As Reported by the House Financial Institutions Committee 1
122nd General Assembly 4
Regular Session Sub. H. B. No. 695 5
1997-1998 6
REPRESENTATIVES STAPLETON-THOMAS-WILLAMOWSKI-HARRIS- 8
GARCIA-OLMAN-VAN VYVEN-SALERNO-TAYLOR-TIBERI- 9
EVANS-HOUSEHOLDER-JACOBSON-MYERS 10
_________________________________________________________________ 11
A B I L L
To amend sections 1707.01, 1707.03, 1707.11, 13
1707.14, 1707.17, 1707.18, 1707.19, 1707.20, 14
1707.22, 1707.23, 1707.25, 1707.27, 1707.36, 15
1707.391, 1707.42, 1707.431, 1707.44, 1707.46, 16
1707.48, and 1707.99, and to enact sections 18
1707.092, 1707.093, 1707.141, 1707.151, and 19
1707.161 of the Revised Code to modify the 21
Securities Law, including modifications to the 22
list of securities transactions exempt from 23
registration, provisions for notice filings by 25
investment companies and in connection with 26
covered security offerings, provisions for 27
electronic filing, provisions for the 29
registration and regulation of investment 30
advisers and investment adviser representatives, 31
provisions applying to investigation of alleged 32
violations of the Securities Law by the Office of 34
the Attorney-Inspector and increasing the 35
penalties that apply to violations of the 36
Securities Law, and other provisions for related 39
changes. 40
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 42
Section 1. That sections 1707.01, 1707.03, 1707.11, 44
1707.14, 1707.17, 1707.18, 1707.19, 1707.20, 1707.22, 1707.23, 46
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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, 49
1707.093, 1707.141, 1707.151, and 1707.161 of the Revised Code be 50
enacted to read as follows: 51
Sec. 1707.01. As used in this chapter: 60
(A) Whenever the context requires it, "division" or 62
"division of securities" may be read as "director of commerce" or 63
as "commissioner of securities." 64
(B) "Security" means any certificate or instrument that 66
represents title to or interest in, or is secured by any lien or 67
charge upon, the capital, assets, profits, property, or credit of 68
any person or of any public or governmental body, subdivision, or 69
agency. It includes shares of stock, certificates for shares of 70
stock, membership interests in limited liability companies, 71
voting-trust certificates, warrants and options to purchase 72
securities, subscription rights, interim receipts, interim 73
certificates, promissory notes, all forms of commercial paper, 74
evidences of indebtedness, bonds, debentures, land trust 75
certificates, fee certificates, leasehold certificates, syndicate 76
certificates, endowment certificates, certificates or written 77
instruments in or under profit-sharing or participation 78
agreements or in or under oil, gas, or mining leases, or 79
certificates or written instruments of any interest in or under 80
the same, receipts evidencing preorganization or reorganization 81
subscriptions, preorganization certificates, reorganization 82
certificates, certificates evidencing an interest in any trust or 83
pretended trust, any investment contract, any instrument 84
evidencing a promise or an agreement to pay money, warehouse 85
receipts for intoxicating liquor, and the currency of any 86
government other than those of the United States and Canada, but 87
sections 1707.01 to 1707.45 of the Revised Code do not apply to 88
bond investment companies or to the sale of real estate. 89
(C)(1) "Sale" has the full meaning of "sale" as applied by 91
or accepted in courts of law or equity, and includes every 92
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disposition, or attempt to dispose, of a security or of an 93
interest in a security. "Sale" also includes a contract to sell, 94
an exchange, an attempt to sell, an option of sale, a 95
solicitation of a sale, a solicitation of an offer to buy, a 96
subscription, or an offer to sell, directly or indirectly, by 97
agent, circular, pamphlet, advertisement, or otherwise. 98
(2) "Sell" means any act by which a sale is made. 100
(3) The use of advertisements, circulars, or pamphlets in 102
connection with the sale of securities in this state exclusively 103
to the purchasers specified in division (D) of section 1707.03 of 104
the Revised Code is not a sale when the advertisements, 105
circulars, and pamphlets describing and offering those securities 106
bear a readily legible legend in substance as follows: "This 107
offer is made on behalf of dealers licensed under sections 108
1707.01 to 1707.45 of the Revised Code, and is confined in this 109
state exclusively to institutional investors and licensed 110
dealers." 111
(4) The offering of securities by any person in 113
conjunction with a licensed dealer by use of advertisement, 114
circular, or pamphlet is not a sale if that person does not 115
otherwise attempt to sell securities in this state. 116
(5) Any security given with, or as a bonus on account of, 118
any purchase of securities is conclusively presumed to constitute 119
a part of the subject of that purchase and has been "sold." 120
(6) "Sale" by an owner, pledgee, or mortgagee, or by a 122
person acting in a representative capacity, includes sale on 123
behalf of such party by an agent, including a licensed dealer or 124
salesman SALESPERSON. 125
(D) "Person"," EXCEPT AS OTHERWISE PROVIDED IN THIS 127
CHAPTER, means a natural person, firm, partnership, limited 129
partnership, partnership association, syndicate, joint-stock 130
company, unincorporated association, trust or trustee except 131
where the trust was created or the trustee designated by law or 132
judicial authority or by a will, and a corporation or limited 133
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liability company organized under the laws of any state, any 134
foreign government, or any political subdivision of a state or 135
foreign government.
(E)(1) "Dealer," except as otherwise provided in this 137
chapter, means every person, other than a salesman SALESPERSON, 138
who engages or professes to engage, in this state, for either all 139
or part of the person's time, directly or indirectly, either in 140
the business of the sale of securities for the person's own 141
account, or in the business of the purchase or sale of securities 142
for the account of others in the reasonable expectation of 143
receiving a commission, fee, or other remuneration as a result of 144
engaging in the purchase and sale of securities. "Dealer" does 145
not mean any of the following:
(a) Any issuer, including any officer, director, employee, 147
or trustee of, OR MEMBER OR MANAGER OF, or partner in, or any 148
general partner of, any issuer, that sells, offers for sale, or 150
does any act in furtherance of the sale of a security that 151
represents an economic interest in that issuer, provided no 152
commission, fee, or other similar remuneration is paid to or 153
received by the issuer for the sale; 154
(b) Any licensed attorney, public accountant, or firm of 156
such attorneys or accountants, whose activities are incidental to 157
the practice of the attorney's, accountant's or firm's 158
profession;
(c) Any person that, for the account of others, engages in 160
the purchase or sale of securities that are issued and 161
outstanding before such purchase and sale, if a majority or more 162
of the equity interest of an issuer is sold in that transaction, 163
and if, in the case of a corporation, the securities sold in that 164
transaction represent a majority or more of the voting power of 165
the corporation in the election of directors; 166
(d) Any person that brings an issuer together with a 168
potential investor and whose compensation is not directly or 169
indirectly based on the sale of any securities by the issuer to 170
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the investor; 171
(e) Any bank, savings and loan association, savings bank, 173
or credit union chartered under the laws of the United States or 174
any state thereof, provided that all transactions are consummated 175
by or through a person licensed pursuant to section 1707.14 of 176
the Revised Code; 177
(f) Any person that the division of securities by rule 179
exempts from the definition of "dealer" under division (E)(1) of 180
this section. 181
(2) "Licensed dealer" means a dealer licensed under this 184
chapter.
(F)(1) "Salesman" OR "SALESPERSON" means every natural 186
person, other than a dealer, employed, authorized, or appointed 189
by a dealer to sell securities within this state. 190
(2) The general partners of a partnership, and the 192
executive officers of a corporation or unincorporated 193
association, licensed as a dealer are not salesmen SALESPERSONS 194
within the meaning of this definition, nor are such clerical or 195
other employees of an issuer or dealer as are employed for work 196
to which the sale of securities is secondary and incidental; but 197
the division of securities may require a license from any such 198
partner, executive officer, or employee if it determines that 199
protection of the public necessitates the licensing. 200
(3) "Licensed salesman SALESPERSON" means a salesman 202
SALESPERSON licensed under this chapter. 203
(G) "Issuer" means every person who has issued, proposes 205
to issue, or issues any security. 206
(H) "Director" means each director or trustee of a 208
corporation, each trustee of a trust, each general partner of a 209
partnership, except a partnership association, each manager of a 210
partnership association, and any person vested with managerial or 211
directory power over an issuer not having a board of directors or 212
trustees. 213
(I) "Incorporator" means any incorporator of a corporation 215
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and any organizer of, or any person participating, other than in 216
a representative or professional capacity, in the organization of 217
an unincorporated issuer. 218
(J) "Fraud," "fraudulent acts," "fraudulent practices," or 220
"fraudulent transactions" means anything recognized on or after 221
July 22, 1929, as such in courts of law or equity; any device, 222
scheme, or artifice to defraud or to obtain money or property by 223
means of any false pretense, representation, or promise; any 224
fictitious or pretended purchase or sale of securities; and any 225
act, practice, transaction, or course of business relating to the 226
sale of securities that is fraudulent or that has operated or 227
would operate as a fraud upon the purchaser. 228
(K) Except as otherwise specifically provided, whenever 230
any classification or computation is based upon "par value," as 231
applied to securities without par value, the average of the 232
aggregate consideration received or to be received by the issuer 233
for each class of those securities shall be used as the basis for 234
that classification or computation. 235
(L)(1) "Intangible property" means patents, copyrights, 237
secret processes, formulas, services, good will, promotion and 238
organization fees and expenses, trademarks, trade brands, trade 239
names, licenses, franchises, any other assets treated as 240
intangible according to generally accepted accounting principles, 241
and securities, accounts receivable, or contract rights having no 242
readily determinable value. 243
(2) "Tangible property" means all property other than 245
intangible property and includes securities, accounts receivable, 246
and contract rights, when the securities, accounts receivable, or 247
contract rights have a readily determinable value. 248
(M) "Public utilities" means those utilities defined in 250
sections 4905.02, 4905.03, 4907.02, and 4907.03 of the Revised 251
Code; in the case of a foreign corporation, it means those 252
utilities defined as public utilities by the laws of its 253
domicile; and in the case of any other foreign issuer, it means 254
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those utilities defined as public utilities by the laws of the 255
situs of its principal place of business. The term always 256
includes railroads whether or not they are so defined as public 257
utilities. 258
(N) "State" means any state of the United States, any 260
territory or possession of the United States, the District of 261
Columbia, and any province of Canada. 262
(O) "Bank" means any bank, trust company, savings and loan 264
association, or savings bank, OR CREDIT UNION that is 265
incorporated or organized under the laws of the United States, 267
any state of the United States, Canada, or any province of Canada 268
and that is subject to regulation or supervision by that country, 269
state, or province.
(P) "Include," when used in a definition, does not exclude 271
other things or persons otherwise within the meaning of the term 272
defined. 273
(Q)(1) "Registration by description" means that the 275
requirements of section 1707.08 of the Revised Code have been 276
complied with. 277
(2) "Registration by qualification" means that the 279
requirements of sections 1707.09 and 1707.11 of the Revised Code 280
have been complied with. 281
(3) "Registration by coordination" means that there has 283
been compliance with section 1707.091 of the Revised Code. 284
Reference in this chapter to registration by qualification also 285
shall be deemed to include registration by coordination unless 286
the context otherwise indicates. 287
(R) "Intoxicating liquor" includes all liquids and 289
compounds that contain more than three and two-tenths per cent of 290
alcohol by weight and are fit for use for beverage purposes. 291
(S) "Institutional investor" means any corporation, bank, 293
insurance company, pension fund or pension fund trust, employees' 294
profit-sharing fund or employees' profit-sharing trust, any 295
association engaged, as a substantial part of its business or 296
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operations, in purchasing or holding securities, or any trust in 297
respect of which a bank is trustee or cotrustee. "Institutional 298
investor" does not include any business entity formed for the 299
primary purpose of evading sections 1707.01 to 1707.45 of the 300
Revised Code. 301
(T) "Securities Act of 1933," 84 48 Stat. 74, 15 U.S.C. 303
77a-77aa 77a, "Securities Exchange Act of 1934," 48 Stat. 881, 15 305
U.S.C. 78a-78jj, and "Internal Revenue Code of 1954 1986," 68a 307
100 Stat. 3 2085, 26 U.S.C. 1, "INVESTMENT ADVISERS ACT OF 1940," 309
54 STAT. 847, 15 U.S.C. 80b, AND "INVESTMENT COMPANY ACT OF 311
1940," 54 STAT. 789, 15 U.S.C. 80a mean the federal statutes of 313
those names as amended before or after July 20, 1978 THE 314
EFFECTIVE DATE OF THIS AMENDMENT. 315
(U) "Securities and exchange commission" means the 317
securities and exchange commission established by the Securities 318
Exchange Act of 1934. 319
(V)(1) "Control bid" means the purchase of or offer to 321
purchase any equity security of a subject company from a resident 322
of this state if either of the following applies: 323
(a) After the purchase of that security, the offeror would 325
be directly or indirectly the beneficial owner of more than ten 326
per cent of any class of the issued and outstanding equity 327
securities of the issuer. 328
(b) The offeror is the subject company, there is a pending 330
control bid by a person other than the issuer, and the number of 331
the issued and outstanding shares of the subject company would be 332
reduced by more than ten per cent. 333
(2) For purposes of division (V)(1) of this section, 335
"control bid" does not include any of the following: 336
(a) A bid made by a dealer for the dealer's own account in 338
the ordinary course of business of buying and selling securities; 339
(b) An offer to acquire any equity security solely in 341
exchange for any other security, or the acquisition of any equity 342
security pursuant to an offer, for the sole account of the 343
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offeror, in good faith and not for the purpose of avoiding the 344
provisions of this chapter, and not involving any public offering 345
of the other security within the meaning of Section 4 of Title I 346
of the "Securities Act of 1933," 48 Stat. 77, 15 U.S.C.A. 77d(2), 347
as amended; 348
(c) Any other offer to acquire any equity security, or the 350
acquisition of any equity security pursuant to an offer, for the 351
sole account of the offeror, from not more than fifty persons, in 352
good faith and not for the purpose of avoiding the provisions of 353
this chapter. 354
(W) "Offeror" means a person who makes, or in any way 356
participates or aids in making, a control bid and includes 357
persons acting jointly or in concert, or who intend to exercise 358
jointly or in concert any voting rights attached to the 359
securities for which the control bid is made and also includes 360
any subject company making a control bid for its own securities. 361
(X)(1) "Investment advisor ADVISER" means any person who, 364
for compensation, engages in the business of advising others, 365
either directly or through publications or writings, as to the 366
value of securities or as to the advisability of investing in, 367
purchasing, or selling securities, or who, for compensation and 368
as a part of regular business, issues or promulgates analyses or 369
reports concerning securities. "
(2) "Investment advisor ADVISER" does not mean any of the 372
following:
(1)(a) Any licensed attorney, public accountant, or firm 375
of such attorneys or accountants, engineer, any bank, savings and 376
loan association, or savings bank, or any director, officer, or 377
employee of a bank, savings and loan association, or savings bank 379
OR TEACHER, whose activities are PERFORMANCE OF INVESTMENT 380
ADVISORY SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS SECTION IS 381
SOLELY incidental to the practice of the attorney's, 382
accountant's, engineer's, director's, officer's, employee's, 384
firm's, bank's, or association's TEACHER'S profession or 385
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occupation;
(2)(b) A publisher or bona fide employee of any bona fide 388
newspaper, news magazine, or business or financial publication of 389
general, regular, and paid REGULAR circulation; 390
(3) Any issuer, including any officer, director, employee, 392
or partner in, or trustee of, any issuer whose performance of 393
these services occurs in furtherance of the sale of a security 394
that represents an economic interest in that issuer, provided 395
that no commission, fee, or remuneration is paid to or received 396
by such person for such advisory services 397
(c) A PERSON WHO ACTS SOLELY AS AN INVESTMENT ADVISER 399
REPRESENTATIVE; 400
(d) A BANK HOLDING COMPANY, AS DEFINED IN THE "BANK 403
HOLDING COMPANY ACT OF 1956," 70 STAT. 133, 12 U.S.C. 1841, THAT 404
IS NOT AN INVESTMENT COMPANY; 405
(e) A BANK, OR ANY RECEIVER, CONSERVATOR, OR OTHER 407
LIQUIDATING AGENT OF A BANK; 408
(f) ANY LICENSED DEALER OR LICENSED SALESPERSON WHOSE 410
PERFORMANCE OF INVESTMENT ADVISORY SERVICES DESCRIBED IN DIVISION 411
(X)(1) OF THIS SECTION IS SOLELY INCIDENTAL TO THE CONDUCT OF THE 412
DEALER'S OR SALESPERSON'S BUSINESS AS A LICENSED DEALER OR 413
LICENSED SALESPERSON AND WHO RECEIVES NO SPECIAL COMPENSATION FOR 414
THE SERVICES;
(g) ANY PERSON, THE ADVICE, ANALYSES, OR REPORTS OF WHICH 416
DO NOT RELATE TO SECURITIES OTHER THAN SECURITIES THAT ARE DIRECT 417
OBLIGATIONS OF, OR OBLIGATIONS GUARANTEED AS TO PRINCIPAL OR 418
INTEREST BY, THE UNITED STATES, OR SECURITIES ISSUED OR 419
GUARANTEED BY CORPORATIONS IN WHICH THE UNITED STATES HAS A 420
DIRECT OR INDIRECT INTEREST, AND THAT HAVE BEEN DESIGNATED BY THE 421
SECRETARY OF THE TREASURY AS EXEMPT SECURITIES AS DEFINED IN THE 422
"SECURITIES EXCHANGE ACT OF 1934," 48 STAT. 881, 15 U.S.C. 78c; 424
(h) ANY OTHER PERSON THAT THE DIVISION DESIGNATES BY RULE, 426
IF THE DIVISION FINDS THAT THE DESIGNATION IS NECESSARY OR 427
APPROPRIATE IN THE PUBLIC INTEREST OR FOR THE PROTECTION OF 428
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INVESTORS OR CLIENTS AND CONSISTENT WITH THE PURPOSES FAIRLY 429
INTENDED BY THE POLICY AND PROVISIONS OF THIS CHAPTER.
(Y)(1) "Subject company" means an issuer that satisfies 431
both of the following: 432
(a) Its principal place of business or its principal 434
executive office is located in this state, or it owns or controls 435
assets located within this state that have a fair market value of 436
at least one million dollars. 437
(b) More than ten per cent of its beneficial or record 439
equity security holders are resident in this state, more than ten 440
per cent of its equity securities are owned beneficially or of 441
record by residents in this state, or more than one thousand of 442
its beneficial or record equity security holders are resident in 443
this state. 444
(2) The division of securities may adopt rules to 446
establish more specific application of the provisions set forth 447
in division (Y)(1) of this section. Notwithstanding the 448
provisions set forth in division (Y)(1) of this section and any 449
rules adopted under this division, the division, by rule or in an 450
adjudicatory proceeding, may make a determination that an issuer 451
does not constitute a "subject company" under division (Y)(1) of 452
this section if appropriate review of control bids involving the 453
issuer is to be made by any regulatory authority of another 454
jurisdiction. 455
(Z) "Beneficial owner" includes any person who directly or 457
indirectly through any contract, arrangement, understanding, or 458
relationship has or shares, or otherwise has or shares, the power 459
to vote or direct the voting of a security or the power to 460
dispose of, or direct the disposition of, the security. 461
"Beneficial ownership" includes the right, exercisable within 462
sixty days, to acquire any security through the exercise of any 463
option, warrant, or right, the conversion of any convertible 464
security, or otherwise. Any security subject to any such option, 465
warrant, right, or conversion privilege held by any person shall 466
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be deemed to be outstanding for the purpose of computing the 467
percentage of outstanding securities of the class owned by that 468
person, but shall not be deemed to be outstanding for the purpose 469
of computing the percentage of the class owned by any other 470
person. A person shall be deemed the beneficial owner of any 471
security beneficially owned by any relative or spouse or relative 472
of the spouse residing in the home of that person, any trust or 473
estate in which that person owns ten per cent or more of the 474
total beneficial interest or serves as trustee or executor, any 475
corporation or entity in which that person owns ten per cent or 476
more of the equity, and any affiliate or associate of that 477
person. 478
(AA) "Offeree" means the beneficial or record owner of any 480
security that an offeror acquires or offers to acquire in 481
connection with a control bid. 482
(BB) "Equity security" means any share or similar 484
security, or any security convertible into any such security, or 485
carrying any warrant or right to subscribe to or purchase any 486
such security, or any such warrant or right, or any other 487
security that, for the protection of security holders, is treated 488
as an equity security pursuant to rules of the division of 489
securities. 490
(CC) "Investment company" has the same meaning as in 492
section 3(A) of the "Investment Company Act of 1940," 54 Stat. 493
789, 15 U.S.C. 80a-1 to 80a-52. 494
(DD) "Penny stock" has the same meaning as in section 497
3(A)(51) of the "Securities Exchange Act of 1934," 48 Stat. 881, 498
15 U.S.C. 78a-78jj, and the rules, regulations, and orders issued 499
pursuant to that section. 500
(EE) "Going concern transaction" has the same meaning 503
given that term under the rules or regulations on the securities 504
and exchange commission issued pursuant to section 13(c) of the 505
"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C.
78a-78jj. 506
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(FF) "Person acting on behalf of an issuer" means an 509
officer, director, or employee of an issuer.
(GG) "Blank check company," "roll-up transaction," 512
"executive officer of an entity," and "direct participation
program" have the same meanings given those terms by rule or 513
regulation of the securities and exchange commission. 514
(HH) "Forward-looking statement" means any of the 516
following:
(1) A statement containing a projection of revenues, 518
income including income loss, earnings per share including 519
earnings loss per share, capital expenditures, dividends, capital 520
structure, or other financial items;
(2) A statement of the plans and objectives of the 522
management of the issuer for future operations, including plans 523
or objectives relating to the products or services of the issuer; 524
(3) A statement of future economic performance, including 526
any statement of that nature contained in a discussion and 527
analysis of financial conditions by the management or in the 528
results of operations included pursuant to the rules and 529
regulations of the securities and exchange commission;
(4) Any disclosed statement of the assumptions underlying 531
or relating to a statement described in division (B)(1), (2), or 533
(3) of section 1707.437 of the Revised Code; 534
(5) Any report issued by an outside reviewer retained by 536
an issuer to the extent that the report relates to a 537
forward-looking statement made by the issuer; 538
(6) A statement containing a projection or estimate of any 540
other items that may be specified by rule or regulation of the 541
securities and exchange commission. 542
(II)(1) "INVESTMENT ADVISER REPRESENTATIVE" MEANS A 544
SUPERVISED PERSON OF AN INVESTMENT ADVISER, PROVIDED THAT MORE 545
THAN TEN PER CENT OF THE SUPERVISED PERSON'S CLIENTS ARE NATURAL 546
PERSONS OTHER THAN EXCEPTED PERSONS DEFINED IN DIVISION (KK) OF 547
THIS SECTION. "INVESTMENT ADVISER REPRESENTATIVE" DOES NOT MEAN 548
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ANY OF THE FOLLOWING:
(a) A SUPERVISED PERSON THAT DOES NOT ON A REGULAR BASIS 550
SOLICIT, MEET WITH, OR OTHERWISE COMMUNICATE WITH CLIENTS OF THE 551
INVESTMENT ADVISER;
(b) A SUPERVISED PERSON THAT PROVIDES ONLY INVESTMENT 553
ADVISORY SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS SECTION BY 554
MEANS OF WRITTEN MATERIALS OR ORAL STATEMENTS THAT DO NOT PURPORT 555
TO MEET THE OBJECTIVES OR NEEDS OF SPECIFIC INDIVIDUALS OR 556
ACCOUNTS;
(c) ANY OTHER PERSON THAT THE DIVISION DESIGNATES BY RULE, 559
IF THE DIVISION FINDS THAT THE DESIGNATION IS NECESSARY OR 560
APPROPRIATE IN THE PUBLIC INTEREST OR FOR THE PROTECTION OF
INVESTORS OR CLIENTS AND IS CONSISTENT WITH THE PROVISIONS FAIRLY 562
INTENDED BY THE POLICY AND PROVISIONS OF THIS CHAPTER. 563
(2) CLIENTS WHO ARE NOT RESIDENTS OF THE UNITED STATES 565
NEED NOT BE INCLUDED IN THE CALCULATION OF THE PERCENTAGE OF 566
REQUIRED CLIENTS UNDER DIVISION (II)(1) OF THIS SECTION. 567
(JJ) "SUPERVISED PERSON" MEANS ANY OF THE FOLLOWING: 569
(1) A PARTNER, OFFICER, OR DIRECTOR OF AN INVESTMENT 571
ADVISER, OR OTHER PERSON OCCUPYING A SIMILAR STATUS OR PERFORMING 572
SIMILAR FUNCTIONS WITH RESPECT TO AN INVESTMENT ADVISER; 573
(2) AN EMPLOYEE OF AN INVESTMENT ADVISER; 575
(3) A PERSON WHO PROVIDES INVESTMENT ADVISORY SERVICES 577
DESCRIBED IN DIVISION (X)(1) OF THIS SECTION ON BEHALF OF THE 578
INVESTMENT ADVISER AND IS SUBJECT TO THE SUPERVISION AND CONTROL 579
OF THE INVESTMENT ADVISER.
(KK) "EXCEPTED PERSON" MEANS A NATURAL PERSON TO WHOM 581
EITHER OF THE FOLLOWING APPLIES: 582
(1) IMMEDIATELY AFTER ENTERING INTO THE INVESTMENT 584
ADVISORY CONTRACT WITH THE INVESTMENT ADVISER, THE PERSON HAS AT 585
LEAST FIVE HUNDRED THOUSAND DOLLARS UNDER MANAGEMENT WITH THE 586
INVESTMENT ADVISER.
(2) THE INVESTMENT ADVISER REASONABLY BELIEVES, 588
IMMEDIATELY PRIOR TO ENTERING INTO AN ADVISORY CONTRACT WITH THE 589
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PERSON, THE PERSON HAS A NET WORTH, TOGETHER WITH ASSETS HELD 590
JOINTLY WITH A SPOUSE, OF MORE THAN ONE MILLION DOLLARS. 591
Sec. 1707.03. (A) As used in this section, "exempt" means 600
that, except in the case of securities the right to buy, sell, or 601
deal in which has been suspended or revoked under an existing 602
order of the division of securities under section 1707.13 of the 603
Revised Code or under a cease and desist order under division (H) 604
of section 1707.23 of the Revised Code, transactions in 605
securities may be carried on and completed without compliance 606
with sections 1707.08 to 1707.11 of the Revised Code. 607
(B) A sale of securities made by or on behalf of a bona 609
fide owner, neither the issuer nor a dealer, is exempt if the 610
sale is made in good faith and not for the purpose of avoiding 611
this chapter and is not made in the course of repeated and 612
successive transactions of a similar character. Any sale of 613
securities over a stock exchange that is lawfully conducted in 614
this state and regularly open for public patronage and that has 615
been established and operated for a period of at least five years 616
prior to the sale at a commission not exceeding the commission 617
regularly charged in such transactions also is exempt. 618
(C) The sale of securities by executors, administrators, 620
receivers, trustees, or anyone acting in a fiduciary capacity is 621
exempt, where such relationship was created by law, by a will, or 622
by judicial authority, and where such sales are subject to 623
approval by, or are made in pursuance to authority granted by, 624
any court of competent jurisdiction or are otherwise authorized 625
and lawfully made by such fiduciary. 626
(D) A sale to the issuer, to a dealer, or to an 628
institutional investor is exempt. 629
(E) A sale in good faith, and not for the purpose of 631
avoiding this chapter, by a pledgee of a security pledged for a 632
bona fide debt is exempt. 633
(F) The sale at public auction by a corporation of shares 635
of its stock because of delinquency in payment for the shares is 636
16
exempt. 637
(G)(1) The giving of any conversion right with, or on 639
account of the purchase of, any security that is exempt, is the 640
subject matter of an exempt transaction, has been registered by 641
description, by coordination, or by qualification, or is the 642
subject matter of a transaction that has been registered by 643
description is exempt. 644
(2) The giving of any subscription right, warrant, or 646
option to purchase a security or right to receive a security upon 647
exchange, which security is exempt at the time the right, 648
warrant, or option to purchase or right to receive is given, is 649
the subject matter of an exempt transaction, is registered by 650
description, by coordination, or by qualification, or is the 651
subject matter of a transaction that has been registered by 652
description is exempt. 653
(3) The giving of any subscription right or any warrant or 655
option to purchase a security, which right, warrant, or option 656
expressly provides that it shall not be exercisable except for a 657
security that at the time of the exercise is exempt, is the 658
subject matter of an exempt transaction, is registered by 659
description, by coordination, or by qualification, or at such 660
time is the subject matter of a transaction that has been 661
registered by description is exempt. 662
(H) The sale of notes, bonds, or other evidences of 664
indebtedness that are secured by a mortgage lien upon real 665
estate, leasehold estate other than oil, gas, or mining 666
leasehold, or tangible personal property, or which evidence of 667
indebtedness is due under or based upon a conditional-sale 668
contract, if all such notes, bonds, or other evidences of 669
indebtedness are sold to a single purchaser at a single sale, is 670
exempt. 671
(I) The delivery of securities by the issuer on the 673
exercise of conversion rights, the sale of securities by the 674
issuer on exercise of subscription rights or of warrants or 675
17
options to purchase securities, the delivery of voting-trust 676
certificates for securities deposited under a voting-trust 677
agreement, the delivery of deposited securities on surrender of 678
voting-trust certificates, and the delivery of final certificates 679
on surrender of interim certificates are exempt; but the sale of 680
securities on exercise of subscription rights, warrants, or 681
options is not an exempt transaction unless those rights, 682
warrants, or options when granted were the subject matter of an 683
exempt transaction under division (G) of this section or were 684
registered by description, by coordination, or by qualification. 685
(J) The sale of securities by a bank, savings and loan 687
association, savings bank, or credit union organized under the 688
laws of the United States or of this state is exempt if at a 689
profit to that seller of not more than two per cent of the total 690
sale price of the securities. 691
(K)(1) The distribution by a corporation of its securities 693
to its security holders as a share dividend or other distribution 694
out of earnings or surplus is exempt. 695
(2) The exchange or distribution by the issuer of any of 697
its securities or of the securities of any of the issuer's wholly 698
owned subsidiaries exclusively with or to its existing security 699
holders, if no commission or other remuneration is given directly 700
or indirectly for soliciting the exchange, is exempt. 701
(3) The sale of preorganization subscriptions for shares 703
of stock of a corporation prior to the incorporation of the 704
corporation is exempt, when the sale is evidenced by a written 705
agreement, no remuneration is given, or promised, directly or 706
indirectly, for or in connection with the sale of those 707
securities, and no consideration is received, directly or 708
indirectly, by any person from the purchasers of those securities 709
until registration by qualification, by coordination, or by 710
description of those securities is made under this chapter. 711
(L) The issuance of securities in exchange for one or more 713
bona fide outstanding securities, claims, or property interests, 714
18
not including securities sold for a consideration payable in 715
whole or in part in cash, under a plan of reorganization, 716
recapitalization, or refinancing approved by a court pursuant to 717
the Bankruptcy Act of the United States or to any other federal 718
act giving any federal court jurisdiction over such plan of 719
reorganization, or under a plan of reorganization approved by a 720
court of competent jurisdiction of any state of the United States 721
is exempt. As used in this division, "reorganization," 722
"recapitalization," and "refinancing" have the same meanings as 723
in section 1707.04 of the Revised Code. 724
(M) A sale by a licensed dealer, acting either as 726
principal or as agent, of securities issued and outstanding 727
before the sale is exempt, unless the sale is of one or more of 728
the following: 729
(1) Securities constituting the whole or a part of an 731
unsold allotment to or subscription by a dealer as an underwriter 732
or other participant in the distribution of those securities by 733
the issuer, whether that distribution is direct or through an 734
underwriter, provided that, if the issuer is such by reason of 735
owning one-fourth or more of those securities, such THE dealer 736
has knowledge of such THIS fact or reasonable cause to believe 738
such THIS fact; 739
(2) Any class of shares issued by a corporation when the 741
number of beneficial owners of that class is less than 742
twenty-five, with the record owner of securities being deemed the 743
beneficial owner for this purpose, in the absence of actual 744
knowledge to the contrary; 745
(3) Securities that within one year were purchased outside 747
this state or within one year were transported into this state, 748
if the dealer has knowledge or reasonable cause to believe, 749
before the sale of those securities, that within one year they 750
were purchased outside this state or within one year were 751
transported into this state; but such a sale of those securities 752
is exempt if any of the following occurs: 753
19
(a) A recognized securities manual contains the names of 755
the issuer's officers and directors, a balance sheet of the 756
issuer as of a date within eighteen months, and a profit and loss 757
statement for either the fiscal year preceding that date or the 758
most recent year of operations; 759
(b) Those securities, or securities of the same class, 761
were registered within one year on the basis provided in section 762
1707.05 of the Revised Code, or within one year were qualified 763
under section 1707.09 or 1707.091 of the Revised Code, and that 764
registration or qualification is in full force and effect; 765
(c) Those securities at the time of sale could be 767
registered on the basis provided in section 1707.05 of the 768
Revised Code; 769
(d) The sale is made by a licensed dealer on behalf of the 771
bona fide owner of those securities in accordance with division 772
(B) of this section; 773
(e) Those securities were transported into Ohio in a 775
transaction of the type described in division (L), (K), or (I) of 776
this section, or in a transaction registered under division (A) 777
of section 1707.06 of the Revised Code. 778
(N) For the purpose of this division and division (M) of 780
this section, "underwriter" means any person who has purchased 781
from an issuer with a view to, or sells for an issuer in 782
connection with, the distribution of any security, or who 783
participates directly or indirectly in any such undertaking or in 784
the underwriting thereof, but "underwriter" does not include a 785
person whose interest is limited to a discount, commission, or 786
profit from the underwriter or from a dealer that is not in 787
excess of the customary distributors' or sellers' discount, 788
commission, or profit; and "issuer" includes any person or any 789
group of persons acting in concert in the sale of such 790
securities, owning beneficially one-fourth or more of the 791
outstanding securities of the class involved in the transactions 792
in question, with the record owner of securities being deemed the 793
20
beneficial owner for this purpose, in the absence of actual 794
knowledge to the contrary. 795
(O)(1) The sale of any equity security is exempt if all 797
the following conditions are satisfied: 798
(a) The sale is by the issuer of the security. 800
(b) The total number of purchasers in this state of all 802
securities issued or sold by the issuer in reliance upon this 803
exemption during the period of one year ending with the date of 804
the sale does not exceed ten. A sale of securities registered 805
under this chapter or sold pursuant to an exemption under this 806
chapter other than this exemption shall not be integrated with a 807
sale pursuant to this exemption in computing the number of 808
purchasers under this exemption. 809
(c) No advertisement, article, notice, or other 811
communication published in any newspaper, magazine, or similar 812
medium or broadcast over television or radio is used in 813
connection with the sale, but the use of an offering circular or 814
other communication delivered by the issuer to selected 815
individuals does not destroy this exemption. 816
(d) The issuer reasonably believes after reasonable 818
investigation that the purchaser is purchasing for investment. 819
(e) The aggregate commission, discount, and other 821
remuneration, excluding legal, accounting, and printing fees, 822
paid or given directly or indirectly does not exceed ten per cent 823
of the initial offering price. 824
(f) Any such commission, discount, or other remuneration 826
for sales in this state is paid or given only to dealers or 827
salesmen SALESPERSONS registered pursuant to this chapter. 828
(2) For the purposes of division (O)(1) of this section, 830
each of the following is deemed to be a single purchaser of a 831
security: husband and wife, a child and its parent or guardian 832
when the parent or guardian holds the security for the benefit of 833
the child, a corporation, a limited liability company, a 834
partnership, an association or other unincorporated entity, a 835
21
joint-stock company, or a trust, but only if the corporation, 836
limited liability company, partnership, association, entity, 837
joint-stock company, or trust was not formed for the purpose of 838
purchasing the security. 839
(3) As used in division (O)(1) of this section, "equity 841
security" means any stock or similar security of a corporation or 842
any membership interest in a limited liability company; or any 843
security convertible, with or without consideration, into such a 844
security, or carrying any warrant or right to subscribe to or 845
purchase such a security; or any such warrant or right; or any 846
other security that the division considers necessary or 847
appropriate, by such rules as it may prescribe in the public 848
interest or for the protection of investors, to treat as an 849
equity security. 850
(P) The sale of securities representing interests in or 852
under profit-sharing or participation agreements relating to oil 853
or gas wells located in this state, or representing interests in 854
or under oil or gas leases of real estate situated in this state, 855
is exempt if the securities are issued by an individual, 856
partnership, limited partnership, partnership association, 857
syndicate, pool, trust or trust fund, or other unincorporated 858
association and if each of the following conditions is complied 859
with: 860
(1) The beneficial owners of the securities do not, and 862
will not after the sale, exceed five natural persons; 863
(2) The securities constitute or represent interests in 865
not more than one oil or gas well; 866
(3) A certificate or other instrument in writing is 868
furnished to each purchaser of the securities at or before the 869
consummation of the sale, disclosing the maximum commission, 870
compensation for services, cost of lease, and expenses with 871
respect to the sale of such interests and with respect to the 872
promotion, development, and management of the oil or gas well, 873
and the total of that commission, compensation, costs, and 874
22
expenses does not exceed twenty-five per cent of the aggregate 875
interests in the oil or gas well, exclusive of any landowner's 876
rental or royalty; 877
(4) The sale is made in good faith and not for the purpose 879
of avoiding this chapter. 880
(Q) The sale of any security is exempt if all of the 882
following conditions are satisfied: 883
(1) The provisions of section 5 of the Securities Act of 885
1933 do not apply to the sale by reason of an exemption under 886
either section 4 (2) of that act or any rule of the securities 887
and exchange commission made to carry out section 4 (2) of that 888
act in effect at the time of the sale. 889
(2) The aggregate commission, discount, and other 891
remuneration, excluding legal, accounting, and printing fees, 892
paid or given directly or indirectly does not exceed ten per cent 893
of the initial offering price. 894
(3) Any such commission, discount, or other remuneration 896
for sales in this state is paid or given only to dealers or 897
salesmen SALESPERSONS registered under this chapter. 898
(4) The issuer or dealer files with the division of 900
securities, not later than sixty days after the sale, a report 901
setting forth the name and address of the issuer, the total 902
amount of the securities sold under this division, the number of 903
persons to whom the securities were sold, the price at which the 904
securities were sold, and the commissions or discounts paid or 905
given. 906
(5) The issuer pays a filing fee of one hundred dollars 908
for the first filing and fifty dollars for every subsequent 909
filing during each calendar year. 910
(R) A sale of a money order, travelers' check, or other 912
instrument for the transmission of money by a person qualified to 913
engage in such business under section 1109.60 or Chapter 1315. of 915
the Revised Code is exempt. 916
(S) A sale by a licensed dealer of securities that are in 918
23
the process of registration under the "Securities Act of 1933," 919
48 Stat. 74, 15 U.S.C. 77a, as amended, unless exempt under that 920
act, and that are in the process of registration, if registration 921
is required under this chapter, is exempt, provided that no sale 922
of that nature shall be consummated prior to the registration by 923
description or qualification of the securities. 924
(T) The execution by a licensed dealer of orders for the 926
purchase of any security is exempt, provided that the dealer acts 927
only as agent for the purchaser, has made no solicitation of the 928
order to purchase the security, has no interest in the 929
distribution of the security, and delivers to the purchaser 930
written confirmation of the transaction that clearly itemizes his 931
commission. "Solicitation," as used in this division, means 932
solicitation of the order for the specific security purchased and 933
does not include general solicitations or advertisements of any 934
kind. 935
(U) The sale insofar as the security holders of a person 937
are concerned, where, pursuant to statutory provisions of the 938
jurisdiction under which that person is organized or pursuant to 939
provisions contained in its articles of incorporation, 940
certificate of incorporation, partnership agreement, declaration 941
of trust, trust indenture, or similar controlling instrument, 942
there is submitted to the security holders, for their vote or 943
consent, (1) a plan or agreement for a reclassification of 944
securities of that person that involves the substitution of a 945
security of that person for another security of that person, (2) 946
a plan or agreement of merger or consolidation or a similar plan 947
or agreement of acquisition in which the securities of that 948
person held by the security holders will become or be exchanged 949
for securities of any other person, or (3) a plan or agreement 950
for a combination as defined in division (Q) of section 1701.01 951
of the Revised Code or a similar plan or agreement for the 952
transfer of assets of that person to another person in 953
consideration of the issuance of securities of any person, is 954
24
exempt if, with respect to any of the foregoing transactions, 955
either of the following conditions is satisfied: 956
(a) The securities to be issued to the security holders 958
are effectively registered under sections 6 to 8 of the 959
Securities Act of 1933 and offered and sold in compliance with 960
section 5 of that act; 961
(b) At least twenty days prior to the date on which a 963
meeting of the security holders is held or the earliest date on 964
which corporate action may be taken when no meeting is held, 965
there is submitted to the security holders, by that person, or by 966
the person whose securities are to be issued in the transaction, 967
information substantially equivalent to the information that 968
would be required to be included in a proxy statement or 969
information statement prepared by or on behalf of the management 970
of an issuer subject to section 14(a) or 14(c) of the Securities 972
Exchange Act of 1934.
(V) The sale of any security is exempt if the division by 974
rule finds that registration is not necessary or appropriate in 975
the public interest or for the protection of investors. 976
(W) Any offer or sale of securities made in reliance on 978
the exemptions provided by Rule 505 of Regulation D made pursuant 979
to the Securities Act of 1933 and the conditions and definitions 980
provided by Rules 501 to 503 thereunder is exempt if the offer or 981
sale satisfies all of the following conditions: 982
(1) No commission or other remuneration is given, directly 984
or indirectly, to any person for soliciting or selling to any 985
person in this state in reliance on the exemption under this 986
division, except to dealers licensed in this state. 987
(2)(a) Unless the cause for disqualification is waived 989
under division (W)(2)(b) of this section, no exemption under this 990
section is available for the securities of an issuer unless the 991
issuer did not know and in the exercise of reasonable care could 992
not have known that any of the following applies to any of the 993
persons described in Rule 252(c) 262(a) to (f)(c) of Regulation A 995
25
under the Securities Act of 1933: 996
(i) The person has filed an application for registration 998
or qualification that is the subject of an effective order 999
entered against the issuer, its officers, directors, general 1,000
partners, controlling persons or affiliates thereof, pursuant to 1,001
the law of any state within five years before the filing of a 1,002
notice required under division (W)(3) of this section denying 1,003
effectiveness to, or suspending or revoking the effectiveness of, 1,004
the registration statement. 1,005
(ii) The person has been convicted of any offense in 1,007
connection with the offer, sale, or purchase of any security or 1,008
franchise, or any felony involving fraud or deceit, including, 1,009
but not limited to, forgery, embezzlement, fraud, theft, or 1,010
conspiracy to defraud. 1,011
(iii) The person is subject to an effective administrative 1,013
order or judgment that was entered by a state securities 1,014
administrator within five years before the filing of a notice 1,015
required under division (W)(3) of this section and that 1,016
prohibits, denies, or revokes the use of any exemption from 1,017
securities registration, prohibits the transaction of business by 1,018
the person as a dealer, or is based on fraud, deceit, an untrue 1,019
statement of a material fact, or an omission to state a material 1,020
fact. 1,021
(iv) The person is subject to any order, judgment, or 1,023
decree of any court entered within five years before the filing 1,024
of a notice required under division (W)(3) of this section, 1,025
temporarily, preliminarily, or permanently restraining or 1,026
enjoining the person from engaging in or continuing any conduct 1,027
or practice in connection with the offer, sale, or purchase of 1,028
any security, or the making of any false filing with any state. 1,029
(b)(i) Any disqualification under this division involving 1,031
a dealer may be waived if the dealer is or continues to be 1,032
licensed in this state as a dealer after notifying the 1,033
commissioner of the act or event causing disqualification. 1,034
26
(ii) The commissioner may waive any disqualification under 1,036
this paragraph upon a showing of good cause that it is not 1,037
necessary under the circumstances that use of the exemption be 1,038
denied. 1,039
(3) Not later than five business days before the earlier 1,041
of the date on which the first use of an offering document or the 1,042
first sale is made in this state in reliance on the exemption 1,043
under this division, there is filed with the commissioner a 1,044
notice comprised of offering material in compliance with the 1,045
requirements of Rule 502 of Regulation D under the Securities Act 1,046
of 1933 and a fee of one hundred dollars. Material amendments to 1,047
the offering document shall be filed with the commissioner not 1,048
later than the date of their first use in this state. 1,049
(4) The aggregate commission, discount, and other 1,051
remuneration paid or given, directly or indirectly, does not 1,052
exceed twelve per cent of the initial offering price, excluding 1,053
legal, accounting, and printing fees. 1,054
(5) The commissioner, by rule, may increase the number of 1,056
purchasers or waive any other conditions of the exemption under 1,057
this division for a particular offering. The commissioner may 1,058
require the filing of advertising used in connection with offers 1,059
or sales in reliance on the exemption. 1,060
(X) ANY OFFER OR SALE OF SECURITIES MADE IN RELIANCE ON 1,063
THE EXEMPTION PROVIDED IN RULE 506 OF REGULATION D UNDER THE 1,067
SECURITIES ACT OF 1933, AND IN ACCORDANCE WITH RULES 501 TO 503 1,069
OF REGULATION D UNDER THE SECURITIES ACT OF 1933, IS EXEMPT 1,073
PROVIDED THAT ALL OF THE FOLLOWING APPLY: 1,074
(1) THE ISSUER MAKES A NOTICE FILING WITH THE DIVISION ON 1,076
FORM D OF THE SECURITIES AND EXCHANGE COMMISSION WITHIN FIFTEEN 1,078
DAYS OF THE FIRST SALE IN THIS STATE; 1,079
(2) ANY COMMISSION, DISCOUNT, OR OTHER REMUNERATION FOR 1,081
SALES OF SECURITIES IN THIS STATE IS PAID OR GIVEN ONLY TO 1,082
DEALERS OR SALESPERSONS LICENSED UNDER THIS CHAPTER; 1,083
(3) THE ISSUER PAYS A FILING FEE OF ONE HUNDRED DOLLARS TO 1,085
27
THE DIVISION; HOWEVER, NO FILING FEE SHALL BE REQUIRED TO FILE 1,086
AMENDMENTS TO THE FORM D OF THE SECURITIES AND EXCHANGE 1,088
COMMISSION.
(Y) THE OFFER OR SALE OF SECURITIES IS EXEMPT PROVIDED THAT 1,091
ALL OF THE FOLLOWING APPLY:
(1) THE SALE OF SECURITIES IS MADE ONLY TO PERSONS WHO ARE, 1,094
OR WHO THE ISSUER REASONABLY BELIEVES ARE, ACCREDITED INVESTORS 1,095
AS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT 1,099
OF 1933.
(2) THE ISSUER REASONABLY BELIEVES THAT ALL PURCHASERS ARE 1,101
PURCHASING FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN 1,102
CONNECTION WITH A DISTRIBUTION OF THE SECURITY. ANY RESALE OF A 1,103
SECURITY SOLD IN RELIANCE ON THIS EXEMPTION WITHIN TWELVE MONTHS 1,104
OF SALE SHALL BE PRESUMED TO BE WITH A VIEW TO DISTRIBUTION AND 1,105
NOT FOR INVESTMENT, EXCEPT A RESALE TO WHICH ANY OF THE FOLLOWING 1,107
APPLIES:
(a) THE RESALE IS PURSUANT TO A REGISTRATION STATEMENT 1,110
EFFECTIVE UNDER SECTION 1707.09 OR 1707.091 OF THE REVISED CODE. 1,112
(b) THE RESALE IS TO AN ACCREDITED INVESTOR, AS DEFINED IN 1,115
RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933. 1,119
(c) THE RESALE IS TO AN INSTITUTIONAL INVESTOR PURSUANT TO 1,122
THE EXEMPTIONS UNDER DIVISION (B) OR (D) OF THIS SECTION. 1,124
(3) THE EXEMPTION UNDER THIS DIVISION IS NOT AVAILABLE TO 1,126
AN ISSUER THAT IS IN THE DEVELOPMENT STAGE AND THAT EITHER HAS NO 1,128
SPECIFIC BUSINESS PLAN OR PURPOSE OR HAS INDICATED THAT ITS
BUSINESS PLAN IS TO ENGAGE IN A MERGER OR ACQUISITION WITH AN 1,129
UNIDENTIFIED COMPANY OR COMPANIES, OR OTHER ENTITIES OR PERSONS. 1,131
(4) THE EXEMPTION UNDER THIS DIVISION IS NOT AVAILABLE TO 1,133
AN ISSUER, IF THE ISSUER, ANY OF THE ISSUER'S PREDECESSORS, ANY 1,134
AFFILIATED ISSUER, ANY OF THE ISSUER'S DIRECTORS, OFFICERS, 1,135
GENERAL PARTNERS, OR BENEFICIAL OWNERS OF TEN PER CENT OR MORE OF 1,137
ANY CLASS OF ITS EQUITY SECURITIES, ANY OF THE ISSUER'S PROMOTERS 1,138
PRESENTLY CONNECTED WITH THE ISSUER IN ANY CAPACITY, ANY 1,139
UNDERWRITER OF THE SECURITIES TO BE OFFERED, OR ANY PARTNER,
28
DIRECTOR, OR OFFICER OF SUCH UNDERWRITER: 1,140
(a) WITHIN THE PAST FIVE YEARS, HAS FILED A REGISTRATION 1,143
STATEMENT THAT IS THE SUBJECT OF A CURRENTLY EFFECTIVE 1,144
REGISTRATION STOP ORDER ENTERED BY ANY STATE SECURITIES 1,145
ADMINISTRATOR OR THE SECURITIES AND EXCHANGE COMMISSION; 1,146
(b) WITHIN THE PAST FIVE YEARS, HAS BEEN CONVICTED OF ANY 1,149
CRIMINAL OFFENSE IN CONNECTION WITH THE OFFER, PURCHASE, OR SALE 1,150
OF ANY SECURITY, OR INVOLVING FRAUD OR DECEIT; 1,151
(c) IS CURRENTLY SUBJECT TO ANY STATE OR FEDERAL 1,154
ADMINISTRATIVE ENFORCEMENT ORDER OR JUDGMENT, ENTERED WITHIN THE 1,155
PAST FIVE YEARS, FINDING FRAUD OR DECEIT IN CONNECTION WITH THE 1,156
PURCHASE OR SALE OF ANY SECURITY;
(d) IS CURRENTLY SUBJECT TO ANY ORDER, JUDGMENT, OR DECREE 1,159
OF ANY COURT OF COMPETENT JURISDICTION, ENTERED WITHIN THE PAST 1,160
FIVE YEARS, THAT TEMPORARILY, PRELIMINARILY, OR PERMANENTLY 1,161
RESTRAINS OR ENJOINS THE PARTY FROM ENGAGING IN OR CONTINUING TO 1,162
ENGAGE IN ANY CONDUCT OR PRACTICE INVOLVING FRAUD OR DECEIT IN 1,163
CONNECTION WITH THE PURCHASE OR SALE OF ANY SECURITY. 1,164
(5) DIVISION (Y)(4) OF THIS SECTION IS INAPPLICABLE IF ANY 1,167
OF THE FOLLOWING APPLIES: 1,168
(a) THE PARTY SUBJECT TO THE DISQUALIFICATION IS LICENSED 1,171
OR REGISTERED TO CONDUCT SECURITIES BUSINESS IN THE STATE IN 1,172
WHICH THE ORDER, JUDGMENT, OR DECREE CREATING THE 1,173
DISQUALIFICATION WAS ENTERED AGAINST THE PARTY DESCRIBED IN 1,174
DIVISION (Y)(4) OF THIS SECTION. 1,175
(b) BEFORE THE FIRST OFFER IS MADE UNDER THIS EXEMPTION, 1,179
THE STATE SECURITIES ADMINISTRATOR, OR THE COURT OR REGULATORY 1,180
AUTHORITY THAT ENTERED THE ORDER, JUDGMENT, OR DECREE, WAIVES THE 1,181
DISQUALIFICATION.
(c) THE ISSUER DID NOT KNOW AND, IN THE EXERCISE OF 1,184
REASONABLE CARE BASED ON REASONABLE INVESTIGATION, COULD NOT HAVE 1,185
KNOWN THAT A DISQUALIFICATION FROM THE EXEMPTION EXISTED UNDER 1,186
DIVISION (Y)(4) OF THIS SECTION. 1,187
(6) A GENERAL ANNOUNCEMENT OF THE PROPOSED OFFERING MAY BE 1,189
29
MADE BY ANY MEANS; HOWEVER, THE GENERAL ANNOUNCEMENT SHALL 1,190
INCLUDE ONLY THE FOLLOWING INFORMATION, UNLESS ADDITIONAL 1,191
INFORMATION IS SPECIFICALLY PERMITTED BY THE DIVISION BY RULE: 1,193
(a) THE NAME, ADDRESS, AND TELEPHONE NUMBER OF THE ISSUER 1,196
OF THE SECURITIES;
(b) THE NAME, A BRIEF DESCRIPTION, AND PRICE OF ANY 1,199
SECURITY TO BE ISSUED;
(c) A BRIEF DESCRIPTION OF THE BUSINESS OF THE ISSUER; 1,202
(d) THE TYPE, NUMBER, AND AGGREGATE AMOUNT OF SECURITIES 1,205
BEING OFFERED;
(e) THE NAME, ADDRESS, AND TELEPHONE NUMBER OF THE PERSON 1,208
TO CONTACT FOR ADDITIONAL INFORMATION; AND
(f) A STATEMENT INDICATING ALL OF THE FOLLOWING: 1,211
(i) SALES WILL ONLY BE MADE TO ACCREDITED INVESTORS AS 1,214
DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1,219
1933;
(ii) NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED OR 1,222
WILL BE ACCEPTED BY WAY OF THIS GENERAL ANNOUNCEMENT; 1,223
(iii) THE SECURITIES HAVE NOT BEEN REGISTERED WITH OR 1,226
APPROVED BY ANY STATE SECURITIES ADMINISTRATOR OR THE SECURITIES 1,227
AND EXCHANGE COMMISSION AND ARE BEING OFFERED AND SOLD PURSUANT 1,228
TO AN EXEMPTION FROM REGISTRATION. 1,229
(7) THE ISSUER, IN CONNECTION WITH AN OFFER, MAY PROVIDE 1,231
INFORMATION IN ADDITION TO THE GENERAL ANNOUNCEMENT DESCRIBED IN 1,232
DIVISION (Y)(6) OF THIS SECTION, PROVIDED THAT EITHER OF THE 1,234
FOLLOWING APPLIES:
(a) THE INFORMATION IS DELIVERED THROUGH AN ELECTRONIC 1,237
DATABASE THAT IS RESTRICTED TO PERSONS THAT ARE ACCREDITED 1,238
INVESTORS AS DEFINED IN RULE 501 OF REGULATION D UNDER THE 1,242
SECURITIES ACT OF 1933. 1,243
(b) THE INFORMATION IS DELIVERED AFTER THE ISSUER 1,246
REASONABLY BELIEVES THAT THE PROSPECTIVE PURCHASER IS AN 1,247
ACCREDITED INVESTOR AS DEFINED IN RULE 501 OF REGULATION D UNDER 1,250
THE SECURITIES ACT OF 1933. 1,252
30
(8) NO TELEPHONE SOLICITATION SHALL BE DONE, UNLESS PRIOR 1,254
TO PLACING THE TELEPHONE CALL, THE ISSUER REASONABLY BELIEVES 1,255
THAT THE PROSPECTIVE PURCHASER TO BE SOLICITED IS AN ACCREDITED 1,256
INVESTOR AS DEFINED IN RULE 501 OF REGULATION D UNDER THE 1,260
SECURITIES ACT OF 1933. 1,261
(9) DISSEMINATION OF THE GENERAL ANNOUNCEMENT DESCRIBED IN 1,263
DIVISION (Y)(6) OF THIS SECTION TO PERSONS THAT ARE NOT 1,265
ACCREDITED INVESTORS, AS DEFINED IN RULE 501 OF REGULATION D 1,268
UNDER THE SECURITIES ACT OF 1933, DOES NOT DISQUALIFY THE ISSUER 1,271
FROM CLAIMING AN EXEMPTION UNDER THIS DIVISION. 1,272
(10) THE ISSUER SHALL FILE WITH THE DIVISION NOTICE OF THE 1,274
OFFERING OF SECURITIES WITHIN FIFTEEN DAYS AFTER NOTICE OF THE 1,275
OFFERING IS MADE TO THE PUBLIC OR A GENERAL ANNOUNCEMENT IS MADE 1,276
TO THE PUBLIC IN THIS STATE. THE FILING SHALL BE ON FORMS 1,277
ADOPTED BY THE DIVISION AND SHALL INCLUDE A COPY OF THE GENERAL 1,278
ANNOUNCEMENT, IF ONE IS MADE REGARDING THE PROPOSED OFFERING, AND 1,280
COPIES OF ANY OFFERING MATERIALS, CIRCULARS, OR PROSPECTUSES. A 1,281
FILING FEE OF ONE HUNDRED DOLLARS ALSO SHALL BE INCLUDED. 1,282
Sec. 1707.092. (A) FOR THE PURPOSES OF SELLING SECURITIES 1,285
IN THIS STATE, AN INVESTMENT COMPANY, AS DEFINED BY THE 1,287
INVESTMENT COMPANY ACT OF 1940, THAT IS REGISTERED OR HAS FILED A 1,290
REGISTRATION STATEMENT WITH THE SECURITIES AND EXCHANGE 1,291
COMMISSION UNDER THE INVESTMENT COMPANY ACT OF 1940, SHALL FILE 1,294
THE FOLLOWING WITH THE DIVISION OF SECURITIES: 1,295
(1) FOR THE PURPOSES OF THE SALE OF SECURITIES BY A 1,297
MANAGED INVESTMENT COMPANY, AS DEFINED IN THE INVESTMENT COMPANY 1,300
ACT OF 1940: 1,301
(a) A NOTICE FILING CONSISTING OF EITHER OF THE FOLLOWING: 1,304
(i) A COPY OF THE INVESTMENT COMPANY'S FEDERAL 1,307
REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE 1,308
COMMISSION;
(ii) A FORM U-1 OR FORM NF OF THE NORTH AMERICAN 1,314
SECURITIES ADMINISTRATORS ASSOCIATION AND A COPY OF THE 1,315
INVESTMENT COMPANY'S PROSPECTUS AND STATEMENT OF ADDITIONAL 1,316
31
INFORMATION. 1,317
(b) APPROPRIATE FILING FEES CONSISTING OF BOTH OF THE 1,320
FOLLOWING:
(i) A FLAT FEE OF ONE HUNDRED DOLLARS; 1,323
(ii) A FEE CALCULATED AT ONE-TENTH OF ONE PER CENT OF THE 1,326
AGGREGATE PRICE AT WHICH THE SECURITIES ARE TO BE SOLD TO THE 1,327
PUBLIC IN THIS STATE, WHICH CALCULATED FEE, HOWEVER, SHALL IN NO 1,328
CASE BE LESS THAN ONE HUNDRED OR MORE THAN ONE THOUSAND DOLLARS. 1,329
(c) UPON THE REGISTRATION OF THE SECURITIES WITH THE 1,332
SECURITIES AND EXCHANGE COMMISSION, A MANAGED INVESTMENT COMPANY 1,333
WITH AN INITIAL NOTICE FILING ON FILE WITH THE DIVISION SHALL 1,334
SUBMIT TO THE DIVISION A COPY OF ITS FINAL PROSPECTUS. 1,335
(2) FOR THE PURPOSES OF THE SALE OF SECURITIES BY A 1,337
NON-MANAGED INVESTMENT COMPANY, AS DEFINED IN THE INVESTMENT 1,340
COMPANY ACT OF 1940: 1,341
(a) A NOTICE FILING CONSISTING OF EITHER A COPY OF THE 1,344
INVESTMENT COMPANY'S FEDERAL REGISTRATION STATEMENT AS FILED WITH 1,345
THE SECURITIES AND EXCHANGE COMMISSION OR A FORM U-1 OR FORM NF 1,347
OF THE NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION. 1,350
(b) APPROPRIATE FILING FEES, AS PROVIDED IN DIVISION 1,354
(A)(1)(b) OF THIS SECTION. 1,355
(c) UPON THE EFFECTIVENESS OF THE REGISTRATION OF THE 1,358
SECURITIES WITH THE SECURITIES AND EXCHANGE COMMISSION, A 1,359
NON-MANAGED INVESTMENT COMPANY SHALL SUBMIT TO THE DIVISION A 1,360
COPY OF ITS FINAL PROSPECTUS.
(B)(1) UPON PAYMENT OF THE MAXIMUM FILING FEES AS PROVIDED 1,363
IN DIVISION (A)(1)(b) OR (2)(b) OF THIS SECTION, A MANAGED OR 1,366
NON-MANAGED INVESTMENT COMPANY MAY SELL AN INDEFINITE AMOUNT OF 1,367
SECURITIES IN THIS STATE.
(2) A MANAGED OR NON-MANAGED INVESTMENT COMPANY MAKING A 1,369
NOTICE FILING AS PROVIDED IN THIS SECTION SHALL COMPLY WITH 1,370
SECTION 1707.11 OF THE REVISED CODE. AN INVESTMENT COMPANY THAT 1,373
PREVIOUSLY FILED WITH THE DIVISION A VALID CONSENT TO SERVICE OF 1,374
PROCESS PURSUANT TO SECTION 1707.11 OF THE REVISED CODE MAY 1,376
32
INCORPORATE THAT CONSENT BY REFERENCE. 1,377
(C)(1) FOR OFFERINGS INVOLVING COVERED SECURITIES, AS 1,380
DEFINED IN SECTION 18 OF THE "SECURITIES ACT OF 1933," 15 U.S.C. 1,383
77r, THAT ARE NOT SUBJECT TO SECTION 1707.02, 1707.03, 1707.04, 1,385
1707.05, 1707.06, 1707.07, 1707.08, 1707.09, OR 1707.091 OF THE 1,386
REVISED CODE, OR DIVISION (A) OF THIS SECTION, A NOTICE FILING 1,388
SHALL BE SUBMITTED TO THE DIVISION TOGETHER WITH A CONSENT TO 1,389
SERVICE OF PROCESS PURSUANT TO SECTION 1707.11 OF THE REVISED 1,392
CODE AND A FILING FEE AS PROVIDED IN DIVISION (A)(1)(b) OF THIS 1,395
SECTION.
(2) THE NOTICE FILING DESCRIBED IN DIVISION (C)(1) OF THIS 1,398
SECTION SHALL CONSIST OF ANY DOCUMENT FILED WITH THE SECURITIES 1,399
AND EXCHANGE COMMISSION PURSUANT TO THE SECURITIES ACT OF 1933, 1,402
TOGETHER WITH ANNUAL OR PERIODIC REPORTS OF THE VALUE OF THE 1,403
SECURITIES SOLD OR OFFERED TO BE SOLD TO PERSONS LOCATED IN THIS 1,404
STATE.
(D) A NOTICE FILING SUBMITTED UNDER THIS SECTION SHALL BE 1,407
EFFECTIVE FOR THIRTEEN MONTHS. 1,408
Sec. 1707.093. NOTWITHSTANDING ANY PROVISION OF CHAPTER 1,411
1707. OF THE REVISED CODE, OR ANY RULE ADOPTED BY THE DIVISION OF 1,414
SECURITIES UNDER THAT CHAPTER, REQUIRING A SIGNATURE OR 1,415
VERIFICATION, THE DIVISION MAY PROVIDE BY RULE FOR THE ELECTRONIC 1,416
FILING OR SUBMISSION OF ANY FORM, DOCUMENT, MATERIAL, OR 1,417
INFORMATION THAT IS REQUIRED OR PERMITTED TO BE FILED WITH OR 1,418
SUBMITTED TO THE DIVISION.
Sec. 1707.11. For the purposes of this section, A 1,427
"PERSON," OR an "applicant" for registration or claim of 1,428
exemption, means every issuer. 1,429
Every applicant for registration, or for claim of exemption 1,431
pursuant to division (O) or (Q), (W), (X), OR (Y) of section 1,433
1707.03 of the Revised Code, AND EVERY PERSON SUBMITTING A NOTICE 1,435
FILING PURSUANT TO SECTION 1707.092 OF THE REVISED CODE, for the 1,438
sale of securities pursuant to this chapter, which is an 1,439
incorporated applicant OR PERSON not domiciled in this state or
33
NOT LICENSED UNDER SECTION 1703.03 OF THE REVISED CODE, OR IS an 1,443
unincorporated applicant OR PERSON having the situs of its 1,444
principal place of business outside this state, shall file with 1,446
its application OR NOTICE FILING its irrevocable written consent, 1,448
executed and acknowledged by an individual duly authorized to 1,449
give such THE consent, that actions growing out of the sale of 1,451
such securities or fraud committed by an applicant in this state 1,452
may be commenced against it, in the proper court of any county in 1,453
this state in which a cause of action for such fraud may arise or 1,454
in which the plaintiff in such THE action may reside, by serving 1,456
on the secretary of state any proper process or pleading 1,457
authorized by the laws of this state. Such consent shall 1,458
stipulate that such service of such process or pleading on the 1,460
secretary of state shall be taken in all courts to be as valid 1,461
and binding as if service had been made upon the applicant 1,462
itself.
Service of any process or pleadings may be made on the 1,464
secretary of state by duplicate copies, of which one shall be 1,465
filed in the office of the secretary of state, and the other 1,466
immediately forwarded by the secretary of state by certified mail 1,467
to the principal place of business of such THE applicant, or the 1,468
last known address as shown on the application form filed with 1,470
the division, or if it has a principal office in this state, then 1,471
to such THE principal office; but failure to mail such copy shall 1,472
not invalidate such THE service. 1,474
Sec. 1707.14. (A)(1) No person shall act as a dealer, 1,483
unless the person is licensed as a dealer by the division of 1,484
securities, except in the following cases: 1,485
(a) When the person is transacting business through or 1,487
with a licensed dealer; 1,488
(b) When the securities are the subject matter of one or 1,490
more transactions enumerated in divisions (B) to (L), (O) to (R), 1,491
and (U) to (W)(Y) of section 1707.03, or in section 1707.06 of 1,492
the Revised Code, except when a commission, discount, or other 1,494
34
remuneration is paid or given in consideration with transactions 1,495
enumerated in divisions (O), (Q), and (W), (X), AND (Y) of 1,497
section 1707.03, or in section 1707.06 of the Revised Code; 1,498
(c) When the person is an issuer selling securities issued 1,500
by it or by its subsidiary, if such securities are specified 1,501
under division (G) or (I) of section 1707.02, or under section 1,502
1707.04 of the Revised Code; 1,503
(d) When the person is participating in transactions 1,505
exempt, under section 1707.34 of the Revised Code, from this 1,506
chapter. 1,507
(2) Notwithstanding the exceptions to licensure set forth 1,509
in divisions (A)(1)(a) to (d) of this section, no person other 1,510
than an issuer selling its own securities shall engage in the 1,511
business of selling securities to an institutional investor 1,512
unless such THE person is licensed as a dealer or the division, 1,513
by rule, finds that such licensure is not necessary for the 1,515
protection of investors or in the public interest. 1,516
(B) Each dealer that in any twelve-month or shorter 1,518
period, alone or with any other dealer with which it is 1,519
affiliated, has total revenues of one hundred fifty thousand 1,520
dollars or more derived from the business of buying, selling, or 1,521
otherwise dealing in securities, and that at any time during such 1,522
period has one hundred or more retail securities customers, shall 1,523
be registered as a broker or dealer with the securities and 1,524
exchange commission under the Securities Exchange Act of 1934, 1,525
except the following entities: 1,526
(1) A bank, savings and loan association, savings bank, or 1,528
credit union chartered under the laws of the United States or any 1,529
state thereof; 1,530
(2) A dealer that enters into and is in compliance with an 1,532
undertaking accepted by the division, in which the dealer agrees 1,533
that it will not engage in any transaction involving the buying, 1,534
selling, or otherwise dealing in securities with any natural 1,535
person in this state, except for transactions involving either of 1,536
35
the following: 1,537
(a) Securities of corporations or associations that have 1,539
qualified for treatment as nonprofit organizations pursuant to 1,540
section 501(c)(3) of the "Internal Revenue Code of 1986," 100 1,541
Stat. 2085, 26 U.S.C.A. 501, as amended; 1,542
(b) Securities or transactions that are described in 1,544
divisions (A)(1)(a) to (d) of this section. 1,545
(C) Every dealer that must be registered as a broker or 1,547
dealer with the securities and exchange commission pursuant to 1,548
division (B) of this section shall become so registered no later 1,549
than ninety days after the date on which the dealer meets the 1,550
requirements for such registration. 1,551
(D) The division by rule may exempt any dealer from 1,553
complying with the licensing or registration requirements of this 1,554
section, if the division finds that such licensing or 1,555
registration is not necessary for the protection of investors or 1,556
in the public interest. 1,557
(E) As used in division (B) of this section, "retail 1,559
securities customer" means a person that purchases from or 1,560
through or sells securities to or through a dealer, and that is 1,561
not an officer, a director, a principal, a general partner, or an 1,562
employee of, the dealer. Each of the following is deemed to be a 1,563
single retail securities customer: 1,564
(1) A husband and wife; 1,566
(2) A minor child and his or her parent or legal guardian; 1,568
(3) A corporation, a partnership, an association or other 1,570
unincorporated entity, a joint stock company, or a trust. 1,571
Sec. 1707.141. (A) NO PERSON SHALL ACT AS AN INVESTMENT 1,573
ADVISER, UNLESS ONE OF THE FOLLOWING APPLIES: 1,574
(1) THE PERSON IS LICENSED AS AN INVESTMENT ADVISER BY THE 1,576
DIVISION OF SECURITIES; HOWEVER, NOTHING IN THIS SECTION SHALL BE 1,577
CONSTRUED TO PROHIBIT A PERSON FROM BEING LICENSED BY THE 1,578
DIVISION AS BOTH AN INVESTMENT ADVISER AND A DEALER OR 1,579
SALESPERSON.
36
(2) THE PERSON IS REGISTERED UNDER SECTION 203 OF THE 1,581
"INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, AS AN 1,583
INVESTMENT ADVISER AND IS IN COMPLIANCE WITH THE NOTICE FILING 1,584
REQUIREMENTS OF DIVISION (B) OF THIS SECTION. 1,585
(3) THE PERSON HAS NO PLACE OF BUSINESS IN THIS STATE, AND 1,587
THE PERSON'S ONLY CLIENTS IN THIS STATE ARE ANY OF THE FOLLOWING: 1,588
(a) INVESTMENT COMPANIES AS DEFINED IN THE INVESTMENT 1,591
COMPANY ACT OF 1940;
(b) OTHER INVESTMENT ADVISERS; 1,593
(c) LICENSED DEALERS; 1,595
(d) BANKS; 1,597
(e) INSURANCE COMPANIES SUBJECT TO REGULATION UNDER TITLE 1,600
XXXIX OF THE REVISED CODE AND HEALTH INSURING CORPORATIONS
REGULATED UNDER CHAPTER 1751. OF THE REVISED CODE; 1,601
(f) EMPLOYEE BENEFIT PLANS WITH ASSETS OF NOT LESS THAN 1,603
ONE MILLION DOLLARS; 1,604
(g) GOVERNMENT AGENCIES OR INSTRUMENTALITIES, WHETHER 1,606
ACTING FOR THEMSELVES OR TRUSTEES WITH INVESTMENT CONTROL; 1,607
(h) OTHER INSTITUTIONAL INVESTORS AS THE DIVISION MAY 1,609
DESIGNATE BY RULE. 1,610
(4) THE PERSON HAS NO PLACE OF BUSINESS IN THIS STATE, AND 1,612
DURING THE PRECEDING TWELVE-MONTH PERIOD, THE PERSON HAS HAD NOT 1,613
MORE THAN FIVE CLIENTS, OTHER THAN THOSE DESCRIBED IN DIVISION 1,614
(A)(3) OF THIS SECTION, THAT ARE RESIDENTS OF THIS STATE. 1,615
(B)(1) NO PERSON WHO IS REGISTERED UNDER SECTION 203 OF 1,617
THE "INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, AS AN 1,620
INVESTMENT ADVISER SHALL ACT AS AN INVESTMENT ADVISER, UNLESS THE 1,621
PERSON HAS DONE BOTH OF THE FOLLOWING: 1,622
(a) FILED WITH THE DIVISION A CONSENT TO SERVICE OF 1,625
PROCESS TOGETHER WITH EITHER A NOTICE FILING FORM AS SPECIFIED IN 1,626
RULES ADOPTED BY THE DIVISION OR A COPY OF THOSE DOCUMENTS THAT 1,627
HAVE BEEN FILED BY THE INVESTMENT ADVISER WITH THE SECURITIES AND 1,628
EXCHANGE COMMISSION AS SPECIFIED IN RULES ADOPTED BY THE 1,629
DIVISION; 1,630
37
(b) PAID THE NOTICE FILING FEE SPECIFIED IN DIVISION (B) 1,632
OF SECTION 1707.17 OF THE REVISED CODE. 1,633
(2) UPON COMPLIANCE WITH DIVISION (B)(1) OF THIS SECTION, 1,635
THE DIVISION SHALL ISSUE TO THE PERSON AN ACKNOWLEDGMENT OF 1,636
NOTICE FILING.
(3) THE NOTICE FILING AND FEE REQUIREMENTS OF DIVISION 1,638
(B)(1) OF THIS SECTION DO NOT APPLY TO A PERSON DESCRIBED IN 1,639
DIVISION (A)(3) OR (4) OF THIS SECTION. 1,640
Sec. 1707.151. (A) APPLICATION FOR AN INVESTMENT 1,642
ADVISER'S LICENSE SHALL BE MADE IN ACCORDANCE WITH THIS SECTION 1,643
AND BY FILING WITH THE DIVISION OF SECURITIES THE INFORMATION, 1,644
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION. 1,645
(B) EVERY APPLICANT NOT A RESIDENT OF THIS STATE SHALL 1,647
NAME A PERSON WITHIN THIS STATE UPON WHOM PROCESS AGAINST SUCH 1,648
APPLICANT MAY BE SERVED AND SHALL GIVE THE COMPLETE RESIDENCE AND 1,649
BUSINESS ADDRESS OR ADDRESSES OF THE PERSON DESIGNATED. 1,650
(C) EVERY APPLICANT SHALL FILE AN IRREVOCABLE CONSENT TO 1,652
SERVICE OF PROCESS WITH THE SECRETARY OF STATE IN THE EVENT THAT 1,653
THE APPLICANT, IF A RESIDENT OF THIS STATE, OR THE PERSON 1,654
DESIGNATED PURSUANT TO DIVISION (B) OF THIS SECTION, CANNOT BE 1,655
FOUND AT THE ADDRESS GIVEN ON THE APPLICATION. THE CONSENT SHALL 1,656
BE GIVEN AND SERVICE OF PROCESS SHALL BE MADE AS PROVIDED IN 1,657
SECTION 1707.11 OF THE REVISED CODE.
(D)(1) THE DIVISION MAY INVESTIGATE ANY APPLICANT FOR A 1,659
LICENSE AND MAY REQUIRE ANY ADDITIONAL INFORMATION AS IT 1,660
CONSIDERS NECESSARY TO DETERMINE THE APPLICANT'S BUSINESS REPUTE 1,661
AND QUALIFICATIONS TO ACT AS AN INVESTMENT ADVISER. 1,662
(2) IF THE APPLICATION FOR ANY LICENSE INVOLVES 1,664
INVESTIGATION OUTSIDE OF THIS STATE, THE APPLICANT MAY BE 1,665
REQUIRED BY THE DIVISION TO ADVANCE SUFFICIENT FUNDS TO PAY ANY 1,666
OF THE ACTUAL EXPENSES OF THE EXAMINATION. THE DIVISION SHALL 1,667
FURNISH THE APPLICANT WITH AN ITEMIZED STATEMENT OF SUCH EXPENSES 1,668
THAT THE APPLICANT IS REQUIRED TO PAY.
(E) THE DIVISION SHALL BY RULE REQUIRE ONE NATURAL PERSON 1,670
38
WHO IS A PRINCIPAL, OFFICER, DIRECTOR, GENERAL PARTNER, MANAGER, 1,671
OR EMPLOYEE OF AN INVESTMENT ADVISER TO PASS AN EXAMINATION 1,672
DESIGNATED BY THE DIVISION OR ACHIEVE A SPECIFIED PROFESSIONAL 1,674
DESIGNATION. EVERY INVESTMENT ADVISER THAT IS NOT A NATURAL 1,675
PERSON SHALL NOTIFY THE DIVISION OF THE NAME AND RELATIONSHIP TO 1,676
THE INVESTMENT ADVISER OF THE NATURAL PERSON WHO HAS PASSED THE 1,677
EXAMINATION OR ACHIEVED THE SPECIFIED PROFESSIONAL DESIGNATION ON 1,678
BEHALF OF THE INVESTMENT ADVISER AND WHO WILL SERVE AS THE
DESIGNATED PRINCIPAL ON BEHALF OF THE INVESTMENT ADVISER. 1,679
(F) AN INVESTMENT ADVISER LICENSED UNDER SECTION 1707.141 1,681
OF THE REVISED CODE SHALL EMPLOY ONLY INVESTMENT ADVISER 1,682
REPRESENTATIVES LICENSED, OR EXEMPTED FROM LICENSURE, UNDER 1,683
SECTION 1707.161 OF THE REVISED CODE.
(G) IF THE DIVISION FINDS THAT THE APPLICANT IS OF GOOD 1,685
BUSINESS REPUTE, APPEARS TO BE QUALIFIED TO ACT AS AN INVESTMENT 1,686
ADVISER, AND HAS COMPLIED WITH SECTIONS 1707.01 TO 1707.45 OF THE 1,687
REVISED CODE AND RULES ADOPTED UNDER THOSE SECTIONS BY THE 1,688
DIVISION, THE DIVISION, UPON PAYMENT OF THE FEES PRESCRIBED BY
DIVISION (B) OF SECTION 1707.17 OF THE REVISED CODE, SHALL ISSUE 1,689
TO THE APPLICANT A LICENSE AUTHORIZING THE APPLICANT TO ACT AS AN 1,690
INVESTMENT ADVISER.
Sec. 1707.161. (A) NO PERSON SHALL ACT AS AN INVESTMENT 1,692
ADVISER REPRESENTATIVE, UNLESS ONE OF THE FOLLOWING APPLIES: 1,693
(1) THE PERSON IS LICENSED AS AN INVESTMENT ADVISER 1,695
REPRESENTATIVE BY THE DIVISION OF SECURITIES. 1,696
(2) THE PERSON IS A NATURAL PERSON WHO IS LICENSED AS AN 1,698
INVESTMENT ADVISER BY THE DIVISION, AND DOES NOT ACT AS AN 1,699
INVESTMENT ADVISER REPRESENTATIVE FOR ANOTHER INVESTMENT ADVISER; 1,700
HOWEVER, A NATURAL PERSON WHO IS LICENSED AS AN INVESTMENT 1,702
ADVISER BY THE DIVISION MAY ACT AS AN INVESTMENT ADVISER 1,703
REPRESENTATIVE FOR ANOTHER INVESTMENT ADVISER IF THE NATURAL 1,704
PERSON ALSO IS LICENSED BY THE DIVISION AS AN INVESTMENT ADVISER 1,705
REPRESENTATIVE OF THE OTHER INVESTMENT ADVISER.
(3) THE PERSON IS EMPLOYED BY OR ASSOCIATED WITH AN 1,707
39
INVESTMENT ADVISER REGISTERED UNDER SECTION 203 OF THE 1,708
"INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, AND DOES NOT 1,710
HAVE A PLACE OF BUSINESS IN THIS STATE. 1,711
(4) THE PERSON IS EMPLOYED BY OR ASSOCIATED WITH AN 1,713
INVESTMENT ADVISER THAT IS EXEMPTED FROM LICENSURE PURSUANT TO 1,714
DIVISION (A)(3) OR (4) OF SECTION 1707.141 OF THE REVISED CODE. 1,715
(B)(1) NO INVESTMENT ADVISER REPRESENTATIVE REQUIRED TO BE 1,717
LICENSED UNDER THIS SECTION SHALL ACT AS AN INVESTMENT ADVISER 1,718
REPRESENTATIVE FOR MORE THAN TWO INVESTMENT ADVISERS. AN 1,719
INVESTMENT ADVISER REPRESENTATIVE THAT ACTS AS AN INVESTMENT 1,720
ADVISER REPRESENTATIVE FOR TWO INVESTMENT ADVISERS SHALL DO SO 1,721
ONLY AFTER THE OCCURRENCE OF BOTH OF THE FOLLOWING: 1,722
(a) BEING PROPERLY LICENSED, OR PROPERLY EXCEPTED FROM 1,725
LICENSURE UNDER THIS SECTION, AS AN INVESTMENT ADVISER 1,726
REPRESENTATIVE FOR BOTH INVESTMENT ADVISERS; 1,727
(b) COMPLYING WITH THE REQUIREMENTS SET FORTH IN RULES 1,730
ADOPTED BY THE DIVISION REGARDING CONSENT OF BOTH INVESTMENT 1,731
ADVISERS AND NOTICE.
(2) NOTHING IN THIS SECTION SHALL BE CONSTRUED TO PROHIBIT 1,733
A NATURAL PERSON FROM BEING LICENSED BY THE DIVISION AS BOTH AN 1,736
INVESTMENT ADVISER AND AN INVESTMENT ADVISER REPRESENTATIVE. 1,737
(3) NOTHING IS THIS SECTION SHALL BE CONSTRUED TO PROHIBIT 1,740
A NATURAL PERSON FROM BEING LICENSED BY THE DIVISION AS BOTH A 1,741
SALESPERSON AND AN INVESTMENT ADVISER REPRESENTATIVE. 1,742
(C) AN INVESTMENT ADVISER REPRESENTATIVE'S LICENSE ISSUED 1,744
UNDER THIS SECTION SHALL NOT BE EFFECTIVE DURING ANY PERIOD WHEN 1,745
THE INVESTMENT ADVISER REPRESENTATIVE IS NOT EMPLOYED BY OR 1,746
ASSOCIATED WITH AN INVESTMENT ADVISER THAT IS LICENSED BY THE 1,747
DIVISION OR THAT IS IN COMPLIANCE WITH THE NOTICE FILING 1,748
REQUIREMENTS OF DIVISION (B) OF SECTION 1707.141 OF THE REVISED
CODE. NOTICE OF THE COMMENCEMENT AND TERMINATION OF THE 1,749
EMPLOYMENT OR ASSOCIATION OF AN INVESTMENT ADVISER REPRESENTATIVE 1,751
LICENSED UNDER THIS SECTION SHALL BE GIVEN TO THE DIVISION WITHIN 1,752
THIRTY DAYS AFTER THE COMMENCEMENT OR TERMINATION BY EITHER OF
40
THE FOLLOWING: 1,753
(1) THE INVESTMENT ADVISER, IN THE CASE OF AN INVESTMENT 1,755
ADVISER REPRESENTATIVE LICENSED UNDER THIS SECTION AND EMPLOYED 1,756
BY OR ASSOCIATED WITH, OR FORMERLY EMPLOYED BY OR ASSOCIATED 1,758
WITH, AN INVESTMENT ADVISER LICENSED UNDER SECTION 1707.141 OF 1,759
THE REVISED CODE;
(2) THE INVESTMENT ADVISER REPRESENTATIVE, IN THE CASE OF 1,761
AN INVESTMENT ADVISER REPRESENTATIVE LICENSED UNDER THIS SECTION 1,762
AND EMPLOYED BY OR ASSOCIATED WITH, OR FORMERLY EMPLOYED BY OR 1,764
ASSOCIATED WITH, AN INVESTMENT ADVISER THAT IS SUBJECT TO THE
NOTICE FILINGS REQUIREMENTS OF DIVISION (B) OF SECTION 1707.141 1,766
OF THE REVISED CODE.
(D)(1) APPLICATION FOR AN INVESTMENT ADVISER 1,768
REPRESENTATIVE LICENSE SHALL BE MADE IN ACCORDANCE WITH THIS 1,769
SECTION AND BY FILING WITH THE DIVISION THE INFORMATION, 1,770
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION. 1,771
(2) THE DIVISION SHALL BY RULE REQUIRE AN APPLICANT TO 1,773
PASS AN EXAMINATION DESIGNATED BY THE DIVISION OR ACHIEVE A 1,774
SPECIFIED PROFESSIONAL DESIGNATION.
(3) PRIOR TO ISSUING THE INVESTMENT ADVISER REPRESENTATIVE 1,777
LICENSE, THE DIVISION MAY REQUIRE THE APPLICANT TO REIMBURSE THE 1,778
DIVISION FOR THE ACTUAL EXPENSES INCURRED IN INVESTIGATING THE 1,779
APPLICANT. AN ITEMIZED STATEMENT OF ANY SUCH EXPENSES THAT THE 1,781
APPLICANT IS REQUIRED TO PAY SHALL BE FURNISHED TO THE APPLICANT
BY THE DIVISION. 1,782
(E) IF THE DIVISION FINDS THAT THE APPLICANT IS OF GOOD 1,784
BUSINESS REPUTE, APPEARS TO BE QUALIFIED TO ACT AS AN INVESTMENT 1,785
ADVISER REPRESENTATIVE, AND HAS COMPLIED WITH SECTIONS 1707.01 TO 1,786
1707.45 OF THE REVISED CODE AND THE RULES ADOPTED UNDER THOSE 1,787
SECTIONS BY THE DIVISION, THE DIVISION, UPON PAYMENT OF THE FEES 1,788
PRESCRIBED BY DIVISION (B) OF SECTION 1707.17 OF THE REVISED
CODE, SHALL ISSUE TO THE APPLICANT A LICENSE AUTHORIZING THE 1,789
APPLICANT TO ACT AS AN INVESTMENT ADVISER REPRESENTATIVE FOR THE 1,790
INVESTMENT ADVISER, OR INVESTMENT ADVISERS THAT ARE UNDER COMMON 1,791
41
OWNERSHIP OR CONTROL, NAMED IN THE APPLICATION.
Sec. 1707.17. (A)(1) The license of every dealer in and 1,800
salesman SALESPERSON of securities shall expire on the 1,802
thirty-first day of December of each year, and may be renewed 1,803
upon the filing with the division of securities of an application 1,804
for renewal, and the payment of the fee prescribed in this 1,805
section, not less than fifteen nor more than sixty days before 1,806
the expiration of the old license. The division may accept an 1,807
application for renewal less than fifteen days before the 1,808
expiration of any calendar year. It THE DIVISION ALSO MAY ACCEPT 1,809
AN APPLICATION FOR RENEWAL UP TO TEN DAYS AFTER EXPIRATION OF A 1,810
LICENSE, PROVIDED THAT THE APPLICATION FOR RENEWAL IS ACCOMPANIED 1,811
BY THE LICENSE RENEWAL FEE AND THE ADDITIONAL FEE PRESCRIBED IN 1,812
DIVISION (B) OF THIS SECTION. THE DIVISION shall give notice, 1,815
without unreasonable delay, of its action on any application for 1,816
renewal of a dealer's or salesman's SALESPERSON'S license. 1,817
(2) THE LICENSE OF EVERY INVESTMENT ADVISER AND INVESTMENT 1,820
ADVISER REPRESENTATIVE LICENSED UNDER SECTION 1707.141 OR 1,821
1707.161 OF THE REVISED CODE SHALL EXPIRE ON THE THIRTY-FIRST DAY 1,822
OF DECEMBER OF EACH YEAR. THE LICENSES MAY BE RENEWED UPON THE 1,823
FILING WITH THE DIVISION OF A COMPLETED LICENSE RENEWAL 1,824
APPLICATION, AND THE PAYMENT OF THE FEE PRESCRIBED IN DIVISION 1,825
(B) OF THIS SECTION, NOT LESS THAN THIRTY NOR MORE THAN 1,827
SEVENTY-FIVE DAYS BEFORE THE EXPIRATION OF THE OLD LICENSE. THE 1,828
DIVISION MAY ACCEPT A LICENSE RENEWAL APPLICATION FILED LESS THAN 1,829
THIRTY DAYS BEFORE THE EXPIRATION OF ANY CALENDAR YEAR. THE 1,830
DIVISION ALSO MAY ACCEPT A LICENSE RENEWAL APPLICATION UP TO TEN 1,832
DAYS AFTER EXPIRATION OF A LICENSE, PROVIDED THAT THE LICENSE 1,833
RENEWAL APPLICATION IS ACCOMPANIED BY THE LICENSE RENEWAL FEE AND 1,834
THE ADDITIONAL FEE PRESCRIBED IN DIVISION (B) OF THIS SECTION. 1,836
THE DIVISION SHALL GIVE NOTICE, WITHOUT UNREASONABLE DELAY, OF 1,837
ITS ACTION ON ANY LICENSE RENEWAL APPLICATION. 1,838
(3) AN INVESTMENT ADVISER REQUIRED TO MAKE A NOTICE FILING 1,840
UNDER DIVISION (B) OF SECTION 1707.141 OF THE REVISED CODE 1,842
42
ANNUALLY SHALL FILE WITH THE DIVISION THE NOTICE FILING AND THE 1,843
FEE PRESCRIBED IN DIVISION (B) OF THIS SECTION, NO LATER THAN THE 1,844
THIRTY-FIRST DAY OF DECEMBER OF EACH YEAR. THE DIVISION MAY 1,845
ACCEPT A NOTICE FILING UP TO TEN DAYS AFTER THE THIRTY-FIRST DAY 1,846
OF DECEMBER OF EACH YEAR, PROVIDED THAT THE NOTICE FILING IS 1,847
ACCOMPANIED BY THE NOTICE FILING FEE AND THE ADDITIONAL FEE 1,848
PRESCRIBED IN DIVISION (B) OF THIS SECTION. 1,849
(B)(1) The fee for each dealer's license, and for each 1,851
annual renewal thereof, shall be, thirty dollars per salesman 1,852
SALESPERSON, but not less than one hundred fifty nor more than 1,853
five thousand dollars. UPON PAYMENT OF AN ADDITIONAL FEE OF 1,854
ONE-HALF OF THE LICENSE RENEWAL FEE, THE DIVISION MAY ACCEPT AN 1,855
APPLICATION FOR RENEWAL FILED UP TO TEN DAYS AFTER THE EXPIRATION 1,856
OF A LICENSE ON THE THIRTY-FIRST DAY OF DECEMBER. The fee for 1,858
the examination of applicant dealers, when administered by the 1,860
division, shall be seventy-five dollars.
A dealer's license may be issued at any time for the 1,862
remainder of the calendar year. In such event, the annual fee 1,863
shall not be reduced. 1,864
(2) The fee for each salesman's SALESPERSON'S license, and 1,867
for each annual renewal thereof, shall be fifty dollars. The fee 1,869
for the examination of an applicant salesman SALESPERSON, when 1,870
administered by the division, shall be fifty dollars. 1,871
(3) THE FEE FOR EACH INVESTMENT ADVISER'S LICENSE, AND FOR 1,874
EACH ANNUAL RENEWAL THEREOF, SHALL BE TWO HUNDRED DOLLARS. UPON 1,875
THE PAYMENT OF AN ADDITIONAL FEE OF ONE-HALF OF THE LICENSE FEE,
THE DIVISION MAY ACCEPT A LICENSE RENEWAL APPLICATION FILED UP TO 1,877
TEN DAYS AFTER EXPIRATION OF A LICENSE ON THE THIRTY-FIRST DAY OF 1,878
DECEMBER.
(4) THE FEE FOR EACH INVESTMENT ADVISER NOTICE FILING 1,880
REQUIRED BY DIVISION (B) OF SECTION 1707.141 OF THE REVISED CODE 1,882
SHALL BE TWO HUNDRED DOLLARS. UPON THE PAYMENT OF AN ADDITIONAL 1,883
FEE OF ONE-HALF OF THE NOTICE FILING FEE, THE DIVISION MAY ACCEPT 1,884
A NOTICE FILING FILED UP TO TEN DAYS AFTER THE THIRTY-FIRST DAY 1,885
43
OF DECEMBER. A NOTICE FILING MAY BE MADE AT ANY TIME DURING THE 1,886
CALENDAR YEAR. IN THAT EVENT, THE NOTICE FILING FEE SHALL NOT BE 1,887
REDUCED.
(5) THE FEE FOR EACH INVESTMENT ADVISER REPRESENTATIVE'S 1,889
LICENSE, AND FOR EACH ANNUAL RENEWAL THEREOF, SHALL BE FIFTY 1,890
DOLLARS; HOWEVER, THE FEE SHALL BE WAIVED FOR THE INVESTMENT 1,891
ADVISER REPRESENTATIVE DESIGNATED THE PRINCIPAL OF THE INVESTMENT 1,893
ADVISER PURSUANT TO DIVISION (E) OF SECTION 1707.151 OF THE 1,895
REVISED CODE. UPON THE PAYMENT OF AN ADDITIONAL FEE OF ONE-HALF 1,896
OF THE LICENSE FEE, THE DIVISION MAY ACCEPT A LICENSE RENEWAL 1,898
APPLICATION FILED UP TO TEN DAYS AFTER EXPIRATION OF A LICENSE ON 1,899
THE THIRTY-FIRST DAY OF DECEMBER. 1,900
(C) A DEALER'S, SALESPERSON'S, INVESTMENT ADVISER'S, OR 1,902
INVESTMENT ADVISER REPRESENTATIVE'S LICENSE MAY BE ISSUED AT ANY 1,904
TIME FOR THE REMAINDER OF THE CALENDAR YEAR. IN THAT EVENT, THE 1,905
ANNUAL FEE SHALL NOT BE REDUCED. 1,906
Sec. 1707.18. (A)(1) If a partnership licensed as a 1,915
dealer is terminated under the laws of the state where such THE 1,916
partnership is organized, or by death, resignation, withdrawal, 1,918
or addition of a general partner, the license of the partnership 1,919
shall be automatically extended for a period of thirty days after 1,920
such THE termination. The license of such THE partnership and 1,922
the licenses of its salesmen SALESPERSONS may be transferred to 1,924
the successor partnership within such THAT period if the division 1,926
of securities finds that the successor partnership is 1,928
substantially similar to its predecessor partnership, and if an 1,929
application for transfer of license has been filed. The fee for 1,930
such a transfer shall be fifty dollars, plus ten dollars for 1,931
every salesman's SALESPERSON'S license which THAT is transferred. 1,933
(2) IF A PARTNERSHIP LICENSED AS AN INVESTMENT ADVISER IS 1,936
TERMINATED UNDER THE LAWS OF THE STATE WHERE THE PARTNERSHIP IS 1,937
ORGANIZED, OR BY DEATH, RESIGNATION, WITHDRAWAL, OR ADDITION OF A 1,938
GENERAL PARTNER, THE LICENSE OF THE PARTNERSHIP SHALL BE 1,939
AUTOMATICALLY EXTENDED FOR A PERIOD OF THIRTY DAYS AFTER THE 1,940
44
TERMINATION. THE LICENSE OF THE PARTNERSHIP SHALL, AND THE 1,941
LICENSES OF ITS INVESTMENT ADVISER REPRESENTATIVES MAY, BE 1,942
TRANSFERRED TO THE SUCCESSOR PARTNERSHIP WITHIN THAT PERIOD IF 1,943
THE DIVISION FINDS THAT THE SUCCESSOR PARTNERSHIP IS
SUBSTANTIALLY SIMILAR TO ITS PREDECESSOR PARTNERSHIP, AND IF AN 1,944
APPLICATION FOR TRANSFER OF LICENSE HAS BEEN FILED. THE FEE FOR 1,945
SUCH TRANSFER SHALL BE FIFTY DOLLARS, PLUS TEN DOLLARS FOR EVERY 1,946
INVESTMENT ADVISER REPRESENTATIVE'S LICENSE THAT IS TRANSFERRED. 1,947
(B)(1) If a licensed dealer changes its business form, 1,949
reincorporates, or by merger or otherwise becomes a different 1,950
person, as person is defined in section 1707.01 of the Revised 1,951
Code, upon application the division of securities may transfer 1,952
the dealer's license and the licenses of its salesmen 1,953
SALESPERSONS to the successor entity, if the division of 1,955
securities finds that the successor entity is substantially 1,956
similar to the predecessor entity. The fee for such a transfer 1,957
shall be fifty dollars plus ten dollars for every salesman's 1,958
SALESPERSON'S license transferred. 1,959
(2) IF A LICENSED INVESTMENT ADVISER CHANGES ITS BUSINESS 1,962
FORM, REINCORPORATES, OR BY MERGER OR OTHERWISE BECOMES A 1,963
DIFFERENT PERSON, AS PERSON IS DEFINED IN SECTION 1707.01 OF THE 1,964
REVISED CODE, UPON APPLICATION, THE DIVISION MAY TRANSFER THE 1,965
INVESTMENT ADVISER LICENSE AND THE LICENSES OF ITS INVESTMENT 1,966
ADVISER REPRESENTATIVES TO THE SUCCESSOR ENTITY, IF THE DIVISION 1,967
FINDS THAT THE SUCCESSOR ENTITY IS SUBSTANTIALLY SIMILAR TO THE 1,968
PREDECESSOR ENTITY. THE FEE FOR THE TRANSFER SHALL BE FIFTY 1,969
DOLLARS PLUS TEN DOLLARS FOR EVERY INVESTMENT ADVISER 1,970
REPRESENTATIVE'S LICENSE TRANSFERRED.
Sec. 1707.19. (A) An original license, or a renewal 1,979
thereof, applied for by a dealer or salesman SALESPERSON of 1,980
securities, OR BY AN INVESTMENT ADVISER OR AN INVESTMENT ADVISER 1,981
REPRESENTATIVE, may be refused, and any such license granted may 1,983
be suspended and, after notice and hearing in accordance with 1,984
sections 119.01 to 119.13, inclusive, CHAPTER 119. of the Revised 1,985
45
Code, may be revoked, by the division of securities, if the 1,987
division determines that such THE applicant or such THE licensed 1,989
dealer or salesman, SALESPERSON, INVESTMENT ADVISER, OR 1,990
INVESTMENT ADVISER REPRESENTATIVE:
(A)(1) Is not of good business repute; 1,992
(B)(2) Is conducting an illegitimate or fraudulent 1,994
business;
(C)(3) Is, in the case of a dealer OR INVESTMENT ADVISER, 1,997
insolvent;
(D)(4) Has intentionally violated any provision of 1,999
sections 1707.01 to 1707.45, inclusive, of the Revised Code, or 2,000
any regulation or order made thereunder; 2,001
(E)(5) Has knowingly and intentionally made a false 2,003
statement of a material fact in an application for a license, in 2,004
a description or application that has been filed, or in any 2,005
statement made to the division under such sections; 2,006
(F)(6) Has refused to comply with any lawful order or 2,008
requirement of the division under section 1707.23 of the Revised 2,009
Code; 2,010
(G)(7) Has been guilty of any fraudulent act in connection 2,012
with the sale of any securities OR IN CONNECTION WITH ACTING AS 2,013
AN INVESTMENT ADVISER OR INVESTMENT ADVISER REPRESENTATIVE; 2,014
(H)(8) Conducts business in purchasing or selling 2,016
securities at such variations from the existing market as in the 2,017
light of all the circumstances are unconscionable; 2,018
(I)(9) Conducts business in violation of such rules and 2,020
regulations as the division prescribes for the protection of 2,021
investors, CLIENTS, OR POTENTIAL CLIENTS; 2,022
(J)(10)(a) Has failed to furnish to the division any 2,024
information with respect to his THE purchases or sales of 2,027
securities within this state in his capacity as a licensed dealer 2,028
or salesman which THAT may be reasonably requested by the 2,030
division as pertinent to the protection of investors in this 2,031
state.
46
(b) HAS FAILED TO FURNISH TO THE DIVISION ANY INFORMATION 2,034
WITH RESPECT TO ACTING AS AN INVESTMENT ADVISER OR AN INVESTMENT 2,035
ADVISER REPRESENTATIVE WITHIN THIS STATE THAT MAY BE REASONABLY 2,036
REQUESTED BY THE DIVISION.
(B) For the protection of investors the division may 2,038
prescribe reasonable rules defining fraudulent, evasive, 2,039
deceptive, or grossly unfair practices or devices in the purchase 2,040
or sale of securities. 2,041
(C) FOR THE PROTECTION OF INVESTORS, CLIENTS, OR POTENTIAL 2,044
CLIENTS, THE DIVISION MAY PRESCRIBE REASONABLE RULES REGARDING 2,045
THE ACTS AND PRACTICES OF AN INVESTMENT ADVISER OR AN INVESTMENT 2,046
ADVISER REPRESENTATIVE.
(D) Pending any investigation or hearing provided for in 2,048
sections 1707.01 to 1707.45, inclusive, of the Revised Code, the 2,049
division may order the suspension of any dealer's or salesman's, 2,050
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER 2,051
REPRESENTATIVE'S license by notifying the party concerned of such 2,053
suspension and the cause for it. If it is a salesman SALESPERSON 2,054
whose license is suspended, the division shall also notify the 2,056
dealer employing him THE SALESPERSON. IF IT IS AN INVESTMENT 2,057
ADVISER REPRESENTATIVE WHOSE LICENSE IS SUSPENDED, THE DIVISION 2,058
ALSO SHALL NOTIFY THE INVESTMENT ADVISER WITH WHOM THE INVESTMENT 2,059
ADVISER REPRESENTATIVE IS EMPLOYED OR ASSOCIATED. 2,060
(E)(1) The suspension or revocation of the dealer's 2,062
license suspends those THE LICENSES of all his salesmen THE 2,063
DEALER'S SALESPERSONS. 2,064
(2) THE SUSPENSION OR REVOCATION OF THE INVESTMENT 2,066
ADVISER'S LICENSE SUSPENDS THE LICENSES OF ALL THE INVESTMENT 2,067
ADVISER'S INVESTMENT ADVISER REPRESENTATIVES. THE SUSPENSION OR 2,068
REVOCATION OF AN INVESTMENT ADVISER'S REGISTRATION UNDER SECTION 2,070
203 OF THE "INVESTMENT ADVISERS ACT OF 1940," 15 U.S.C. 80b-3, 2,072
SUSPENDS THE LICENSES OF ALL THE INVESTMENT ADVISER'S INVESTMENT 2,073
ADVISER REPRESENTATIVES.
(F) It is sufficient cause for refusal, revocation, or 2,075
47
suspension of the license in case of a partnership, partnership 2,076
association, corporation, or unincorporated association if any 2,077
general partner of such THE partnership, manager of such THE 2,079
partnership association, or executive officer of such THE 2,080
corporation or unincorporated association is not of good business 2,081
repute or has been guilty of any act or omission which would be 2,082
cause for refusing or revoking the license of an individual 2,083
dealer or salesman, SALESPERSON, INVESTMENT ADVISER, OR 2,084
INVESTMENT ADVISER REPRESENTATIVE. 2,085
Sec. 1707.20. (A) The division of securities may adopt, 2,094
amend, and rescind such rules, forms, and orders as are necessary 2,095
to carry out sections 1707.01 to 1707.45 of the Revised Code, 2,096
including rules and forms governing registration statements, 2,097
applications, and reports, and defining any terms, whether or not 2,098
used in sections 1707.01 to 1707.45 of the Revised Code, insofar 2,099
as the definitions are not inconsistent with said THESE sections. 2,101
For the purpose of rules and forms, the division of securities 2,102
may classify securities, persons, and matters within its 2,103
jurisdiction, and prescribe different requirements for different 2,104
classes. 2,105
(B) No rule, form, or order may be made, amended, or 2,107
rescinded unless the division of securities finds that the action 2,108
is necessary or appropriate in the public interest or for the 2,109
protection of investors, CLIENTS, OR PROSPECTIVE CLIENTS and 2,110
consistent with the purposes fairly intended by the policy and 2,112
provisions of sections 1707.01 to 1707.45 of the Revised Code. 2,113
In prescribing rules and forms and in otherwise administering 2,114
sections 1707.01 to 1707.45 of the Revised Code, the division of 2,115
securities may cooperate with the securities administrators of 2,116
the other states and the securities and exchange commission with 2,117
a view of effectuating the policy of this section to achieve 2,118
maximum uniformity in the form and content of registration 2,119
statements, applications, reports, and overall securities 2,120
regulation wherever practicable.
48
(C) The division of securities may by rule or order 2,122
prescribe: 2,123
(1) The form and content of financial statements required 2,125
under sections 1707.01 to 1707.45 of the Revised Code; 2,126
(2) The circumstances under which consolidated financial 2,128
statements shall be filed; 2,129
(3) Whether any required financial statements shall be 2,131
certified by independent or certified public accountants. All 2,132
financial statements shall be prepared in accordance with 2,133
generally accepted accounting practices. 2,134
(D) All rules and forms of the division of securities 2,136
shall be published; and in addition to fulfilling the 2,137
requirements of sections 119.01 to 119.13 CHAPTER 119. of the 2,139
Revised Code, the division shall prescribe, and shall publish and 2,140
make available its rules regarding the sale of securities, the 2,141
administration of sections 1707.01 to 1707.45 of the Revised 2,142
Code, and the procedure and practice before the division. 2,143
The division may also publish and distribute annually a 2,145
list of licensed dealers and salesmen. 2,146
(E) No provision of sections 1707.01 to 1707.45 of the 2,148
Revised Code imposing any liability applies to any act done or 2,149
omitted in good faith in conformity with any rule, form, or order 2,150
of the division of securities, notwithstanding that the rule, 2,151
form, or order may later be amended or rescinded or be determined 2,152
by judicial or other authority to be invalid for any reason, 2,153
except that the issuance of an order granting effectiveness to a 2,154
registration under section 1707.09 or 1707.091 of the Revised 2,155
Code for the purposes of this division shall not be deemed an 2,156
order other than as the establishment of the fact of 2,157
registration. 2,158
Sec. 1707.22. Whenever a dealer's or salesman's, 2,167
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER 2,168
REPRESENTATIVE'S license has been refused, suspended, or revoked, 2,171
or a renewal thereof has been denied, by the division of 2,172
49
securities, or whenever the division has refused to qualify
securities or has suspended or revoked the registration of any 2,173
particular security by description or by qualification, or the 2,174
right to buy, sell, or deal in any particular security whether it 2,175
is registered or qualified or exempt, or whether the transactions 2,176
in it are registered or exempt, the aggrieved party may appeal in 2,177
accordance with sections 119.01 to 119.13, inclusive, CHAPTER 2,178
119. of the Revised Code. 2,179
An order sustaining the refusal of the division to grant or 2,181
renew a dealer's or salesman's, SALESPERSON'S, INVESTMENT 2,182
ADVISER'S, OR INVESTMENT ADVISER REPRESENTATIVE'S license or to 2,183
grant qualification of securities, or AN ORDER sustaining the 2,185
division in suspending or revoking a dealer's or salesman's,
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER 2,186
REPRESENTATIVE'S license, the registration of any particular 2,188
security by description or by qualification, or the right to buy, 2,189
sell, or deal in any particular security, shall not bar, after 2,190
ten days from such THE order, a new registration by description, 2,191
or a new application of the plaintiff for such a license or 2,192
qualification or for a withdrawal of such A revocation or 2,193
suspension; nor shall an order in favor of the plaintiff prevent 2,195
the division, after proper notice and hearing, from thereafter 2,196
revoking or suspending such license, registration, or right to
buy, sell, or deal in a particular security, for any proper cause 2,197
which may, after such THE order, accrue or be discovered. 2,198
Sec. 1707.23. Whenever it appears to the division of 2,207
securities, from its files, upon complaint, or otherwise, that 2,208
any person has engaged in, is engaged in, or is about to engage 2,209
in any practice declared to be illegal or prohibited by Chapter 2,210
1707. of the Revised Code, or defined as fraudulent in such 2,211
chapter OR CONSIDERED A DISHONEST OR UNETHICAL PRACTICE, or any 2,213
other deceptive scheme or practice in connection with the sale of 2,214
securities, OR ACTING AS AN INVESTMENT ADVISER OR INVESTMENT 2,215
ADVISER REPRESENTATIVE, or when the division believes it to be in 2,217
50
the best interests of the public and necessary for the protection 2,218
of investors, the division may DO ANY OF THE FOLLOWING:
(A) Require any person to file with it, on such forms as 2,220
it prescribes, an original or additional statement or report in 2,221
writing, under oath or otherwise, as to any facts or 2,222
circumstances concerning the issuance, sale, or offer for sale of 2,223
securities within this state by said THE person, AS TO THE 2,225
PERSON'S ACTS OR PRACTICES AS AN INVESTMENT ADVISER OR INVESTMENT
ADVISER REPRESENTATIVE WITHIN THIS STATE, and as to such other 2,227
information as it deems material or relevant thereto. 2,228
(B) Examine any INVESTMENT ADVISER, INVESTMENT ADVISER 2,230
REPRESENTATIVE, OR ANY seller, dealer, salesman SALESPERSON, or 2,232
issuer of any such securities, and any of their agents, 2,234
employees, partners, officers, directors, members, or 2,235
shareholders, wherever located, under oath; and examine such 2,236
records, books, documents, accounts, and papers as the division 2,237
deems material or relevant to the inquiry. 2,238
(C) Require the attendance of such witnesses, and the 2,240
production of such books, records, and papers, as are required 2,241
either by the division or by any party to a hearing before the 2,242
division, and for that purpose issue a subpoena for any witness, 2,243
or a subpoena duces tecum to compel the production of any books, 2,244
records, or papers. Such THE subpoena shall be served by 2,245
certified mail, return receipt requested. If the subpoena is 2,247
returned because of inability to deliver, or if no return is 2,248
received within thirty days of the date of mailing, the subpoena 2,249
may be served by ordinary mail. If no return of ordinary mail is 2,250
received within thirty days after the date of mailing, service 2,251
shall be deemed to have been made. If the subpoena is returned 2,252
because of inability to deliver, the division may designate a 2,253
person or persons to effect either personal or residence service 2,254
upon such THE witness. Such THE person may be the sheriff of the 2,256
county in which the witness resides or may be found or any other 2,257
duly designated person. The fees and mileage of such THE person 2,258
51
serving such THE subpoena shall be the same as those allowed by 2,260
the courts of common pleas in criminal cases, and shall be paid 2,262
from the funds of the division. Fees and mileage for such THE 2,263
witness shall be the same as those allowed for witnesses by the 2,265
courts of common pleas in criminal cases, and shall be paid from 2,266
the funds of the division upon request of such THE witness 2,267
following the hearing.
(D) Proceed under section 1707.19 of the Revised Code to 2,269
suspend the license of any licensed dealer or salesman, LICENSED 2,271
SALESPERSON, LICENSED INVESTMENT ADVISER, OR LICENSED INVESTMENT
ADVISER REPRESENTATIVE and ultimately, if the division 2,273
determines, revoke such license under such sections. 2,274
(E) Initiate criminal proceedings under section 1707.042 2,276
or 1707.44 of the Revised Code by laying before the prosecuting 2,277
attorney of the proper county any evidence of criminality which 2,278
shall come COMES to its knowledge; and in the event of the 2,279
neglect or refusal of the prosecuting attorney to prosecute such 2,281
violations, or at the request of the prosecuting attorney, the 2,282
division shall submit such THE evidence to the attorney general, 2,283
who may proceed in the prosecution with all the rights, 2,285
privileges, and powers conferred by law on prosecuting attorneys, 2,286
including the power to appear before grand juries and to 2,287
interrogate witnesses before such grand juries. 2,288
(F) Require any dealers forthwith to furnish to the 2,290
division copies of prospectuses, circulars, or advertisements 2,291
respecting securities, which THAT they publish or generally 2,292
distribute, OR REQUIRE ANY INVESTMENT ADVISERS IMMEDIATELY TO 2,293
FURNISH TO THE DIVISION COPIES OF BROCHURES, ADVERTISEMENTS, 2,294
PUBLICATIONS, ANALYSES, REPORTS, OR OTHER WRITINGS THAT THEY 2,295
PUBLISH OR DISTRIBUTE. 2,296
(G) Require any dealers to mail to the division, prior to 2,298
sale, notices of intention to sell, in respect to all securities 2,299
which are not exempt under section 1707.02 of the Revised Code, 2,300
or which are sold in transactions not exempt under section 2,301
52
1707.03 or 1707.04 of the Revised Code. 2,302
(H) Issue and cause to be served by certified mail upon 2,304
all persons affected an order requiring the person or persons to 2,305
cease and desist from the acts or practices appearing to the 2,306
division of securities to constitute violations of Chapter 1707. 2,307
of the Revised Code OR RULES ADOPTED UNDER THAT CHAPTER BY THE 2,308
DIVISION. The order shall state specifically the section or 2,310
sections of Chapter 1707. of the Revised Code OR THE RULE OR
RULES ADOPTED UNDER THAT CHAPTER BY THE DIVISION that appear to 2,312
the division of securities to have been violated and the facts 2,313
constituting the violation. If after the issuance of the order 2,314
it appears to the division of securities that any person or 2,315
persons affected by the order have engaged in any act or practice 2,316
from which the person or persons shall have been required, by the 2,317
order, to cease and desist, the director of commerce may apply to 2,318
the court of common pleas of any county for, and upon proof of 2,319
the validity of the order of the division of securities, the 2,320
delivery of the order to the person or persons affected, and of 2,321
the illegality and the continuation of the acts or practices that 2,322
are the subject of the order, the court may grant an injunction 2,323
implementing the order of the division of securities. 2,324
(I) ISSUE AND INITIATE CONTEMPT PROCEEDINGS IN THIS STATE 2,326
REGARDING SUBPOENAS AND SUBPOENAS DUCES TECUM AT THE REQUEST OF 2,328
THE SECURITIES ADMINISTRATOR OF ANOTHER STATE, IF IT APPEARS TO 2,329
THE DIVISION THAT THE ACTIVITIES FOR WHICH THE INFORMATION IS 2,330
SOUGHT WOULD VIOLATE CHAPTER 1707. OF THE REVISED CODE IF THE 2,332
ACTIVITIES HAD OCCURRED IN THIS STATE.
Sec. 1707.25. In case any person fails to file any 2,341
statement or report required by sections 1707.01 to 1707.45, 2,342
inclusive, of the Revised Code, to obey any subpoena the issuance 2,343
of which is provided for in such THOSE sections, or to produce 2,344
books, records, or papers, give testimony, or answer questions, 2,346
as required by such THOSE sections, the director of commerce may 2,347
apply to a court of common pleas of any county for, and upon 2,349
53
proof of such failure such THE court may grant an injunction 2,350
restraining the ACTING AS AN INVESTMENT ADVISER OR INVESTMENT 2,351
ADVISER REPRESENTATIVE, OR THE issuance, sale, or offer for sale 2,352
of any securities by such THE person or by its agents, employees, 2,354
partners, officers, directors, or shareholders, until such 2,355
failure has been remedied and such other relief as the facts may 2,356
warrant has been had. Such injunctive relief is available in 2,357
addition to the other remedies provided for in such sections 2,358
1707.01 TO 1707.45 OF THE REVISED CODE. 2,359
Where the person refusing to comply with such order of 2,361
court is an issuer of securities, the court may enjoin the sale 2,362
by any dealer of any securities of said THE issuer, and the 2,363
division of securities may revoke the qualification of the 2,365
securities of said THE issuer, or suspend or revoke the sale of 2,366
any securities of said THE issuer which have been registered by 2,368
description, and such securities shall not thereafter be sold by 2,370
any dealer until such THE order of the court or of the division 2,371
is withdrawn.
Sec. 1707.27. If the court of common pleas is satisfied 2,380
with the sufficiency of the application for a receivership, and 2,381
of the sufficiency of the proof of substantial violation of 2,382
sections 1707.01 to 1707.45, inclusive, of the Revised Code, or 2,383
of the use of any act, practice, or transaction declared to be 2,384
illegal, OR prohibited, or declared DEFINED AS fraudulent, OR 2,385
CONSIDERED TO BE DISHONEST OR UNETHICAL, by such THOSE sections, 2,386
to the material prejudice of a purchaser or holder of securities, 2,387
such OR CLIENT OF AN INVESTMENT ADVISER OR INVESTMENT ADVISER 2,388
REPRESENTATIVE, THE court may appoint a receiver, for any person 2,390
so violating sections 1707.01 to 1707.45, inclusive, of the 2,392
Revised Code, with power to sue for, collect, receive, and take 2,394
into his THE RECEIVER'S possession all the books, records, and 2,395
papers of such THE person and all rights, credits, property, and 2,396
choses in action acquired by such THE person by means of any such 2,398
act, practice, or transaction, and also all property with which 2,399
54
such THE property has been mingled, if such THE property cannot 2,400
be identified in kind because of such THE commingling, and with 2,401
power to sell, convey, and assign such THE property, and to hold 2,403
and dispose of the proceeds under the direction of the court of 2,405
common pleas. Such THE court shall have jurisdiction of all 2,406
questions arising in said THE proceedings and may make such 2,408
orders and decrees therein as justice and equity require. 2,409
Sec. 1707.36. (A) There is hereby created in the division 2,418
of securities a position to be known as attorney-inspector, which 2,419
shall be held only by an attorney at law. The duties of this 2,420
position are to investigate and report upon all complaints and 2,421
alleged violations of laws relating to the issue and sale of 2,422
securities and to represent the division in prosecutions arising 2,423
from such complaints and alleged violations. 2,424
THE OFFICE OF THE ATTORNEY-INSPECTOR IS HEREBY DESIGNATED A 2,427
CRIMINAL JUSTICE AGENCY IN INVESTIGATING REPORTED VIOLATIONS OF 2,428
LAW RELATING TO SECURITIES AND INVESTMENT ADVICE, AND AS SUCH IS 2,429
AUTHORIZED BY THIS STATE TO APPLY FOR ACCESS TO THE COMPUTERIZED 2,430
DATABASES ADMINISTERED BY THE NATIONAL CRIME INFORMATION CENTER 2,431
OR THE LAW ENFORCEMENT AUTOMATED DATA SYSTEM IN OHIO, AND TO 2,432
OTHER COMPUTERIZED DATABASES ADMINISTERED FOR THE PURPOSE OF 2,433
MAKING CRIMINAL JUSTICE INFORMATION ACCESSIBLE TO STATE CRIMINAL 2,434
JUSTICE AGENCIES. 2,435
(B) There is hereby created in the division of securities 2,437
two positions to be known as control-bid attorneys, which shall 2,438
be held only by attorneys at law. The duties of these positions 2,439
are to investigate and report upon all matters relating to 2,440
control-bids and related matters and to represent the division in 2,441
the regulatory matters arising under the Ohio control-bid law. 2,442
(C) The attorney-inspector and each control-bid attorney 2,444
shall be paid at a rate not less than pay range 47 set out in 2,445
schedule E-2 of section 124.152 of the Revised Code, to be paid 2,446
as other operating expenses of the division. 2,447
Sec. 1707.391. When any securities have been sold in 2,456
55
reliance upon division (O) or, (Q), (W), (X), OR (Y) of section 2,459
1707.03 of the Revised Code, section 1707.08 of the Revised Code, 2,460
or any other section of Chapter 1707. of the Revised Code that 2,461
the division of securities may specify by rule, but such reliance 2,462
was improper because the required filings were not timely or 2,463
properly made due to excusable neglect, upon the effective date 2,464
of an application, made to the division and payment of the 2,465
required fee, if not already paid, plus a penalty fee equal to 2,466
such THE required fee, the sale of the securities shall be deemed 2,468
exempt, qualified, or registered, as though timely and properly 2,469
filed. Such application shall become effective upon the 2,470
expiration of fourteen days after the date of the filing in 2,471
question if prior thereto the division did not give notice to the 2,472
applicant that the application was denied based on a finding of 2,473
lack of excusable neglect. The division shall promptly adopt and 2,474
promulgate rules establishing provisions defining excusable 2,475
neglect and otherwise establishing reasonable standards for 2,476
determining excusable neglect. 2,477
The effectiveness of an application under this section does 2,479
not relieve anyone who has, other than for excusable neglect, 2,480
violated sections 1707.01 to 1707.45 of the Revised Code, or any 2,481
previous law in force at the time of sale, from prosecution 2,482
thereunder. 2,483
Sec. 1707.42. (A) Whoever, with intent to secure 2,492
financial gain to himself SELF, advises and procures any person 2,494
to purchase any security, and receives any commission or reward 2,495
for such THE advice or services without disclosing to the 2,496
purchaser the fact of his THE PERSON'S agency or his interest in 2,498
such sales, shall be liable to such THE purchaser for the amount 2,499
of such THE purchaser's damage thereby, upon tender of such THE 2,501
security to, and suit brought against, such THE adviser, by such 2,503
THE purchaser. No such suit shall be brought more than one year 2,504
subsequent to such THE purchase. 2,505
(B) WHOEVER ACTS AS AN INVESTMENT ADVISER OR INVESTMENT 2,507
56
ADVISER REPRESENTATIVE IN VIOLATION OF CHAPTER 1707. OF THE 2,508
REVISED CODE SHALL BE LIABLE FOR DAMAGES RESULTING FROM THE 2,509
VIOLATION IN AN ACTION AT LAW IN A COURT OF COMPETENT 2,510
JURISDICTION. DAMAGES MAY INCLUDE CONSIDERATION PAID FOR THE
ADVICE, ANY LOSS DUE TO THE ADVICE, AND ALL COURT COSTS, LESS THE 2,511
AMOUNT OF ANY INCOME RECEIVED FROM THE ADVICE. NO PERSON MAY 2,512
BRING AN ACTION UNDER THIS DIVISION MORE THAN FOUR YEARS AFTER 2,513
THE RENDERING OF INVESTMENT ADVICE OR TWO YEARS AFTER DISCOVERY 2,514
OF FACTS CONSTITUTING THE VIOLATION, WHICHEVER IS THE SHORTER 2,515
PERIOD.
Sec. 1707.431. For purposes of this section, the following 2,524
persons shall not be deemed to have effected, participated in, or 2,525
aided the seller in any way in making, a sale or contract of sale 2,526
in violation of sections 1707.01 to 1707.45 of the Revised Code: 2,527
(A) Any attorney, accountant, or engineer whose 2,529
performance is incidental to the practice of his THE PERSON'S 2,530
profession; 2,531
(B) Any person, OTHER THAN AN INVESTMENT ADVISER OR AN 2,533
INVESTMENT ADVISER REPRESENTATIVE, who brings any issuer together 2,534
with any potential investor, without receiving, directly or 2,535
indirectly, a commission, fee, or other remuneration based on the 2,536
sale of any securities by any such THE issuer to any such THE 2,537
investor. Remuneration received by such THE person solely for 2,539
the purpose of offsetting the reasonable out-of-pocket costs 2,541
incurred by the person shall not be deemed such a commission, 2,542
fee, or other remuneration.
Any person claiming exemption under this division for a 2,544
publicly advertised meeting shall file a notice with the division 2,545
of securities indicating an intent to cause or hold such a 2,546
meeting at least twenty-one days prior to the meeting. The 2,547
division may, upon receipt of such notice, issue an order denying 2,548
the availability of an exemption under this division not more 2,549
than fourteen days after receipt of such THE notice based on a 2,550
finding that the applicant is not entitled to the exemption. 2,551
57
Notwithstanding the notice described in this section, a failure 2,552
to file such a THE notice does not create a presumption that a 2,553
person was participating in or aiding in the making of a sale or 2,555
contract of sale in violation of this chapter. 2,556
(C) Any person whom the division exempts from this 2,558
provision by rule. 2,559
Sec. 1707.44. (A)(1) No person shall engage in any act or 2,568
practice that violates division (A), (B), or (C) of section 2,570
1707.14 of the Revised Code, and no salesperson shall sell 2,571
securities in this state without being licensed pursuant to 2,572
section 1707.16 of the Revised Code.
(2) NO PERSON SHALL ENGAGE IN ANY ACT OR PRACTICE THAT 2,574
VIOLATES DIVISION (A) OF SECTION 1707.141 OR SECTION 1707.161 OF 2,575
THE REVISED CODE.
(B) No person shall knowingly make or cause to be made any 2,577
false representation concerning a material and relevant fact, in 2,578
any oral statement or in any prospectus, circular, description, 2,579
application, or written statement, for any of the following 2,580
purposes: 2,581
(1) Complying with this chapter, in regard to registering 2,583
securities by description; 2,584
(2) Securing the qualification of any securities under 2,586
this chapter; 2,587
(3) Procuring the licensing of any dealer or, salesperson, 2,590
INVESTMENT ADVISER, OR INVESTMENT ADVISER REPRESENTATIVE under 2,592
this chapter;
(4) Selling any securities in this state; 2,594
(5) ADVISING FOR COMPENSATION, AS TO THE VALUE OF 2,596
SECURITIES OR AS TO THE ADVISABILITY OF INVESTING IN, PURCHASING, 2,597
OR SELLING SECURITIES.
(C) No person shall knowingly and intentionally sell, 2,599
cause to be sold, offer for sale, or cause to be offered for 2,600
sale, any security which comes under any of the following 2,601
descriptions: 2,602
58
(1) Is not exempt under section 1707.02 of the Revised 2,604
Code, nor the subject matter of one of the transactions exempted 2,605
in sections 1707.03, 1707.04, and 1707.34 of the Revised Code, 2,606
has not been registered by description, coordination, or 2,607
qualification, and is not the subject matter of a transaction 2,608
that has been registered by description; 2,609
(2) The prescribed fees for registering by description, by 2,611
coordination, or by qualification have not been paid in respect 2,612
to such security; 2,613
(3) Such person has been notified by the division, or has 2,615
knowledge of the notice, that the right to buy, sell, or deal in 2,617
such security has been suspended or revoked, or that the 2,618
registration by description, by coordination, or by qualification 2,619
under which it may be sold has been suspended or revoked; 2,620
(4) The offer or sale is accompanied by a statement that 2,622
the security offered or sold has been or is to be in any manner 2,623
indorsed by the division. 2,624
(D) No person who is an officer, director, or trustee of, 2,626
or a dealer for, any issuer, and who knows such issuer to be 2,627
insolvent in that the liabilities of such issuer exceed its 2,628
assets, shall sell any securities of or for any such issuer, 2,629
without disclosing the fact of the insolvency to the purchaser. 2,631
(E) No person with intent to aid in the sale of any 2,633
securities on behalf of the issuer, shall knowingly make any 2,634
representation not authorized by such issuer or at material 2,635
variance with statements and documents filed with the division by 2,636
such issuer. 2,637
(F) No person, with intent to deceive, shall sell, cause 2,639
to be sold, offer for sale, or cause to be offered for sale, any 2,640
securities of an insolvent issuer, with knowledge that such 2,641
issuer is insolvent in that the liabilities of such issuer exceed 2,642
its assets, taken at their fair market value. 2,643
(G) No person in selling securities shall knowingly engage 2,645
in any act or practice which is, in this chapter, declared 2,646
59
illegal, defined as fraudulent, or prohibited. 2,648
(H) No licensed dealer shall refuse to buy from, sell to, 2,650
or trade with any person because the person appears on a 2,651
blacklist issued by, or is being boycotted by, any foreign 2,652
corporate or governmental entity, nor sell any securities of or 2,653
for any issuer who is known in relation to the issuance or sale 2,654
of such securities to have engaged in such practices. 2,655
(I) No dealer in securities, knowing that the dealer's 2,657
liabilities exceed the reasonable value of the dealer's assets, 2,659
shall accept money or securities, except in payment of or as 2,660
security for an existing debt, from a customer who is ignorant of 2,661
the dealer's insolvency, and thereby cause the customer to lose 2,664
any part of the customer's securities or the value thereof, by 2,665
doing either of the following without the customer's consent: 2,666
(1) Pledging, selling, or otherwise disposing of such 2,668
securities, when the dealer has no lien on or any special 2,670
property in such securities;
(2) Pledging such securities for more than the amount due, 2,672
or otherwise disposing of such securities for the dealer's own 2,674
benefit, when the dealer has a lien or indebtedness on such 2,675
securities. 2,676
It is an affirmative defense to a charge under this 2,678
division that, at the time the securities involved were pledged, 2,679
sold, or disposed of, the dealer had in the dealer's possession 2,681
or control, and available for delivery, securities of the same 2,682
kinds and in amounts sufficient to satisfy all customers entitled 2,683
thereto, upon demand and tender of any amount due thereon. 2,684
(J) No person, with purpose to deceive, shall make, issue, 2,686
publish, or cause to be made, issued, or published any statement 2,687
or advertisement as to the value of securities, or as to alleged 2,688
facts affecting the value of securities, or as to the financial 2,689
condition of any issuer of securities, when the person knows that 2,692
such statement or advertisement is false in any material respect. 2,693
(K) No person, with purpose to deceive, shall make, 2,695
60
record, or publish or cause to be made, recorded, or published, a 2,696
report of any transaction in securities which is false in any 2,697
material respect. 2,698
(L) No dealer shall engage in any act that violates the 2,700
provisions of section 15(c) or 15(g) of the "Securities Exchange 2,701
Act of 1934," 48 Stat. 881, 15 U.S.C.A. 78o(c) or (g), or any 2,702
rule or regulation promulgated by the securities and exchange 2,703
commission thereunder. If, subsequent to October 11, 1994, 2,704
additional amendments to section 15(c) or 15(g) are adopted, or 2,705
additional rules or regulations are promulgated pursuant to such 2,706
sections, the division of securities shall, by rule, adopt the 2,707
amendments, rules, or regulations, unless the division finds that 2,708
the amendments, rules, or regulations are not necessary for the 2,709
protection of investors or in the public interest.
(M)(1) NO INVESTMENT ADVISER OR INVESTMENT ADVISER 2,711
REPRESENTATIVE SHALL DO ANY OF THE FOLLOWING: 2,712
(a) EMPLOY ANY DEVICE, SCHEME, OR ARTIFICE TO DEFRAUD ANY 2,715
PERSON;
(b) ENGAGE IN ANY ACT, PRACTICE, OR COURSE OF BUSINESS 2,717
THAT OPERATES OR WOULD OPERATE AS A FRAUD OR DECEIT UPON ANY 2,718
PERSON; 2,719
(c) ENGAGE IN DISHONEST OR UNETHICAL PRACTICES IN 2,721
VIOLATION OF RULES ADOPTED BY THE DIVISION. 2,722
(2) NO INVESTMENT ADVISER OR INVESTMENT ADVISER 2,724
REPRESENTATIVE LICENSED OR REQUIRED TO BE LICENSED UNDER THIS 2,725
CHAPTER SHALL TAKE OR HAVE CUSTODY OF ANY SECURITIES OR FUNDS OF 2,726
ANY PERSON, EXCEPT AS PROVIDED IN RULES ADOPTED BY THE DIVISION. 2,727
(3) IN THE SOLICITATION OF CLIENTS OR PROSPECTIVE CLIENTS, 2,729
NO PERSON SHALL MAKE ANY UNTRUE STATEMENT OF A MATERIAL FACT OR 2,730
OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE 2,731
STATEMENTS MADE NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES 2,732
UNDER WHICH THE STATEMENTS WERE MADE. 2,733
Sec. 1707.46. The principal executive officer of the 2,742
division of securities shall be the commissioner of securities, 2,743
61
who shall be appointed by the director of commerce. The 2,744
commissioner of securities shall enforce all the laws and 2,745
administrative rules enacted OR ADOPTED to regulate the sale of 2,746
bonds, stocks, and other securities and to prevent fraud in such 2,747
sales. THE COMMISSIONER ALSO SHALL ENFORCE ALL THE LAWS AND 2,748
ADMINISTRATIVE RULES ENACTED OR ADOPTED TO REGULATE INVESTMENT 2,749
ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES AND TO PREVENT 2,750
FRAUD IN THEIR ACTS, PRACTICES, AND TRANSACTIONS. 2,751
The commissioner shall be paid at a rate not less than pay 2,753
range 47 set out in schedule E-2 of section 124.152 of the 2,754
Revised Code, to be paid as other operating expenses of the 2,755
division.
Sec. 1707.48. The division of securities shall retain the 2,764
originals or copies of all documents filed with the division 2,765
pertaining to registration by description, qualification, or 2,766
coordination and all filings for claims of exemption for eight 2,767
years from the date of the initial filing. For purposes of this 2,768
section, the date of the initial filing shall be the date upon
which the first fee for such filing was received by the division. 2,769
The division shall retain all documents, testimony 2,771
transcripts, investigative reports, and investigative notes that 2,772
the division has compiled in original or copy form for five years 2,773
from the date of the alleged or suspected violation of any 2,774
provision of this chapter.
All other documents filed with the division shall be 2,776
retained in original or copy form for five years. 2,777
THE DIVISION MAY BY RULE EXEMPT ANY DOCUMENT OR RECORD FROM 2,779
THIS SECTION, PROVIDED THAT ANY DOCUMENT OR RECORD EXEMPTED IS 2,780
RETAINED BY THE DIVISION FOR AT LEAST AS LONG AS IT WOULD HAVE 2,781
BEEN RETAINED HAD IT BEEN SUBJECT TO THIS SECTION. 2,782
Sec. 1707.99. Whoever commits any act described in 2,791
division (A) of section 1707.042 or section 1707.44 of the 2,793
Revised Code is guilty of a violation of sections 1707.01 to 2,794
1707.45 of the Revised Code and THE FOLLOWING APPLY TO THE 2,795
62
OFFENDER:
(A) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,798
THE OFFENSE OR THE LOSS TO THE VICTIM IS LESS THAN FIVE HUNDRED 2,799
DOLLARS, THE OFFENDER is guilty of a felony of the fifth degree, 2,802
and the court may impose upon the offender an additional fine of 2,805
not more than two thousand five hundred dollars.
(B) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,808
THE OFFENSE OR THE LOSS TO THE VICTIM IS FIVE HUNDRED DOLLARS OR 2,809
MORE BUT LESS THAN FIVE THOUSAND DOLLARS, THE OFFENDER IS GUILTY 2,810
OF A FELONY OF THE FOURTH DEGREE, AND THE COURT MAY IMPOSE UPON 2,811
THE OFFENDER AN ADDITIONAL FINE OF NOT MORE THAN FIVE THOUSAND 2,812
DOLLARS. 2,813
(C) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,816
THE OFFENSE OR THE LOSS TO THE VICTIM IS FIVE THOUSAND DOLLARS OR 2,817
MORE BUT LESS THAN TWENTY-FIVE THOUSAND DOLLARS, THE OFFENDER IS 2,818
GUILTY OF A FELONY OF THE THIRD DEGREE, AND THE COURT MAY IMPOSE 2,819
UPON THE OFFENDER AN ADDITIONAL FINE OF NOT MORE THAN TEN 2,820
THOUSAND DOLLARS.
(D) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,823
THE OFFENSE OR THE LOSS TO THE VICTIM IS TWENTY-FIVE THOUSAND 2,824
DOLLARS OR MORE BUT LESS THAN ONE HUNDRED THOUSAND DOLLARS, THE 2,825
OFFENDER IS GUILTY OF A FELONY OF THE SECOND DEGREE, AND THE 2,826
COURT MAY IMPOSE UPON THE OFFENDER AN ADDITIONAL FINE OF NOT MORE 2,827
THAN FIFTEEN THOUSAND DOLLARS. 2,828
(E) IF THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN 2,831
THE OFFENSE OR THE LOSS TO THE VICTIM IS ONE HUNDRED THOUSAND 2,832
DOLLARS OR MORE, THE OFFENDER IS GUILTY OF A FELONY OF THE FIRST 2,833
DEGREE, AND THE COURT MAY IMPOSE UPON THE OFFENDER AN ADDITIONAL 2,834
FINE OF NOT MORE THAN TWENTY THOUSAND DOLLARS. 2,835
Section 2. That existing sections 1707.01, 1707.03, 2,837
1707.11, 1707.14, 1707.17, 1707.18, 1707.19, 1707.20, 1707.22, 2,839
1707.23, 1707.25, 1707.27, 1707.36, 1707.391, 1707.42, 1707.431,
1707.44, 1707.46, 1707.48, and 1707.99 of the Revised Code are 2,841
hereby repealed.
63
Section 3. It is the intent of the General Assembly that 2,843
the Commissioner of Securities take action reasonably necessary 2,844
to provide for the timely and orderly licensure of investment 2,845
advisers and investment adviser representatives consistent with 2,846
sections 1707.141, 1707.161, and 1707.17 of the Revised Code. 2,847