As Reported by House Civil and Commercial Law Committee 1
123rd General Assembly 4
Regular Session Sub. H. B. No. 551 5
1999-2000 6
REPRESENTATIVE SALERNO-PETERSON-CALLENDER-WOMER BENJAMIN 8
_________________________________________________________________ 9
A B I L L
To amend sections 1707.01, 1707.02, 1707.11, 11
1707.15, 1707.151, 1707.16, 1707.17, and 1707.23; 12
to enact sections 3916.01, 3916.02, 3916.03,
3916.05, 3916.07, 3916.08, 3916.10, 3916.12, 13
3916.13, 3916.15, 3916.17, 3916.19, 3916.21, 14
3916.22, 3916.24, 3916.26, 3916.28, 3916.30, 15
3916.32, and 3916.99; and to repeal sections
1707.432, 1707.433, 1707.434, 1707.435, 1707.436, 16
1707.437, 1707.438, and 1707.439 of the Revised 17
Code to adopt the Viatical Settlements Model Act 18
of the National Association of Insurance
Commissioners, to make life settlement interests 19
subject to the Ohio Securities Law, and to make 20
other changes in the Securities Law, including
changes relative to exempt securities, consent to 21
service of process, application for a dealer's, 22
investment adviser's, or salesperson's license, 23
and private civil actions seeking damages arising 24
from the sale of a security.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 26
Section 1. That sections 1707.01, 1707.02, 1707.11, 28
1707.15, 1707.151, 1707.16, 1707.17, and 1707.23 be amended and 30
sections 3916.01, 3916.02, 3916.03, 3916.05, 3916.07, 3916.08, 31
3916.10, 3916.12, 3916.13, 3916.15, 3916.17, 3916.19, 3916.21, 32
3916.22, 3916.24, 3916.26, 3916.28, 3916.30, 3916.32, and 3916.99 33
of the Revised Code be enacted to read as follows: 34
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Sec. 1707.01. As used in this chapter: 43
(A) Whenever the context requires it, "division" or 45
"division of securities" may be read as "director of commerce" or 46
as "commissioner of securities." 47
(B) "Security" means any certificate or instrument that 49
represents title to or interest in, or is secured by any lien or 50
charge upon, the capital, assets, profits, property, or credit of 51
any person or of any public or governmental body, subdivision, or 52
agency. It includes shares of stock, certificates for shares of 53
stock, membership interests in limited liability companies, 54
voting-trust certificates, warrants and options to purchase 55
securities, subscription rights, interim receipts, interim 56
certificates, promissory notes, all forms of commercial paper, 57
evidences of indebtedness, bonds, debentures, land trust 58
certificates, fee certificates, leasehold certificates, syndicate 59
certificates, endowment certificates, certificates or written 60
instruments in or under profit-sharing or participation 61
agreements or in or under oil, gas, or mining leases, or 62
certificates or written instruments of any interest in or under 63
the same, receipts evidencing preorganization or reorganization 64
subscriptions, preorganization certificates, reorganization 65
certificates, certificates evidencing an interest in any trust or 66
pretended trust, any investment contract, ANY LIFE SETTLEMENT 67
INTEREST, any instrument evidencing a promise or an agreement to 68
pay money, warehouse receipts for intoxicating liquor, and the 69
currency of any government other than those of the United States 70
and Canada, but sections 1707.01 to 1707.45 of the Revised Code 71
do not apply to the sale of real estate. 72
(C)(1) "Sale" has the full meaning of "sale" as applied by 74
or accepted in courts of law or equity, and includes every 75
disposition, or attempt to dispose, of a security or of an 76
interest in a security. "Sale" also includes a contract to sell, 77
an exchange, an attempt to sell, an option of sale, a 78
solicitation of a sale, a solicitation of an offer to buy, a 79
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subscription, or an offer to sell, directly or indirectly, by 80
agent, circular, pamphlet, advertisement, or otherwise. 81
(2) "Sell" means any act by which a sale is made. 83
(3) The use of advertisements, circulars, or pamphlets in 85
connection with the sale of securities in this state exclusively 86
to the purchasers specified in division (D) of section 1707.03 of 87
the Revised Code is not a sale when the advertisements, 88
circulars, and pamphlets describing and offering those securities 89
bear a readily legible legend in substance as follows: "This 90
offer is made on behalf of dealers licensed under sections 91
1707.01 to 1707.45 of the Revised Code, and is confined in this 92
state exclusively to institutional investors and licensed 93
dealers." 94
(4) The offering of securities by any person in 96
conjunction with a licensed dealer by use of advertisement, 97
circular, or pamphlet is not a sale if that person does not 98
otherwise attempt to sell securities in this state. 99
(5) Any security given with, or as a bonus on account of, 101
any purchase of securities is conclusively presumed to constitute 102
a part of the subject of that purchase and has been "sold." 103
(6) "Sale" by an owner, pledgee, or mortgagee, or by a 105
person acting in a representative capacity, includes sale on 106
behalf of such party by an agent, including a licensed dealer or 107
salesperson. 108
(D) "Person," except as otherwise provided in this 110
chapter, means a natural person, firm, partnership, limited 112
partnership, partnership association, syndicate, joint-stock 113
company, unincorporated association, trust or trustee except 114
where the trust was created or the trustee designated by law or 115
judicial authority or by a will, and a corporation or limited 116
liability company organized under the laws of any state, any 117
foreign government, or any political subdivision of a state or 118
foreign government.
(E)(1) "Dealer," except as otherwise provided in this 120
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chapter, means every person, other than a salesperson, who 122
engages or professes to engage, in this state, for either all or
part of the person's time, directly or indirectly, either in the 123
business of the sale of securities for the person's own account, 124
or in the business of the purchase or sale of securities for the 125
account of others in the reasonable expectation of receiving a 126
commission, fee, or other remuneration as a result of engaging in 127
the purchase and sale of securities. "Dealer" does not mean any 128
of the following:
(a) Any issuer, including any officer, director, employee, 130
or trustee of, or member or manager of, or partner in, or any 131
general partner of, any issuer, that sells, offers for sale, or 133
does any act in furtherance of the sale of a security that 134
represents an economic interest in that issuer, provided no 135
commission, fee, or other similar remuneration is paid to or 136
received by the issuer for the sale; 137
(b) Any licensed attorney, public accountant, or firm of 139
such attorneys or accountants, whose activities are incidental to 140
the practice of the attorney's, accountant's, or firm's 141
profession;
(c) Any person that, for the account of others, engages in 143
the purchase or sale of securities that are issued and 144
outstanding before such purchase and sale, if a majority or more 145
of the equity interest of an issuer is sold in that transaction, 146
and if, in the case of a corporation, the securities sold in that 147
transaction represent a majority or more of the voting power of 148
the corporation in the election of directors; 149
(d) Any person that brings an issuer together with a 151
potential investor and whose compensation is not directly or 152
indirectly based on the sale of any securities by the issuer to 153
the investor; 154
(e) Any bank, savings and loan association, savings bank, 156
or credit union chartered under the laws of the United States or 157
any state of the United States, provided that all transactions 159
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are consummated by or through a person licensed pursuant to 160
section 1707.14 of the Revised Code; 161
(f) Any person that the division of securities by rule 163
exempts from the definition of "dealer" under division (E)(1) of 164
this section. 165
(2) "Licensed dealer" means a dealer licensed under this 168
chapter.
(F)(1) "Salesman" or "salesperson" means every natural 170
person, other than a dealer, who is employed, authorized, or 171
appointed by a dealer to sell securities within this state. 172
(2) The general partners of a partnership, and the 174
executive officers of a corporation or unincorporated 175
association, licensed as a dealer are not salespersons within the 177
meaning of this definition, nor are such clerical or other
employees of an issuer or dealer as are employed for work to 178
which the sale of securities is secondary and incidental; but the 179
division of securities may require a license from any such 180
partner, executive officer, or employee if it determines that 181
protection of the public necessitates the licensing. 182
(3) "Licensed salesperson" means a salesperson licensed 185
under this chapter.
(G) "Issuer" means every person who has issued, proposes 187
to issue, or issues any security. 188
(H) "Director" means each director or trustee of a 190
corporation, each trustee of a trust, each general partner of a 191
partnership, except a partnership association, each manager of a 192
partnership association, and any person vested with managerial or 193
directory power over an issuer not having a board of directors or 194
trustees. 195
(I) "Incorporator" means any incorporator of a corporation 197
and any organizer of, or any person participating, other than in 198
a representative or professional capacity, in the organization of 199
an unincorporated issuer. 200
(J) "Fraud," "fraudulent," "fraudulent acts," "fraudulent 202
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practices," or "fraudulent transactions" means anything 203
recognized on or after July 22, 1929, as such in courts of law or 204
equity; any device, scheme, or artifice to defraud or to obtain 205
money or property by means of any false pretense, representation, 206
or promise; any fictitious or pretended purchase or sale of 207
securities; and any act, practice, transaction, or course of 208
business relating to the purchase or sale of securities that is 209
fraudulent or that has operated or would operate as a fraud upon 211
the seller or purchaser.
(K) Except as otherwise specifically provided, whenever 213
any classification or computation is based upon "par value," as 214
applied to securities without par value, the average of the 215
aggregate consideration received or to be received by the issuer 216
for each class of those securities shall be used as the basis for 217
that classification or computation. 218
(L)(1) "Intangible property" means patents, copyrights, 220
secret processes, formulas, services, good will, promotion and 221
organization fees and expenses, trademarks, trade brands, trade 222
names, licenses, franchises, any other assets treated as 223
intangible according to generally accepted accounting principles, 224
and securities, accounts receivable, or contract rights having no 225
readily determinable value. 226
(2) "Tangible property" means all property other than 228
intangible property and includes securities, accounts receivable, 229
and contract rights, when the securities, accounts receivable, or 230
contract rights have a readily determinable value. 231
(M) "Public utilities" means those utilities defined in 233
sections 4905.02, 4905.03, 4907.02, and 4907.03 of the Revised 234
Code; in the case of a foreign corporation, it means those 235
utilities defined as public utilities by the laws of its 236
domicile; and in the case of any other foreign issuer, it means 237
those utilities defined as public utilities by the laws of the 238
situs of its principal place of business. The term always 239
includes railroads whether or not they are so defined as public 240
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utilities. 241
(N) "State" means any state of the United States, any 243
territory or possession of the United States, the District of 244
Columbia, and any province of Canada. 245
(O) "Bank" means any bank, trust company, savings and loan 247
association, savings bank, or credit union that is incorporated 249
or organized under the laws of the United States, any state of 250
the United States, Canada, or any province of Canada and that is 251
subject to regulation or supervision by that country, state, or 252
province.
(P) "Include," when used in a definition, does not exclude 254
other things or persons otherwise within the meaning of the term 255
defined. 256
(Q)(1) "Registration by description" means that the 258
requirements of section 1707.08 of the Revised Code have been 259
complied with. 260
(2) "Registration by qualification" means that the 262
requirements of sections 1707.09 and 1707.11 of the Revised Code 263
have been complied with. 264
(3) "Registration by coordination" means that there has 266
been compliance with section 1707.091 of the Revised Code. 267
Reference in this chapter to registration by qualification also 268
shall be deemed to include registration by coordination unless 269
the context otherwise indicates. 270
(R) "Intoxicating liquor" includes all liquids and 272
compounds that contain more than three and two-tenths per cent of 273
alcohol by weight and are fit for use for beverage purposes. 274
(S) "Institutional investor" means any corporation, bank, 276
insurance company, pension fund or pension fund trust, employees' 277
profit-sharing fund or employees' profit-sharing trust, any 278
association engaged, as a substantial part of its business or 279
operations, in purchasing or holding securities, or any trust in 280
respect of which a bank is trustee or cotrustee. "Institutional 281
investor" does not include any business entity formed for the 282
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primary purpose of evading sections 1707.01 to 1707.45 of the 283
Revised Code. 284
(T) "Securities Act of 1933," 48 Stat. 74, 15 U.S.C. 77a, 287
"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C. 78a, 288
"Internal Revenue Code of 1986," 100 Stat. 2085, 26 U.S.C. 1, 289
"Investment Advisers Act of 1940," 54 Stat. 847, 15 U.S.C. 80b, 290
and "Investment Company Act of 1940," 54 Stat. 789, 15 U.S.C. 80a 292
mean the federal statutes of those names as amended before or 293
after March 18, 1999.
(U) "Securities and exchange commission" means the 295
securities and exchange commission established by the Securities 296
Exchange Act of 1934. 297
(V)(1) "Control bid" means the purchase of or offer to 299
purchase any equity security of a subject company from a resident 300
of this state if either of the following applies: 301
(a) After the purchase of that security, the offeror would 303
be directly or indirectly the beneficial owner of more than ten 304
per cent of any class of the issued and outstanding equity 305
securities of the issuer. 306
(b) The offeror is the subject company, there is a pending 308
control bid by a person other than the issuer, and the number of 309
the issued and outstanding shares of the subject company would be 310
reduced by more than ten per cent. 311
(2) For purposes of division (V)(1) of this section, 313
"control bid" does not include any of the following: 314
(a) A bid made by a dealer for the dealer's own account in 316
the ordinary course of business of buying and selling securities; 317
(b) An offer to acquire any equity security solely in 319
exchange for any other security, or the acquisition of any equity 320
security pursuant to an offer, for the sole account of the 321
offeror, in good faith and not for the purpose of avoiding the 322
provisions of this chapter, and not involving any public offering 323
of the other security within the meaning of Section 4 of Title I 324
of the "Securities Act of 1933," 48 Stat. 77, 15 U.S.C.A. 77d(2), 325
9
as amended; 326
(c) Any other offer to acquire any equity security, or the 328
acquisition of any equity security pursuant to an offer, for the 329
sole account of the offeror, from not more than fifty persons, in 330
good faith and not for the purpose of avoiding the provisions of 331
this chapter. 332
(W) "Offeror" means a person who makes, or in any way 334
participates or aids in making, a control bid and includes 335
persons acting jointly or in concert, or who intend to exercise 336
jointly or in concert any voting rights attached to the 337
securities for which the control bid is made and also includes 338
any subject company making a control bid for its own securities. 339
(X)(1) "Investment adviser" means any person who, for 342
compensation, engages in the business of advising others, either 343
directly or through publications or writings, as to the value of 344
securities or as to the advisability of investing in, purchasing, 345
or selling securities, or who, for compensation and as a part of 346
regular business, issues or promulgates analyses or reports 347
concerning securities.
(2) "Investment adviser" does not mean any of the 349
following:
(a) Any attorney, accountant, engineer, or teacher, whose 351
performance of investment advisory services described in division 353
(X)(1) of this section is solely incidental to the practice of 354
the attorney's, accountant's, engineer's, or teacher's 355
profession;
(b) A publisher of any bona fide newspaper, news magazine, 358
or business or financial publication of general and regular 359
circulation;
(c) A person who acts solely as an investment adviser 361
representative; 362
(d) A bank holding company, as defined in the "Bank 364
Holding Company Act of 1956," 70 Stat. 133, 12 U.S.C. 1841, that 366
is not an investment company; 367
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(e) A bank, or any receiver, conservator, or other 369
liquidating agent of a bank; 370
(f) Any licensed dealer or licensed salesperson whose 372
performance of investment advisory services described in division 373
(X)(1) of this section is solely incidental to the conduct of the 374
dealer's or salesperson's business as a licensed dealer or 375
licensed salesperson and who receives no special compensation for 376
the services;
(g) Any person, the advice, analyses, or reports of which 378
do not relate to securities other than securities that are direct 379
obligations of, or obligations guaranteed as to principal or 380
interest by, the United States, or securities issued or 381
guaranteed by corporations in which the United States has a 382
direct or indirect interest, and that have been designated by the 383
secretary of the treasury as exempt securities as defined in the 384
"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C. 78c; 385
(h) Any person that is excluded from the definition of 387
investment adviser pursuant to section 202(a)(11)(A) to (E) of 389
the "Investment Advisers Act of 1940," 15 U.S.C. 80b-2(a)(11), or 390
that has received an order from the securities and exchange 391
commission under section 202(a)(11)(F) of the "Investment 392
Advisers Act of 1940," 15 U.S.C. 80b-2(a)(11)(F), declaring that 393
the person is not within the intent of section 202(a)(11) of the 394
Investment Advisers Act of 1940.
(i) Any other person that the division designates by rule, 396
if the division finds that the designation is necessary or 397
appropriate in the public interest or for the protection of 398
investors or clients and consistent with the purposes fairly 399
intended by the policy and provisions of this chapter.
(Y)(1) "Subject company" means an issuer that satisfies 401
both of the following: 402
(a) Its principal place of business or its principal 404
executive office is located in this state, or it owns or controls 405
assets located within this state that have a fair market value of 406
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at least one million dollars. 407
(b) More than ten per cent of its beneficial or record 409
equity security holders are resident in this state, more than ten 410
per cent of its equity securities are owned beneficially or of 411
record by residents in this state, or more than one thousand of 412
its beneficial or record equity security holders are resident in 413
this state. 414
(2) The division of securities may adopt rules to 416
establish more specific application of the provisions set forth 417
in division (Y)(1) of this section. Notwithstanding the 418
provisions set forth in division (Y)(1) of this section and any 419
rules adopted under this division, the division, by rule or in an 420
adjudicatory proceeding, may make a determination that an issuer 421
does not constitute a "subject company" under division (Y)(1) of 422
this section if appropriate review of control bids involving the 423
issuer is to be made by any regulatory authority of another 424
jurisdiction. 425
(Z) "Beneficial owner" includes any person who directly or 427
indirectly through any contract, arrangement, understanding, or 428
relationship has or shares, or otherwise has or shares, the power 429
to vote or direct the voting of a security or the power to 430
dispose of, or direct the disposition of, the security. 431
"Beneficial ownership" includes the right, exercisable within 432
sixty days, to acquire any security through the exercise of any 433
option, warrant, or right, the conversion of any convertible 434
security, or otherwise. Any security subject to any such option, 435
warrant, right, or conversion privilege held by any person shall 436
be deemed to be outstanding for the purpose of computing the 437
percentage of outstanding securities of the class owned by that 438
person, but shall not be deemed to be outstanding for the purpose 439
of computing the percentage of the class owned by any other 440
person. A person shall be deemed the beneficial owner of any 441
security beneficially owned by any relative or spouse or relative 442
of the spouse residing in the home of that person, any trust or 443
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estate in which that person owns ten per cent or more of the 444
total beneficial interest or serves as trustee or executor, any 445
corporation or entity in which that person owns ten per cent or 446
more of the equity, and any affiliate or associate of that 447
person. 448
(AA) "Offeree" means the beneficial or record owner of any 450
security that an offeror acquires or offers to acquire in 451
connection with a control bid. 452
(BB) "Equity security" means any share or similar 454
security, or any security convertible into any such security, or 455
carrying any warrant or right to subscribe to or purchase any 456
such security, or any such warrant or right, or any other 457
security that, for the protection of security holders, is treated 458
as an equity security pursuant to rules of the division of 459
securities. 460
(CC) "Investment company" has the same meaning as in 462
section 3(A) of the "Investment Company Act of 1940," 54 Stat. 463
789, 15 U.S.C. 80a-1 to 80a-52. 464
(DD) "Penny stock" has the same meaning as in section 467
3(A)(51) of the "Securities Exchange Act of 1934," 48 Stat. 881, 468
15 U.S.C. 78a-78jj, and the rules, regulations, and orders issued 469
pursuant to that section. 470
(EE) "Going concern transaction" has the same meaning 473
given that term under the rules or regulations on the securities 474
and exchange commission issued pursuant to section 13(c) of the 475
"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C.
78a-78jj. 476
(FF) "Person acting on behalf of an issuer" means an 479
officer, director, or employee of an issuer.
(GG) "Blank check company," "roll-up transaction," 482
"executive officer of an entity," and "direct participation
program" have the same meanings given those terms by rule or 483
regulation of the securities and exchange commission. 484
(HH) "Forward-looking statement" means any of the 486
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following:
(1) A statement containing a projection of revenues, 488
income including income loss, earnings per share including 489
earnings loss per share, capital expenditures, dividends, capital 490
structure, or other financial items;
(2) A statement of the plans and objectives of the 492
management of the issuer for future operations, including plans 493
or objectives relating to the products or services of the issuer; 494
(3) A statement of future economic performance, including 496
any statement of that nature contained in a discussion and 497
analysis of financial conditions by the management or in the 498
results of operations included pursuant to the rules and 499
regulations of the securities and exchange commission;
(4) Any disclosed statement of the assumptions underlying 501
or relating to a statement described in division (B)(1), (2), or 503
(3) of section 1707.437 of the Revised Code; 504
(5) Any report issued by an outside reviewer retained by 506
an issuer to the extent that the report relates to a 507
forward-looking statement made by the issuer; 508
(6) A statement containing a projection or estimate of any 510
other items that may be specified by rule or regulation of the 511
securities and exchange commission. 512
(II)(1) "Investment adviser representative" means a 514
supervised person of an investment adviser, provided that the 516
supervised person has more than five clients who are natural 517
persons other than excepted persons defined in division (KK) of 518
this section, and that more than ten per cent of the supervised 519
person's clients are natural persons other than excepted persons
defined in division (KK) of this section. "Investment adviser 520
representative" does not mean any of the following: 521
(a) A supervised person that does not on a regular basis 523
solicit, meet with, or otherwise communicate with clients of the 524
investment adviser;
(b) A supervised person that provides only investment 526
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advisory services described in division (X)(1) of this section by 527
means of written materials or oral statements that do not purport 528
to meet the objectives or needs of specific individuals or 529
accounts;
(c) Any other person that the division designates by rule, 532
if the division finds that the designation is necessary or 533
appropriate in the public interest or for the protection of
investors or clients and is consistent with the provisions fairly 535
intended by the policy and provisions of this chapter. 536
(2) For the purpose of the calculation of clients in 538
division (II)(1) of this section, a natural person and the 540
following persons are deemed a single client: Any minor child of 541
the natural person; any relative, spouse, or relative of the 542
spouse of the natural person who has the same principal residence 543
as the natural person; all accounts of which the natural person 544
or the persons referred to in division (II)(2) of this section 546
are the only primary beneficiaries; and all trusts of which the 547
natural person or persons referred to in division (II)(2) of this 548
section are the only primary beneficiaries. Persons who are not 549
residents of the United States need not be included in the 551
calculation of clients under division (II)(1) of this section. 552
(3) If subsequent to March 18, 1999, amendments are 554
enacted or adopted defining "investment adviser representative" 555
for purposes of the Investment Advisers Act of 1940 or additional 557
rules or regulations are promulgated by the securities and 558
exchange commission regarding the definition of "investment 559
adviser representative" for purposes of the Investment Advisers 561
Act of 1940, the division of securities shall, by rule, adopt the 562
substance of the amendments, rules, or regulations, unless the 563
division finds that the amendments, rules, or regulations are not 564
necessary for the protection of investors or in the public 565
interest.
(JJ) "Supervised person" means a natural person who is any 567
of the following: 568
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(1) A partner, officer, or director of an investment 570
adviser, or other person occupying a similar status or performing 571
similar functions with respect to an investment adviser; 572
(2) An employee of an investment adviser; 574
(3) A person who provides investment advisory services 576
described in division (X)(1) of this section on behalf of the 577
investment adviser and is subject to the supervision and control 578
of the investment adviser.
(KK) "Excepted person" means a natural person to whom any 580
of the following applies: 581
(1) Immediately after entering into the investment 583
advisory contract with the investment adviser, the person has at 584
least seven hundred fifty thousand dollars under the management 586
of the investment adviser.
(2) The investment adviser reasonably believes either of 588
the following at the time the investment advisory contract is 589
entered into with the person:
(a) The person has a net worth, together with assets held 592
jointly with a spouse, of more than one million five hundred 593
thousand dollars.
(b) The person is a qualified purchaser as defined in 596
division (LL) of this section.
(3) Immediately prior to entering into an investment 598
advisory contract with the investment adviser, the person is 599
either of the following: 600
(a) An executive officer, director, trustee, general 603
partner, or person serving in a similar capacity, of the 604
investment adviser;
(b) An employee of the investment adviser, other than an 607
employee performing solely clerical, secretarial, or 608
administrative functions or duties for the investment adviser, 609
which employee, in connection with the employee's regular 610
functions or duties, participates in the investment activities of 611
the investment adviser, provided that, for at least twelve 612
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months, the employee has been performing such nonclerical, 613
nonsecretarial, or nonadministrative functions or duties for or 614
on behalf of the investment adviser or performing substantially 615
similar functions or duties for or on behalf of another company. 616
If subsequent to March 18, 1999, amendments are enacted or 619
adopted defining "excepted person" for purposes of the Investment 620
Advisers Act of 1940 or additional rules or regulations are 622
promulgated by the securities and exchange commission regarding 623
the definition of "excepted person" for purposes of the 624
Investment Advisers Act of 1940, the division of securities 626
shall, by rule, adopt the substance of the amendments, rules, or 627
regulations, unless the division finds that the amendments, 628
rules, or regulations are not necessary for the protection of 629
investors or in the public interest.
(LL)(1) "Qualified purchaser" means either of the 631
following:
(a) A natural person who owns not less than five million 634
dollars in investments as defined by rule by the division of 635
securities;
(b) A natural person, acting for the person's own account 638
or accounts of other qualified purchasers, who in the aggregate 639
owns and invests on a discretionary basis, not less than 640
twenty-five million dollars in investments as defined by rule by 641
the division of securities. 642
(2) If subsequent to March 18, 1999, amendments are 644
enacted or adopted defining "qualified purchaser" for purposes of 645
the Investment Advisers Act of 1940 or additional rules or 647
regulations are promulgated by the securities and exchange
commission regarding the definition of "qualified purchaser" for 648
purposes of the Investment Advisers Act of 1940, the division of 649
securities shall, by rule, adopt the amendments, rules, or 650
regulations, unless the division finds that the amendments, 651
rules, or regulations are not necessary for the protection of 652
investors or in the public interest. 653
17
(MM)(1) "Purchase" has the full meaning of "purchase" as 655
applied by or accepted in courts of law or equity and includes 656
every acquisition of, or attempt to acquire, a security or an 657
interest in a security. "Purchase" also includes a contract to 658
purchase, an exchange, an attempt to purchase, an option to 659
purchase, a solicitation of a purchase, a solicitation of an 660
offer to sell, a subscription, or an offer to purchase, directly 661
or indirectly, by agent, circular, pamphlet, advertisement, or
otherwise. 662
(2) "Purchase" means any act by which a purchase is made. 664
(3) Any security given with, or as a bonus on account of, 666
any purchase of securities is conclusively presumed to constitute 667
a part of the subject of that purchase. 668
(NN) "LIFE SETTLEMENT INTEREST" MEANS THE ENTIRE INTEREST 670
OR ANY FRACTIONAL INTEREST IN AN INSURANCE POLICY OR CERTIFICATE 671
OF INSURANCE, OR IN AN INSURANCE BENEFIT UNDER SUCH A POLICY OR 672
CERTIFICATE, THAT IS THE SUBJECT OF A LIFE SETTLEMENT CONTRACT. 673
FOR PURPOSES OF THIS DIVISION, "LIFE SETTLEMENT CONTRACT" 675
MEANS AN AGREEMENT FOR THE PURCHASE, SALE, ASSIGNMENT, TRANSFER, 677
DEVISE, OR BEQUEST OF ANY PORTION OF THE DEATH BENEFIT OR 678
OWNERSHIP OF ANY LIFE INSURANCE POLICY OR CONTRACT, IN RETURN FOR 679
CONSIDERATION OR ANY OTHER THING OF VALUE THAT IS LESS THAN THE 680
EXPECTED DEATH BENEFIT OF THE LIFE INSURANCE POLICY OR CONTRACT. 681
"LIFE SETTLEMENT CONTRACT" INCLUDES A VIATICAL SETTLEMENT 682
CONTRACT AS DEFINED IN SECTION 3916.01 OF THE REVISED CODE, BUT 683
DOES NOT INCLUDE ANY OF THE FOLLOWING: 684
(1) A LOAN BY AN INSURER UNDER THE TERMS OF A LIFE 686
INSURANCE POLICY, INCLUDING, BUT NOT LIMITED TO, A LOAN SECURED 687
BY THE CASH VALUE OF THE POLICY; 688
(2) AN AGREEMENT WITH A BANK THAT TAKES AN ASSIGNMENT OF A 690
LIFE INSURANCE POLICY AS COLLATERAL FOR A LOAN; 691
(3) THE PROVISION OF ACCELERATED BENEFITS AS DEFINED IN 693
SECTION 3915.21 OF THE REVISED CODE; 694
(4) ANY AGREEMENT BETWEEN AN INSURER AND A REINSURER; 696
18
(5) AN AGREEMENT BY AN INDIVIDUAL TO PURCHASE AN EXISTING 698
LIFE INSURANCE POLICY OR CONTRACT FROM THE ORIGINAL OWNER OF THE 699
POLICY OR CONTRACT, IF THE INDIVIDUAL DOES NOT ENTER INTO MORE 700
THAN ONE LIFE SETTLEMENT CONTRACT PER CALENDAR YEAR; 701
(6) THE INITIAL PURCHASE OF AN INSURANCE POLICY OR 703
CERTIFICATE OF INSURANCE FROM ITS OWNER BY A VIATICAL SETTLEMENT 704
PROVIDER, AS DEFINED IN SECTION 3916.01 OF THE REVISED CODE, THAT 705
IS LICENSED UNDER CHAPTER 3916. OF THE REVISED CODE. 708
Sec. 1707.02. (A) "Exempt," as used in this section, 717
means exempt from sections 1707.08 to 1707.11 and 1707.39 of the 718
Revised Code. 719
(B)(1) Except as provided in division (B)(2) of this 721
section, the following securities are exempt, if the issuer or 722
guarantor has the power of taxation or assessment for the purpose 723
of paying the obligation represented by the security, or is in 724
specific terms empowered by the laws of the state of issuance to 725
issue securities payable as to principal or interest, or as to 726
both, out of revenues collected or administered by such issuer: 727
(a) Any security issued or guaranteed by the United 729
States; 730
(b) Any security issued or guaranteed by, and recognized, 732
at the time of sale, as its valid obligation by, any foreign 733
government with which the United States is, at the time of sale, 734
maintaining diplomatic relations; 735
(c) Any security issued or guaranteed, and recognized as 737
its valid obligation, by any political subdivision or any 738
governmental or other public body, corporation, or agency in or 739
of the United States, any state, territory, or possession of the 740
United States, or any foreign government with which the United 741
States is, at the time of sale, maintaining diplomatic relations. 742
(2) If a security described in division (B)(1) of this 744
section is not payable out of the proceeds of a general tax, the 746
security is exempt only if, at the time of its first sale in this
state, there is no default in the payment of any of the interest 748
19
or principal of the security, and there are no adjudications or 749
pending suits adversely affecting its validity. 750
(C) Any security issued by and representing an interest in 752
or an obligation of a state or nationally chartered bank, savings 753
and loan association, savings bank, or credit union, or a 755
governmental corporation or agency created by or under the laws 756
of the United States or of Canada is exempt, if it is under the 757
supervision of or subject to regulation by the government or 758
state under whose laws it was organized.
(D) Any interim certificate is exempt, if the securities 760
to be delivered therefor are themselves exempt, are the subject 761
matter of an exempt transaction, have been registered by 762
description or registered by qualification, or are the subject 763
matter of a transaction which has been registered by description. 764
(E)(1) Any A security, whether a preliminary or final 766
security, is exempt, which, at the time of sale within this 767
state, is listed, or listed upon notice of issuance, on the 768
Cincinnati stock exchange, the Midwest stock exchange, the New 769
York stock exchange, or the American stock exchange, or is 770
designated, or approved for designation upon notice of issuance, 771
as a national market system security on the national association 772
of securities dealers automated quotation system, or is listed or 773
designated on any other stock exchange or national quotation 774
system approved by the division as having listing requirements 775
substantially equivalent to those of any one of those exchanges 776
or systems, and any security senior to any security so listed or 777
designated is also exempt; but these exemptions shall apply only 778
so long as such security remains so listed or designated pursuant 779
to official action of such exchange or system and not under 780
suspension, and only so long as such exchange or system remains 781
approved under this section IF IT MEETS ANY OF THE FOLLOWING 783
REQUIREMENTS:
(a) THE SECURITY IS LISTED, OR AUTHORIZED FOR LISTING, ON 785
THE NEW YORK STOCK EXCHANGE, THE AMERICAN STOCK EXCHANGE, OR THE 787
20
NATIONAL MARKET SYSTEM OF THE NASDAQ STOCK MARKET, OR ANY 788
SUCCESSOR TO SUCH ENTITIES. 789
(b) THE SECURITY IS LISTED, OR AUTHORIZED FOR LISTING, ON 791
A NATIONAL SECURITIES EXCHANGE OR SYSTEM, OR ON A TIER OR SEGMENT 792
OF SUCH EXCHANGE OR SYSTEM, DESIGNATED BY THE SECURITIES AND 794
EXCHANGE COMMISSION IN RULE 146(b) PROMULGATED UNDER SECTION 795
18(b)(1) OF THE SECURITIES ACT OF 1933. 796
(c) THE SECURITY IS LISTED, OR AUTHORIZED FOR LISTING, ON 798
A NATIONAL SECURITIES EXCHANGE OR SYSTEM, OR ON A TIER OR SEGMENT 799
OF SUCH EXCHANGE OR SYSTEM, THAT HAS LISTING STANDARDS THAT THE 801
DIVISION OF SECURITIES, ON ITS OWN INITIATIVE OR ON THE BASIS OF 802
AN APPLICATION, DETERMINES BY RULE ARE SUBSTANTIALLY SIMILAR TO 803
THE LISTING STANDARDS APPLICABLE TO SECURITIES DESCRIBED IN 804
DIVISION (E)(1)(a) OF THIS SECTION.
(d) THE SECURITY IS A SECURITY OF THE SAME ISSUER THAT IS 806
EQUAL IN SENIORITY OR THAT IS A SENIOR SECURITY TO A SECURITY 807
DESCRIBED IN DIVISION (E)(1)(a), (b), OR (c) OF THIS SECTION. 809
(2) Application for approval of a stock exchange or system 811
not approved in this section may be made by any organized stock 812
exchange or system, or by any dealer who is a member of such 813
exchange, in such manner and upon such forms as are prescribed by 814
the division, accompanied by payment of an approval fee of two 815
hundred dollars, and the division shall make such investigation 816
and may hold such hearings as it deems necessary to determine the 817
propriety of giving approval. The cost of such investigation 818
shall be borne by the applicant. The division may enter an order 819
of approval, and if it does so, it shall notify the applicant of 820
such approval. 821
(3) The division may revoke the approval of an exchange or 823
system approved ENUMERATED in DIVISION (E)(1) OF this section or 826
approved by it upon finding, PROVIDED THAT THE EXCHANGE OR SYSTEM 827
IS NOT LISTED IN SECTION 18(b)(1) OF THE SECURITIES ACT OF 1933 828
OR ANY RULE PROMULGATED THEREUNDER. THE DIVISION MAY EFFECT A 829
REVOCATION after due notice, investigation, and A hearing, AND A 830
21
FINDING that the practices or requirements of such exchange or 832
system have been so changed or modified, or are, in their actual 833
operation, such that the contemplated protection is no longer 834
afforded. The principles of res adjudicata ordinarily applicable 835
in civil matters shall not be applicable to this matter, which is 836
hereby declared to be administrative rather than judicial. 837
Notice of the hearing may ye given by certified mail at least ten 838
days before such hearing.
(4) The division may suspend the exemption of any security 840
described in division (E)(1) of this section, PROVIDED THAT THE 842
SECURITY IS LISTED OR AUTHORIZED FOR LISTING ON AN EXCHANGE OR 843
SYSTEM THAT IS NOT LISTED IN SECTION 18(b)(1) OF THE SECURITIES 844
ACT OF 1933 OR ANY RULE PROMULGATED THEREUNDER. THE DIVISION MAY 846
EFFECT A SUSPENSION by giving notice, by certified mail, to that 848
effect to the exchange or system upon which such security is 849
listed or designated and to the issuer of such security. After 850
notice and hearing, the division may revoke such exemption if it 851
appears to it that sales of such security have been fraudulent or 852
that future sales of it would be fraudulent. The division shall 853
set such hearing not later than ten days from the date of the 854
order of suspension, but may for good cause continue such hearing 855
upon application of the exchange or system upon which such 856
security is listed or designated or upon application of the 857
issuer of such security.
(F) Any security, issued or guaranteed as to principal, 859
interest, or dividend or distribution by a corporation owning or 860
operating any public utility, is exempt, if such corporation is, 861
as to its rates and charges or as to the issuance and 862
guaranteeing of securities, under the supervision of or regulated 863
by a public commission, board, or officer of the United States, 864
or of Canada, or of any state, province, or municipal corporation 865
in either of such countries. Equipment-trust securities based on 866
chattel mortgages, leases, or agreements for conditional sale, of 867
cars, locomotives, motor trucks, or other rolling stock or of 868
22
motor vehicles mortgaged, leased, or sold to, or finished for the 869
use of, a public utility, are exempt; and so are equipment 870
securities where the ownership or title of such equipment is 871
pledged or retained, in accordance with the laws of the United 872
States or of any state, or of Canada or any province thereof, to 873
secure the payment of such securities. 874
(G) Commercial paper and promissory notes are exempt when 876
they are not offered directly or indirectly for sale to the 877
public. 878
(H) Any security issued or guaranteed by an insurance 880
company, except as provided in section 1707.32 of the Revised 881
Code, is exempt if such company is under the supervision of, and 882
the issuance or guaranty of such security is regulated by, a 883
state. 884
(I) Any security, except notes, bonds, debentures, or 886
other evidences of indebtedness or of promises or agreements to 887
pay money, which is issued by a person, corporation, or 888
association organized not for profit, including persons, 889
corporations, and associations organized exclusively for 890
conducting county fairs, or for religious, educational, social, 894
recreational, athletic, benevolent, fraternal, charitable, or 895
reformatory purposes, and agricultural cooperatives as defined in 896
section 1729.01 of the Revised Code, is exempt, if no part of the 898
net earnings of such issuer inures to the benefit of any 899
shareholder or member of such issuer or of any individual, and if 900
the total commission, remuneration, expense, or discount in 901
connection with the sale of such securities does not exceed two 902
per cent of the total sale price thereof plus five hundred 903
dollars.
(J)(1) Any securities outstanding for a period of not less 905
than five years, on which there has occurred no default in 906
payment of principal, interest, or dividend or distribution for 907
the five years immediately preceding the sale, are exempt. 908
(2) For the purpose of division (J) of this section, the 910
23
dividend, distribution, or interest rate on securities in which 911
no such rate is specified shall be at the rate of at least four 912
per cent annually on the aggregate of the price at which such 913
securities are to be sold. 914
(K) All bonds issued under authority of Chapter 165. or 916
761., or section 4582.06 or 4582.31 of the Revised Code are 917
exempt. 918
Sec. 1707.11. For the purposes of this section, a 927
"person," or an "applicant" for registration or claim of 928
exemption, means every issuer. 929
Every applicant for registration or for claim of exemption 931
pursuant to division (Q), (W), (X), or (Y) of section 1707.03 of 933
the Revised Code, and every (A) EACH person submitting a notice 934
filing pursuant to section 1707.092 of the Revised Code, for the 937
sale of securities pursuant to this chapter, which THAT is an 938
incorporated applicant or person not domiciled in ORGANIZED UNDER 939
THE LAWS OF this state or, THAT IS not licensed under section 940
1703.03 of the Revised Code, or is an unincorporated applicant or 942
person having the situs of THAT DOES NOT HAVE its principal place 944
of business outside IN this state, shall file with its
application or notice filing its SUBMIT TO THE DIVISION OF 946
SECURITIES AN IRREVOCABLE CONSENT TO SERVICE OF PROCESS, AS 947
DESCRIBED IN DIVISION (B) OF THIS SECTION, IN CONNECTION WITH ANY 948
OF THE FOLLOWING:
(1) FILINGS TO CLAIM ANY OF THE EXEMPTIONS ENUMERATED IN 950
DIVISION (Q), (W), (X), OR (Y) OF SECTION 1707.03 OF THE REVISED 953
CODE;
(2) APPLICATIONS FOR REGISTRATION BY DESCRIPTION, 955
QUALIFICATION, OR COORDINATION; 956
(3) NOTICE FILINGS PURSUANT TO SECTION 1707.092 OR 958
1707.141 OF THE REVISED CODE; 959
(4) APPLICATIONS FOR LICENSURE AS A SECURITIES DEALER 961
UNDER SECTION 1707.15 OF THE REVISED CODE; 962
(5) APPLICATIONS FOR LICENSURE AS AN INVESTMENT ADVISER 964
24
UNDER SECTION 1707.151 OF THE REVISED CODE. 965
(B) THE irrevocable written consent, SHALL BE executed and 968
acknowledged by an individual duly authorized to give the 969
consent, AND SHALL DO ALL OF THE FOLLOWING: 970
(1) DESIGNATE THE SECRETARY OF STATE AS AGENT FOR SERVICE 972
OF PROCESS OR PLEADINGS; 973
(2) STATE that actions growing out of the sale of such 976
securities, THE GIVING OF INVESTMENT ADVICE, or fraud committed 977
by an applicant in this state A PERSON ON WHOSE BEHALF THE 978
CONSENT IS SUBMITTED may be commenced against it THE PERSON, in 979
the proper court of any county in this state in which a cause of 980
action for fraud may arise or in which the plaintiff in the 981
action may reside, by serving on the secretary of state any 982
proper process or pleading authorized by the laws of this state. 983
Such consent shall stipulate; 984
(3) STIPULATE that service of process or pleading on the 987
secretary of state shall be taken in all courts to be as valid 988
and binding as if service had been made upon the applicant itself 989
PERSON ON WHOSE BEHALF THE CONSENT IS SUBMITTED. 990
(C) Service of any process or pleadings may be made on the 992
secretary of state by duplicate copies, of which one shall be 993
filed in the office of the secretary of state, and the other 994
immediately forwarded by the secretary of state by certified mail 995
to the principal place of business of the applicant, PERSON ON 996
WHOSE BEHALF THE CONSENT IS SUBMITTED or TO the last known 998
address as shown on the application form filed FILING MADE with 999
the division, or if it has a principal office in this state, then 1,000
to the principal office; but. HOWEVER, failure to mail such copy 1,002
shall DOES not invalidate the service. 1,003
Sec. 1707.15. An application to act as dealer (A) 1,012
APPLICATION FOR A DEALER'S LICENSE shall be MADE in writing 1,014
ACCORDANCE WITH THIS SECTION and shall be filed BY FILING with 1,015
the division of securities. It shall be in such form as the 1,016
division prescribes, and verified by oath of the applicant, his 1,017
25
agent, or his attorney, and it shall set forth THE INFORMATION, 1,018
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION, 1,019
ALONG WITH ALL OF THE FOLLOWING INFORMATION:
(A)(1) The name and address of the applicant; 1,021
(B)(2) A description of the applicant, including, if the 1,023
applicant is a partnership, unincorporated association, or any 1,024
similar form of business organization, the names and the 1,025
residence and business addresses of all partners, officers, 1,026
directors, trustees, or managers of the organization, and the 1,027
limitation of the liability of any partner or member; and if the 1,028
applicant is a corporation, a list of its executive officers and 1,029
directors, and the residence and business addresses of each,; and 1,031
if it is a foreign corporation, a copy of its articles of 1,032
incorporation in addition thereto; 1,033
(C)(3) The location and addresses of the principal office 1,035
and all other offices of the applicant; 1,036
(D)(4) A general description of the business of the 1,038
applicant done prior to such THE application, including a list of 1,039
states in which the applicant is a licensed dealer; 1,041
(E) The names and addresses of all salesmen of the 1,043
applicant at the date of the application; 1,044
(F) The nature of the applicant's business, and its places 1,046
of business, for the period of ten years next preceding the date 1,047
of application. 1,048
Every (B) EACH applicant not a resident of this state 1,051
shall name a person within this state upon whom process against
such applicant may be served and shall give the complete 1,053
residence and business address of the person designated. 1,054
Every applicant shall file an irrevocable consent to 1,056
service of process on the secretary of state in the event that 1,057
such applicant, if a resident of this state, or the person 1,058
designated by the nonresident applicant, cannot be found at the 1,059
address given. Such consent shall be given and service 1,060
thereunder shall be made as provided in section 1707.11 of the 1,061
26
Revised Code. 1,062
(C)(1) The division may investigate any applicant for a 1,064
license, and may require such additional information as it deems 1,065
necessary to determine the applicant's business repute and 1,066
qualifications to act as a dealer in securities. 1,067
(2) If the application for any license involves 1,069
investigation outside of this state, the applicant may be 1,070
required by the division to advance sufficient funds to pay any 1,071
of the actual expenses of such examination. An itemized 1,072
statement of any such expenses which he THE APPLICANT is required 1,073
to pay shall be furnished the applicant by the division. 1,075
If the applicant is merely renewing his license for the 1,078
previous year the application need contain only the information
required by divisions (B), (C), and (E) of this section. 1,079
(D) The division shall by rule require an applicant ONE 1,081
NATURAL PERSON WHO IS A PRINCIPAL, OFFICER, DIRECTOR, GENERAL 1,082
PARTNER, MANAGER, OR EMPLOYEE OF A DEALER to pass an examination 1,084
which covers his knowledge of securities laws and practices 1,085
DESIGNATED BY THE DIVISION. EACH DEALER THAT IS NOT A NATURAL 1,086
PERSON SHALL NOTIFY THE DIVISION OF THE NAME AND RELATIONSHIP TO 1,087
THE DEALER OF THE NATURAL PERSON WHO HAS PASSED THE EXAMINATION 1,088
ON BEHALF OF THE DEALER AND WHO WILL SERVE AS THE DESIGNATED 1,089
PRINCIPAL ON BEHALF OF THE DEALER. 1,090
(E) DEALERS SHALL EMPLOY AS SALESPERSONS ONLY THOSE 1,092
SALESPERSONS WHO ARE LICENSED UNDER THIS CHAPTER. IF AT ANY TIME 1,093
A SALESPERSON RESIGNS OR IS DISCHARGED OR A NEW SALESPERSON IS 1,094
ADDED, THE DEALER SHALL PROMPTLY NOTIFY THE DIVISION. 1,095
(F) If the division finds that the applicant is of good 1,097
business repute, appears qualified to act as a dealer in 1,098
securities, and has fully complied with sections 1707.01 to 1,099
1707.45 of the Revised Code THIS CHAPTER AND RULES ADOPTED UNDER 1,100
THIS CHAPTER BY THE DIVISION, the division shall issue to such 1,101
applicant a license to act as dealer, upon payment by the 1,102
applicant of the fee FEES prescribed by DIVISION (B) OF section 1,104
27
1707.17 of the Revised Code.
The division may, after proper hearing, refuse, as provided 1,106
in section 1707.19 of the Revised Code, SHALL ISSUE to grant a 1,107
license to the applicant. 1,109
Dealers shall employ as salesmen only those who are 1,111
licensed under sections 1707.01 to 1707.45 of the Revised Code. 1,112
If at any time such salesmen resign or are discharged or new 1,113
salesmen are added, the dealer shall forthwith notify the 1,114
division and shall file with the division the names and addresses 1,115
of new salesmen A LICENSE AUTHORIZING THE APPLICANT TO ACT AS A 1,116
DEALER. 1,117
Sec. 1707.151. (A) Application for an investment 1,126
adviser's license shall be made in accordance with this section 1,127
and by filing with the division of securities the information, 1,128
materials, and forms specified in rules adopted by the division. 1,129
(B) Every applicant not a resident of this state shall 1,131
name a person within this state upon whom process against such 1,132
applicant may be served and shall give the complete residence and 1,133
business address or addresses of the person designated. 1,134
(C) Every EACH applicant shall file an irrevocable consent 1,136
to service of process naming the secretary of state for service 1,138
of process in the event that the applicant, if a resident of this 1,141
state, or the person designated pursuant to division (B) of this 1,142
section, cannot be found at the address given on the application. 1,143
The consent shall be given and service of process shall be made 1,144
as provided in section 1707.11 of the Revised Code. 1,145
(D)(C)(1) The division may investigate any applicant for a 1,147
license and may require any additional information as it 1,149
considers necessary to determine the applicant's business repute 1,150
and qualifications to act as an investment adviser. 1,151
(2) If the application for any license involves 1,153
investigation outside of this state, the applicant may be 1,154
required by the division to advance sufficient funds to pay any 1,155
of the actual expenses of the examination. The division shall 1,156
28
furnish the applicant with an itemized statement of such expenses 1,157
that the applicant is required to pay.
(E)(D) The division shall by rule require one natural 1,159
person who is a principal, officer, director, general partner, 1,161
manager, or employee of an investment adviser to pass an 1,162
examination designated by the division or achieve a specified 1,163
professional designation. Every EACH investment adviser that is 1,165
not a natural person shall notify the division of the name and
relationship to the investment adviser of the natural person who 1,167
has passed the examination or achieved the specified professional
designation on behalf of the investment adviser and who will 1,168
serve as the designated principal on behalf of the investment 1,169
adviser.
(F)(E) An investment adviser licensed under section 1,171
1707.141 of the Revised Code shall employ only investment adviser 1,173
representatives licensed, or exempted from licensure, under 1,174
section 1707.161 of the Revised Code.
(G)(F) If the division finds that the applicant is of good 1,176
business repute, appears to be qualified to act as an investment 1,178
adviser, and has complied with sections 1707.01 to 1707.45 of the 1,180
Revised Code THIS CHAPTER and rules adopted under those sections 1,181
THIS CHAPTER by the division, the division, upon payment of the 1,182
fees prescribed by division (B) of section 1707.17 of the Revised 1,183
Code, shall issue to the applicant a license authorizing the 1,185
applicant to act as an investment adviser.
Sec. 1707.16. (A) Every salesman SALESPERSON of 1,194
securities must be licensed by the division of securities and 1,196
shall be employed only by the licensed dealer specified in his 1,197
THE SALESPERSON'S license. IF THE SALESPERSON SEVERS THE 1,198
CONNECTION WITH THAT LICENSED DEALER, THE SALESPERSON'S LICENSE 1,199
IS VOID.
The application (B) APPLICATION for a salesman's 1,202
SALESPERSON'S license shall set forth BE MADE IN ACCORDANCE WITH 1,203
THIS SECTION AND BY FILING WITH THE DIVISION THE INFORMATION, 1,204
29
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION, 1,205
ALONG WITH ALL OF THE FOLLOWING INFORMATION: 1,206
(A)(1) The name and complete residence and business 1,208
addresses of the applicant; 1,209
(B)(2) The name of the dealer who is employing the 1,211
applicant or who intends to employ him THE APPLICANT; 1,212
(C)(3) The applicant's age and education, and his THE 1,215
APPLICANT'S experience in the sale of securities; whether he THE 1,217
APPLICANT has ever been licensed by the division, and if so, 1,219
when; whether he THE APPLICANT has ever been refused a license by 1,221
the division; and whether he THE APPLICANT has ever been licensed 1,222
or refused a license or any similar permit by any division or 1,223
commissioner of securities, whatsoever name known or designated, 1,224
anywhere;. 1,225
(C) THE DIVISION SHALL BY RULE REQUIRE AN APPLICANT TO 1,227
PASS AN EXAMINATION DESIGNATED BY THE DIVISION. 1,228
(D) The nature of the employment, and the names and 1,230
addresses of the employers, of the applicant for the period of 1,231
ten years immediately preceding the date of the application. 1,232
If the division finds that the applicant is of good 1,234
business repute, appears to be qualified to act as a salesman 1,235
SALESPERSON of securities, and has fully complied with sections 1,237
1707.01 to 1707.45 of the Revised Code THIS CHAPTER, and that the 1,238
dealer named in the application is a licensed dealer, the 1,239
division shall, upon payment of the fees prescribed by section 1,240
1707.17 of the Revised Code, issue a license to the applicant 1,241
authorizing him THE APPLICANT to act as salesman SALESPERSON for 1,242
the dealer named in the application. 1,243
If such salesman severs his connection with such dealer, 1,245
the salesman's license is void. 1,246
The division shall by rule require an applicant to pass an 1,248
examination which covers his knowledge of securities laws and 1,250
practices.
If the applicant is merely renewing his license for the 1,252
30
previous year or renewing his license upon change of employment, 1,253
only the information required under divisions (A) and (B) of this 1,254
section need be given. 1,255
Sec. 1707.17. (A)(1) The license of every dealer in and 1,264
salesperson of securities shall expire on the thirty-first day of 1,265
December of each year, and may be renewed upon the filing with 1,266
the division of securities of an application for renewal, and the 1,267
payment of the fee prescribed in this section, between the first 1,269
day of November and the fifteenth day of December of each year. 1,270
The division may accept an application for renewal filed between 1,271
the fifteenth and the thirty-first day of December of each year. 1,272
The division also may accept an application for renewal received 1,273
by the division not later than the tenth day of January of the 1,274
subsequent calendar year, provided that the application for 1,276
renewal is accompanied by the license renewal fee and the 1,277
additional fee prescribed in division (B) of this section. The 1,278
division shall give notice, without unreasonable delay, of its 1,280
action on any application for renewal of a dealer's or 1,281
salesperson's license. 1,282
(2) The license of every investment adviser and investment 1,285
adviser representative licensed under section 1707.141 or 1,286
1707.161 of the Revised Code shall expire on the thirty-first day 1,287
of December of each year. The licenses may be renewed upon the 1,288
filing with the division of an application for renewal, and the 1,289
payment of the fee prescribed in division (B) of this section, 1,290
between the fifteenth day of October and the thirtieth day of 1,291
November of each year. The division may accept an application 1,293
for renewal filed between the first and thirty-first day of 1,294
December of each year. The division also may accept an 1,295
application for renewal received by the division not later than 1,296
the tenth day of January of the subsequent calenar CALENDAR year, 1,297
provided that the application for renewal is accompanied by the 1,299
license renewal fee and the additional fee prescribed in division 1,301
(B) of this section. The division shall give notice, without 1,302
31
unreasonable delay, of its action on any application for renewal. 1,303
(3) An investment adviser required to make a notice filing 1,305
under division (B) of section 1707.141 of the Revised Code 1,307
annually shall file with the division the notice filing and the 1,308
fee prescribed in division (B) of this section, no later than the 1,309
thirty-first day of December of each year. The division may 1,310
accept a notice filing received by the division not later than 1,311
the tenth day of January of the subsequent calendar year, 1,312
provided that the notice filing is accompanied by the notice 1,314
filing fee and the additional fee prescribed in division (B) of 1,315
this section.
(B)(1) The fee for each dealer's license, and for each 1,317
annual renewal thereof that is received by the division not later 1,318
than the thirty-first day of December of each year, shall be 1,319
thirty dollars per salesperson, but not less than one hundred 1,321
fifty nor more than five thousand dollars. Upon payment of an 1,322
additional fee of one-half of the license renewal fee, the 1,323
division may accept an application for renewal received by the 1,324
division between the first and tenth day of January of the 1,325
subsequent calendar year. The fee for the examination of 1,326
applicant dealers, when administered by the division, shall be 1,328
seventy-five dollars.
(2) The fee for each salesperson's license, and for each 1,331
annual renewal thereof, shall be fifty dollars. The fee for the 1,333
examination of an applicant salesperson, when administered by the 1,335
division, shall be fifty dollars.
(3) The fee for each investment adviser's license, and for 1,338
each annual renewal thereof that is received by the division not
later than the thirty-first day of December of each year, shall 1,339
be two hundred dollars. Upon the payment of an additional fee of 1,341
one-half of the license fee, the division may accept a license 1,342
renewal application received by the division between the first 1,343
and tenth day of January of the subsequent calendar year. If the 1,345
fee for an investment adviser license is paid to the division on 1,346
32
or before October 1, 1999, that fee shall cover the issuance of 1,348
the initial license and also shall cover any fee for renewal of 1,349
the license for the period ending December 31, 2000. 1,350
(4) The fee for each investment adviser notice filing 1,352
required by division (B) of section 1707.141 of the Revised Code 1,354
and received by the division not later than the thirty-first day
of December of each year shall be one hundred dollars. Upon the 1,355
payment of an additional fee of one-half of the notice filing 1,357
fee, the division may accept a notice filing received by the 1,358
division between the first and tenth day of January of the 1,359
subsequent calendar year. A notice filing may be made at any 1,361
time during the calendar year. In that event, the notice filing 1,362
fee shall not be reduced. If the fee for an investment adviser
notice filing is paid to the division on or before October 1, 1,364
1999, that fee shall cover the initial notice filing and also 1,365
shall cover any fee for the notice filing for the period ending 1,366
December 31, 2000. 1,367
(5) The fee for each investment adviser representative's 1,369
license, and for each annual renewal thereof that is received by 1,370
the division not later than the thirty-first day of December of 1,371
each year, shall be thirty-five dollars; however, the fee shall 1,373
be waived for the investment adviser representative designated 1,374
the principal of the investment adviser pursuant to division 1,376
(E)(D) of section 1707.151 of the Revised Code. Upon the payment 1,377
of an additional fee of one-half of the license fee, the division 1,378
may accept a license renewal application received by the division 1,379
between the first and tenth day of January of the subsequent 1,380
calendar year. If the fee for an investment adviser 1,381
representative's license is paid to the division on or before 1,382
October 1, 1999, that fee shall cover the issuance of the initial 1,384
license and also shall cover any fee for renewal of the license 1,385
for the period ending December 31, 2000. 1,386
(C) A dealer's, salesperson's, investment adviser's, or 1,388
investment adviser representative's license may be issued at any 1,390
33
time for the remainder of the calendar year. In that event, the 1,391
annual fee shall not be reduced. 1,392
Sec. 1707.23. Whenever it appears to the division of 1,401
securities, from its files, upon complaint, or otherwise, that 1,402
any person has engaged in, is engaged in, or is about to engage 1,403
in any practice declared to be illegal or prohibited by Chapter 1,404
1707. of the Revised Code THIS CHAPTER or rules adopted under 1,405
that THIS chapter by the division, or defined as fraudulent in 1,407
that THIS chapter or rules adopted under that THIS chapter by the 1,408
division, or any other deceptive scheme or practice in connection 1,409
with the sale of securities, or acting as an investment adviser 1,410
or investment adviser representative, or when the division 1,411
believes it to be in the best interests of the public and 1,412
necessary for the protection of investors, the division may do 1,413
any of the following:
(A) Require any person to file with it, on such forms as 1,415
it prescribes, an original or additional statement or report in 1,416
writing, under oath or otherwise, as to any facts or 1,417
circumstances concerning the issuance, sale, or offer for sale of 1,418
securities within this state by the person, as to the person's 1,420
acts or practices as an investment adviser or investment adviser 1,421
representative within this state, and as to other information as 1,422
it deems material or relevant thereto;
(B) Examine any investment adviser, investment adviser 1,424
representative, or any seller, dealer, salesperson, or issuer of 1,426
any securities, and any of their agents, employees, partners, 1,427
officers, directors, members, or shareholders, wherever located, 1,428
under oath; and examine records, books, documents, accounts, and 1,430
papers as the division deems material or relevant to the inquiry; 1,431
(C) Require the attendance of witnesses, and the 1,433
production of books, records, and papers, as are required either 1,435
by the division or by any party to a hearing before the division, 1,436
and for that purpose issue a subpoena for any witness, or a 1,437
subpoena duces tecum to compel the production of any books,
34
records, or papers. The subpoena shall be served by PERSONAL 1,439
SERVICE OR BY certified mail, return receipt requested. If the 1,440
subpoena is returned because of inability to deliver, or if no 1,441
return is received within thirty days of the date of mailing, the 1,442
subpoena may be served by ordinary mail. If no return of 1,443
ordinary mail is received within thirty days after the date of 1,444
mailing, service shall be deemed to have been made. If the 1,445
subpoena is returned because of inability to deliver, the 1,446
division may designate a person or persons to effect either 1,447
personal or residence service upon the witness. The person 1,448
DESIGNATED TO EFFECT PERSONAL OR RESIDENCE SERVICE UNDER THIS 1,449
DIVISION may be the sheriff of the county in which the witness 1,450
resides or may be found or any other duly designated person. The 1,451
fees and mileage of the person serving the subpoena shall be the 1,452
same as those allowed by the courts of common pleas in criminal 1,453
cases, and shall be paid from the funds of the division. Fees 1,454
and mileage for the witness shall be the same as those allowed 1,455
for witnesses by the courts of common pleas in criminal cases, 1,456
and shall be paid from the funds of the division upon request of 1,457
the witness following the hearing.
(D) Proceed under section 1707.19 of the Revised Code to 1,459
suspend the license of any licensed dealer, licensed salesperson, 1,461
licensed investment adviser, or licensed investment adviser 1,462
representative and ultimately, if the division determines, revoke 1,463
such license under such sections; 1,464
(E) Initiate criminal proceedings under section 1707.042 1,466
or 1707.44 of the Revised Code or rules adopted under those 1,467
sections by the division by laying before the prosecuting 1,468
attorney of the proper county any evidence of criminality which 1,469
comes to its knowledge; and in the event of the neglect or 1,470
refusal of the prosecuting attorney to prosecute such violations, 1,471
or at the request of the prosecuting attorney, the division shall 1,472
submit the evidence to the attorney general, who may proceed in 1,474
the prosecution with all the rights, privileges, and powers 1,475
35
conferred by law on prosecuting attorneys, including the power to 1,476
appear before grand juries and to interrogate witnesses before 1,477
such grand juries. 1,478
(F) Require any dealers forthwith to furnish to the 1,480
division copies of prospectuses, circulars, or advertisements 1,481
respecting securities that they publish or generally distribute, 1,483
or require any investment advisers immediately to furnish to the 1,484
division copies of brochures, advertisements, publications, 1,485
analyses, reports, or other writings that they publish or 1,486
distribute;
(G) Require any dealers to mail to the division, prior to 1,488
sale, notices of intention to sell, in respect to all securities 1,489
which are not exempt under section 1707.02 of the Revised Code, 1,490
or which are sold in transactions not exempt under section 1,491
1707.03 or 1707.04 of the Revised Code; 1,492
(H) Issue and cause to be served by certified mail upon 1,494
all persons affected an order requiring the person or persons to 1,495
cease and desist from the acts or practices appearing to the 1,496
division to constitute violations of Chapter 1707. of the Revised 1,498
Code THIS CHAPTER or rules adopted under that THIS chapter by the 1,499
division. The order shall state specifically the section or 1,501
sections of Chapter 1707. of the Revised Code THIS CHAPTER or the 1,502
rule or rules adopted under that THIS chapter by the division 1,503
that appear to the division to have been violated and the facts 1,505
constituting the violation. If after the issuance of the order 1,506
it appears to the division that any person or persons affected by 1,507
the order have engaged in any act or practice from which the 1,508
person or persons shall have been required, by the order, to 1,509
cease and desist, the director of commerce may apply to the court 1,510
of common pleas of any county for, and upon proof of the validity 1,511
of the order of the division, the delivery of the order to the 1,512
person or persons affected, and of the illegality and the 1,513
continuation of the acts or practices that are the subject of the 1,514
order, the court may grant an injunction implementing the order 1,515
36
of the division.
(I) Issue and initiate contempt proceedings in this state 1,517
regarding subpoenas and subpoenas duces tecum at the request of 1,519
the securities administrator of another state, if it appears to 1,520
the division that the activities for which the information is 1,521
sought would violate Chapter 1707. of the Revised Code THIS 1,522
CHAPTER if the activities had occurred in this state. 1,523
Sec. 3916.01. AS USED IN THIS CHAPTER: 1,525
(A) "FINANCING ENTITY" MEANS AN UNDERWRITER, PLACEMENT 1,527
AGENT, LENDER, PURCHASER OF SECURITIES, PURCHASER OF A POLICY OR 1,528
CERTIFICATE FROM A VIATICAL SETTLEMENT PROVIDER, CREDIT ENHANCER, 1,529
OR ANY OTHER PERSON THAT IS A PARTY TO A VIATICAL SETTLEMENT 1,530
CONTRACT, HAS AN AGREEMENT IN WRITING WITH A VIATICAL SETTLEMENT 1,531
PROVIDER TO ACT AS A PARTICIPANT IN A FINANCING TRANSACTION, AND 1,532
HAS A DIRECT OWNERSHIP INTEREST IN THE POLICY OR CERTIFICATE THAT 1,533
IS THE SUBJECT OF THE VIATICAL SETTLEMENT CONTRACT, BUT WHOSE
SOLE ACTIVITY RELATED TO THE TRANSACTION IS PROVIDING FUNDS TO 1,534
EFFECT THE VIATICAL SETTLEMENT. 1,535
(B) "FINANCING TRANSACTION" MEANS A TRANSACTION IN WHICH A 1,537
LICENSED VIATICAL SETTLEMENT PROVIDER OR A FINANCING ENTITY 1,538
OBTAINS FINANCING FOR VIATICAL SETTLEMENT CONTRACTS, VIATICATED 1,539
POLICIES, OR INTERESTS THEREIN, WHICH FINANCING INCLUDES, BUT IS 1,540
NOT LIMITED TO, ANY SECURED OR UNSECURED FINANCING, ANY 1,541
SECURITIZATION TRANSACTION OR SECURITIES OFFERING THAT IS EITHER 1,542
REGISTERED OR EXEMPT FROM REGISTRATION UNDER FEDERAL SECURITIES
LAW AND CHAPTER 1707. OF THE REVISED CODE, OR ANY DIRECT PURCHASE 1,543
OF INTERESTS IN A POLICY OR CERTIFICATE, IF THE TRANSACTION 1,545
COMPLIES WITH FEDERAL SECURITIES LAW AND CHAPTER 1707. OF THE 1,546
REVISED CODE.
(C) "VIATICAL SETTLEMENT BROKER" MEANS A PERSON THAT, ON 1,548
BEHALF OF A VIATOR AND FOR A FEE, COMMISSION, OR OTHER VALUABLE 1,549
CONSIDERATION, OFFERS OR ATTEMPTS TO NEGOTIATE VIATICAL 1,550
SETTLEMENTS BETWEEN A VIATOR AND ONE OR MORE VIATICAL SETTLEMENT 1,551
PROVIDERS. "VIATICAL SETTLEMENT BROKER" DOES NOT INCLUDE AN 1,552
37
ATTORNEY, A CERTIFIED PUBLIC ACCOUNTANT, OR A FINANCIAL PLANNER
RETAINED TO REPRESENT THE VIATOR WHOSE COMPENSATION IS PAID 1,554
DIRECTLY BY, OR AT THE DIRECTION OF, THE VIATOR.
(D) "VIATICAL SETTLEMENT CONTRACT" MEANS EITHER OF THE 1,556
FOLLOWING:
(1) AN AGREEMENT BETWEEN A VIATICAL SETTLEMENT PROVIDER 1,558
AND A VIATOR UNDER WHICH THE VIATICAL SETTLEMENT PROVIDER PAYS 1,559
COMPENSATION OR ANY OTHER THING OF VALUE, WHICH COMPENSATION OR 1,560
OTHER THING OF VALUE IS LESS THAN THE EXPECTED DEATH BENEFIT OF 1,561
THE INSURANCE POLICY OR CERTIFICATE, IN RETURN FOR THE VIATOR'S 1,562
ASSIGNMENT, TRANSFER, SALE, DEVISE, OR BEQUEST OF THE DEATH
BENEFIT OR OWNERSHIP OF ALL OR A PORTION OF THE INSURANCE POLICY 1,563
OR CERTIFICATE TO THE VIATICAL SETTLEMENT PROVIDER; 1,564
(2) A CONTRACT FOR A LOAN OR ANY OTHER FINANCIAL 1,566
TRANSACTION SECURED PRIMARILY BY AN INDIVIDUAL OR GROUP LIFE 1,567
INSURANCE POLICY OR CERTIFICATE, OTHER THAN A LOAN BY A LIFE 1,569
INSURANCE COMPANY PURSUANT TO THE TERMS OF THE LIFE INSURANCE 1,570
CONTRACT OR A LOAN SECURED BY THE CASH VALUE OF A POLICY OR
CERTIFICATE. 1,571
(E)(1) "VIATICAL SETTLEMENT PROVIDER" MEANS EITHER OF THE 1,573
FOLLOWING: 1,574
(a) A PERSON, OTHER THAN A VIATOR, THAT ENTERS INTO A 1,576
VIATICAL SETTLEMENT CONTRACT; 1,577
(b) A PERSON THAT OBTAINS FINANCING FROM A FINANCING 1,579
ENTITY FOR THE PURCHASE, ACQUISITION, TRANSFER, OR OTHER 1,580
ASSIGNMENT OF ONE OR MORE VIATICAL SETTLEMENT CONTRACTS, 1,581
VIATICATED POLICIES, OR INTERESTS THEREIN, OR THAT OTHERWISE 1,582
SELLS, ASSIGNS, TRANSFERS, PLEDGES, HYPOTHECATES, OR OTHERWISE
DISPOSES OF ONE OR MORE VIATICAL SETTLEMENT CONTRACTS, VIATICATED 1,583
POLICIES, OR INTERESTS THEREIN. 1,584
(2) "VIATICAL SETTLEMENT PROVIDER" DOES NOT INCLUDE ANY OF 1,586
THE FOLLOWING:
(a) A BANK, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, 1,588
CREDIT UNION, OR OTHER FINANCIAL INSTITUTION THAT TAKES AN 1,589
38
ASSIGNMENT OF A LIFE INSURANCE POLICY OR CERTIFICATE AS 1,590
COLLATERAL FOR A LOAN;
(b) THE ISSUER OF A LIFE INSURANCE POLICY OR CERTIFICATE 1,592
PROVIDING ACCELERATED BENEFITS AS DEFINED IN SECTION 3915.21 OF 1,594
THE REVISED CODE;
(c) AN INDIVIDUAL WHO ENTERS INTO NOT MORE THAN ONE 1,596
AGREEMENT IN ANY CALENDAR YEAR FOR THE TRANSFER OF LIFE INSURANCE 1,597
POLICIES OR CERTIFICATES FOR ANY VALUE LESS THAN THE EXPECTED 1,599
DEATH BENEFIT.
(F) "VIATICAL SETTLEMENT REPRESENTATIVE" MEANS AN 1,601
APPOINTED AGENT OF A LICENSED VIATICAL SETTLEMENT PROVIDER OR 1,602
VIATICAL SETTLEMENT BROKER, AS APPLICABLE, THAT ACTS OR AIDS IN 1,603
ANY MANNER IN THE SOLICITATION OF A VIATICAL SETTLEMENT. 1,604
"VIATICAL SETTLEMENT REPRESENTATIVE" DOES NOT INCLUDE ANY OF THE
FOLLOWING: 1,605
(1) AN ATTORNEY, A CERTIFIED PUBLIC ACCOUNTANT, A 1,607
FINANCIAL PLANNER, OR ANY OTHER PERSON EXERCISING A POWER OF 1,609
ATTORNEY GRANTED BY A VIATOR;
(2) ANY PERSON THAT IS RETAINED TO REPRESENT A VIATOR AND 1,611
WHOSE COMPENSATION IS PAID BY OR AT THE DIRECTION OF THE VIATOR, 1,612
REGARDLESS OF WHETHER THE VIATICAL SETTLEMENT IS CONSUMMATED. 1,613
(G) "VIATICATED POLICY" MEANS A LIFE INSURANCE POLICY OR 1,615
CERTIFICATE THAT HAS BEEN ACQUIRED BY A VIATICAL SETTLEMENT 1,616
PROVIDER, OR BY A PERSON DESIGNATED BY THE VIATICAL SETTLEMENT 1,617
PROVIDER, PURSUANT TO A VIATICAL SETTLEMENT CONTRACT. 1,618
(H) "VIATOR" MEANS THE OWNER OF A LIFE INSURANCE POLICY OR 1,620
A CERTIFICATE HOLDER UNDER A GROUP POLICY INSURING THE LIFE OF AN 1,621
INDIVIDUAL WITH A TERMINAL OR CHRONIC ILLNESS OR CONDITION, WHO 1,622
ENTERS OR SEEKS TO ENTER INTO A VIATICAL SETTLEMENT CONTRACT. 1,623
Sec. 3916.02. NO PERSON SHALL ACT AS A VIATICAL SETTLEMENT 1,625
PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR VIATICAL 1,626
SETTLEMENT BROKER WITHOUT FIRST HAVING OBTAINED A LICENSE FROM 1,628
THE SUPERINTENDENT OF INSURANCE.
Sec. 3916.03. (A) AN APPLICANT FOR A LICENSE AS A 1,630
39
VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, 1,631
OR VIATICAL SETTLEMENT BROKER SHALL SUBMIT AN APPLICATION FOR THE 1,633
LICENSE IN A MANNER PRESCRIBED BY THE SUPERINTENDENT OF 1,634
INSURANCE. THE APPLICATION SHALL BE ACCOMPANIED BY A FEE
ESTABLISHED BY THE SUPERINTENDENT BY RULE ADOPTED IN ACCORDANCE 1,635
WITH CHAPTER 119. OF THE REVISED CODE. 1,636
(B) THE SUPERINTENDENT SHALL ISSUE TO AN APPLICANT A 1,638
LICENSE THAT STATES IN SUBSTANCE THAT THE PERSON IS AUTHORIZED TO 1,639
ACT AS A VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT 1,640
REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER, AS APPLICABLE, IF 1,641
BOTH OF THE FOLLOWING APPLY:
(1) THE APPLICANT PROVIDES A DETAILED PLAN OF OPERATION 1,643
AND, IF THE APPLICANT IS A LEGAL ENTITY, A CERTIFICATE OF GOOD 1,644
STANDING FROM THE SECRETARY OF STATE OR OTHER PROOF SATISFACTORY 1,645
TO THE SUPERINTENDENT.
(2) THE SUPERINTENDENT FINDS ALL OF THE FOLLOWING: 1,647
(a) THE APPLICANT IS COMPETENT AND TRUSTWORTHY AND INTENDS 1,649
TO ACT IN GOOD FAITH IN THE CAPACITY OF A VIATICAL SETTLEMENT 1,650
PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR VIATICAL 1,651
SETTLEMENT BROKER, AS APPLICABLE.
(b) THE APPLICANT HAS A GOOD BUSINESS REPUTATION AND HAS 1,653
HAD EXPERIENCE, TRAINING, OR EDUCATION SO AS TO BE QUALIFIED TO 1,654
ACT IN THE CAPACITY OF A VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,655
SETTLEMENT REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER, AS 1,656
APPLICABLE.
(C) AN APPLICANT SHALL PROVIDE ALL INFORMATION REQUESTED 1,658
BY THE SUPERINTENDENT. THE SUPERINTENDENT MAY, AT ANY TIME, 1,659
REQUIRE AN APPLICANT TO FULLY DISCLOSE THE IDENTITY OF ALL 1,660
STOCKHOLDERS, PARTNERS, OFFICERS, MEMBERS, AND EMPLOYEES, AND 1,661
MAY, IN THE EXERCISE OF THE SUPERINTENDENT'S DISCRETION, REFUSE 1,662
TO ISSUE A LICENSE TO A LEGAL ENTITY IF THE SUPERINTENDENT IS NOT
SATISFIED THAT EACH OFFICER, EMPLOYEE, STOCKHOLDER, PARTNER, OR 1,663
MEMBER WHO MAY MATERIALLY INFLUENCE THE APPLICANT'S CONDUCT MEETS 1,664
THE STANDARDS SET FORTH IN THIS CHAPTER. 1,665
40
(D) A LICENSE ISSUED TO A LEGAL ENTITY DOES NOT AUTHORIZE 1,667
ANY MEMBER, OFFICER, OR EMPLOYEE TO ACT AS A VIATICAL SETTLEMENT 1,668
PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR VIATICAL 1,669
SETTLEMENT BROKER, AS APPLICABLE, UNDER THE LICENSE. EACH 1,670
MEMBER, OFFICER, AND EMPLOYEE INVOLVED IN A VIATICAL SETTLEMENT 1,671
TRANSACTION SHALL BE LICENSED UNDER THIS CHAPTER, UNLESS THEY 1,672
PERFORM ONLY CLERICAL OR MINISTERIAL DUTIES.
(E) A LICENSE AS A VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,674
SETTLEMENT REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER MAY, IN 1,675
THE DISCRETION OF THE SUPERINTENDENT AND THE PAYMENT OF A RENEWAL 1,676
FEE ESTABLISHED BY THE SUPERINTENDENT BY RULE ADOPTED IN 1,677
ACCORDANCE WITH CHAPTER 119. OF THE REVISED CODE, BE CONTINUED 1,678
PAST THE LAST DAY OF FEBRUARY NEXT AFTER ITS ISSUE AND AFTER THE 1,679
LAST DAY OF FEBRUARY IN EACH SUCCEEDING YEAR. FAILURE TO PAY THE 1,680
RENEWAL FEE BY THE REQUIRED DATE RESULTS IN THE EXPIRATION OF THE
LICENSE. 1,681
(F) THE SUPERINTENDENT SHALL NOT ISSUE A LICENSE TO A 1,683
NONRESIDENT APPLICANT, UNLESS A WRITTEN DESIGNATION OF AN AGENT 1,684
FOR SERVICE OF PROCESS IS FILED AND MAINTAINED WITH THE 1,685
SUPERINTENDENT.
(G) ANY FEE COLLECTED UNDER THIS SECTION SHALL BE PAID 1,687
INTO THE STATE TREASURY TO THE CREDIT OF THE DEPARTMENT OF 1,688
INSURANCE OPERATING FUND CREATED BY SECTION 3901.021 OF THE 1,689
REVISED CODE.
Sec. 3916.05. (A) A VIATICAL SETTLEMENT REPRESENTATIVE 1,691
SHALL NOT SOLICIT A VIATICAL SETTLEMENT CONTRACT WITHOUT FIRST 1,692
OBTAINING AN APPOINTMENT FROM A VIATICAL SETTLEMENT PROVIDER OR 1,693
VIATICAL SETTLEMENT BROKER.
(B) A VIATICAL SETTLEMENT REPRESENTATIVE SHALL NOT 1,695
REPRESENT BOTH THE VIATICAL SETTLEMENT PROVIDER AND THE VIATICAL 1,696
SETTLEMENT BROKER WITH RESPECT TO THE SAME VIATOR. 1,697
Sec. 3916.07. (A) IF A VIATICAL SETTLEMENT PROVIDER, 1,699
VIATICAL SETTLEMENT BROKER, OR VIATICAL SETTLEMENT REPRESENTATIVE 1,700
SUSPECTS ANOTHER VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,701
41
SETTLEMENT BROKER, OR VIATICAL SETTLEMENT REPRESENTATIVE OF 1,702
FRAUD, FORGERY, MISREPRESENTATION, THEFT, CONVERSION, ANY OTHER 1,703
CULPABLE MISAPPROPRIATION, OR ANY VIOLATION OF TITLE XXXIX OF THE 1,704
REVISED CODE, THE VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,707
SETTLEMENT BROKER, OR VIATICAL SETTLEMENT REPRESENTATIVE PROMPTLY 1,708
SHALL NOTIFY THE SUPERINTENDENT OF INSURANCE OF THE SUSPICION. 1,709
THE NOTICE SHALL INCLUDE A COMPLETE STATEMENT OF THE FACTS AND 1,710
THE REASONS THAT GAVE RISE TO THE SUSPICION. 1,711
(B) IN THE ABSENCE OF FRAUD OR BAD FAITH, A VIATICAL 1,713
SETTLEMENT PROVIDER, VIATICAL SETTLEMENT BROKER, OR VIATICAL 1,714
SETTLEMENT REPRESENTATIVE IS IMMUNE FROM ANY CIVIL LIABILITY THAT 1,715
OTHERWISE MIGHT BE IMPOSED AS A RESULT OF ANY ACTION TAKEN BY THE 1,716
VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT BROKER, OR 1,717
VIATICAL SETTLEMENT REPRESENTATIVE TO COMPLY WITH DIVISION (A) OF 1,718
THIS SECTION.
Sec. 3916.08. IRRESPECTIVE OF THE MANNER IN WHICH THE 1,720
VIATICAL SETTLEMENT BROKER IS COMPENSATED, A VIATICAL SETTLEMENT 1,721
BROKER IS DEEMED TO REPRESENT ONLY THE VIATOR AND OWES A 1,722
FIDUCIARY DUTY TO THE VIATOR TO ACT ACCORDING TO THE VIATOR'S 1,723
INSTRUCTIONS AND IN THE BEST INTEREST OF THE VIATOR.
Sec. 3916.10. (A) A PERSON SHALL NOT USE A VIATICAL 1,725
SETTLEMENT CONTRACT FORM OR PROVIDE A DISCLOSURE STATEMENT FORM 1,726
TO A VIATOR IN THIS STATE UNLESS THE VIATICAL SETTLEMENT CONTRACT 1,727
FORM OR THE DISCLOSURE STATEMENT FORM IS FILED WITH AND APPROVED 1,728
BY THE SUPERINTENDENT OF INSURANCE. THE SUPERINTENDENT SHALL 1,730
DISAPPROVE A VIATICAL SETTLEMENT CONTRACT FORM OR A DISCLOSURE 1,731
STATEMENT FORM IF, IN THE SUPERINTENDENT'S OPINION, THE VIATICAL 1,732
SETTLEMENT CONTRACT FORM, THE DISCLOSURE STATEMENT FORM, OR ANY 1,733
PROVISION CONTAINED THEREIN IS UNREASONABLE, CONTRARY TO THE 1,734
INTERESTS OF THE PUBLIC, OR OTHERWISE MISLEADING OR UNFAIR TO THE 1,735
VIATOR.
(B) THE SUPERINTENDENT MAY ADOPT RULES IN ACCORDANCE WITH 1,737
CHAPTER 119. OF THE REVISED CODE TO ESTABLISH REASONABLE FEES FOR 1,738
ANY SERVICE OR TRANSACTION PERFORMED BY THE DEPARTMENT OF 1,739
42
INSURANCE PURSUANT TO DIVISION (A) OF THIS SECTION. ANY FEE 1,740
COLLECTED PURSUANT TO THOSE RULES SHALL BE PAID INTO THE STATE 1,741
TREASURY TO THE CREDIT OF THE DEPARTMENT OF INSURANCE OPERATING 1,742
FUND CREATED BY SECTION 3901.021 OF THE REVISED CODE.
Sec. 3916.12. (A) A VIATICAL SETTLEMENT PROVIDER, 1,744
VIATICAL SETTLEMENT REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER 1,745
SHALL DISCLOSE THE FOLLOWING TO A VIATOR NO LATER THAN THE TIME 1,746
OF APPLICATION:
(1) POSSIBLE ALTERNATIVES TO VIATICAL SETTLEMENT CONTRACTS 1,748
FOR INDIVIDUALS WITH CATASTROPHIC, LIFE-THREATENING, OR CHRONIC 1,749
ILLNESSES, INCLUDING ANY ACCELERATED DEATH BENEFITS OFFERED UNDER 1,750
THE VIATOR'S LIFE INSURANCE POLICY OR CERTIFICATE; 1,751
(2) THAT SOME OR ALL OF THE PROCEEDS OF THE VIATICAL 1,753
SETTLEMENT MAY BE SUBJECT TO FEDERAL INCOME TAXATION AND STATE 1,754
FRANCHISE AND INCOME TAXATION, AND THAT ASSISTANCE SHOULD BE 1,755
SOUGHT FROM A PROFESSIONAL TAX ADVISOR;
(3) THAT THE PROCEEDS OF THE VIATICAL SETTLEMENT COULD BE 1,757
SUBJECT TO THE CLAIMS OF CREDITORS; 1,758
(4) THAT RECEIPT OF THE PROCEEDS OF THE VIATICAL 1,760
SETTLEMENT MAY ADVERSELY AFFECT THE VIATOR'S ELIGIBILITY FOR 1,761
MEDICAL ASSISTANCE UNDER CHAPTER 5111. OF THE REVISED CODE OR 1,762
OTHER GOVERNMENT BENEFITS OR ENTITLEMENTS, AND THAT ADVICE SHOULD 1,763
BE OBTAINED FROM THE APPROPRIATE GOVERNMENT AGENCIES;
(5) THAT THE VIATOR HAS A RIGHT TO RESCIND THE VIATICAL 1,765
SETTLEMENT CONTRACT FOR AT LEAST FIFTEEN DAYS AFTER THE VIATOR 1,766
RECEIVES THE VIATICAL SETTLEMENT PROCEEDS; 1,767
(6) THAT FUNDS WILL BE SENT TO THE VIATOR WITHIN TWO 1,769
BUSINESS DAYS AFTER THE VIATICAL SETTLEMENT PROVIDER HAS RECEIVED 1,770
ACKNOWLEDGMENT FROM THE INSURER OR GROUP ADMINISTRATOR THAT 1,771
OWNERSHIP OF THE POLICY OR INTEREST IN THE CERTIFICATE HAS BEEN 1,772
TRANSFERRED AND THAT THE BENEFICIARY HAS BEEN DESIGNATED PURSUANT 1,773
TO THE VIATICAL SETTLEMENT CONTRACT;
(7) THAT ENTERING INTO A VIATICAL SETTLEMENT CONTRACT MAY 1,775
CAUSE OTHER RIGHTS OR BENEFITS, INCLUDING CONVERSION RIGHTS AND 1,776
43
WAIVER OF PREMIUM BENEFITS THAT MAY EXIST UNDER THE POLICY OR 1,777
CERTIFICATE, TO BE FORFEITED BY THE VIATOR AND THAT ASSISTANCE 1,778
SHOULD BE SOUGHT FROM A FINANCIAL ADVISOR.
(B) A VIATICAL SETTLEMENT PROVIDER SHALL DISCLOSE THE 1,780
FOLLOWING TO A VIATOR PRIOR TO THE DATE THE VIATICAL SETTLEMENT 1,781
CONTRACT IS SIGNED BY ALL THE NECESSARY PARTIES: 1,782
(1) THE AFFILIATION, IF ANY, BETWEEN THE VIATICAL 1,784
SETTLEMENT PROVIDER AND THE ISSUER OF THE INSURANCE POLICY OR 1,785
CERTIFICATE TO BE VIATICATED;
(2) IF AN INSURANCE POLICY OR CERTIFICATE TO BE VIATICATED 1,787
HAS BEEN ISSUED AS A JOINT POLICY OR CERTIFICATE OR INVOLVES 1,789
FAMILY RIDERS OR ANY COVERAGE OF A LIFE OTHER THAN THE INSURED, 1,791
THE POSSIBLE LOSS OF COVERAGE ON THE OTHER LIVES AND THAT ADVICE
SHOULD BE SOUGHT FROM THE VIATOR'S INSURANCE PRODUCER OR THE 1,792
COMPANY ISSUING THE POLICY OR CERTIFICATE; 1,793
(3) THE DOLLAR AMOUNT OF THE CURRENT DEATH BENEFIT PAYABLE 1,795
TO THE VIATICAL SETTLEMENT PROVIDER UNDER THE POLICY OR 1,796
CERTIFICATE, ALONG WITH THE AVAILABILITY OF ANY ADDITIONAL 1,797
GUARANTEED INSURANCE BENEFITS, THE DOLLAR AMOUNT OF ANY 1,798
ACCIDENTAL DEATH AND DISMEMBERMENT BENEFITS UNDER THE POLICY OR
CERTIFICATE, AND THE VIATICAL SETTLEMENT PROVIDER'S INTEREST IN 1,799
THOSE BENEFITS. 1,800
Sec. 3916.13. A VIATICAL SETTLEMENT PROVIDER ENTERING INTO 1,802
A VIATICAL SETTLEMENT CONTRACT SHALL FIRST OBTAIN ALL OF THE 1,803
FOLLOWING:
(A) IF THE VIATOR IS THE INSURED, A WRITTEN STATEMENT FROM 1,805
AN ATTENDING PHYSICIAN THAT THE VIATOR IS OF SOUND MIND AND UNDER 1,806
NO CONSTRAINT OR UNDUE INFLUENCE TO ENTER INTO A VIATICAL 1,807
SETTLEMENT CONTRACT. AS USED IN THIS DIVISION, "PHYSICIAN" MEANS 1,808
A PERSON AUTHORIZED UNDER CHAPTER 4731. OF THE REVISED CODE TO 1,809
PRACTICE MEDICINE AND SURGERY OR OSTEOPATHIC MEDICINE AND
SURGERY. 1,810
(B) A WITNESSED DOCUMENT IN WHICH THE VIATOR, IN WRITING, 1,812
CONSENTS TO THE VIATICAL SETTLEMENT CONTRACT, ACKNOWLEDGES THAT 1,813
44
THE INSURED HAS A TERMINAL OR CHRONIC ILLNESS OR CONDITION, 1,814
REPRESENTS THAT THE VIATOR HAS A FULL AND COMPLETE UNDERSTANDING 1,815
OF THE VIATICAL SETTLEMENT CONTRACT AND OF THE BENEFITS OF THE 1,816
LIFE INSURANCE POLICY OR CERTIFICATE, AND ACKNOWLEDGES THAT THE 1,817
VIATOR HAS ENTERED INTO THE VIATICAL SETTLEMENT CONTRACT FREELY 1,818
AND VOLUNTARILY;
(C) A DOCUMENT IN WHICH THE INSURED CONSENTS IN WRITING TO 1,820
THE RELEASE OF THE INSURED'S MEDICAL RECORDS TO A VIATICAL 1,821
SETTLEMENT PROVIDER OR VIATICAL SETTLEMENT BROKER. 1,822
Sec. 3916.15. EACH VIATICAL SETTLEMENT CONTRACT ENTERED 1,824
INTO IN THIS STATE SHALL PROVIDE THE VIATOR WITH AN UNCONDITIONAL 1,825
RIGHT TO RESCIND THE CONTRACT FOR AT LEAST FIFTEEN DAYS AFTER THE 1,826
RECEIPT OF THE VIATICAL SETTLEMENT PROCEEDS. IF THE INSURED DIES 1,827
DURING THE RESCISSION PERIOD, THE VIATICAL SETTLEMENT CONTRACT IS 1,828
DEEMED TO HAVE BEEN RESCINDED, SUBJECT TO REPAYMENT OF ALL 1,829
VIATICAL SETTLEMENT PROCEEDS TO THE VIATICAL SETTLEMENT PROVIDER.
IF A VIATICAL SETTLEMENT CONTRACT IS RESCINDED BY THE VIATOR 1,831
PURSUANT TO THIS SECTION, OWNERSHIP OF THE INSURANCE POLICY OR 1,832
CERTIFICATE REVERTS TO THE VIATOR OR TO THE VIATOR'S ESTATE IF 1,833
THE VIATOR IS DECEASED, IRRESPECTIVE OF ANY TRANSFER OF OWNERSHIP 1,834
OF THE POLICY OR CERTIFICATE BY THE VIATOR, VIATICAL SETTLEMENT 1,835
PROVIDER, OR ANY OTHER PERSON. 1,836
Sec. 3916.17. (A) A VIATICAL SETTLEMENT PROVIDER, 1,838
IMMEDIATELY UPON RECEIPT OF DOCUMENTS TO EFFECT THE TRANSFER OF 1,839
THE INSURANCE POLICY OR CERTIFICATE, SHALL PAY THE PROCEEDS OF 1,841
THE VIATICAL SETTLEMENT TO AN ESCROW OR TRUST ACCOUNT IN A STATE 1,842
OR FEDERALLY CHARTERED FINANCIAL INSTITUTION WHOSE DEPOSITS ARE 1,843
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION. THE
ACCOUNT SHALL BE MANAGED BY A TRUSTEE OR ESCROW AGENT INDEPENDENT 1,844
OF THE PARTIES TO THE CONTRACT. THE TRUSTEE OR ESCROW AGENT 1,845
SHALL TRANSFER THE PROCEEDS TO THE VIATOR IMMEDIATELY UPON THE 1,846
VIATICAL SETTLEMENT PROVIDER'S RECEIPT OF ACKNOWLEDGMENT OF THE 1,847
TRANSFER OF THE INSURANCE POLICY OR CERTIFICATE.
(B) FAILURE TO TRANSFER THE PROCEEDS TO THE VIATOR WITHIN 1,849
45
TWO BUSINESS DAYS AFTER THE VIATICAL SETTLEMENT PROVIDER RECEIVES 1,850
ACKNOWLEDGMENT OF THE TRANSFER OF THE INSURANCE POLICY OR 1,851
CERTIFICATE RENDERS THE VIATICAL SETTLEMENT CONTRACT VOIDABLE BY 1,853
THE VIATOR FOR LACK OF CONSIDERATION UNTIL THE TIME CONSIDERATION 1,854
IS TENDERED TO AND ACCEPTED BY THE VIATOR. IF A VIATICAL 1,855
SETTLEMENT CONTRACT IS VOIDED BY THE VIATOR PURSUANT TO THIS 1,856
DIVISION, OWNERSHIP OF THE INSURANCE POLICY OR CERTIFICATE 1,857
REVERTS TO THE VIATOR OR TO THE VIATOR'S ESTATE IF THE VIATOR IS 1,858
DECEASED, IRRESPECTIVE OF ANY TRANSFER OF OWNERSHIP OF THE POLICY 1,859
OR CERTIFICATE BY THE VIATOR, VIATICAL SETTLEMENT PROVIDER, OR 1,860
ANY OTHER PERSON.
Sec. 3916.19. AFTER A VIATICAL SETTLEMENT HAS OCCURRED, 1,862
THE VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT 1,863
REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER SHALL NOT CONTACT 1,864
THE INSURED FOR THE PURPOSE OF DETERMINING THE INSURED'S HEALTH 1,865
STATUS MORE THAN ONCE EVERY THREE MONTHS IF THE INSURED HAS A 1,866
LIFE EXPECTANCY OF MORE THAN ONE YEAR, OR MORE THAN ONCE PER
MONTH IF THE INSURED HAS A LIFE EXPECTANCY OF ONE YEAR OR LESS. 1,867
THE VIATICAL SETTLEMENT PROVIDER OR VIATICAL SETTLEMENT BROKER 1,868
SHALL EXPLAIN THE PROCEDURE FOR MAKING THESE CONTACTS AT THE TIME 1,869
THE VIATICAL SETTLEMENT CONTRACT IS ENTERED INTO. 1,870
THE LIMITATIONS SET FORTH IN THIS SECTION DO NOT APPLY TO 1,872
CONTACTS MADE WITH AN INSURED UNDER A VIATICATED POLICY FOR 1,873
PURPOSES OTHER THAN TO DETERMINE THE INSURED'S HEALTH STATUS. 1,874
Sec. 3916.21. (A) EACH VIATICAL SETTLEMENT PROVIDER SHALL 1,876
MAINTAIN RECORDS OF ALL TRANSACTIONS OF VIATICAL SETTLEMENT 1,877
CONTRACTS, INCLUDING THE NAME, INDIVIDUAL IDENTIFICATION, AND 1,878
MEDICAL RECORD OF THE VIATOR. SUCH RECORDS SHALL BE MADE 1,879
AVAILABLE TO THE SUPERINTENDENT OF INSURANCE FOR INSPECTION 1,880
DURING REASONABLE BUSINESS HOURS.
(B) A VIATICAL SETTLEMENT PROVIDER SHALL MAINTAIN THE 1,882
RECORD OF A VIATICAL SETTLEMENT FOR AT LEAST FIVE YEARS AFTER THE 1,883
DEATH OF THE INSURED.
Sec. 3916.22. EACH VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,885
46
SETTLEMENT REPRESENTATIVE, AND VIATICAL SETTLEMENT BROKER 1,886
LICENSED UNDER THIS CHAPTER SHALL FILE WITH THE SUPERINTENDENT OF 1,887
INSURANCE, ON OR BEFORE THE FIRST DAY OF MARCH, AN ANNUAL 1,888
STATEMENT CONTAINING THE INFORMATION REQUIRED BY THE
SUPERINTENDENT BY RULE ADOPTED IN ACCORDANCE WITH CHAPTER 119. OF 1,889
THE REVISED CODE.
Sec. 3916.24. EXCEPT AS OTHERWISE PERMITTED OR REQUIRED BY 1,891
LAW, A VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT 1,892
REPRESENTATIVE, VIATICAL SETTLEMENT BROKER, INSURANCE COMPANY, 1,893
INSURANCE AGENT, INSURANCE BROKER, INFORMATION BUREAU, RATING 1,894
AGENCY OR COMPANY, OR ANY OTHER PERSON WITH ACTUAL KNOWLEDGE OF A 1,895
VIATOR'S IDENTITY, SHALL NOT DISCLOSE THAT IDENTITY AS A VIATOR,
INCLUDING THE VIATOR'S NAME, INDIVIDUAL IDENTIFICATION DATA, OR 1,896
MEDICAL RECORD, UNLESS ANY OF THE FOLLOWING APPLY: 1,897
(A) THE DISCLOSURE IS NECESSARY TO EFFECT A VIATICAL 1,899
SETTLEMENT BETWEEN THE VIATOR AND A VIATICAL SETTLEMENT PROVIDER, 1,900
AND THE VIATOR HAS PROVIDED PRIOR WRITTEN CONSENT TO THE 1,901
DISCLOSURE.
(B) THE DISCLOSURE IS PROVIDED IN RESPONSE TO AN 1,903
INVESTIGATION OR EXAMINATION BY THE SUPERINTENDENT OF INSURANCE 1,904
OR BY ANY OTHER GOVERNMENTAL OFFICER OR AGENCY. 1,905
(C) THE DISCLOSURE IS A TERM OF, OR CONDITION TO, THE 1,907
TRANSFER OF A VIATICATED POLICY BY ONE VIATICAL SETTLEMENT 1,908
PROVIDER TO ANOTHER VIATICAL SETTLEMENT PROVIDER. 1,909
Sec. 3916.26. (A) THE SUPERINTENDENT OF INSURANCE, OR ANY 1,911
PERSON APPOINTED BY THE SUPERINTENDENT, MAY EXAMINE, WHENEVER THE 1,912
SUPERINTENDENT CONSIDERS IT REASONABLY NECESSARY TO PROTECT THE 1,913
INTERESTS OF THE PUBLIC, THE BUSINESS AND AFFAIRS OF ANY VIATICAL 1,914
SETTLEMENT PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR 1,915
VIATICAL SETTLEMENT BROKER LICENSED UNDER THIS CHAPTER, OR ANY 1,916
APPLICANT FOR A LICENSE. THE SUPERINTENDENT MAY ORDER ANY
LICENSEE OR APPLICANT TO PRODUCE ANY RECORD, BOOK, FILE, OR OTHER 1,917
INFORMATION REASONABLY NECESSARY TO ASCERTAIN WHETHER THE 1,918
LICENSEE OR APPLICANT IS ACTING OR HAS ACTED IN VIOLATION OF THE 1,919
47
LAW OR IN A MANNER OTHERWISE CONTRARY TO THE INTERESTS OF THE 1,920
PUBLIC.
(B) THE LICENSEE OR APPLICANT SHALL PAY TO THE 1,922
SUPERINTENDENT ALL COSTS, ASSESSMENTS, FORFEITURES, OR FINES 1,923
INCURRED IN CONDUCTING AN EXAMINATION UNDER THIS SECTION. THE 1,924
SUPERINTENDENT SHALL DEPOSIT THE MONEY INTO THE STATE TREASURY TO 1,926
THE CREDIT OF THE DEPARTMENT OF INSURANCE OPERATING FUND CREATED
BY SECTION 3901.021 OF THE REVISED CODE. 1,927
(C) THE WORK PAPERS OF THE SUPERINTENDENT, OR OF ANY 1,929
PERSON APPOINTED BY THE SUPERINTENDENT, RESULTING FROM THE 1,930
CONDUCT OF AN EXAMINATION MADE UNDER THIS SECTION, ARE 1,931
CONFIDENTIAL AND ARE NOT A PUBLIC RECORD AS DEFINED IN SECTION 1,932
149.43 OF THE REVISED CODE. THE ORIGINAL WORK PAPERS AND ANY
COPIES OF THEM ARE NOT SUBJECT TO SUBPOENA AND SHALL NOT BE MADE 1,933
PUBLIC BY THE SUPERINTENDENT OR ANY OTHER PERSON. HOWEVER, THE 1,934
ORIGINAL WORK PAPERS AND ANY COPIES OF THEM MAY BE RELEASED BY 1,935
THE SUPERINTENDENT TO THE INSURANCE REGULATORY AUTHORITY OF ANY 1,936
OTHER STATE IF THAT AUTHORITY AGREES TO MAINTAIN THE 1,937
CONFIDENTIALITY OF THE WORK PAPERS OR COPIES AND IF THE WORK
PAPERS AND COPIES ARE NOT PUBLIC RECORDS UNDER THE LAWS OF THAT 1,938
STATE.
(D) ANY NAME, INDIVIDUAL IDENTIFICATION DATA, OR MEDICAL 1,940
RECORD OF A VIATOR THAT IS OBTAINED BY OR DISCLOSED TO THE 1,941
SUPERINTENDENT OR ANY OTHER PERSON IN THE COURSE OF AN 1,942
EXAMINATION MADE UNDER THIS SECTION IS CONFIDENTIAL AND IS NOT A 1,943
PUBLIC RECORD AS DEFINED IN SECTION 149.43 OF THE REVISED CODE.
THE SUPERINTENDENT OR OTHER PERSON SHALL NOT DISCLOSE SUCH 1,944
INFORMATION, EXCEPT IN THE FURTHERANCE OF THE SUPERINTENDENT'S 1,945
OFFICIAL DUTIES, OR TO ANOTHER REGULATOR OR A LAW ENFORCEMENT 1,946
AGENCY.
Sec. 3916.28. (A) THE SUPERINTENDENT OF INSURANCE MAY 1,948
SUSPEND, REVOKE, OR REFUSE TO RENEW THE LICENSE OF A VIATICAL 1,949
SETTLEMENT PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR 1,950
VIATICAL SETTLEMENT BROKER, IF THE SUPERINTENDENT FINDS THAT ANY 1,951
48
OF THE FOLLOWING APPLY:
(1) THERE WAS A MATERIAL MISREPRESENTATION IN THE 1,953
APPLICATION FOR THE LICENSE. 1,954
(2) THE LICENSEE OR ANY OFFICER, PARTNER, MEMBER, OR KEY 1,956
MANAGEMENT PERSONNEL HAS BEEN CONVICTED OF FRAUDULENT OR 1,957
DISHONEST PRACTICES, IS SUBJECT TO A FINAL ADMINISTRATIVE ACTION 1,958
IN ANOTHER STATE, OR IS OTHERWISE SHOWN TO BE UNTRUSTWORTHY OR 1,959
INCOMPETENT.
(3) THE VIATICAL SETTLEMENT PROVIDER MADE AN UNREASONABLE 1,961
PAYMENT TO A VIATOR. 1,962
(4) THE LICENSEE HAS BEEN CONVICTED OF OR HAS PLEADED 1,964
GUILTY OR NO CONTEST TO A FELONY, A CRIME INVOLVING MORAL 1,965
TURPITUDE, OR A MISDEMEANOR INVOLVING FRAUD. 1,966
(5) THE VIATICAL SETTLEMENT PROVIDER HAS USED A VIATICAL 1,968
SETTLEMENT CONTRACT FORM THAT HAS NOT BEEN APPROVED UNDER THIS 1,969
CHAPTER.
(6) THE VIATICAL SETTLEMENT PROVIDER HAS FAILED TO HONOR 1,971
CONTRACTUAL OBLIGATIONS SET OUT IN A VIATICAL SETTLEMENT 1,972
CONTRACT.
(7) THE LICENSEE NO LONGER MEETS THE REQUIREMENTS FOR 1,974
INITIAL LICENSURE.
(8) THE VIATICAL SETTLEMENT PROVIDER HAS ASSIGNED, 1,976
TRANSFERRED, OR PLEDGED A VIATICATED POLICY TO A PERSON THAT IS 1,977
NOT A VIATICAL SETTLEMENT PROVIDER LICENSED IN THIS STATE OR A 1,978
FINANCING ENTITY.
(9) THE LICENSEE HAS VIOLATED ANY PROVISION OF THIS 1,980
CHAPTER OR ANY RULE ADOPTED UNDER THIS CHAPTER. 1,981
(10) THE LICENSEE HAS COMMITTED ANY COERCIVE, FRAUDULENT, 1,983
OR DISHONEST ACT, OR MADE ANY UNTRUE, DECEPTIVE, OR MISLEADING 1,984
STATEMENT, IN CONNECTION WITH A VIATICAL TRANSACTION OR A 1,985
PROPOSED VIATICAL TRANSACTION.
(B) BEFORE THE SUPERINTENDENT REFUSES TO ISSUE A LICENSE 1,987
UNDER THIS CHAPTER, OR SUSPENDS, REVOKES, OR REFUSES TO RENEW THE 1,988
LICENSE OF A VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT 1,989
49
REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER, THE SUPERINTENDENT 1,990
SHALL PROVIDE THE LICENSEE OR APPLICANT WITH NOTICE AND AN 1,991
OPPORTUNITY FOR HEARING AS PROVIDED IN CHAPTER 119. OF THE 1,992
REVISED CODE, EXCEPT AS FOLLOWS:
(1)(a) ANY NOTICE OF OPPORTUNITY FOR HEARING, THE HEARING 1,994
OFFICER'S FINDINGS AND RECOMMENDATIONS, OR THE SUPERINTENDENT'S 1,995
ORDER SHALL BE SERVED BY CERTIFIED MAIL AT THE LAST KNOWN ADDRESS 1,996
OF THE LICENSEE OR APPLICANT. SERVICE SHALL BE EVIDENCED BY 1,997
RETURN RECEIPT SIGNED BY ANY PERSON.
FOR PURPOSES OF THIS SECTION, THE "LAST KNOWN ADDRESS" IS 1,999
THE ADDRESS THAT APPEARS IN THE LICENSING RECORDS OF THE 2,000
DEPARTMENT OF INSURANCE.
(b) IF THE CERTIFIED MAIL ENVELOPE IS RETURNED WITH AN 2,002
ENDORSEMENT SHOWING THAT SERVICE WAS REFUSED, OR THAT THE 2,003
ENVELOPE WAS UNCLAIMED, THE NOTICE AND ALL SUBSEQUENT NOTICES 2,004
REQUIRED BY CHAPTER 119. OF THE REVISED CODE MAY BE SERVED BY 2,005
ORDINARY MAIL TO THE LAST KNOWN ADDRESS OF THE LICENSEE OR 2,006
APPLICANT. THE MAILING SHALL BE EVIDENCED BY A CERTIFICATE OF
MAILING. SERVICE IS DEEMED COMPLETE AS OF THE DATE OF SUCH 2,007
CERTIFICATE PROVIDED THAT THE ORDINARY MAIL ENVELOPE IS NOT 2,008
RETURNED BY THE POSTAL AUTHORITIES WITH AN ENDORSEMENT SHOWING 2,009
FAILURE OF DELIVERY. THE TIME PERIOD IN WHICH TO REQUEST A 2,010
HEARING, AS PROVIDED IN CHAPTER 119. OF THE REVISED CODE, BEGINS 2,011
TO RUN ON THE DATE OF MAILING.
(c) IF SERVICE BY ORDINARY MAIL FAILS, THE SUPERINTENDENT 2,013
MAY CAUSE A SUMMARY OF THE SUBSTANTIVE PROVISIONS OF THE NOTICE 2,014
TO BE PUBLISHED ONCE A WEEK FOR THREE CONSECUTIVE WEEKS IN A 2,015
NEWSPAPER OF GENERAL CIRCULATION IN THE COUNTY WHERE THE LAST 2,016
KNOWN PLACE OF RESIDENCE OR BUSINESS OF THE LICENSEE OR APPLICANT 2,017
IS LOCATED. THE NOTICE IS CONSIDERED SERVED ON THE DATE OF THE 2,018
THIRD PUBLICATION. 2,019
(d) ANY NOTICE REQUIRED TO BE SERVED UNDER CHAPTER 119. OF 2,022
THE REVISED CODE SHALL ALSO BE SERVED UPON THE ATTORNEY OF THE
LICENSEE OR APPLICANT BY ORDINARY MAIL IF THE ATTORNEY HAS 2,024
50
ENTERED AN APPEARANCE IN THE MATTER.
(e) THE SUPERINTENDENT MAY, AT ANY TIME, PERFECT SERVICE 2,026
ON A LICENSEE OR APPLICANT BY PERSONAL DELIVERY OF THE NOTICE BY 2,027
AN EMPLOYEE OF THE DEPARTMENT. 2,028
(f) NOTICES REGARDING THE SCHEDULING OF HEARINGS AND ALL 2,030
OTHER MATTERS NOT DESCRIBED IN DIVISION (B)(1)(a) OF THIS SECTION 2,032
SHALL BE SENT BY ORDINARY MAIL TO THE LICENSEE OR APPLICANT AND
TO THE ATTORNEY OF THE LICENSEE OR APPLICANT. 2,033
(2) ANY SUBPOENA FOR THE APPEARANCE OF A WITNESS OR THE 2,035
PRODUCTION OF DOCUMENTS OR OTHER EVIDENCE AT A HEARING, OR FOR 2,036
THE PURPOSE OF TAKING TESTIMONY FOR USE AT A HEARING, SHALL BE 2,037
SERVED BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, BY AN 2,038
ATTORNEY OR BY AN EMPLOYEE OF THE DEPARTMENT DESIGNATED BY THE 2,039
SUPERINTENDENT. SUCH SUBPOENAS SHALL BE ENFORCED IN THE MANNER 2,040
PROVIDED IN SECTION 119.09 OF THE REVISED CODE. NOTHING IN THIS
SECTION SHALL BE CONSTRUED AS LIMITING THE SUPERINTENDENT'S OTHER 2,041
STATUTORY POWERS TO ISSUE SUBPOENAS. 2,042
Sec. 3916.30. (A) THE SUPERINTENDENT OF INSURANCE MAY 2,044
ADOPT RULES IN ACCORDANCE WITH CHAPTER 119. OF THE REVISED CODE 2,045
FOR PURPOSES OF IMPLEMENTING THIS CHAPTER, INCLUDING RULES 2,046
GOVERNING THE RELATIONSHIP AND RESPONSIBILITIES OF BOTH INSURERS 2,047
AND VIATICAL SETTLEMENT PROVIDERS, VIATICAL SETTLEMENT 2,048
REPRESENTATIVES, AND VIATICAL SETTLEMENT BROKERS DURING THE 2,050
VIATICATION OF A LIFE INSURANCE POLICY OR CERTIFICATE.
(B) THE SUPERINTENDENT MAY ALSO DO THE FOLLOWING: 2,052
(1) ESTABLISH STANDARDS FOR EVALUATING THE REASONABLENESS 2,054
OF PAYMENTS UNDER VIATICAL SETTLEMENT CONTRACTS. THIS AUTHORITY 2,056
INCLUDES, BUT IS NOT LIMITED TO, THE REGULATION OF DISCOUNT RATES 2,058
USED TO DETERMINE THE AMOUNT PAID IN EXCHANGE FOR THE ASSIGNMENT, 2,059
TRANSFER, SALE, DEVISE, OR BEQUEST OF A BENEFIT UNDER A LIFE 2,060
INSURANCE POLICY OR CERTIFICATE.
(2) ESTABLISH APPROPRIATE LICENSING REQUIREMENTS AND 2,062
STANDARDS FOR CONTINUED LICENSURE FOR VIATICAL SETTLEMENT 2,063
PROVIDERS, VIATICAL SETTLEMENT REPRESENTATIVES, AND VIATICAL 2,064
51
SETTLEMENT BROKERS;
(3) REQUIRE A BOND OR OTHER MECHANISM FOR ENSURING THE 2,066
FINANCIAL ACCOUNTABILITY OF VIATICAL SETTLEMENT PROVIDERS. 2,067
Sec. 3916.32. (A) NO PERSON SHALL FAIL TO COMPLY WITH 2,069
THIS CHAPTER. 2,070
(B) WHOEVER VIOLATES DIVISION (A) OF THIS SECTION IS 2,072
DEEMED TO HAVE ENGAGED IN AN UNFAIR AND DECEPTIVE ACT OR PRACTICE 2,073
IN THE BUSINESS OF INSURANCE UNDER SECTIONS 3901.19 TO 3901.26 OF 2,074
THE REVISED CODE. 2,075
Sec. 3916.99. WHOEVER VIOLATES SECTION 3916.02 OF THE 2,077
REVISED CODE IS GUILTY OF A FELONY OF THE THIRD DEGREE. 2,078
Section 2. That existing sections 1707.01, 1707.02, 2,081
1707.11, 1707.15, 1707.151, 1707.16, 1707.17, and 1707.23 and 2,082
sections 1707.432, 1707.433, 1707.434, 1707.435, 1707.436,
1707.437, 1707.438, and 1707.439 of the Revised Code are hereby 2,083
repealed.
Section 3. Sections 1 and 2 of this act shall take effect 2,085
six months after the effective date of this act. 2,086
Section 4. Any person that, on the effective date of this 2,088
act, transacts business in this state as a viatical settlement 2,089
provider, viatical settlement representative, or viatical 2,090
settlement broker may continue to do so pending approval of the 2,091
person's application for a license, if the person applies for the 2,092
license during the six-month period immediately following the 2,093
effective date of this act. 2,094