERVATOR, OR OTHER 409
LIQUIDATING AGENT OF A BANK; 410
(f) ANY LICENSED DEALER OR LICENSED SALESPERSON WHOSE 412
PERFORMANCE OF INVESTMENT ADVISORY SERVICES DESCRIBED IN DIVISION 413
(X)(1) OF THIS SECTION IS SOLELY INCIDENTAL TO THE CONDUCT OF THE 414
DEALER'S OR SALESPERSON'S BUSINESS AS A LICENSED DEALER OR 415
LICENSED SALESPERSON AND WHO RECEIVES NO SPECIAL COMPENSATION FOR 416
THE SERVICES;
(g) ANY PERSON, THE ADVICE, ANALYSES, OR REPORTS OF WHICH 418
DO NOT RELATE TO SECURITIES OTHER THAN SECURITIES THAT ARE DIRECT 419
OBLIGATIONS OF, OR OBLIGATIONS GUARANTEED AS TO PRINCIPAL OR 420
INTEREST BY, THE UNITED STATES, OR SECURITIES ISSUED OR 421
GUARANTEED BY CORPORATIONS IN WHICH THE UNITED STATES HAS A 422
DIRECT OR INDIRECT INTEREST, AND THAT HAVE BEEN DESIGNATED BY THE 423
SECRETARY OF THE TREASURY AS EXEMPT SECURITIES AS DEFINED IN THE 424
"SECURITIES EXCHANGE ACT OF 1934," 48 STAT. 881, 15 U.S.C. 78c; 426
(h) ANY OTHER PERSON THAT THE DIVISION DESIGNATES BY RULE, 428
IF THE DIVISION FINDS THAT THE DESIGNATION IS NECESSARY OR 429
11
APPROPRIATE IN THE PUBLIC INTEREST OR FOR THE PROTECTION OF 430
INVESTORS OR CLIENTS AND CONSISTENT WITH THE PURPOSES FAIRLY 431
INTENDED BY THE POLICY AND PROVISIONS OF THIS CHAPTER.
(Y)(1) "Subject company" means an issuer that satisfies 433
both of the following: 434
(a) Its principal place of business or its principal 436
executive office is located in this state, or it owns or controls 437
assets located within this state that have a fair market value of 438
at least one million dollars. 439
(b) More than ten per cent of its beneficial or record 441
equity security holders are resident in this state, more than ten 442
per cent of its equity securities are owned beneficially or of 443
record by residents in this state, or more than one thousand of 444
its beneficial or record equity security holders are resident in 445
this state. 446
(2) The division of securities may adopt rules to 448
establish more specific application of the provisions set forth 449
in division (Y)(1) of this section. Notwithstanding the 450
provisions set forth in division (Y)(1) of this section and any 451
rules adopted under this division, the division, by rule or in an 452
adjudicatory proceeding, may make a determination that an issuer 453
does not constitute a "subject company" under division (Y)(1) of 454
this section if appropriate review of control bids involving the 455
issuer is to be made by any regulatory authority of another 456
jurisdiction. 457
(Z) "Beneficial owner" includes any person who directly or 459
indirectly through any contract, arrangement, understanding, or 460
relationship has or shares, or otherwise has or shares, the power 461
to vote or direct the voting of a security or the power to 462
dispose of, or direct the disposition of, the security. 463
"Beneficial ownership" includes the right, exercisable within 464
sixty days, to acquire any security through the exercise of any 465
option, warrant, or right, the conversion of any convertible 466
security, or otherwise. Any security subject to any such option, 467
12
warrant, right, or conversion privilege held by any person shall 468
be deemed to be outstanding for the purpose of computing the 469
percentage of outstanding securities of the class owned by that 470
person, but shall not be deemed to be outstanding for the purpose 471
of computing the percentage of the class owned by any other 472
person. A person shall be deemed the beneficial owner of any 473
security beneficially owned by any relative or spouse or relative 474
of the spouse residing in the home of that person, any trust or 475
estate in which that person owns ten per cent or more of the 476
total beneficial interest or serves as trustee or executor, any 477
corporation or entity in which that person owns ten per cent or 478
more of the equity, and any affiliate or associate of that 479
person. 480
(AA) "Offeree" means the beneficial or record owner of any 482
security that an offeror acquires or offers to acquire in 483
connection with a control bid. 484
(BB) "Equity security" means any share or similar 486
security, or any security convertible into any such security, or 487
carrying any warrant or right to subscribe to or purchase any 488
such security, or any such warrant or right, or any other 489
security that, for the protection of security holders, is treated 490
as an equity security pursuant to rules of the division of 491
securities. 492
(CC) "Investment company" has the same meaning as in 494
section 3(A) of the "Investment Company Act of 1940," 54 Stat. 495
789, 15 U.S.C. 80a-1 to 80a-52. 496
(DD) "Penny stock" has the same meaning as in section 499
3(A)(51) of the "Securities Exchange Act of 1934," 48 Stat. 881, 500
15 U.S.C. 78a-78jj, and the rules, regulations, and orders issued 501
pursuant to that section. 502
(EE) "Going concern transaction" has the same meaning 505
given that term under the rules or regulations on the securities 506
and exchange commission issued pursuant to section 13(c) of the 507
"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C.
13
78a-78jj. 508
(FF) "Person acting on behalf of an issuer" means an 511
officer, director, or employee of an issuer.
(GG) "Blank check company," "roll-up transaction," 514
"executive officer of an entity," and "direct participation
program" have the same meanings given those terms by rule or 515
regulation of the securities and exchange commission. 516
(HH) "Forward-looking statement" means any of the 518
following:
(1) A statement containing a projection of revenues, 520
income including income loss, earnings per share including 521
earnings loss per share, capital expenditures, dividends, capital 522
structure, or other financial items;
(2) A statement of the plans and objectives of the 524
management of the issuer for future operations, including plans 525
or objectives relating to the products or services of the issuer; 526
(3) A statement of future economic performance, including 528
any statement of that nature contained in a discussion and 529
analysis of financial conditions by the management or in the 530
results of operations included pursuant to the rules and 531
regulations of the securities and exchange commission;
(4) Any disclosed statement of the assumptions underlying 533
or relating to a statement described in division (B)(1), (2), or 535
(3) of section 1707.437 of the Revised Code; 536
(5) Any report issued by an outside reviewer retained by 538
an issuer to the extent that the report relates to a 539
forward-looking statement made by the issuer; 540
(6) A statement containing a projection or estimate of any 542
other items that may be specified by rule or regulation of the 543
securities and exchange commission. 544
(II)(1) "INVESTMENT ADVISER REPRESENTATIVE" MEANS A 546
SUPERVISED PERSON OF AN INVESTMENT ADVISER, PROVIDED THAT MORE 547
THAN TEN PER CENT OF THE SUPERVISED PERSON'S CLIENTS ARE NATURAL 548
PERSONS OTHER THAN EXCEPTED PERSONS DEFINED IN DIVISION (KK) OF 549
14
THIS SECTION. "INVESTMENT ADVISER REPRESENTATIVE" DOES NOT MEAN 550
ANY OF THE FOLLOWING:
(a) A SUPERVISED PERSON THAT DOES NOT ON A REGULAR BASIS 552
SOLICIT, MEET WITH, OR OTHERWISE COMMUNICATE WITH CLIENTS OF THE 553
INVESTMENT ADVISER;
(b) A SUPERVISED PERSON THAT PROVIDES ONLY INVESTMENT 555
ADVISORY SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS SECTION BY 556
MEANS OF WRITTEN MATERIALS OR ORAL STATEMENTS THAT DO NOT PURPORT 557
TO MEET THE OBJECTIVES OR NEEDS OF SPECIFIC INDIVIDUALS OR 558
ACCOUNTS;
(c) ANY OTHER PERSON THAT THE DIVISION DESIGNATES BY RULE, 561
IF THE DIVISION FINDS THAT THE DESIGNATION IS NECESSARY OR 562
APPROPRIATE IN THE PUBLIC INTEREST OR FOR THE PROTECTION OF
INVESTORS OR CLIENTS AND IS CONSISTENT WITH THE PROVISIONS FAIRLY 564
INTENDED BY THE POLICY AND PROVISIONS OF THIS CHAPTER. 565
(2) CLIENTS WHO ARE NOT RESIDENTS OF THE UNITED STATES 567
NEED NOT BE INCLUDED IN THE CALCULATION OF THE PERCENTAGE OF 568
REQUIRED CLIENTS UNDER DIVISION (II)(1) OF THIS SECTION. 569
(JJ) "SUPERVISED PERSON" MEANS ANY OF THE FOLLOWING: 571
(1) A PARTNER, OFFICER, OR DIRECTOR OF AN INVESTMENT 573
ADVISER, OR OTHER PERSON OCCUPYING A SIMILAR STATUS OR PERFORMING 574
SIMILAR FUNCTIONS WITH RESPECT TO AN INVESTMENT ADVISER; 575
(2) AN EMPLOYEE OF AN INVESTMENT ADVISER; 577
(3) A PERSON WHO PROVIDES INVESTMENT ADVISORY SERVICES 579
DESCRIBED IN DIVISION (X)(1) OF THIS SECTION ON BEHALF OF THE 580
INVESTMENT ADVISER AND IS SUBJECT TO THE SUPERVISION AND CONTROL 581
OF THE INVESTMENT ADVISER.
(KK) "EXCEPTED PERSON" MEANS A NATURAL PERSON TO WHOM 583
EITHER OF THE FOLLOWING APPLIES: 584
(1) IMMEDIATELY AFTER ENTERING INTO THE INVESTMENT 586
ADVISORY CONTRACT WITH THE INVESTMENT ADVISER, THE PERSON HAS AT 587
LEAST FIVE HUNDRED THOUSAND DOLLARS UNDER MANAGEMENT WITH THE 588
INVESTMENT ADVISER.
(2) THE INVESTMENT ADVISER REASONABLY BELIEVES, 590
15
IMMEDIATELY PRIOR TO ENTERING INTO AN ADVISORY CONTRACT WITH THE 591
PERSON, THE PERSON HAS A NET WORTH, TOGETHER WITH ASSETS HELD 592
JOINTLY WITH A SPOUSE, OF MORE THAN ONE MILLION DOLLARS. 593
Sec. 1707.03. (A) As used in this section, "exempt" means 602
that, except in the case of securities the right to buy, sell, or 603
deal in which has been suspended or revoked under an existing 604
order of the division of securities under section 1707.13 of the 605
Revised Code or under a cease and desist order under division (H) 606
of section 1707.23 of the Revised Code, transactions in 607
securities may be carried on and completed without compliance 608
with sections 1707.08 to 1707.11 of the Revised Code. 609
(B) A sale of securities made by or on behalf of a bona 611
fide owner, neither the issuer nor a dealer, is exempt if the 612
sale is made in good faith and not for the purpose of avoiding 613
this chapter and is not made in the course of repeated and 614
successive transactions of a similar character. Any sale of 615
securities over a stock exchange that is lawfully conducted in 616
this state and regularly open for public patronage and that has 617
been established and operated for a period of at least five years 618
prior to the sale at a commission not exceeding the commission 619
regularly charged in such transactions also is exempt. 620
(C) The sale of securities by executors, administrators, 622
receivers, trustees, or anyone acting in a fiduciary capacity is 623
exempt, where such relationship was created by law, by a will, or 624
by judicial authority, and where such sales are subject to 625
approval by, or are made in pursuance to authority granted by, 626
any court of competent jurisdiction or are otherwise authorized 627
and lawfully made by such fiduciary. 628
(D) A sale to the issuer, to a dealer, or to an 630
institutional investor is exempt. 631
(E) A sale in good faith, and not for the purpose of 633
avoiding this chapter, by a pledgee of a security pledged for a 634
bona fide debt is exempt. 635
(F) The sale at public auction by a corporation of shares 637
16
of its stock because of delinquency in payment for the shares is 638
exempt. 639
(G)(1) The giving of any conversion right with, or on 641
account of the purchase of, any security that is exempt, is the 642
subject matter of an exempt transaction, has been registered by 643
description, by coordination, or by qualification, or is the 644
subject matter of a transaction that has been registered by 645
description is exempt. 646
(2) The giving of any subscription right, warrant, or 648
option to purchase a security or right to receive a security upon 649
exchange, which security is exempt at the time the right, 650
warrant, or option to purchase or right to receive is given, is 651
the subject matter of an exempt transaction, is registered by 652
description, by coordination, or by qualification, or is the 653
subject matter of a transaction that has been registered by 654
description is exempt. 655
(3) The giving of any subscription right or any warrant or 657
option to purchase a security, which right, warrant, or option 658
expressly provides that it shall not be exercisable except for a 659
security that at the time of the exercise is exempt, is the 660
subject matter of an exempt transaction, is registered by 661
description, by coordination, or by qualification, or at such 662
time is the subject matter of a transaction that has been 663
registered by description is exempt. 664
(H) The sale of notes, bonds, or other evidences of 666
indebtedness that are secured by a mortgage lien upon real 667
estate, leasehold estate other than oil, gas, or mining 668
leasehold, or tangible personal property, or which evidence of 669
indebtedness is due under or based upon a conditional-sale 670
contract, if all such notes, bonds, or other evidences of 671
indebtedness are sold to a single purchaser at a single sale, is 672
exempt. 673
(I) The delivery of securities by the issuer on the 675
exercise of conversion rights, the sale of securities by the 676
17
issuer on exercise of subscription rights or of warrants or 677
options to purchase securities, the delivery of voting-trust 678
certificates for securities deposited under a voting-trust 679
agreement, the delivery of deposited securities on surrender of 680
voting-trust certificates, and the delivery of final certificates 681
on surrender of interim certificates are exempt; but the sale of 682
securities on exercise of subscription rights, warrants, or 683
options is not an exempt transaction unless those rights, 684
warrants, or options when granted were the subject matter of an 685
exempt transaction under division (G) of this section or were 686
registered by description, by coordination, or by qualification. 687
(J) The sale of securities by a bank, savings and loan 689
association, savings bank, or credit union organized under the 690
laws of the United States or of this state is exempt if at a 691
profit to that seller of not more than two per cent of the total 692
sale price of the securities. 693
(K)(1) The distribution by a corporation of its securities 695
to its security holders as a share dividend or other distribution 696
out of earnings or surplus is exempt. 697
(2) The exchange or distribution by the issuer of any of 699
its securities or of the securities of any of the issuer's wholly 700
owned subsidiaries exclusively with or to its existing security 701
holders, if no commission or other remuneration is given directly 702
or indirectly for soliciting the exchange, is exempt. 703
(3) The sale of preorganization subscriptions for shares 705
of stock of a corporation prior to the incorporation of the 706
corporation is exempt, when the sale is evidenced by a written 707
agreement, no remuneration is given, or promised, directly or 708
indirectly, for or in connection with the sale of those 709
securities, and no consideration is received, directly or 710
indirectly, by any person from the purchasers of those securities 711
until registration by qualification, by coordination, or by 712
description of those securities is made under this chapter. 713
(L) The issuance of securities in exchange for one or more 715
18
bona fide outstanding securities, claims, or property interests, 716
not including securities sold for a consideration payable in 717
whole or in part in cash, under a plan of reorganization, 718
recapitalization, or refinancing approved by a court pursuant to 719
the Bankruptcy Act of the United States or to any other federal 720
act giving any federal court jurisdiction over such plan of 721
reorganization, or under a plan of reorganization approved by a 722
court of competent jurisdiction of any state of the United States 723
is exempt. As used in this division, "reorganization," 724
"recapitalization," and "refinancing" have the same meanings as 725
in section 1707.04 of the Revised Code. 726
(M) A sale by a licensed dealer, acting either as 728
principal or as agent, of securities issued and outstanding 729
before the sale is exempt, unless the sale is of one or more of 730
the following: 731
(1) Securities constituting the whole or a part of an 733
unsold allotment to or subscription by a dealer as an underwriter 734
or other participant in the distribution of those securities by 735
the issuer, whether that distribution is direct or through an 736
underwriter, provided that, if the issuer is such by reason of 737
owning one-fourth or more of those securities, such THE dealer 738
has knowledge of such THIS fact or reasonable cause to believe 740
such THIS fact; 741
(2) Any class of shares issued by a corporation when the 743
number of beneficial owners of that class is less than 744
twenty-five, with the record owner of securities being deemed the 745
beneficial owner for this purpose, in the absence of actual 746
knowledge to the contrary; 747
(3) Securities that within one year were purchased outside 749
this state or within one year were transported into this state, 750
if the dealer has knowledge or reasonable cause to believe, 751
before the sale of those securities, that within one year they 752
were purchased outside this state or within one year were 753
transported into this state; but such a sale of those securities 754
19
is exempt if any of the following occurs: 755
(a) A recognized securities manual contains the names of 757
the issuer's officers and directors, a balance sheet of the 758
issuer as of a date within eighteen months, and a profit and loss 759
statement for either the fiscal year preceding that date or the 760
most recent year of operations; 761
(b) Those securities, or securities of the same class, 763
were registered within one year on the basis provided in section 764
1707.05 of the Revised Code, or within one year were qualified 765
under section 1707.09 or 1707.091 of the Revised Code, and that 766
registration or qualification is in full force and effect; 767
(c) Those securities at the time of sale could be 769
registered on the basis provided in section 1707.05 of the 770
Revised Code; 771
(d) The sale is made by a licensed dealer on behalf of the 773
bona fide owner of those securities in accordance with division 774
(B) of this section; 775
(e) Those securities were transported into Ohio in a 777
transaction of the type described in division (L), (K), or (I) of 778
this section, or in a transaction registered under division (A) 779
of section 1707.06 of the Revised Code. 780
(N) For the purpose of this division and division (M) of 782
this section, "underwriter" means any person who has purchased 783
from an issuer with a view to, or sells for an issuer in 784
connection with, the distribution of any security, or who 785
participates directly or indirectly in any such undertaking or in 786
the underwriting thereof, but "underwriter" does not include a 787
person whose interest is limited to a discount, commission, or 788
profit from the underwriter or from a dealer that is not in 789
excess of the customary distributors' or sellers' discount, 790
commission, or profit; and "issuer" includes any person or any 791
group of persons acting in concert in the sale of such 792
securities, owning beneficially one-fourth or more of the 793
outstanding securities of the class involved in the transactions 794
20
in question, with the record owner of securities being deemed the 795
beneficial owner for this purpose, in the absence of actual 796
knowledge to the contrary. 797
(O)(1) The sale of any equity security is exempt if all 799
the following conditions are satisfied: 800
(a) The sale is by the issuer of the security. 802
(b) The total number of purchasers in this state of all 804
securities issued or sold by the issuer in reliance upon this 805
exemption during the period of one year ending with the date of 806
the sale does not exceed ten. A sale of securities registered 807
under this chapter or sold pursuant to an exemption under this 808
chapter other than this exemption shall not be integrated with a 809
sale pursuant to this exemption in computing the number of 810
purchasers under this exemption. 811
(c) No advertisement, article, notice, or other 813
communication published in any newspaper, magazine, or similar 814
medium or broadcast over television or radio is used in 815
connection with the sale, but the use of an offering circular or 816
other communication delivered by the issuer to selected 817
individuals does not destroy this exemption. 818
(d) The issuer reasonably believes after reasonable 820
investigation that the purchaser is purchasing for investment. 821
(e) The aggregate commission, discount, and other 823
remuneration, excluding legal, accounting, and printing fees, 824
paid or given directly or indirectly does not exceed ten per cent 825
of the initial offering price. 826
(f) Any such commission, discount, or other remuneration 828
for sales in this state is paid or given only to dealers or 829
salesmen SALESPERSONS registered pursuant to this chapter. 830
(2) For the purposes of division (O)(1) of this section, 832
each of the following is deemed to be a single purchaser of a 833
security: husband and wife, a child and its parent or guardian 834
when the parent or guardian holds the security for the benefit of 835
the child, a corporation, a limited liability company, a 836
21
partnership, an association or other unincorporated entity, a 837
joint-stock company, or a trust, but only if the corporation, 838
limited liability company, partnership, association, entity, 839
joint-stock company, or trust was not formed for the purpose of 840
purchasing the security. 841
(3) As used in division (O)(1) of this section, "equity 843
security" means any stock or similar security of a corporation or 844
any membership interest in a limited liability company; or any 845
security convertible, with or without consideration, into such a 846
security, or carrying any warrant or right to subscribe to or 847
purchase such a security; or any such warrant or right; or any 848
other security that the division considers necessary or 849
appropriate, by such rules as it may prescribe in the public 850
interest or for the protection of investors, to treat as an 851
equity security. 852
(P) The sale of securities representing interests in or 854
under profit-sharing or participation agreements relating to oil 855
or gas wells located in this state, or representing interests in 856
or under oil or gas leases of real estate situated in this state, 857
is exempt if the securities are issued by an individual, 858
partnership, limited partnership, partnership association, 859
syndicate, pool, trust or trust fund, or other unincorporated 860
association and if each of the following conditions is complied 861
with: 862
(1) The beneficial owners of the securities do not, and 864
will not after the sale, exceed five natural persons; 865
(2) The securities constitute or represent interests in 867
not more than one oil or gas well; 868
(3) A certificate or other instrument in writing is 870
furnished to each purchaser of the securities at or before the 871
consummation of the sale, disclosing the maximum commission, 872
compensation for services, cost of lease, and expenses with 873
respect to the sale of such interests and with respect to the 874
promotion, development, and management of the oil or gas well, 875
22
and the total of that commission, compensation, costs, and 876
expenses does not exceed twenty-five per cent of the aggregate 877
interests in the oil or gas well, exclusive of any landowner's 878
rental or royalty; 879
(4) The sale is made in good faith and not for the purpose 881
of avoiding this chapter. 882
(Q) The sale of any security is exempt if all of the 884
following conditions are satisfied: 885
(1) The provisions of section 5 of the Securities Act of 887
1933 do not apply to the sale by reason of an exemption under 888
either section 4 (2) of that act or any rule of the securities 889
and exchange commission made to carry out section 4 (2) of that 890
act in effect at the time of the sale. 891
(2) The aggregate commission, discount, and other 893
remuneration, excluding legal, accounting, and printing fees, 894
paid or given directly or indirectly does not exceed ten per cent 895
of the initial offering price. 896
(3) Any such commission, discount, or other remuneration 898
for sales in this state is paid or given only to dealers or 899
salesmen SALESPERSONS registered under this chapter. 900
(4) The issuer or dealer files with the division of 902
securities, not later than sixty days after the sale, a report 903
setting forth the name and address of the issuer, the total 904
amount of the securities sold under this division, the number of 905
persons to whom the securities were sold, the price at which the 906
securities were sold, and the commissions or discounts paid or 907
given. 908
(5) The issuer pays a filing fee of one hundred dollars 910
for the first filing and fifty dollars for every subsequent 911
filing during each calendar year. 912
(R) A sale of a money order, travelers' check, or other 914
instrument for the transmission of money by a person qualified to 915
engage in such business under section 1109.60 or Chapter 1315. of 917
the Revised Code is exempt. 918
23
(S) A sale by a licensed dealer of securities that are in 920
the process of registration under the "Securities Act of 1933," 921
48 Stat. 74, 15 U.S.C. 77a, as amended, unless exempt under that 922
act, and that are in the process of registration, if registration 923
is required under this chapter, is exempt, provided that no sale 924
of that nature shall be consummated prior to the registration by 925
description or qualification of the securities. 926
(T) The execution by a licensed dealer of orders for the 928
purchase of any security is exempt, provided that the dealer acts 929
only as agent for the purchaser, has made no solicitation of the 930
order to purchase the security, has no interest in the 931
distribution of the security, and delivers to the purchaser 932
written confirmation of the transaction that clearly itemizes his 933
commission. "Solicitation," as used in this division, means 934
solicitation of the order for the specific security purchased and 935
does not include general solicitations or advertisements of any 936
kind. 937
(U) The sale insofar as the security holders of a person 939
are concerned, where, pursuant to statutory provisions of the 940
jurisdiction under which that person is organized or pursuant to 941
provisions contained in its articles of incorporation, 942
certificate of incorporation, partnership agreement, declaration 943
of trust, trust indenture, or similar controlling instrument, 944
there is submitted to the security holders, for their vote or 945
consent, (1) a plan or agreement for a reclassification of 946
securities of that person that involves the substitution of a 947
security of that person for another security of that person, (2) 948
a plan or agreement of merger or consolidation or a similar plan 949
or agreement of acquisition in which the securities of that 950
person held by the security holders will become or be exchanged 951
for securities of any other person, or (3) a plan or agreement 952
for a combination as defined in division (Q) of section 1701.01 953
of the Revised Code or a similar plan or agreement for the 954
transfer of assets of that person to another person in 955
24
consideration of the issuance of securities of any person, is 956
exempt if, with respect to any of the foregoing transactions, 957
either of the following conditions is satisfied: 958
(a) The securities to be issued to the security holders 960
are effectively registered under sections 6 to 8 of the 961
Securities Act of 1933 and offered and sold in compliance with 962
section 5 of that act; 963
(b) At least twenty days prior to the date on which a 965
meeting of the security holders is held or the earliest date on 966
which corporate action may be taken when no meeting is held, 967
there is submitted to the security holders, by that person, or by 968
the person whose securities are to be issued in the transaction, 969
information substantially equivalent to the information that 970
would be required to be included in a proxy statement or 971
information statement prepared by or on behalf of the management 972
of an issuer subject to section 14(a) or 14(c) of the Securities 974
Exchange Act of 1934.
(V) The sale of any security is exempt if the division by 976
rule finds that registration is not necessary or appropriate in 977
the public interest or for the protection of investors. 978
(W) Any offer or sale of securities made in reliance on 980
the exemptions provided by Rule 505 of Regulation D made pursuant 981
to the Securities Act of 1933 and the conditions and definitions 982
provided by Rules 501 to 503 thereunder is exempt if the offer or 983
sale satisfies all of the following conditions: 984
(1) No commission or other remuneration is given, directly 986
or indirectly, to any person for soliciting or selling to any 987
person in this state in reliance on the exemption under this 988
division, except to dealers licensed in this state. 989
(2)(a) Unless the cause for disqualification is waived 991
under division (W)(2)(b) of this section, no exemption under this 992
section is available for the securities of an issuer unless the 993
issuer did not know and in the exercise of reasonable care could 994
not have known that any of the following applies to any of the 995
25
persons described in Rule 252(c) 262(a) to (f)(c) of Regulation A 997
under the Securities Act of 1933: 998
(i) The person has filed an application for registration 1,000
or qualification that is the subject of an effective order 1,001
entered against the issuer, its officers, directors, general 1,002
partners, controlling persons or affiliates thereof, pursuant to 1,003
the law of any state within five years before the filing of a 1,004
notice required under division (W)(3) of this section denying 1,005
effectiveness to, or suspending or revoking the effectiveness of, 1,006
the registration statement. 1,007
(ii) The person has been convicted of any offense in 1,009
connection with the offer, sale, or purchase of any security or 1,010
franchise, or any felony involving fraud or deceit, including, 1,011
but not limited to, forgery, embezzlement, fraud, theft, or 1,012
conspiracy to defraud. 1,013
(iii) The person is subject to an effective administrative 1,015
order or judgment that was entered by a state securities 1,016
administrator within five years before the filing of a notice 1,017
required under division (W)(3) of this section and that 1,018
prohibits, denies, or revokes the use of any exemption from 1,019
securities registration, prohibits the transaction of business by 1,020
the person as a dealer, or is based on fraud, deceit, an untrue 1,021
statement of a material fact, or an omission to state a material 1,022
fact. 1,023
(iv) The person is subject to any order, judgment, or 1,025
decree of any court entered within five years before the filing 1,026
of a notice required under division (W)(3) of this section, 1,027
temporarily, preliminarily, or permanently restraining or 1,028
enjoining the person from engaging in or continuing any conduct 1,029
or practice in connection with the offer, sale, or purchase of 1,030
any security, or the making of any false filing with any state. 1,031
(b)(i) Any disqualification under this division involving 1,033
a dealer may be waived if the dealer is or continues to be 1,034
licensed in this state as a dealer after notifying the 1,035
26
commissioner of the act or event causing disqualification. 1,036
(ii) The commissioner may waive any disqualification under 1,038
this paragraph upon a showing of good cause that it is not 1,039
necessary under the circumstances that use of the exemption be 1,040
denied. 1,041
(3) Not later than five business days before the earlier 1,043
of the date on which the first use of an offering document or the 1,044
first sale is made in this state in reliance on the exemption 1,045
under this division, there is filed with the commissioner a 1,046
notice comprised of offering material in compliance with the 1,047
requirements of Rule 502 of Regulation D under the Securities Act 1,048
of 1933 and a fee of one hundred dollars. Material amendments to 1,049
the offering document shall be filed with the commissioner not 1,050
later than the date of their first use in this state. 1,051
(4) The aggregate commission, discount, and other 1,053
remuneration paid or given, directly or indirectly, does not 1,054
exceed twelve per cent of the initial offering price, excluding 1,055
legal, accounting, and printing fees. 1,056
(5) The commissioner, by rule, may increase the number of 1,058
purchasers or waive any other conditions of the exemption under 1,059
this division for a particular offering. The commissioner may 1,060
require the filing of advertising used in connection with offers 1,061
or sales in reliance on the exemption. 1,062
(X) ANY OFFER OR SALE OF SECURITIES MADE IN RELIANCE ON 1,065
THE EXEMPTION PROVIDED IN RULE 506 OF REGULATION D UNDER THE 1,069
SECURITIES ACT OF 1933, AND IN ACCORDANCE WITH RULES 501 TO 503 1,071
OF REGULATION D UNDER THE SECURITIES ACT OF 1933, IS EXEMPT 1,075
PROVIDED THAT ALL OF THE FOLLOWING APPLY: 1,076
(1) THE ISSUER MAKES A NOTICE FILING WITH THE DIVISION ON 1,078
FORM D OF THE SECURITIES AND EXCHANGE COMMISSION WITHIN FIFTEEN 1,080
DAYS OF THE FIRST SALE IN THIS STATE; 1,081
(2) ANY COMMISSION, DISCOUNT, OR OTHER REMUNERATION FOR 1,083
SALES OF SECURITIES IN THIS STATE IS PAID OR GIVEN ONLY TO 1,084
DEALERS OR SALESPERSONS LICENSED UNDER THIS CHAPTER; 1,085
27
(3) THE ISSUER PAYS A FILING FEE OF ONE HUNDRED DOLLARS TO 1,087
THE DIVISION; HOWEVER, NO FILING FEE SHALL BE REQUIRED TO FILE 1,088
AMENDMENTS TO THE FORM D OF THE SECURITIES AND EXCHANGE 1,090
COMMISSION.
(Y) THE OFFER OR SALE OF SECURITIES IS EXEMPT PROVIDED THAT 1,093
ALL OF THE FOLLOWING APPLY:
(1) THE SALE OF SECURITIES IS MADE ONLY TO PERSONS WHO ARE, 1,096
OR WHO THE ISSUER REASONABLY BELIEVES ARE, ACCREDITED INVESTORS 1,097
AS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT 1,101
OF 1933.
(2) THE ISSUER REASONABLY BELIEVES THAT ALL PURCHASERS ARE 1,103
PURCHASING FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN 1,104
CONNECTION WITH A DISTRIBUTION OF THE SECURITY. ANY RESALE OF A 1,105
SECURITY SOLD IN RELIANCE ON THIS EXEMPTION WITHIN TWELVE MONTHS 1,106
OF SALE SHALL BE PRESUMED TO BE WITH A VIEW TO DISTRIBUTION AND 1,107
NOT FOR INVESTMENT, EXCEPT A RESALE TO WHICH ANY OF THE FOLLOWING 1,109
APPLIES:
(a) THE RESALE IS PURSUANT TO A REGISTRATION STATEMENT 1,112
EFFECTIVE UNDER SECTION 1707.09 OR 1707.091 OF THE REVISED CODE. 1,114
(b) THE RESALE IS TO AN ACCREDITED INVESTOR, AS DEFINED IN 1,117
RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933. 1,121
(c) THE RESALE IS TO AN INSTITUTIONAL INVESTOR PURSUANT TO 1,124
THE EXEMPTIONS UNDER DIVISION (B) OR (D) OF THIS SECTION. 1,126
(3) THE EXEMPTION UNDER THIS DIVISION IS NOT AVAILABLE TO 1,128
AN ISSUER THAT IS IN THE DEVELOPMENT STAGE AND THAT EITHER HAS NO 1,130
SPECIFIC BUSINESS PLAN OR PURPOSE OR HAS INDICATED THAT ITS
BUSINESS PLAN IS TO ENGAGE IN A MERGER OR ACQUISITION WITH AN 1,131
UNIDENTIFIED COMPANY OR COMPANIES, OR OTHER ENTITIES OR PERSONS. 1,133
(4) THE EXEMPTION UNDER THIS DIVISION IS NOT AVAILABLE TO 1,135
AN ISSUER, IF THE ISSUER, ANY OF THE ISSUER'S PREDECESSORS, ANY 1,136
AFFILIATED ISSUER, ANY OF THE ISSUER'S DIRECTORS, OFFICERS, 1,137
GENERAL PARTNERS, OR BENEFICIAL OWNERS OF TEN PER CENT OR MORE OF 1,139
ANY CLASS OF ITS EQUITY SECURITIES, ANY OF THE ISSUER'S PROMOTERS 1,140
PRESENTLY CONNECTED WITH THE ISSUER IN ANY CAPACITY, ANY 1,141
28
UNDERWRITER OF THE SECURITIES TO BE OFFERED, OR ANY PARTNER,
DIRECTOR, OR OFFICER OF SUCH UNDERWRITER: 1,142
(a) WITHIN THE PAST FIVE YEARS, HAS FILED A REGISTRATION 1,145
STATEMENT THAT IS THE SUBJECT OF A CURRENTLY EFFECTIVE 1,146
REGISTRATION STOP ORDER ENTERED BY ANY STATE SECURITIES 1,147
ADMINISTRATOR OR THE SECURITIES AND EXCHANGE COMMISSION; 1,148
(b) WITHIN THE PAST FIVE YEARS, HAS BEEN CONVICTED OF ANY 1,151
CRIMINAL OFFENSE IN CONNECTION WITH THE OFFER, PURCHASE, OR SALE 1,152
OF ANY SECURITY, OR INVOLVING FRAUD OR DECEIT; 1,153
(c) IS CURRENTLY SUBJECT TO ANY STATE OR FEDERAL 1,156
ADMINISTRATIVE ENFORCEMENT ORDER OR JUDGMENT, ENTERED WITHIN THE 1,157
PAST FIVE YEARS, FINDING FRAUD OR DECEIT IN CONNECTION WITH THE 1,158
PURCHASE OR SALE OF ANY SECURITY;
(d) IS CURRENTLY SUBJECT TO ANY ORDER, JUDGMENT, OR DECREE 1,161
OF ANY COURT OF COMPETENT JURISDICTION, ENTERED WITHIN THE PAST 1,162
FIVE YEARS, THAT TEMPORARILY, PRELIMINARILY, OR PERMANENTLY 1,163
RESTRAINS OR ENJOINS THE PARTY FROM ENGAGING IN OR CONTINUING TO 1,164
ENGAGE IN ANY CONDUCT OR PRACTICE INVOLVING FRAUD OR DECEIT IN 1,165
CONNECTION WITH THE PURCHASE OR SALE OF ANY SECURITY. 1,166
(5) DIVISION (Y)(4) OF THIS SECTION IS INAPPLICABLE IF ANY 1,169
OF THE FOLLOWING APPLIES: 1,170
(a) THE PARTY SUBJECT TO THE DISQUALIFICATION IS LICENSED 1,173
OR REGISTERED TO CONDUCT SECURITIES BUSINESS IN THE STATE IN 1,174
WHICH THE ORDER, JUDGMENT, OR DECREE CREATING THE 1,175
DISQUALIFICATION WAS ENTERED AGAINST THE PARTY DESCRIBED IN 1,176
DIVISION (Y)(4) OF THIS SECTION. 1,177
(b) BEFORE THE FIRST OFFER IS MADE UNDER THIS EXEMPTION, 1,181
THE STATE SECURITIES ADMINISTRATOR, OR THE COURT OR REGULATORY 1,182
AUTHORITY THAT ENTERED THE ORDER, JUDGMENT, OR DECREE, WAIVES THE 1,183
DISQUALIFICATION.
(c) THE ISSUER DID NOT KNOW AND, IN THE EXERCISE OF 1,186
REASONABLE CARE BASED ON REASONABLE INVESTIGATION, COULD NOT HAVE 1,187
KNOWN THAT A DISQUALIFICATION FROM THE EXEMPTION EXISTED UNDER 1,188
DIVISION (Y)(4) OF THIS SECTION. 1,189
29
(6) A GENERAL ANNOUNCEMENT OF THE PROPOSED OFFERING MAY BE 1,191
MADE BY ANY MEANS; HOWEVER, THE GENERAL ANNOUNCEMENT SHALL 1,192
INCLUDE ONLY THE FOLLOWING INFORMATION, UNLESS ADDITIONAL 1,193
INFORMATION IS SPECIFICALLY PERMITTED BY THE DIVISION BY RULE: 1,195
(a) THE NAME, ADDRESS, AND TELEPHONE NUMBER OF THE ISSUER 1,198
OF THE SECURITIES;
(b) THE NAME, A BRIEF DESCRIPTION, AND PRICE OF ANY 1,201
SECURITY TO BE ISSUED;
(c) A BRIEF DESCRIPTION OF THE BUSINESS OF THE ISSUER; 1,204
(d) THE TYPE, NUMBER, AND AGGREGATE AMOUNT OF SECURITIES 1,207
BEING OFFERED;
(e) THE NAME, ADDRESS, AND TELEPHONE NUMBER OF THE PERSON 1,210
TO CONTACT FOR ADDITIONAL INFORMATION; AND
(f) A STATEMENT INDICATING ALL OF THE FOLLOWING: 1,213
(i) SALES WILL ONLY BE MADE TO ACCREDITED INVESTORS AS 1,216
DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1,221
1933;
(ii) NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED OR 1,224
WILL BE ACCEPTED BY WAY OF THIS GENERAL ANNOUNCEMENT; 1,225
(iii) THE SECURITIES HAVE NOT BEEN REGISTERED WITH OR 1,228
APPROVED BY ANY STATE SECURITIES ADMINISTRATOR OR THE SECURITIES 1,229
AND EXCHANGE COMMISSION AND ARE BEING OFFERED AND SOLD PURSUANT 1,230
TO AN EXEMPTION FROM REGISTRATION. 1,231
(7) THE ISSUER, IN CONNECTION WITH AN OFFER, MAY PROVIDE 1,233
INFORMATION IN ADDITION TO THE GENERAL ANNOUNCEMENT DESCRIBED IN 1,234
DIVISION (Y)(6) OF THIS SECTION, PROVIDED THAT EITHER OF THE 1,236
FOLLOWING APPLIES:
(a) THE INFORMATION IS DELIVERED THROUGH AN ELECTRONIC 1,239
DATABASE THAT IS RESTRICTED TO PERSONS THAT ARE ACCREDITED 1,240
INVESTORS AS DEFINED IN RULE 501 OF REGULATION D UNDER THE 1,244
SECURITIES ACT OF 1933. 1,245
(b) THE INFORMATION IS DELIVERED AFTER THE ISSUER 1,248
REASONABLY BELIEVES THAT THE PROSPECTIVE PURCHASER IS AN 1,249
ACCREDITED INVESTOR AS DEFINED IN RULE 501 OF REGULATION D UNDER 1,252
30
THE SECURITIES ACT OF 1933. 1,254
(8) NO TELEPHONE SOLICITATION SHALL BE DONE, UNLESS PRIOR 1,256
TO PLACING THE TELEPHONE CALL, THE ISSUER REASONABLY BELIEVES 1,257
THAT THE PROSPECTIVE PURCHASER TO BE SOLICITED IS AN ACCREDITED 1,258
INVESTOR AS DEFINED IN RULE 501 OF REGULATION D UNDER THE 1,262
SECURITIES ACT OF 1933. 1,263
(9) DISSEMINATION OF THE GENERAL ANNOUNCEMENT DESCRIBED IN 1,265
DIVISION (Y)(6) OF THIS SECTION TO PERSONS THAT ARE NOT 1,267
ACCREDITED INVESTORS, AS DEFINED IN RULE 501 OF REGULATION D 1,270
UNDER THE SECURITIES ACT OF 1933, DOES NOT DISQUALIFY THE ISSUER 1,273
FROM CLAIMING AN EXEMPTION UNDER THIS DIVISION. 1,274
(10) THE ISSUER SHALL FILE WITH THE DIVISION NOTICE OF THE 1,276
OFFERING OF SECURITIES WITHIN FIFTEEN DAYS AFTER NOTICE OF THE 1,277
OFFERING IS MADE TO THE PUBLIC OR A GENERAL ANNOUNCEMENT IS MADE 1,278
TO THE PUBLIC IN THIS STATE. THE FILING SHALL BE ON FORMS 1,279
ADOPTED BY THE DIVISION AND SHALL INCLUDE A COPY OF THE GENERAL 1,280
ANNOUNCEMENT, IF ONE IS MADE REGARDING THE PROPOSED OFFERING, AND 1,282
COPIES OF ANY OFFERING MATERIALS, CIRCULARS, OR PROSPECTUSES. A 1,283
FILING FEE OF ONE HUNDRED DOLLARS ALSO SHALL BE INCLUDED. 1,284
Sec. 1707.092. (A) FOR THE PURPOSES OF SELLING SECURITIES 1,287
IN THIS STATE, AN INVESTMENT COMPANY, AS DEFINED BY THE 1,289
INVESTMENT COMPANY ACT OF 1940, THAT IS REGISTERED OR HAS FILED A 1,292
REGISTRATION STATEMENT WITH THE SECURITIES AND EXCHANGE 1,293
COMMISSION UNDER THE INVESTMENT COMPANY ACT OF 1940, SHALL FILE 1,296
THE FOLLOWING WITH THE DIVISION OF SECURITIES: 1,297
(1) FOR THE PURPOSES OF THE SALE OF SECURITIES BY A 1,299
MANAGED INVESTMENT COMPANY, AS DEFINED IN THE INVESTMENT COMPANY 1,302
ACT OF 1940: 1,303
(a) A NOTICE FILING CONSISTING OF EITHER OF THE FOLLOWING: 1,306
(i) A COPY OF THE INVESTMENT COMPANY'S FEDERAL 1,309
REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE 1,310
COMMISSION;
(ii) A FORM U-1 OR FORM NF OF THE NORTH AMERICAN 1,316
SECURITIES ADMINISTRATORS ASSOCIATION AND A COPY OF THE 1,317
31
INVESTMENT COMPANY'S PROSPECTUS AND STATEMENT OF ADDITIONAL 1,318
INFORMATION. 1,319
(b) APPROPRIATE FILING FEES CONSISTING OF BOTH OF THE 1,322
FOLLOWING:
(i) A FLAT FEE OF ONE HUNDRED DOLLARS; 1,325
(ii) A FEE CALCULATED AT ONE-TENTH OF ONE PER CENT OF THE 1,328
AGGREGATE PRICE AT WHICH THE SECURITIES ARE TO BE SOLD TO THE 1,329
PUBLIC IN THIS STATE, WHICH CALCULATED FEE, HOWEVER, SHALL IN NO 1,330
CASE BE LESS THAN ONE HUNDRED OR MORE THAN ONE THOUSAND DOLLARS. 1,331
(c) UPON THE REGISTRATION OF THE SECURITIES WITH THE 1,334
SECURITIES AND EXCHANGE COMMISSION, A MANAGED INVESTMENT COMPANY 1,335
WITH AN INITIAL NOTICE FILING ON FILE WITH THE DIVISION SHALL 1,336
SUBMIT TO THE DIVISION A COPY OF ITS FINAL PROSPECTUS. 1,337
(2) FOR THE PURPOSES OF THE SALE OF SECURITIES BY A 1,339
NON-MANAGED INVESTMENT COMPANY, AS DEFINED IN THE INVESTMENT 1,342
COMPANY ACT OF 1940: 1,343
(a) A NOTICE FILING CONSISTING OF EITHER A COPY OF THE 1,346
INVESTMENT COMPANY'S FEDERAL REGISTRATION STATEMENT AS FILED WITH 1,347
THE SECURITIES AND EXCHANGE COMMISSION OR A FORM U-1 OR FORM NF 1,349
OF THE NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION. 1,352
(b) APPROPRIATE FILING FEES, AS PROVIDED IN DIVISION 1,356
(A)(1)(b) OF THIS SECTION. 1,357
(c) UPON THE EFFECTIVENESS OF THE REGISTRATION OF THE 1,360
SECURITIES WITH THE SECURITIES AND EXCHANGE COMMISSION, A 1,361
NON-MANAGED INVESTMENT COMPANY SHALL SUBMIT TO THE DIVISION A 1,362
COPY OF ITS FINAL PROSPECTUS.
(B)(1) UPON PAYMENT OF THE MAXIMUM FILING FEES AS PROVIDED 1,365
IN DIVISION (A)(1)(b) OR (2)(b) OF THIS SECTION, A MANAGED OR 1,368
NON-MANAGED INVESTMENT COMPANY MAY SELL AN INDEFINITE AMOUNT OF 1,369
SECURITIES IN THIS STATE.
(2) A MANAGED OR NON-MANAGED INVESTMENT COMPANY MAKING A 1,371
NOTICE FILING AS PROVIDED IN THIS SECTION SHALL COMPLY WITH 1,372
SECTION 1707.11 OF THE REVISED CODE. AN INVESTMENT COMPANY THAT 1,375
PREVIOUSLY FILED WITH THE DIVISION A VALID CONSENT TO SERVICE OF 1,376
32
PROCESS PURSUANT TO SECTION 1707.11 OF THE REVISED CODE MAY 1,378
INCORPORATE THAT CONSENT BY REFERENCE. 1,379
(C)(1) FOR OFFERINGS INVOLVING COVERED SECURITIES, AS 1,382
DEFINED IN SECTION 18 OF THE "SECURITIES ACT OF 1933," 15 U.S.C. 1,385
77r, THAT ARE NOT SUBJECT TO SECTION 1707.02, 1707.03, 1707.04, 1,387
1707.05, 1707.06, 1707.07, 1707.08, 1707.09, OR 1707.091 OF THE 1,388
REVISED CODE, OR DIVISION (A) OF THIS SECTION, A NOTICE FILING 1,390
SHALL BE SUBMITTED TO THE DIVISION TOGETHER WITH A CONSENT TO 1,391
SERVICE OF PROCESS PURSUANT TO SECTION 1707.11 OF THE REVISED 1,394
CODE AND A FILING FEE AS PROVIDED IN DIVISION (A)(1)(b) OF THIS 1,397
SECTION.
(2) THE NOTICE FILING DESCRIBED IN DIVISION (C)(1) OF THIS 1,400
SECTION SHALL CONSIST OF ANY DOCUMENT FILED WITH THE SECURITIES 1,401
AND EXCHANGE COMMISSION PURSUANT TO THE SECURITIES ACT OF 1933, 1,404
TOGETHER WITH ANNUAL OR PERIODIC REPORTS OF THE VALUE OF THE 1,405
SECURITIES SOLD OR OFFERED TO BE SOLD TO PERSONS LOCATED IN THIS 1,406
STATE.
(D) A NOTICE FILING SUBMITTED UNDER THIS SECTION SHALL BE 1,409
EFFECTIVE FOR THIRTEEN MONTHS. 1,410
Sec. 1707.093. NOTWITHSTANDING ANY PROVISION OF CHAPTER 1,413
1707. OF THE REVISED CODE, OR ANY RULE ADOPTED BY THE DIVISION OF 1,416
SECURITIES UNDER THAT CHAPTER, REQUIRING A SIGNATURE OR 1,417
VERIFICATION, THE DIVISION MAY PROVIDE BY RULE FOR THE ELECTRONIC 1,418
FILING OR SUBMISSION OF ANY FORM, DOCUMENT, MATERIAL, OR 1,419
INFORMATION THAT IS REQUIRED OR PERMITTED TO BE FILED WITH OR 1,420
SUBMITTED TO THE DIVISION.
Sec. 1707.11. For the purposes of this section, A 1,429
"PERSON," OR an "applicant" for registration or claim of 1,430
exemption, means every issuer. 1,431
Every applicant for registration, or for claim of exemption 1,433
pursuant to division (O) or (Q), (W), (X), OR (Y) of section 1,435
1707.03 of the Revised Code, AND EVERY PERSON SUBMITTING A NOTICE 1,437
FILING PURSUANT TO SECTION 1707.092 OF THE REVISED CODE, for the 1,440
sale of securities pursuant to this chapter, which is an 1,441
33
incorporated applicant OR PERSON not domiciled in this state or
NOT LICENSED UNDER SECTION 1703.03 OF THE REVISED CODE, OR IS an 1,445
unincorporated applicant OR PERSON having the situs of its 1,446
principal place of business outside this state, shall file with 1,448
its application OR NOTICE FILING its irrevocable written consent, 1,450
executed and acknowledged by an individual duly authorized to 1,451
give such THE consent, that actions growing out of the sale of 1,453
such securities or fraud committed by an applicant in this state 1,454
may be commenced against it, in the proper court of any county in 1,455
this state in which a cause of action for such fraud may arise or 1,456
in which the plaintiff in such THE action may reside, by serving 1,458
on the secretary of state any proper process or pleading 1,459
authorized by the laws of this state. Such consent shall 1,460
stipulate that such service of such process or pleading on the 1,462
secretary of state shall be taken in all courts to be as valid 1,463
and binding as if service had been made upon the applicant 1,464
itself.
Service of any process or pleadings may be made on the 1,466
secretary of state by duplicate copies, of which one shall be 1,467
filed in the office of the secretary of state, and the other 1,468
immediately forwarded by the secretary of state by certified mail 1,469
to the principal place of business of such THE applicant, or the 1,470
last known address as shown on the application form filed with 1,472
the division, or if it has a principal office in this state, then 1,473
to such THE principal office; but failure to mail such copy shall 1,474
not invalidate such THE service. 1,476
Sec. 1707.14. (A)(1) No person shall act as a dealer, 1,485
unless the person is licensed as a dealer by the division of 1,486
securities, except in the following cases: 1,487
(a) When the person is transacting business through or 1,489
with a licensed dealer; 1,490
(b) When the securities are the subject matter of one or 1,492
more transactions enumerated in divisions (B) to (L), (O) to (R), 1,493
and (U) to (W)(Y) of section 1707.03, or in section 1707.06 of 1,494
34
the Revised Code, except when a commission, discount, or other 1,496
remuneration is paid or given in consideration with transactions 1,497
enumerated in divisions (O), (Q), and (W), (X), AND (Y) of 1,499
section 1707.03, or in section 1707.06 of the Revised Code; 1,500
(c) When the person is an issuer selling securities issued 1,502
by it or by its subsidiary, if such securities are specified 1,503
under division (G) or (I) of section 1707.02, or under section 1,504
1707.04 of the Revised Code; 1,505
(d) When the person is participating in transactions 1,507
exempt, under section 1707.34 of the Revised Code, from this 1,508
chapter. 1,509
(2) Notwithstanding the exceptions to licensure set forth 1,511
in divisions (A)(1)(a) to (d) of this section, no person other 1,512
than an issuer selling its own securities shall engage in the 1,513
business of selling securities to an institutional investor 1,514
unless such THE person is licensed as a dealer or the division, 1,515
by rule, finds that such licensure is not necessary for the 1,517
protection of investors or in the public interest. 1,518
(B) Each dealer that in any twelve-month or shorter 1,520
period, alone or with any other dealer with which it is 1,521
affiliated, has total revenues of one hundred fifty thousand 1,522
dollars or more derived from the business of buying, selling, or 1,523
otherwise dealing in securities, and that at any time during such 1,524
period has one hundred or more retail securities customers, shall 1,525
be registered as a broker or dealer with the securities and 1,526
exchange commission under the Securities Exchange Act of 1934, 1,527
except the following entities: 1,528
(1) A bank, savings and loan association, savings bank, or 1,530
credit union chartered under the laws of the United States or any 1,531
state thereof; 1,532
(2) A dealer that enters into and is in compliance with an 1,534
undertaking accepted by the division, in which the dealer agrees 1,535
that it will not engage in any transaction involving the buying, 1,536
selling, or otherwise dealing in securities with any natural 1,537
35
person in this state, except for transactions involving either of 1,538
the following: 1,539
(a) Securities of corporations or associations that have 1,541
qualified for treatment as nonprofit organizations pursuant to 1,542
section 501(c)(3) of the "Internal Revenue Code of 1986," 100 1,543
Stat. 2085, 26 U.S.C.A. 501, as amended; 1,544
(b) Securities or transactions that are described in 1,546
divisions (A)(1)(a) to (d) of this section. 1,547
(C) Every dealer that must be registered as a broker or 1,549
dealer with the securities and exchange commission pursuant to 1,550
division (B) of this section shall become so registered no later 1,551
than ninety days after the date on which the dealer meets the 1,552
requirements for such registration. 1,553
(D) The division by rule may exempt any dealer from 1,555
complying with the licensing or registration requirements of this 1,556
section, if the division finds that such licensing or 1,557
registration is not necessary for the protection of investors or 1,558
in the public interest. 1,559
(E) As used in division (B) of this section, "retail 1,561
securities customer" means a person that purchases from or 1,562
through or sells securities to or through a dealer, and that is 1,563
not an officer, a director, a principal, a general partner, or an 1,564
employee of, the dealer. Each of the following is deemed to be a 1,565
single retail securities customer: 1,566
(1) A husband and wife; 1,568
(2) A minor child and his or her THE MINOR CHILD'S parent 1,570
or legal guardian; 1,571
(3) A corporation, a partnership, an association or other 1,573
unincorporated entity, a joint stock company, or a trust. 1,574
Sec. 1707.141. (A) NO PERSON SHALL ACT AS AN INVESTMENT 1,576
ADVISER, UNLESS ONE OF THE FOLLOWING APPLIES: 1,577
(1) THE PERSON IS LICENSED AS AN INVESTMENT ADVISER BY THE 1,579
DIVISION OF SECURITIES; HOWEVER, NOTHING IN THIS SECTION SHALL BE 1,580
CONSTRUED TO PROHIBIT A PERSON FROM BEING LICENSED BY THE 1,581
36
DIVISION AS BOTH AN INVESTMENT ADVISER AND A DEALER OR 1,582
SALESPERSON.
(2) THE PERSON IS REGISTERED UNDER SECTION 203 OF THE 1,584
"INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, AS AN 1,586
INVESTMENT ADVISER AND IS IN COMPLIANCE WITH THE NOTICE FILING 1,587
REQUIREMENTS OF DIVISION (B) OF THIS SECTION. 1,588
(3) THE PERSON HAS NO PLACE OF BUSINESS IN THIS STATE, AND 1,590
THE PERSON'S ONLY CLIENTS IN THIS STATE ARE ANY OF THE FOLLOWING: 1,591
(a) INVESTMENT COMPANIES AS DEFINED IN THE INVESTMENT 1,594
COMPANY ACT OF 1940;
(b) OTHER INVESTMENT ADVISERS; 1,596
(c) LICENSED DEALERS; 1,598
(d) BANKS; 1,600
(e) INSURANCE COMPANIES SUBJECT TO REGULATION UNDER TITLE 1,603
XXXIX OF THE REVISED CODE AND HEALTH INSURING CORPORATIONS
REGULATED UNDER CHAPTER 1751. OF THE REVISED CODE; 1,604
(f) EMPLOYEE BENEFIT PLANS WITH ASSETS OF NOT LESS THAN 1,606
ONE MILLION DOLLARS; 1,607
(g) GOVERNMENT AGENCIES OR INSTRUMENTALITIES, WHETHER 1,609
ACTING FOR THEMSELVES OR TRUSTEES WITH INVESTMENT CONTROL; 1,610
(h) OTHER INSTITUTIONAL INVESTORS AS THE DIVISION MAY 1,612
DESIGNATE BY RULE. 1,613
(4) THE PERSON HAS NO PLACE OF BUSINESS IN THIS STATE, AND 1,615
DURING THE PRECEDING TWELVE-MONTH PERIOD, THE PERSON HAS HAD NOT 1,616
MORE THAN FIVE CLIENTS, OTHER THAN THOSE DESCRIBED IN DIVISION 1,617
(A)(3) OF THIS SECTION, THAT ARE RESIDENTS OF THIS STATE. 1,618
(B)(1) NO PERSON WHO IS REGISTERED UNDER SECTION 203 OF 1,620
THE "INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, AS AN 1,623
INVESTMENT ADVISER SHALL ACT AS AN INVESTMENT ADVISER, UNLESS THE 1,624
PERSON HAS DONE BOTH OF THE FOLLOWING: 1,625
(a) FILED WITH THE DIVISION A CONSENT TO SERVICE OF 1,628
PROCESS TOGETHER WITH EITHER A NOTICE FILING FORM AS SPECIFIED IN 1,629
RULES ADOPTED BY THE DIVISION OR A COPY OF THOSE DOCUMENTS THAT 1,630
HAVE BEEN FILED BY THE INVESTMENT ADVISER WITH THE SECURITIES AND 1,631
37
EXCHANGE COMMISSION AS SPECIFIED IN RULES ADOPTED BY THE 1,632
DIVISION; 1,633
(b) PAID THE NOTICE FILING FEE SPECIFIED IN DIVISION (B) 1,635
OF SECTION 1707.17 OF THE REVISED CODE. 1,636
(2) UPON COMPLIANCE WITH DIVISION (B)(1) OF THIS SECTION, 1,638
THE DIVISION SHALL ISSUE TO THE PERSON AN ACKNOWLEDGMENT OF 1,639
NOTICE FILING.
(3) THE NOTICE FILING AND FEE REQUIREMENTS OF DIVISION 1,641
(B)(1) OF THIS SECTION DO NOT APPLY TO A PERSON DESCRIBED IN 1,642
DIVISION (A)(3) OR (4) OF THIS SECTION. 1,643
Sec. 1707.151. (A) APPLICATION FOR AN INVESTMENT 1,645
ADVISER'S LICENSE SHALL BE MADE IN ACCORDANCE WITH THIS SECTION 1,646
AND BY FILING WITH THE DIVISION OF SECURITIES THE INFORMATION, 1,647
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION. 1,648
(B) EVERY APPLICANT NOT A RESIDENT OF THIS STATE SHALL 1,650
NAME A PERSON WITHIN THIS STATE UPON WHOM PROCESS AGAINST SUCH 1,651
APPLICANT MAY BE SERVED AND SHALL GIVE THE COMPLETE RESIDENCE AND 1,652
BUSINESS ADDRESS OR ADDRESSES OF THE PERSON DESIGNATED. 1,653
(C) EVERY APPLICANT SHALL FILE AN IRREVOCABLE CONSENT TO 1,655
SERVICE OF PROCESS WITH THE SECRETARY OF STATE IN THE EVENT THAT 1,656
THE APPLICANT, IF A RESIDENT OF THIS STATE, OR THE PERSON 1,657
DESIGNATED PURSUANT TO DIVISION (B) OF THIS SECTION, CANNOT BE 1,658
FOUND AT THE ADDRESS GIVEN ON THE APPLICATION. THE CONSENT SHALL 1,659
BE GIVEN AND SERVICE OF PROCESS SHALL BE MADE AS PROVIDED IN 1,660
SECTION 1707.11 OF THE REVISED CODE.
(D)(1) THE DIVISION MAY INVESTIGATE ANY APPLICANT FOR A 1,662
LICENSE AND MAY REQUIRE ANY ADDITIONAL INFORMATION AS IT 1,663
CONSIDERS NECESSARY TO DETERMINE THE APPLICANT'S BUSINESS REPUTE 1,664
AND QUALIFICATIONS TO ACT AS AN INVESTMENT ADVISER. 1,665
(2) IF THE APPLICATION FOR ANY LICENSE INVOLVES 1,667
INVESTIGATION OUTSIDE OF THIS STATE, THE APPLICANT MAY BE 1,668
REQUIRED BY THE DIVISION TO ADVANCE SUFFICIENT FUNDS TO PAY ANY 1,669
OF THE ACTUAL EXPENSES OF THE EXAMINATION. THE DIVISION SHALL 1,670
FURNISH THE APPLICANT WITH AN ITEMIZED STATEMENT OF SUCH EXPENSES 1,671
38
THAT THE APPLICANT IS REQUIRED TO PAY.
(E) THE DIVISION SHALL BY RULE REQUIRE ONE NATURAL PERSON 1,673
WHO IS A PRINCIPAL, OFFICER, DIRECTOR, GENERAL PARTNER, MANAGER, 1,674
OR EMPLOYEE OF AN INVESTMENT ADVISER TO PASS AN EXAMINATION 1,675
DESIGNATED BY THE DIVISION OR ACHIEVE A SPECIFIED PROFESSIONAL 1,677
DESIGNATION. EVERY INVESTMENT ADVISER THAT IS NOT A NATURAL 1,678
PERSON SHALL NOTIFY THE DIVISION OF THE NAME AND RELATIONSHIP TO 1,679
THE INVESTMENT ADVISER OF THE NATURAL PERSON WHO HAS PASSED THE 1,680
EXAMINATION OR ACHIEVED THE SPECIFIED PROFESSIONAL DESIGNATION ON 1,681
BEHALF OF THE INVESTMENT ADVISER AND WHO WILL SERVE AS THE
DESIGNATED PRINCIPAL ON BEHALF OF THE INVESTMENT ADVISER. 1,682
(F) AN INVESTMENT ADVISER LICENSED UNDER SECTION 1707.141 1,684
OF THE REVISED CODE SHALL EMPLOY ONLY INVESTMENT ADVISER 1,685
REPRESENTATIVES LICENSED, OR EXEMPTED FROM LICENSURE, UNDER 1,686
SECTION 1707.161 OF THE REVISED CODE.
(G) IF THE DIVISION FINDS THAT THE APPLICANT IS OF GOOD 1,688
BUSINESS REPUTE, APPEARS TO BE QUALIFIED TO ACT AS AN INVESTMENT 1,689
ADVISER, AND HAS COMPLIED WITH SECTIONS 1707.01 TO 1707.45 OF THE 1,690
REVISED CODE AND RULES ADOPTED UNDER THOSE SECTIONS BY THE 1,691
DIVISION, THE DIVISION, UPON PAYMENT OF THE FEES PRESCRIBED BY
DIVISION (B) OF SECTION 1707.17 OF THE REVISED CODE, SHALL ISSUE 1,692
TO THE APPLICANT A LICENSE AUTHORIZING THE APPLICANT TO ACT AS AN 1,693
INVESTMENT ADVISER.
Sec. 1707.161. (A) NO PERSON SHALL ACT AS AN INVESTMENT 1,695
ADVISER REPRESENTATIVE, UNLESS ONE OF THE FOLLOWING APPLIES: 1,696
(1) THE PERSON IS LICENSED AS AN INVESTMENT ADVISER 1,698
REPRESENTATIVE BY THE DIVISION OF SECURITIES. 1,699
(2) THE PERSON IS A NATURAL PERSON WHO IS LICENSED AS AN 1,701
INVESTMENT ADVISER BY THE DIVISION, AND DOES NOT ACT AS AN 1,702
INVESTMENT ADVISER REPRESENTATIVE FOR ANOTHER INVESTMENT ADVISER; 1,703
HOWEVER, A NATURAL PERSON WHO IS LICENSED AS AN INVESTMENT 1,705
ADVISER BY THE DIVISION MAY ACT AS AN INVESTMENT ADVISER 1,706
REPRESENTATIVE FOR ANOTHER INVESTMENT ADVISER IF THE NATURAL 1,707
PERSON ALSO IS LICENSED BY THE DIVISION AS AN INVESTMENT ADVISER 1,708
39
REPRESENTATIVE OF THE OTHER INVESTMENT ADVISER.
(3) THE PERSON IS EMPLOYED BY OR ASSOCIATED WITH AN 1,710
INVESTMENT ADVISER REGISTERED UNDER SECTION 203 OF THE 1,711
"INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, AND DOES NOT 1,713
HAVE A PLACE OF BUSINESS IN THIS STATE. 1,714
(4) THE PERSON IS EMPLOYED BY OR ASSOCIATED WITH AN 1,716
INVESTMENT ADVISER THAT IS EXEMPTED FROM LICENSURE PURSUANT TO 1,717
DIVISION (A)(3) OR (4) OF SECTION 1707.141 OF THE REVISED CODE. 1,718
(B)(1) NO INVESTMENT ADVISER REPRESENTATIVE REQUIRED TO BE 1,720
LICENSED UNDER THIS SECTION SHALL ACT AS AN INVESTMENT ADVISER 1,721
REPRESENTATIVE FOR MORE THAN TWO INVESTMENT ADVISERS. AN 1,722
INVESTMENT ADVISER REPRESENTATIVE THAT ACTS AS AN INVESTMENT 1,723
ADVISER REPRESENTATIVE FOR TWO INVESTMENT ADVISERS SHALL DO SO 1,724
ONLY AFTER THE OCCURRENCE OF BOTH OF THE FOLLOWING: 1,725
(a) BEING PROPERLY LICENSED, OR PROPERLY EXCEPTED FROM 1,728
LICENSURE UNDER THIS SECTION, AS AN INVESTMENT ADVISER 1,729
REPRESENTATIVE FOR BOTH INVESTMENT ADVISERS; 1,730
(b) COMPLYING WITH THE REQUIREMENTS SET FORTH IN RULES 1,733
ADOPTED BY THE DIVISION REGARDING CONSENT OF BOTH INVESTMENT 1,734
ADVISERS AND NOTICE.
(2) NOTHING IN THIS SECTION SHALL BE CONSTRUED TO PROHIBIT 1,736
A NATURAL PERSON FROM BEING LICENSED BY THE DIVISION AS BOTH AN 1,739
INVESTMENT ADVISER AND AN INVESTMENT ADVISER REPRESENTATIVE. 1,740
(3) NOTHING IS THIS SECTION SHALL BE CONSTRUED TO PROHIBIT 1,743
A NATURAL PERSON FROM BEING LICENSED BY THE DIVISION AS BOTH A 1,744
SALESPERSON AND AN INVESTMENT ADVISER REPRESENTATIVE. 1,745
(C) AN INVESTMENT ADVISER REPRESENTATIVE'S LICENSE ISSUED 1,747
UNDER THIS SECTION SHALL NOT BE EFFECTIVE DURING ANY PERIOD WHEN 1,748
THE INVESTMENT ADVISER REPRESENTATIVE IS NOT EMPLOYED BY OR 1,749
ASSOCIATED WITH AN INVESTMENT ADVISER THAT IS LICENSED BY THE 1,750
DIVISION OR THAT IS IN COMPLIANCE WITH THE NOTICE FILING 1,751
REQUIREMENTS OF DIVISION (B) OF SECTION 1707.141 OF THE REVISED
CODE. NOTICE OF THE COMMENCEMENT AND TERMINATION OF THE 1,752
EMPLOYMENT OR ASSOCIATION OF AN INVESTMENT ADVISER REPRESENTATIVE 1,754
40
LICENSED UNDER THIS SECTION SHALL BE GIVEN TO THE DIVISION WITHIN 1,755
THIRTY DAYS AFTER THE COMMENCEMENT OR TERMINATION BY EITHER OF
THE FOLLOWING: 1,756
(1) THE INVESTMENT ADVISER, IN THE CASE OF AN INVESTMENT 1,758
ADVISER REPRESENTATIVE LICENSED UNDER THIS SECTION AND EMPLOYED 1,759
BY OR ASSOCIATED WITH, OR FORMERLY EMPLOYED BY OR ASSOCIATED 1,761
WITH, AN INVESTMENT ADVISER LICENSED UNDER SECTION 1707.141 OF 1,762
THE REVISED CODE;
(2) THE INVESTMENT ADVISER REPRESENTATIVE, IN THE CASE OF 1,764
AN INVESTMENT ADVISER REPRESENTATIVE LICENSED UNDER THIS SECTION 1,765
AND EMPLOYED BY OR ASSOCIATED WITH, OR FORMERLY EMPLOYED BY OR 1,767
ASSOCIATED WITH, AN INVESTMENT ADVISER THAT IS SUBJECT TO THE
NOTICE FILINGS REQUIREMENTS OF DIVISION (B) OF SECTION 1707.141 1,769
OF THE REVISED CODE.
(D)(1) APPLICATION FOR AN INVESTMENT ADVISER 1,771
REPRESENTATIVE LICENSE SHALL BE MADE IN ACCORDANCE WITH THIS 1,772
SECTION AND BY FILING WITH THE DIVISION THE INFORMATION, 1,773
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION. 1,774
(2) THE DIVISION SHALL BY RULE REQUIRE AN APPLICANT TO 1,776
PASS AN EXAMINATION DESIGNATED BY THE DIVISION OR ACHIEVE A 1,777
SPECIFIED PROFESSIONAL DESIGNATION.
(3) PRIOR TO ISSUING THE INVESTMENT ADVISER REPRESENTATIVE 1,780
LICENSE, THE DIVISION MAY REQUIRE THE APPLICANT TO REIMBURSE THE 1,781
DIVISION FOR THE ACTUAL EXPENSES INCURRED IN INVESTIGATING THE 1,782
APPLICANT. AN ITEMIZED STATEMENT OF ANY SUCH EXPENSES THAT THE 1,784
APPLICANT IS REQUIRED TO PAY SHALL BE FURNISHED TO THE APPLICANT
BY THE DIVISION. 1,785
(E) IF THE DIVISION FINDS THAT THE APPLICANT IS OF GOOD 1,787
BUSINESS REPUTE, APPEARS TO BE QUALIFIED TO ACT AS AN INVESTMENT 1,788
ADVISER REPRESENTATIVE, AND HAS COMPLIED WITH SECTIONS 1707.01 TO 1,789
1707.45 OF THE REVISED CODE AND THE RULES ADOPTED UNDER THOSE 1,790
SECTIONS BY THE DIVISION, THE DIVISION, UPON PAYMENT OF THE FEES 1,791
PRESCRIBED BY DIVISION (B) OF SECTION 1707.17 OF THE REVISED
CODE, SHALL ISSUE TO THE APPLICANT A LICENSE AUTHORIZING THE 1,792
41
APPLICANT TO ACT AS AN INVESTMENT ADVISER REPRESENTATIVE FOR THE 1,793
INVESTMENT ADVISER, OR INVESTMENT ADVISERS THAT ARE UNDER COMMON 1,794
OWNERSHIP OR CONTROL, NAMED IN THE APPLICATION.
Sec. 1707.17. (A)(1) The license of every dealer in and 1,803
salesman SALESPERSON of securities shall expire on the 1,805
thirty-first day of December of each year, and may be renewed 1,806
upon the filing with the division of securities of an application 1,807
for renewal, and the payment of the fee prescribed in this 1,808
section, not less than fifteen nor more than sixty days before 1,809
the expiration of the old license. The division may accept an 1,810
application for renewal less than fifteen days before the 1,811
expiration of any calendar year. It THE DIVISION ALSO MAY ACCEPT 1,812
AN APPLICATION FOR RENEWAL UP TO TEN DAYS AFTER EXPIRATION OF A 1,813
LICENSE, PROVIDED THAT THE APPLICATION FOR RENEWAL IS ACCOMPANIED 1,814
BY THE LICENSE RENEWAL FEE AND THE ADDITIONAL FEE PRESCRIBED IN 1,815
DIVISION (B) OF THIS SECTION. THE DIVISION shall give notice, 1,818
without unreasonable delay, of its action on any application for 1,819
renewal of a dealer's or salesman's SALESPERSON'S license. 1,820
(2) THE LICENSE OF EVERY INVESTMENT ADVISER AND INVESTMENT 1,823
ADVISER REPRESENTATIVE LICENSED UNDER SECTION 1707.141 OR 1,824
1707.161 OF THE REVISED CODE SHALL EXPIRE ON THE THIRTY-FIRST DAY 1,825
OF DECEMBER OF EACH YEAR. THE LICENSES MAY BE RENEWED UPON THE 1,826
FILING WITH THE DIVISION OF A COMPLETED LICENSE RENEWAL 1,827
APPLICATION, AND THE PAYMENT OF THE FEE PRESCRIBED IN DIVISION 1,828
(B) OF THIS SECTION, NOT LESS THAN THIRTY NOR MORE THAN 1,830
SEVENTY-FIVE DAYS BEFORE THE EXPIRATION OF THE OLD LICENSE. THE 1,831
DIVISION MAY ACCEPT A LICENSE RENEWAL APPLICATION FILED LESS THAN 1,832
THIRTY DAYS BEFORE THE EXPIRATION OF ANY CALENDAR YEAR. THE 1,833
DIVISION ALSO MAY ACCEPT A LICENSE RENEWAL APPLICATION UP TO TEN 1,835
DAYS AFTER EXPIRATION OF A LICENSE, PROVIDED THAT THE LICENSE 1,836
RENEWAL APPLICATION IS ACCOMPANIED BY THE LICENSE RENEWAL FEE AND 1,837
THE ADDITIONAL FEE PRESCRIBED IN DIVISION (B) OF THIS SECTION. 1,839
THE DIVISION SHALL GIVE NOTICE, WITHOUT UNREASONABLE DELAY, OF 1,840
ITS ACTION ON ANY LICENSE RENEWAL APPLICATION. 1,841
42
(3) AN INVESTMENT ADVISER REQUIRED TO MAKE A NOTICE FILING 1,843
UNDER DIVISION (B) OF SECTION 1707.141 OF THE REVISED CODE 1,845
ANNUALLY SHALL FILE WITH THE DIVISION THE NOTICE FILING AND THE 1,846
FEE PRESCRIBED IN DIVISION (B) OF THIS SECTION, NO LATER THAN THE 1,847
THIRTY-FIRST DAY OF DECEMBER OF EACH YEAR. THE DIVISION MAY 1,848
ACCEPT A NOTICE FILING UP TO TEN DAYS AFTER THE THIRTY-FIRST DAY 1,849
OF DECEMBER OF EACH YEAR, PROVIDED THAT THE NOTICE FILING IS 1,850
ACCOMPANIED BY THE NOTICE FILING FEE AND THE ADDITIONAL FEE 1,851
PRESCRIBED IN DIVISION (B) OF THIS SECTION. 1,852
(B)(1) The fee for each dealer's license, and for each 1,854
annual renewal thereof, shall be, thirty dollars per salesman 1,855
SALESPERSON, but not less than one hundred fifty nor more than 1,856
five thousand dollars. UPON PAYMENT OF AN ADDITIONAL FEE OF 1,857
ONE-HALF OF THE LICENSE RENEWAL FEE, THE DIVISION MAY ACCEPT AN 1,858
APPLICATION FOR RENEWAL FILED UP TO TEN DAYS AFTER THE EXPIRATION 1,859
OF A LICENSE ON THE THIRTY-FIRST DAY OF DECEMBER. The fee for 1,861
the examination of applicant dealers, when administered by the 1,863
division, shall be seventy-five dollars.
A dealer's license may be issued at any time for the 1,865
remainder of the calendar year. In such event, the annual fee 1,866
shall not be reduced. 1,867
(2) The fee for each salesman's SALESPERSON'S license, and 1,870
for each annual renewal thereof, shall be fifty dollars. The fee 1,872
for the examination of an applicant salesman SALESPERSON, when 1,873
administered by the division, shall be fifty dollars. 1,874
(3) THE FEE FOR EACH INVESTMENT ADVISER'S LICENSE, AND FOR 1,877
EACH ANNUAL RENEWAL THEREOF, SHALL BE TWO HUNDRED DOLLARS. UPON 1,878
THE PAYMENT OF AN ADDITIONAL FEE OF ONE-HALF OF THE LICENSE FEE,
THE DIVISION MAY ACCEPT A LICENSE RENEWAL APPLICATION FILED UP TO 1,880
TEN DAYS AFTER EXPIRATION OF A LICENSE ON THE THIRTY-FIRST DAY OF 1,881
DECEMBER.
(4) THE FEE FOR EACH INVESTMENT ADVISER NOTICE FILING 1,883
REQUIRED BY DIVISION (B) OF SECTION 1707.141 OF THE REVISED CODE 1,885
SHALL BE TWO HUNDRED DOLLARS. UPON THE PAYMENT OF AN ADDITIONAL 1,886
43
FEE OF ONE-HALF OF THE NOTICE FILING FEE, THE DIVISION MAY ACCEPT 1,887
A NOTICE FILING FILED UP TO TEN DAYS AFTER THE THIRTY-FIRST DAY 1,888
OF DECEMBER. A NOTICE FILING MAY BE MADE AT ANY TIME DURING THE 1,889
CALENDAR YEAR. IN THAT EVENT, THE NOTICE FILING FEE SHALL NOT BE 1,890
REDUCED.
(5) THE FEE FOR EACH INVESTMENT ADVISER REPRESENTATIVE'S 1,892
LICENSE, AND FOR EACH ANNUAL RENEWAL THEREOF, SHALL BE FIFTY 1,893
DOLLARS; HOWEVER, THE FEE SHALL BE WAIVED FOR THE INVESTMENT 1,894
ADVISER REPRESENTATIVE DESIGNATED THE PRINCIPAL OF THE INVESTMENT 1,896
ADVISER PURSUANT TO DIVISION (E) OF SECTION 1707.151 OF THE 1,898
REVISED CODE. UPON THE PAYMENT OF AN ADDITIONAL FEE OF ONE-HALF 1,899
OF THE LICENSE FEE, THE DIVISION MAY ACCEPT A LICENSE RENEWAL 1,901
APPLICATION FILED UP TO TEN DAYS AFTER EXPIRATION OF A LICENSE ON 1,902
THE THIRTY-FIRST DAY OF DECEMBER. 1,903
(C) A DEALER'S, SALESPERSON'S, INVESTMENT ADVISER'S, OR 1,905
INVESTMENT ADVISER REPRESENTATIVE'S LICENSE MAY BE ISSUED AT ANY 1,907
TIME FOR THE REMAINDER OF THE CALENDAR YEAR. IN THAT EVENT, THE 1,908
ANNUAL FEE SHALL NOT BE REDUCED. 1,909
Sec. 1707.18. (A)(1) If a partnership licensed as a 1,918
dealer is terminated under the laws of the state where such THE 1,919
partnership is organized, or by death, resignation, withdrawal, 1,921
or addition of a general partner, the license of the partnership 1,922
shall be automatically extended for a period of thirty days after 1,923
such THE termination. The license of such THE partnership and 1,925
the licenses of its salesmen SALESPERSONS may be transferred to 1,927
the successor partnership within such THAT period if the division 1,929
of securities finds that the successor partnership is 1,931
substantially similar to its predecessor partnership, and if an 1,932
application for transfer of license has been filed. The fee for 1,933
such a transfer shall be fifty dollars, plus ten dollars for 1,934
every salesman's SALESPERSON'S license which THAT is transferred. 1,936
(2) IF A PARTNERSHIP LICENSED AS AN INVESTMENT ADVISER IS 1,939
TERMINATED UNDER THE LAWS OF THE STATE WHERE THE PARTNERSHIP IS 1,940
ORGANIZED, OR BY DEATH, RESIGNATION, WITHDRAWAL, OR ADDITION OF A 1,941
44
GENERAL PARTNER, THE LICENSE OF THE PARTNERSHIP SHALL BE 1,942
AUTOMATICALLY EXTENDED FOR A PERIOD OF THIRTY DAYS AFTER THE 1,943
TERMINATION. THE LICENSE OF THE PARTNERSHIP SHALL, AND THE 1,944
LICENSES OF ITS INVESTMENT ADVISER REPRESENTATIVES MAY, BE 1,945
TRANSFERRED TO THE SUCCESSOR PARTNERSHIP WITHIN THAT PERIOD IF 1,946
THE DIVISION FINDS THAT THE SUCCESSOR PARTNERSHIP IS
SUBSTANTIALLY SIMILAR TO ITS PREDECESSOR PARTNERSHIP, AND IF AN 1,947
APPLICATION FOR TRANSFER OF LICENSE HAS BEEN FILED. THE FEE FOR 1,948
SUCH TRANSFER SHALL BE FIFTY DOLLARS, PLUS TEN DOLLARS FOR EVERY 1,949
INVESTMENT ADVISER REPRESENTATIVE'S LICENSE THAT IS TRANSFERRED. 1,950
(B)(1) If a licensed dealer changes its business form, 1,952
reincorporates, or by merger or otherwise becomes a different 1,953
person, as person is defined in section 1707.01 of the Revised 1,954
Code, upon application the division of securities may transfer 1,955
the dealer's license and the licenses of its salesmen 1,956
SALESPERSONS to the successor entity, if the division of 1,958
securities finds that the successor entity is substantially 1,959
similar to the predecessor entity. The fee for such a transfer 1,960
shall be fifty dollars plus ten dollars for every salesman's 1,961
SALESPERSON'S license transferred. 1,962
(2) IF A LICENSED INVESTMENT ADVISER CHANGES ITS BUSINESS 1,965
FORM, REINCORPORATES, OR BY MERGER OR OTHERWISE BECOMES A 1,966
DIFFERENT PERSON, AS PERSON IS DEFINED IN SECTION 1707.01 OF THE 1,967
REVISED CODE, UPON APPLICATION, THE DIVISION MAY TRANSFER THE 1,968
INVESTMENT ADVISER LICENSE AND THE LICENSES OF ITS INVESTMENT 1,969
ADVISER REPRESENTATIVES TO THE SUCCESSOR ENTITY, IF THE DIVISION 1,970
FINDS THAT THE SUCCESSOR ENTITY IS SUBSTANTIALLY SIMILAR TO THE 1,971
PREDECESSOR ENTITY. THE FEE FOR THE TRANSFER SHALL BE FIFTY 1,972
DOLLARS PLUS TEN DOLLARS FOR EVERY INVESTMENT ADVISER 1,973
REPRESENTATIVE'S LICENSE TRANSFERRED.
Sec. 1707.19. (A) An original license, or a renewal 1,982
thereof, applied for by a dealer or salesman SALESPERSON of 1,983
securities, OR BY AN INVESTMENT ADVISER OR AN INVESTMENT ADVISER 1,984
REPRESENTATIVE, may be refused, and any such license granted may 1,986
45
be suspended and, after notice and hearing in accordance with 1,987
sections 119.01 to 119.13, inclusive, CHAPTER 119. of the Revised 1,988
Code, may be revoked, by the division of securities, if the 1,990
division determines that such THE applicant or such THE licensed 1,992
dealer or salesman, SALESPERSON, INVESTMENT ADVISER, OR 1,993
INVESTMENT ADVISER REPRESENTATIVE:
(A)(1) Is not of good business repute; 1,995
(B)(2) Is conducting an illegitimate or fraudulent 1,997
business;
(C)(3) Is, in the case of a dealer OR INVESTMENT ADVISER, 2,000
insolvent;
(D)(4) Has intentionally violated any provision of 2,002
sections 1707.01 to 1707.45, inclusive, of the Revised Code, or 2,003
any regulation or order made thereunder; 2,004
(E)(5) Has knowingly and intentionally made a false 2,006
statement of a material fact in an application for a license, in 2,007
a description or application that has been filed, or in any 2,008
statement made to the division under such sections; 2,009
(F)(6) Has refused to comply with any lawful order or 2,011
requirement of the division under section 1707.23 of the Revised 2,012
Code; 2,013
(G)(7) Has been guilty of any fraudulent act in connection 2,015
with the sale of any securities OR IN CONNECTION WITH ACTING AS 2,016
AN INVESTMENT ADVISER OR INVESTMENT ADVISER REPRESENTATIVE; 2,017
(H)(8) Conducts business in purchasing or selling 2,019
securities at such variations from the existing market as in the 2,020
light of all the circumstances are unconscionable; 2,021
(I)(9) Conducts business in violation of such rules and 2,023
regulations as the division prescribes for the protection of 2,024
investors, CLIENTS, OR POTENTIAL CLIENTS; 2,025
(J)(10)(a) Has failed to furnish to the division any 2,027
information with respect to his THE purchases or sales of 2,030
securities within this state in his capacity as a licensed dealer 2,031
or salesman which THAT may be reasonably requested by the 2,033
46
division as pertinent to the protection of investors in this 2,034
state.
(b) HAS FAILED TO FURNISH TO THE DIVISION ANY INFORMATION 2,037
WITH RESPECT TO ACTING AS AN INVESTMENT ADVISER OR AN INVESTMENT 2,038
ADVISER REPRESENTATIVE WITHIN THIS STATE THAT MAY BE REASONABLY 2,039
REQUESTED BY THE DIVISION.
(B) For the protection of investors the division may 2,041
prescribe reasonable rules defining fraudulent, evasive, 2,042
deceptive, or grossly unfair practices or devices in the purchase 2,043
or sale of securities. 2,044
(C) FOR THE PROTECTION OF INVESTORS, CLIENTS, OR POTENTIAL 2,047
CLIENTS, THE DIVISION MAY PRESCRIBE REASONABLE RULES REGARDING 2,048
THE ACTS AND PRACTICES OF AN INVESTMENT ADVISER OR AN INVESTMENT 2,049
ADVISER REPRESENTATIVE.
(D) Pending any investigation or hearing provided for in 2,051
sections 1707.01 to 1707.45, inclusive, of the Revised Code, the 2,052
division may order the suspension of any dealer's or salesman's, 2,053
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER 2,054
REPRESENTATIVE'S license by notifying the party concerned of such 2,056
suspension and the cause for it. If it is a salesman SALESPERSON 2,057
whose license is suspended, the division shall also notify the 2,059
dealer employing him THE SALESPERSON. IF IT IS AN INVESTMENT 2,060
ADVISER REPRESENTATIVE WHOSE LICENSE IS SUSPENDED, THE DIVISION 2,061
ALSO SHALL NOTIFY THE INVESTMENT ADVISER WITH WHOM THE INVESTMENT 2,062
ADVISER REPRESENTATIVE IS EMPLOYED OR ASSOCIATED. 2,063
(E)(1) The suspension or revocation of the dealer's 2,065
license suspends those THE LICENSES of all his salesmen THE 2,066
DEALER'S SALESPERSONS. 2,067
(2) THE SUSPENSION OR REVOCATION OF THE INVESTMENT 2,069
ADVISER'S LICENSE SUSPENDS THE LICENSES OF ALL THE INVESTMENT 2,070
ADVISER'S INVESTMENT ADVISER REPRESENTATIVES. THE SUSPENSION OR 2,071
REVOCATION OF AN INVESTMENT ADVISER'S REGISTRATION UNDER SECTION 2,073
203 OF THE "INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, 2,075
SUSPENDS THE LICENSES OF ALL THE INVESTMENT ADVISER'S INVESTMENT 2,076
47
ADVISER REPRESENTATIVES.
(F) It is sufficient cause for refusal, revocation, or 2,078
suspension of the license in case of a partnership, partnership 2,079
association, corporation, or unincorporated association if any 2,080
general partner of such THE partnership, manager of such THE 2,082
partnership association, or executive officer of such THE 2,083
corporation or unincorporated association is not of good business 2,084
repute or has been guilty of any act or omission which would be 2,085
cause for refusing or revoking the license of an individual 2,086
dealer or salesman, SALESPERSON, INVESTMENT ADVISER, OR 2,087
INVESTMENT ADVISER REPRESENTATIVE. 2,088
Sec. 1707.20. (A) The division of securities may adopt, 2,097
amend, and rescind such rules, forms, and orders as are necessary 2,098
to carry out sections 1707.01 to 1707.45 of the Revised Code, 2,099
including rules and forms governing registration statements, 2,100
applications, and reports, and defining any terms, whether or not 2,101
used in sections 1707.01 to 1707.45 of the Revised Code, insofar 2,102
as the definitions are not inconsistent with said THESE sections. 2,104
For the purpose of rules and forms, the division of securities 2,105
may classify securities, persons, and matters within its 2,106
jurisdiction, and prescribe different requirements for different 2,107
classes. 2,108
(B) No rule, form, or order may be made, amended, or 2,110
rescinded unless the division of securities finds that the action 2,111
is necessary or appropriate in the public interest or for the 2,112
protection of investors, CLIENTS, OR PROSPECTIVE CLIENTS and 2,113
consistent with the purposes fairly intended by the policy and 2,115
provisions of sections 1707.01 to 1707.45 of the Revised Code. 2,116
In prescribing rules and forms and in otherwise administering 2,117
sections 1707.01 to 1707.45 of the Revised Code, the division of 2,118
securities may cooperate with the securities administrators of 2,119
the other states and the securities and exchange commission with 2,120
a view of effectuating the policy of this section to achieve 2,121
maximum uniformity in the form and content of registration 2,122
48
statements, applications, reports, and overall securities 2,123
regulation wherever practicable.
(C) The division of securities may by rule or order 2,125
prescribe: 2,126
(1) The form and content of financial statements required 2,128
under sections 1707.01 to 1707.45 of the Revised Code; 2,129
(2) The circumstances under which consolidated financial 2,131
statements shall be filed; 2,132
(3) Whether any required financial statements shall be 2,134
certified by independent or certified public accountants. All 2,135
financial statements shall be prepared in accordance with 2,136
generally accepted accounting practices. 2,137
(D) All rules and forms of the division of securities 2,139
shall be published; and in addition to fulfilling the 2,140
requirements of sections 119.01 to 119.13 CHAPTER 119. of the 2,142
Revised Code, the division shall prescribe, and shall publish and 2,143
make available its rules regarding the sale of securities, the 2,144
administration of sections 1707.01 to 1707.45 of the Revised 2,145
Code, and the procedure and practice before the division. 2,146
The division may also publish and distribute annually a 2,148
list of licensed dealers and salesmen. 2,149
(E) No provision of sections 1707.01 to 1707.45 of the 2,151
Revised Code imposing any liability applies to any act done or 2,152
omitted in good faith in conformity with any rule, form, or order 2,153
of the division of securities, notwithstanding that the rule, 2,154
form, or order may later be amended or rescinded or be determined 2,155
by judicial or other authority to be invalid for any reason, 2,156
except that the issuance of an order granting effectiveness to a 2,157
registration under section 1707.09 or 1707.091 of the Revised 2,158
Code for the purposes of this division shall not be deemed an 2,159
order other than as the establishment of the fact of 2,160
registration. 2,161
Sec. 1707.22. Whenever a dealer's or salesman's, 2,170
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER 2,171
49
REPRESENTATIVE'S license has been refused, suspended, or revoked, 2,174
or a renewal thereof has been denied, by the division of 2,175
securities, or whenever the division has refused to qualify
securities or has suspended or revoked the registration of any 2,176
particular security by description or by qualification, or the 2,177
right to buy, sell, or deal in any particular security whether it 2,178
is registered or qualified or exempt, or whether the transactions 2,179
in it are registered or exempt, the aggrieved party may appeal in 2,180
accordance with sections 119.01 to 119.13, inclusive, CHAPTER 2,181
119. of the Revised Code. 2,182
An order sustaining the refusal of the division to grant or 2,184
renew a dealer's or salesman's, SALESPERSON'S, INVESTMENT 2,185
ADVISER'S, OR INVESTMENT ADVISER REPRESENTATIVE'S license or to 2,186
grant qualification of securities, or AN ORDER sustaining the 2,188
division in suspending or revoking a dealer's or salesman's,
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER 2,189
REPRESENTATIVE'S license, the registration of any particular 2,191
security by description or by qualification, or the right to buy, 2,192
sell, or deal in any particular security, shall not bar, after 2,193
ten days from such THE order, a new registration by description, 2,194
or a new application of the plaintiff for such a license or 2,195
qualification or for a withdrawal of such A revocation or 2,196
suspension; nor shall an order in favor of the plaintiff prevent 2,198
the division, after proper notice and hearing, from thereafter 2,199
revoking or suspending such license, registration, or right to
buy, sell, or deal in a particular security, for any proper cause 2,200
which may, after such THE order, accrue or be discovered. 2,201
Sec. 1707.23. Whenever it appears to the division of 2,210
securities, from its files, upon complaint, or otherwise, that 2,211
any person has engaged in, is engaged in, or is about to engage 2,212
in any practice declared to be illegal or prohibited by Chapter 2,213
1707. of the Revised Code, or defined as fraudulent in such 2,214
chapter OR CONSIDERED A DISHONEST OR UNETHICAL PRACTICE, or any 2,216
other deceptive scheme or practice in connection with the sale of 2,217
50
securities, OR ACTING AS AN INVESTMENT ADVISER OR INVESTMENT 2,218
ADVISER REPRESENTATIVE, or when the division believes it to be in 2,220
the best interests of the public and necessary for the protection 2,221
of investors, the division may DO ANY OF THE FOLLOWING:
(A) Require any person to file with it, on such forms as 2,223
it prescribes, an original or additional statement or report in 2,224
writing, under oath or otherwise, as to any facts or 2,225
circumstances concerning the issuance, sale, or offer for sale of 2,226
securities within this state by said THE person, AS TO THE 2,228
PERSON'S ACTS OR PRACTICES AS AN INVESTMENT ADVISER OR INVESTMENT
ADVISER REPRESENTATIVE WITHIN THIS STATE, and as to such other 2,230
information as it deems material or relevant thereto. 2,231
(B) Examine any INVESTMENT ADVISER, INVESTMENT ADVISER 2,233
REPRESENTATIVE, OR ANY seller, dealer, salesman SALESPERSON, or 2,235
issuer of any such securities, and any of their agents, 2,237
employees, partners, officers, directors, members, or 2,238
shareholders, wherever located, under oath; and examine such 2,239
records, books, documents, accounts, and papers as the division 2,240
deems material or relevant to the inquiry. 2,241
(C) Require the attendance of such witnesses, and the 2,243
production of such books, records, and papers, as are required 2,244
either by the division or by any party to a hearing before the 2,245
division, and for that purpose issue a subpoena for any witness, 2,246
or a subpoena duces tecum to compel the production of any books, 2,247
records, or papers. Such THE subpoena shall be served by 2,248
certified mail, return receipt requested. If the subpoena is 2,250
returned because of inability to deliver, or if no return is 2,251
received within thirty days of the date of mailing, the subpoena 2,252
may be served by ordinary mail. If no return of ordinary mail is 2,253
received within thirty days after the date of mailing, service 2,254
shall be deemed to have been made. If the subpoena is returned 2,255
because of inability to deliver, the division may designate a 2,256
person or persons to effect either personal or residence service 2,257
upon such THE witness. Such THE person may be the sheriff of the 2,259
51
county in which the witness resides or may be found or any other 2,260
duly designated person. The fees and mileage of such THE person 2,261
serving such THE subpoena shall be the same as those allowed by 2,263
the courts of common pleas in criminal cases, and shall be paid 2,265
from the funds of the division. Fees and mileage for such THE 2,266
witness shall be the same as those allowed for witnesses by the 2,268
courts of common pleas in criminal cases, and shall be paid from 2,269
the funds of the division upon request of such THE witness 2,270
following the hearing.
(D) Proceed under section 1707.19 of the Revised Code to 2,272
suspend the license of any licensed dealer or salesman, LICENSED 2,274
SALESPERSON, LICENSED INVESTMENT ADVISER, OR LICENSED INVESTMENT
ADVISER REPRESENTATIVE and ultimately, if the division 2,276
determines, revoke such license under such sections. 2,277
(E) Initiate criminal proceedings under section 1707.042 2,279
or 1707.44 of the Revised Code by laying before the prosecuting 2,280
attorney of the proper county any evidence of criminality which 2,281
shall come COMES to its knowledge; and in the event of the 2,282
neglect or refusal of the prosecuting attorney to prosecute such 2,284
violations, or at the request of the prosecuting attorney, the 2,285
division shall submit such THE evidence to the attorney general, 2,286
who may proceed in the prosecution with all the rights, 2,288
privileges, and powers conferred by law on prosecuting attorneys, 2,289
including the power to appear before grand juries and to 2,290
interrogate witnesses before such grand juries. 2,291
(F) Require any dealers forthwith to furnish to the 2,293
division copies of prospectuses, circulars, or advertisements 2,294
respecting securities, which THAT they publish or generally 2,295
distribute, OR REQUIRE ANY INVESTMENT ADVISERS IMMEDIATELY TO 2,296
FURNISH TO THE DIVISION COPIES OF BROCHURES, ADVERTISEMENTS, 2,297
PUBLICATIONS, ANALYSES, REPORTS, OR OTHER WRITINGS THAT THEY 2,298
PUBLISH OR DISTRIBUTE. 2,299
(G) Require any dealers to mail to the division, prior to 2,301
sale, notices of intention to sell, in respect to all securities 2,302
52
which are not exempt under section 1707.02 of the Revised Code, 2,303
or which are sold in transactions not exempt under section 2,304
1707.03 or 1707.04 of the Revised Code. 2,305
(H) Issue and cause to be served by certified mail upon 2,307
all persons affected an order requiring the person or persons to 2,308
cease and desist from the acts or practices appearing to the 2,309
division of securities to constitute violations of Chapter 1707. 2,310
of the Revised Code OR RULES ADOPTED UNDER THAT CHAPTER BY THE 2,311
DIVISION. The order shall state specifically the section or 2,313
sections of Chapter 1707. of the Revised Code OR THE RULE OR
RULES ADOPTED UNDER THAT CHAPTER BY THE DIVISION that appear to 2,315
the division of securities to have been violated and the facts 2,316
constituting the violation. If after the issuance of the order 2,317
it appears to the division of securities that any person or 2,318
persons affected by the order have engaged in any act or practice 2,319
from which the person or persons shall have been required, by the 2,320
order, to cease and desist, the director of commerce may apply to 2,321
the court of common pleas of any county for, and upon proof of 2,322
the validity of the order of the division of securities, the 2,323
delivery of the order to the person or persons affected, and of 2,324
the illegality and the continuation of the acts or practices that 2,325
are the subject of the order, the court may grant an injunction 2,326
implementing the order of the division of securities. 2,327
(I) ISSUE AND INITIATE CONTEMPT PROCEEDINGS IN THIS STATE 2,329
REGARDING SUBPOENAS AND SUBPOENAS DUCES TECUM AT THE REQUEST OF 2,331
THE SECURITIES ADMINISTRATOR OF ANOTHER STATE, IF IT APPEARS TO 2,332
THE DIVISION THAT THE ACTIVITIES FOR WHICH THE INFORMATION IS 2,333
SOUGHT WOULD VIOLATE CHAPTER 1707. OF THE REVISED CODE IF THE 2,335
ACTIVITIES HAD OCCURRED IN THIS STATE.
Sec. 1707.25. In case any person fails to file any 2,344
statement or report required by sections 1707.01 to 1707.45, 2,345
inclusive, of the Revised Code, to obey any subpoena the issuance 2,346
of which is provided for in such THOSE sections, or to produce 2,347
books, records, or papers, give testimony, or answer questions, 2,349
53
as required by such THOSE sections, the director of commerce may 2,350
apply to a court of common pleas of any county for, and upon 2,352
proof of such failure such THE court may grant an injunction 2,353
restraining the ACTING AS AN INVESTMENT ADVISER OR INVESTMENT 2,354
ADVISER REPRESENTATIVE, OR THE issuance, sale, or offer for sale 2,355
of any securities by such THE person or by its agents, employees, 2,357
partners, officers, directors, or shareholders, until such 2,358
failure has been remedied and such other relief as the facts may 2,359
warrant has been had. Such injunctive relief is available in 2,360
addition to the other remedies provided for in such sections 2,361
1707.01 TO 1707.45 OF THE REVISED CODE. 2,362
Where the person refusing to comply with such order of 2,364
court is an issuer of securities, the court may enjoin the sale 2,365
by any dealer of any securities of said THE issuer, and the 2,366
division of securities may revoke the qualification of the 2,368
securities of said THE issuer, or suspend or revoke the sale of 2,369
any securities of said THE issuer which have been registered by 2,371
description, and such securities shall not thereafter be sold by 2,373
any dealer until such THE order of the court or of the division 2,374
is withdrawn.
Sec. 1707.27. If the court of common pleas is satisfied 2,383
with the sufficiency of the application for a receivership, and 2,384
of the sufficiency of the proof of substantial violation of 2,385
sections 1707.01 to 1707.45, inclusive, of the Revised Code, or 2,386
of the use of any act, practice, or transaction declared to be 2,387
illegal, OR prohibited, or declared DEFINED AS fraudulent, OR 2,388
CONSIDERED TO BE DISHONEST OR UNETHICAL, by such THOSE sections, 2,389
to the material prejudice of a purchaser or holder of securities, 2,390
such OR CLIENT OF AN INVESTMENT ADVISER OR INVESTMENT ADVISER 2,391
REPRESENTATIVE, THE court may appoint a receiver, for any person 2,393
so violating sections 1707.01 to 1707.45, inclusive, of the 2,395
Revised Code, with power to sue for, collect, receive, and take 2,397
into his THE RECEIVER'S possession all the books, records, and 2,398
papers of such THE person and all rights, credits, property, and 2,399
54
choses in action acquired by such THE person by means of any such 2,401
act, practice, or transaction, and also all property with which 2,402
such THE property has been mingled, if such THE property cannot 2,403
be identified in kind because of such THE commingling, and with 2,404
power to sell, convey, and assign such THE property, and to hold 2,406
and dispose of the proceeds under the direction of the court of 2,408
common pleas. Such THE court shall have jurisdiction of all 2,409
questions arising in said THE proceedings and may make such 2,411
orders and decrees therein as justice and equity require. 2,412
Sec. 1707.36. (A) There is hereby created in the division 2,421
of securities a position to be known as attorney-inspector, which 2,422
shall be held only by an attorney at law. The duties of this 2,423
position are to investigate and report upon all complaints and 2,424
alleged violations of laws relating to the issue and sale of 2,425
securities and to represent the division in prosecutions arising 2,426
from such complaints and alleged violations. 2,427
THE OFFICE OF THE ATTORNEY-INSPECTOR IS HEREBY DESIGNATED A 2,430
CRIMINAL JUSTICE AGENCY IN INVESTIGATING REPORTED VIOLATIONS OF 2,431
LAW RELATING TO SECURITIES AND INVESTMENT ADVICE, AND AS SUCH IS 2,432
AUTHORIZED BY THIS STATE TO APPLY FOR ACCESS TO THE COMPUTERIZED 2,433
DATABASES ADMINISTERED BY THE NATIONAL CRIME INFORMATION CENTER 2,434
OR THE LAW ENFORCEMENT AUTOMATED DATA SYSTEM IN OHIO, AND TO 2,435
OTHER COMPUTERIZED DATABASES ADMINISTERED FOR THE PURPOSE OF 2,436
MAKING CRIMINAL JUSTICE INFORMATION ACCESSIBLE TO STATE CRIMINAL 2,437
JUSTICE AGENCIES. 2,438
(B) There is hereby created in the division of securities 2,440
two positions to be known as control-bid attorneys, which shall 2,441
be held only by attorneys at law. The duties of these positions 2,442
are to investigate and report upon all matters relating to 2,443
control-bids and related matters and to represent the division in 2,444
the regulatory matters arising under the Ohio control-bid law. 2,445
(C) The attorney-inspector and each control-bid attorney 2,447
shall be paid at a rate not less than pay range 47 set out in 2,448
schedule E-2 of section 124.152 of the Revised Code, to be paid 2,449
55
as other operating expenses of the division. 2,450
Sec. 1707.391. When any securities have been sold in 2,459
reliance upon division (O) or, (Q), (W), (X), OR (Y) of section 2,462
1707.03 of the Revised Code, section 1707.08 of the Revised Code, 2,463
or any other section of Chapter 1707. of the Revised Code that 2,464
the division of securities may specify by rule, but such reliance 2,465
was improper because the required filings were not timely or 2,466
properly made due to excusable neglect, upon the effective date 2,467
of an application, made to the division and payment of the 2,468
required fee, if not already paid, plus a penalty fee equal to 2,469
such THE required fee, the sale of the securities shall be deemed 2,471
exempt, qualified, or registered, as though timely and properly 2,472
filed. Such application shall become effective upon the 2,473
expiration of fourteen days after the date of the filing in 2,474
question if prior thereto the division did not give notice to the 2,475
applicant that the application was denied based on a finding of 2,476
lack of excusable neglect. The division shall promptly adopt and 2,477
promulgate rules establishing provisions defining excusable 2,478
neglect and otherwise establishing reasonable standards for 2,479
determining excusable neglect. 2,480
The effectiveness of an application under this section does 2,482
not relieve anyone who has, other than for excusable neglect, 2,483
violated sections 1707.01 to 1707.45 of the Revised Code, or any 2,484
previous law in force at the time of sale, from prosecution 2,485
thereunder. 2,486
Sec. 1707.42. (A) Whoever, with intent to secure 2,495
financial gain to himself SELF, advises and procures any person 2,497
to purchase any security, and receives any commission or reward 2,498
for such THE advice or services without disclosing to the 2,499
purchaser the fact of his THE PERSON'S agency or his interest in 2,501
such sales, shall be liable to such THE purchaser for the amount 2,502
of such THE purchaser's damage thereby, upon tender of such THE 2,504
security to, and suit brought against, such THE adviser, by such 2,506
THE purchaser. No such suit shall be brought more than one year 2,507
56
subsequent to such THE purchase. 2,508
(B) WHOEVER ACTS AS AN INVESTMENT ADVISER OR INVESTMENT 2,510
ADVISER REPRESENTATIVE IN VIOLATION OF CHAPTER 1707. OF THE 2,511
REVISED CODE SHALL BE LIABLE FOR DAMAGES RESULTING FROM THE 2,512
VIOLATION IN AN ACTION AT LAW IN A COURT OF COMPETENT 2,513
JURISDICTION. DAMAGES MAY INCLUDE CONSIDERATION PAID FOR THE
ADVICE, ANY LOSS DUE TO THE ADVICE, AND ALL COURT COSTS, LESS THE 2,514
AMOUNT OF ANY INCOME RECEIVED FROM THE ADVICE. NO PERSON MAY 2,515
BRING AN ACTION UNDER THIS DIVISION MORE THAN FOUR YEARS AFTER 2,516
THE RENDERING OF INVESTMENT ADVICE OR TWO YEARS AFTER DISCOVERY 2,517
OF FACTS CONSTITUTING THE VIOLATION, WHICHEVER IS THE SHORTER 2,518
PERIOD.
Sec. 1707.431. For purposes of this section, the following 2,527
persons shall not be deemed to have effected, participated in, or 2,528
aided the seller in any way in making, a sale or contract of sale 2,529
in violation of sections 1707.01 to 1707.45 of the Revised Code: 2,530
(A) Any attorney, accountant, or engineer whose 2,532
performance is incidental to the practice of his THE PERSON'S 2,533
profession; 2,534
(B) Any person, OTHER THAN AN INVESTMENT ADVISER OR AN 2,536
INVESTMENT ADVISER REPRESENTATIVE, who brings any issuer together 2,537
with any potential investor, without receiving, directly or 2,538
indirectly, a commission, fee, or other remuneration based on the 2,539
sale of any securities by any such THE issuer to any such THE 2,540
investor. Remuneration received by such THE person solely for 2,542
the purpose of offsetting the reasonable out-of-pocket costs 2,544
incurred by the person shall not be deemed such a commission, 2,545
fee, or other remuneration.
Any person claiming exemption under this division for a 2,547
publicly advertised meeting shall file a notice with the division 2,548
of securities indicating an intent to cause or hold such a 2,549
meeting at least twenty-one days prior to the meeting. The 2,550
division may, upon receipt of such notice, issue an order denying 2,551
the availability of an exemption under this division not more 2,552
57
than fourteen days after receipt of such THE notice based on a 2,553
finding that the applicant is not entitled to the exemption. 2,554
Notwithstanding the notice described in this section, a failure 2,555
to file such a THE notice does not create a presumption that a 2,556
person was participating in or aiding in the making of a sale or 2,558
contract of sale in violation of this chapter. 2,559
(C) Any person whom the division exempts from this 2,561
provision by rule. 2,562
Sec. 1707.44. (A)(1) No person shall engage in any act or 2,571
practice that violates division (A), (B), or (C) of section 2,573
1707.14 of the Revised Code, and no salesperson shall sell 2,574
securities in this state without being licensed pursuant to 2,575
section 1707.16 of the Revised Code.
(2) NO PERSON SHALL ENGAGE IN ANY ACT OR PRACTICE THAT 2,577
VIOLATES DIVISION (A) OF SECTION 1707.141 OR SECTION 1707.161 OF 2,578
THE REVISED CODE.
(B) No person shall knowingly make or cause to be made any 2,580
false representation concerning a material and relevant fact, in 2,581
any oral statement or in any prospectus, circular, description, 2,582
application, or written statement, for any of the following 2,583
purposes: 2,584
(1) Complying with this chapter, in regard to registering 2,586
securities by description; 2,587
(2) Securing the qualification of any securities under 2,589
this chapter; 2,590
(3) Procuring the licensing of any dealer or, salesperson, 2,593
INVESTMENT ADVISER, OR INVESTMENT ADVISER REPRESENTATIVE under 2,595
this chapter;
(4) Selling any securities in this state; 2,597
(5) ADVISING FOR COMPENSATION, AS TO THE VALUE OF 2,599
SECURITIES OR AS TO THE ADVISABILITY OF INVESTING IN, PURCHASING, 2,600
OR SELLING SECURITIES.
(C) No person shall knowingly and intentionally sell, 2,602
cause to be sold, offer for sale, or cause to be offered for 2,603
58
sale, any security which comes under any of the following 2,604
descriptions: 2,605
(1) Is not exempt under section 1707.02 of the Revised 2,607
Code, nor the subject matter of one of the transactions exempted 2,608
in sections 1707.03, 1707.04, and 1707.34 of the Revised Code, 2,609
has not been registered by description, coordination, or 2,610
qualification, and is not the subject matter of a transaction 2,611
that has been registered by description; 2,612
(2) The prescribed fees for registering by description, by 2,614
coordination, or by qualification have not been paid in respect 2,615
to such security; 2,616
(3) Such person has been notified by the division, or has 2,618
knowledge of the notice, that the right to buy, sell, or deal in 2,620
such security has been suspended or revoked, or that the 2,621
registration by description, by coordination, or by qualification 2,622
under which it may be sold has been suspended or revoked; 2,623
(4) The offer or sale is accompanied by a statement that 2,625
the security offered or sold has been or is to be in any manner 2,626
indorsed by the division. 2,627
(D) No person who is an officer, director, or trustee of, 2,629
or a dealer for, any issuer, and who knows such issuer to be 2,630
insolvent in that the liabilities of such issuer exceed its 2,631
assets, shall sell any securities of or for any such issuer, 2,632
without disclosing the fact of the insolvency to the purchaser. 2,634
(E) No person with intent to aid in the sale of any 2,636
securities on behalf of the issuer, shall knowingly make any 2,637
representation not authorized by such issuer or at material 2,638
variance with statements and documents filed with the division by 2,639
such issuer. 2,640
(F) No person, with intent to deceive, shall sell, cause 2,642
to be sold, offer for sale, or cause to be offered for sale, any 2,643
securities of an insolvent issuer, with knowledge that such 2,644
issuer is insolvent in that the liabilities of such issuer exceed 2,645
its assets, taken at their fair market value. 2,646
59
(G) No person in selling securities shall knowingly engage 2,648
in any act or practice which is, in this chapter, declared 2,649
illegal, defined as fraudulent, or prohibited. 2,651
(H) No licensed dealer shall refuse to buy from, sell to, 2,653
or trade with any person because the person appears on a 2,654
blacklist issued by, or is being boycotted by, any foreign 2,655
corporate or governmental entity, nor sell any securities of or 2,656
for any issuer who is known in relation to the issuance or sale 2,657
of such securities to have engaged in such practices. 2,658
(I) No dealer in securities, knowing that the dealer's 2,660
liabilities exceed the reasonable value of the dealer's assets, 2,662
shall accept money or securities, except in payment of or as 2,663
security for an existing debt, from a customer who is ignorant of 2,664
the dealer's insolvency, and thereby cause the customer to lose 2,667
any part of the customer's securities or the value thereof, by 2,668
doing either of the following without the customer's consent: 2,669
(1) Pledging, selling, or otherwise disposing of such 2,671
securities, when the dealer has no lien on or any special 2,673
property in such securities;
(2) Pledging such securities for more than the amount due, 2,675
or otherwise disposing of such securities for the dealer's own 2,677
benefit, when the dealer has a lien or indebtedness on such 2,678
securities. 2,679
It is an affirmative defense to a charge under this 2,681
division that, at the time the securities involved were pledged, 2,682
sold, or disposed of, the dealer had in the dealer's possession 2,684
or control, and available for delivery, securities of the same 2,685
kinds and in amounts sufficient to satisfy all customers entitled 2,686
thereto, upon demand and tender of any amount due thereon. 2,687
(J) No person, with purpose to deceive, shall make, issue, 2,689
publish, or cause to be made, issued, or published any statement 2,690
or advertisement as to the value of securities, or as to alleged 2,691
facts affecting the value of securities, or as to the financial 2,692
condition of any issuer of securities, when the person knows that 2,695
60
such statement or advertisement is false in any material respect. 2,696
(K) No person, with purpose to deceive, shall make, 2,698
record, or publish or cause to be made, recorded, or published, a 2,699
report of any transaction in securities which is false in any 2,700
material respect. 2,701
(L) No dealer shall engage in any act that violates the 2,703
provisions of section 15(c) or 15(g) of the "Securities Exchange 2,704
Act of 1934," 48 Stat. 881, 15 U.S.C.A. 78o(c) or (g), or any 2,705
rule or regulation promulgated by the securities and exchange 2,706
commission thereunder. If, subsequent to October 11, 1994, 2,707
additional amendments to section 15(c) or 15(g) are adopted, or 2,708
additional rules or regulations are promulgated pursuant to such 2,709
sections, the division of securities shall, by rule, adopt the 2,710
amendments, rules, or regulations, unless the division finds that 2,711
the amendments, rules, or regulations are not necessary for the 2,712
protection of investors or in the public interest.
(M)(1) NO INVESTMENT ADVISER OR INVESTMENT ADVISER 2,714
REPRESENTATIVE SHALL DO ANY OF THE FOLLOWING: 2,715
(a) EMPLOY ANY DEVICE, SCHEME, OR ARTIFICE TO DEFRAUD ANY 2,718
PERSON;
(b) ENGAGE IN ANY ACT, PRACTICE, OR COURSE OF BUSINESS 2,720
THAT OPERATES OR WOULD OPERATE AS A FRAUD OR DECEIT UPON ANY 2,721
PERSON; 2,722
(c) ENGAGE IN DISHONEST OR UNETHICAL PRACTICES IN 2,724
VIOLATION OF RULES ADOPTED BY THE DIVISION. 2,725
(2) NO INVESTMENT ADVISER OR INVESTMENT ADVISER 2,727
REPRESENTATIVE LICENSED OR REQUIRED TO BE LICENSED UNDER THIS 2,728
CHAPTER SHALL TAKE OR HAVE CUSTODY OF ANY SECURITIES OR FUNDS OF 2,729
ANY PERSON, EXCEPT AS PROVIDED IN RULES ADOPTED BY THE DIVISION. 2,730
(3) IN THE SOLICITATION OF CLIENTS OR PROSPECTIVE CLIENTS, 2,732
NO PERSON SHALL MAKE ANY UNTRUE STATEMENT OF A MATERIAL FACT OR 2,733
OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE 2,734
STATEMENTS MADE NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES 2,735
UNDER WHICH THE STATEMENTS WERE MADE. 2,736
61
Sec. 1707.46. The principal executive officer of the 2,745
division of securities shall be the commissioner of securities, 2,746
who shall be appointed by the director of commerce. The 2,747
commissioner of securities shall enforce all the laws and 2,748
administrative rules enacted OR ADOPTED to regulate the sale of 2,749
bonds, stocks, and other securities and to prevent fraud in such 2,750
sales. THE COMMISSIONER ALSO SHALL ENFORCE ALL THE LAWS AND 2,751
ADMINISTRATIVE RULES ENACTED OR ADOPTED TO REGULATE INVESTMENT 2,752
ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES AND TO PREVENT 2,753
FRAUD IN THEIR ACTS, PRACTICES, AND TRANSACTIONS. 2,754
The commissioner shall be paid at a rate not less than pay 2,756
range 47 set out in schedule E-2 of section 124.152 of the 2,757
Revised Code, to be paid as other operating expenses of the 2,758
division.
Sec. 1707.48. The division of securities shall retain the 2,767
originals or copies of all documents filed with the division 2,768
pertaining to registration by description, qualification, or 2,769
coordination and all filings for claims of exemption for eight 2,770
years from the date of the initial filing. For purposes of this 2,771
section, the date of the initial filing shall be the date upon
which the first fee for such filing was received by the division. 2,772
The division shall retain all documents, testimony 2,774
transcripts, investigative reports, and investigative notes that 2,775
the division has compiled in original or copy form for five years 2,776
from the date of the alleged or suspected violation of any 2,777
provision of this chapter.
All other documents filed with the division shall be 2,779
retained in original or copy form for five years. 2,780
THE DIVISION MAY BY RULE EXEMPT ANY DOCUMENT OR RECORD FROM 2,782
THIS SECTION, PROVIDED THAT ANY DOCUMENT OR RECORD EXEMPTED IS 2,783
RETAINED BY THE DIVISION FOR AT LEAST AS LONG AS IT WOULD HAVE 2,784
BEEN RETAINED HAD IT BEEN SUBJECT TO THIS SECTION. 2,785
Sec. 1707.99. Whoever commits any act described in 2,794
division (A) of section 1707.042 or section 1707.44 of the 2,796
62
Revised Code is guilty of a violation of sections 1707.01 to 2,797
1707.45 of the Revised Code and THE FOLLOWING APPLY TO THE 2,798
OFFENDER:
(A) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,801
THE OFFENSE OR THE LOSS TO THE VICTIM IS LESS THAN FIVE HUNDRED 2,802
DOLLARS, THE OFFENDER is guilty of a felony of the fifth degree, 2,805
and the court may impose upon the offender an additional fine of 2,808
not more than two thousand five hundred dollars.
(B) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,811
THE OFFENSE OR THE LOSS TO THE VICTIM IS FIVE HUNDRED DOLLARS OR 2,812
MORE BUT LESS THAN FIVE THOUSAND DOLLARS, THE OFFENDER IS GUILTY 2,813
OF A FELONY OF THE FOURTH DEGREE, AND THE COURT MAY IMPOSE UPON 2,814
THE OFFENDER AN ADDITIONAL FINE OF NOT MORE THAN FIVE THOUSAND 2,815
DOLLARS. 2,816
(C) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,819
THE OFFENSE OR THE LOSS TO THE VICTIM IS FIVE THOUSAND DOLLARS OR 2,820
MORE BUT LESS THAN TWENTY-FIVE THOUSAND DOLLARS, THE OFFENDER IS 2,821
GUILTY OF A FELONY OF THE THIRD DEGREE, AND THE COURT MAY IMPOSE 2,822
UPON THE OFFENDER AN ADDITIONAL FINE OF NOT MORE THAN TEN 2,823
THOUSAND DOLLARS.
(D) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,826
THE OFFENSE OR THE LOSS TO THE VICTIM IS TWENTY-FIVE THOUSAND 2,827
DOLLARS OR MORE BUT LESS THAN ONE HUNDRED THOUSAND DOLLARS, THE 2,828
OFFENDER IS GUILTY OF A FELONY OF THE SECOND DEGREE, AND THE 2,829
COURT MAY IMPOSE UPON THE OFFENDER AN ADDITIONAL FINE OF NOT MORE 2,830
THAN FIFTEEN THOUSAND DOLLARS. 2,831
(E) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,834
THE OFFENSE OR THE LOSS TO THE VICTIM IS ONE HUNDRED THOUSAND 2,835
DOLLARS OR MORE, THE OFFENDER IS GUILTY OF A FELONY OF THE FIRST 2,836
DEGREE, AND THE COURT MAY IMPOSE UPON THE OFFENDER AN ADDITIONAL 2,837
FINE OF NOT MORE THAN TWENTY THOUSAND DOLLARS. 2,838
Section 2. That existing sections 1707.01, 1707.03, 2,840
1707.11, 1707.14, 1707.17, 1707.18, 1707.19, 1707.20, 1707.22, 2,842
1707.23, 1707.25, 1707.27, 1707.36, 1707.391, 1707.42, 1707.431,
63
1707.44, 1707.46, 1707.48, and 1707.99 of the Revised Code are 2,844
hereby repealed.
Section 3. It is the intent of the General Assembly that 2,846
the Commissioner of Securities take action reasonably necessary 2,847
to provide for the timely and orderly licensure of investment 2,848
advisers and investment adviser representatives consistent with 2,849
sections 1707.141, 1707.161, and 1707.17 of the Revised Code. 2,850