As Passed by the House 1
123rd General Assembly 4
Regular Session Am. Sub. H. B. No. 551 5
1999-2000 6
REPRESENTATIVE SALERNO-PETERSON-CALLENDER-WOMER BENJAMIN- 8
WILLAMOWSKI-GOODMAN-HOOPS-JOLIVETTE-OLMAN-PERRY-BARNES- 9
VERICH-JONES-BRITTON-STEVENS 10
_________________________________________________________________ 11
A B I L L
To amend sections 1707.01, 1707.02, 1707.11, 13
1707.15, 1707.151, 1707.16, 1707.17, and 1707.23; 14
to enact sections 3916.01, 3916.02, 3916.03,
3916.05, 3916.07, 3916.08, 3916.10, 3916.12, 15
3916.13, 3916.15, 3916.17, 3916.19, 3916.21, 16
3916.22, 3916.24, 3916.26, 3916.28, 3916.30, 17
3916.32, and 3916.99; and to repeal sections
1707.432, 1707.433, 1707.434, 1707.435, 1707.436, 18
1707.437, 1707.438, and 1707.439 of the Revised 19
Code to adopt the Viatical Settlements Model Act 20
of the National Association of Insurance
Commissioners, to make life settlement interests 21
subject to the Ohio Securities Law, and to make 22
other changes in the Securities Law, including
changes relative to exempt securities, consent to 23
service of process, application for a dealer's, 24
investment adviser's, or salesperson's license, 25
and private civil actions seeking damages arising 26
from the sale of a security.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 28
Section 1. That sections 1707.01, 1707.02, 1707.11, 30
1707.15, 1707.151, 1707.16, 1707.17, and 1707.23 be amended and 32
sections 3916.01, 3916.02, 3916.03, 3916.05, 3916.07, 3916.08, 33
3916.10, 3916.12, 3916.13, 3916.15, 3916.17, 3916.19, 3916.21, 34
2
3916.22, 3916.24, 3916.26, 3916.28, 3916.30, 3916.32, and 3916.99 35
of the Revised Code be enacted to read as follows: 36
Sec. 1707.01. As used in this chapter: 45
(A) Whenever the context requires it, "division" or 47
"division of securities" may be read as "director of commerce" or 48
as "commissioner of securities." 49
(B) "Security" means any certificate or instrument that 51
represents title to or interest in, or is secured by any lien or 52
charge upon, the capital, assets, profits, property, or credit of 53
any person or of any public or governmental body, subdivision, or 54
agency. It includes shares of stock, certificates for shares of 55
stock, membership interests in limited liability companies, 56
voting-trust certificates, warrants and options to purchase 57
securities, subscription rights, interim receipts, interim 58
certificates, promissory notes, all forms of commercial paper, 59
evidences of indebtedness, bonds, debentures, land trust 60
certificates, fee certificates, leasehold certificates, syndicate 61
certificates, endowment certificates, certificates or written 62
instruments in or under profit-sharing or participation 63
agreements or in or under oil, gas, or mining leases, or 64
certificates or written instruments of any interest in or under 65
the same, receipts evidencing preorganization or reorganization 66
subscriptions, preorganization certificates, reorganization 67
certificates, certificates evidencing an interest in any trust or 68
pretended trust, any investment contract, ANY LIFE SETTLEMENT 69
INTEREST, any instrument evidencing a promise or an agreement to 70
pay money, warehouse receipts for intoxicating liquor, and the 71
currency of any government other than those of the United States 72
and Canada, but sections 1707.01 to 1707.45 of the Revised Code 73
do not apply to the sale of real estate. 74
(C)(1) "Sale" has the full meaning of "sale" as applied by 76
or accepted in courts of law or equity, and includes every 77
disposition, or attempt to dispose, of a security or of an 78
interest in a security. "Sale" also includes a contract to sell, 79
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an exchange, an attempt to sell, an option of sale, a 80
solicitation of a sale, a solicitation of an offer to buy, a 81
subscription, or an offer to sell, directly or indirectly, by 82
agent, circular, pamphlet, advertisement, or otherwise. 83
(2) "Sell" means any act by which a sale is made. 85
(3) The use of advertisements, circulars, or pamphlets in 87
connection with the sale of securities in this state exclusively 88
to the purchasers specified in division (D) of section 1707.03 of 89
the Revised Code is not a sale when the advertisements, 90
circulars, and pamphlets describing and offering those securities 91
bear a readily legible legend in substance as follows: "This 92
offer is made on behalf of dealers licensed under sections 93
1707.01 to 1707.45 of the Revised Code, and is confined in this 94
state exclusively to institutional investors and licensed 95
dealers." 96
(4) The offering of securities by any person in 98
conjunction with a licensed dealer by use of advertisement, 99
circular, or pamphlet is not a sale if that person does not 100
otherwise attempt to sell securities in this state. 101
(5) Any security given with, or as a bonus on account of, 103
any purchase of securities is conclusively presumed to constitute 104
a part of the subject of that purchase and has been "sold." 105
(6) "Sale" by an owner, pledgee, or mortgagee, or by a 107
person acting in a representative capacity, includes sale on 108
behalf of such party by an agent, including a licensed dealer or 109
salesperson. 110
(D) "Person," except as otherwise provided in this 112
chapter, means a natural person, firm, partnership, limited 114
partnership, partnership association, syndicate, joint-stock 115
company, unincorporated association, trust or trustee except 116
where the trust was created or the trustee designated by law or 117
judicial authority or by a will, and a corporation or limited 118
liability company organized under the laws of any state, any 119
foreign government, or any political subdivision of a state or 120
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foreign government.
(E)(1) "Dealer," except as otherwise provided in this 122
chapter, means every person, other than a salesperson, who 124
engages or professes to engage, in this state, for either all or
part of the person's time, directly or indirectly, either in the 125
business of the sale of securities for the person's own account, 126
or in the business of the purchase or sale of securities for the 127
account of others in the reasonable expectation of receiving a 128
commission, fee, or other remuneration as a result of engaging in 129
the purchase and sale of securities. "Dealer" does not mean any 130
of the following:
(a) Any issuer, including any officer, director, employee, 132
or trustee of, or member or manager of, or partner in, or any 133
general partner of, any issuer, that sells, offers for sale, or 135
does any act in furtherance of the sale of a security that 136
represents an economic interest in that issuer, provided no 137
commission, fee, or other similar remuneration is paid to or 138
received by the issuer for the sale; 139
(b) Any licensed attorney, public accountant, or firm of 141
such attorneys or accountants, whose activities are incidental to 142
the practice of the attorney's, accountant's, or firm's 143
profession;
(c) Any person that, for the account of others, engages in 145
the purchase or sale of securities that are issued and 146
outstanding before such purchase and sale, if a majority or more 147
of the equity interest of an issuer is sold in that transaction, 148
and if, in the case of a corporation, the securities sold in that 149
transaction represent a majority or more of the voting power of 150
the corporation in the election of directors; 151
(d) Any person that brings an issuer together with a 153
potential investor and whose compensation is not directly or 154
indirectly based on the sale of any securities by the issuer to 155
the investor; 156
(e) Any bank, savings and loan association, savings bank, 158
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or credit union chartered under the laws of the United States or 159
any state of the United States, provided that all transactions 161
are consummated by or through a person licensed pursuant to 162
section 1707.14 of the Revised Code; 163
(f) Any person that the division of securities by rule 165
exempts from the definition of "dealer" under division (E)(1) of 166
this section. 167
(2) "Licensed dealer" means a dealer licensed under this 170
chapter.
(F)(1) "Salesman" or "salesperson" means every natural 172
person, other than a dealer, who is employed, authorized, or 173
appointed by a dealer to sell securities within this state. 174
(2) The general partners of a partnership, and the 176
executive officers of a corporation or unincorporated 177
association, licensed as a dealer are not salespersons within the 179
meaning of this definition, nor are such clerical or other
employees of an issuer or dealer as are employed for work to 180
which the sale of securities is secondary and incidental; but the 181
division of securities may require a license from any such 182
partner, executive officer, or employee if it determines that 183
protection of the public necessitates the licensing. 184
(3) "Licensed salesperson" means a salesperson licensed 187
under this chapter.
(G) "Issuer" means every person who has issued, proposes 189
to issue, or issues any security. 190
(H) "Director" means each director or trustee of a 192
corporation, each trustee of a trust, each general partner of a 193
partnership, except a partnership association, each manager of a 194
partnership association, and any person vested with managerial or 195
directory power over an issuer not having a board of directors or 196
trustees. 197
(I) "Incorporator" means any incorporator of a corporation 199
and any organizer of, or any person participating, other than in 200
a representative or professional capacity, in the organization of 201
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an unincorporated issuer. 202
(J) "Fraud," "fraudulent," "fraudulent acts," "fraudulent 204
practices," or "fraudulent transactions" means anything 205
recognized on or after July 22, 1929, as such in courts of law or 206
equity; any device, scheme, or artifice to defraud or to obtain 207
money or property by means of any false pretense, representation, 208
or promise; any fictitious or pretended purchase or sale of 209
securities; and any act, practice, transaction, or course of 210
business relating to the purchase or sale of securities that is 211
fraudulent or that has operated or would operate as a fraud upon 213
the seller or purchaser.
(K) Except as otherwise specifically provided, whenever 215
any classification or computation is based upon "par value," as 216
applied to securities without par value, the average of the 217
aggregate consideration received or to be received by the issuer 218
for each class of those securities shall be used as the basis for 219
that classification or computation. 220
(L)(1) "Intangible property" means patents, copyrights, 222
secret processes, formulas, services, good will, promotion and 223
organization fees and expenses, trademarks, trade brands, trade 224
names, licenses, franchises, any other assets treated as 225
intangible according to generally accepted accounting principles, 226
and securities, accounts receivable, or contract rights having no 227
readily determinable value. 228
(2) "Tangible property" means all property other than 230
intangible property and includes securities, accounts receivable, 231
and contract rights, when the securities, accounts receivable, or 232
contract rights have a readily determinable value. 233
(M) "Public utilities" means those utilities defined in 235
sections 4905.02, 4905.03, 4907.02, and 4907.03 of the Revised 236
Code; in the case of a foreign corporation, it means those 237
utilities defined as public utilities by the laws of its 238
domicile; and in the case of any other foreign issuer, it means 239
those utilities defined as public utilities by the laws of the 240
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situs of its principal place of business. The term always 241
includes railroads whether or not they are so defined as public 242
utilities. 243
(N) "State" means any state of the United States, any 245
territory or possession of the United States, the District of 246
Columbia, and any province of Canada. 247
(O) "Bank" means any bank, trust company, savings and loan 249
association, savings bank, or credit union that is incorporated 251
or organized under the laws of the United States, any state of 252
the United States, Canada, or any province of Canada and that is 253
subject to regulation or supervision by that country, state, or 254
province.
(P) "Include," when used in a definition, does not exclude 256
other things or persons otherwise within the meaning of the term 257
defined. 258
(Q)(1) "Registration by description" means that the 260
requirements of section 1707.08 of the Revised Code have been 261
complied with. 262
(2) "Registration by qualification" means that the 264
requirements of sections 1707.09 and 1707.11 of the Revised Code 265
have been complied with. 266
(3) "Registration by coordination" means that there has 268
been compliance with section 1707.091 of the Revised Code. 269
Reference in this chapter to registration by qualification also 270
shall be deemed to include registration by coordination unless 271
the context otherwise indicates. 272
(R) "Intoxicating liquor" includes all liquids and 274
compounds that contain more than three and two-tenths per cent of 275
alcohol by weight and are fit for use for beverage purposes. 276
(S) "Institutional investor" means any corporation, bank, 278
insurance company, pension fund or pension fund trust, employees' 279
profit-sharing fund or employees' profit-sharing trust, any 280
association engaged, as a substantial part of its business or 281
operations, in purchasing or holding securities, or any trust in 282
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respect of which a bank is trustee or cotrustee. "Institutional 283
investor" does not include any business entity formed for the 284
primary purpose of evading sections 1707.01 to 1707.45 of the 285
Revised Code. 286
(T) "Securities Act of 1933," 48 Stat. 74, 15 U.S.C. 77a, 289
"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C. 78a, 290
"Internal Revenue Code of 1986," 100 Stat. 2085, 26 U.S.C. 1, 291
"Investment Advisers Act of 1940," 54 Stat. 847, 15 U.S.C. 80b, 292
and "Investment Company Act of 1940," 54 Stat. 789, 15 U.S.C. 80a 294
mean the federal statutes of those names as amended before or 295
after March 18, 1999.
(U) "Securities and exchange commission" means the 297
securities and exchange commission established by the Securities 298
Exchange Act of 1934. 299
(V)(1) "Control bid" means the purchase of or offer to 301
purchase any equity security of a subject company from a resident 302
of this state if either of the following applies: 303
(a) After the purchase of that security, the offeror would 305
be directly or indirectly the beneficial owner of more than ten 306
per cent of any class of the issued and outstanding equity 307
securities of the issuer. 308
(b) The offeror is the subject company, there is a pending 310
control bid by a person other than the issuer, and the number of 311
the issued and outstanding shares of the subject company would be 312
reduced by more than ten per cent. 313
(2) For purposes of division (V)(1) of this section, 315
"control bid" does not include any of the following: 316
(a) A bid made by a dealer for the dealer's own account in 318
the ordinary course of business of buying and selling securities; 319
(b) An offer to acquire any equity security solely in 321
exchange for any other security, or the acquisition of any equity 322
security pursuant to an offer, for the sole account of the 323
offeror, in good faith and not for the purpose of avoiding the 324
provisions of this chapter, and not involving any public offering 325
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of the other security within the meaning of Section 4 of Title I 326
of the "Securities Act of 1933," 48 Stat. 77, 15 U.S.C.A. 77d(2), 327
as amended; 328
(c) Any other offer to acquire any equity security, or the 330
acquisition of any equity security pursuant to an offer, for the 331
sole account of the offeror, from not more than fifty persons, in 332
good faith and not for the purpose of avoiding the provisions of 333
this chapter. 334
(W) "Offeror" means a person who makes, or in any way 336
participates or aids in making, a control bid and includes 337
persons acting jointly or in concert, or who intend to exercise 338
jointly or in concert any voting rights attached to the 339
securities for which the control bid is made and also includes 340
any subject company making a control bid for its own securities. 341
(X)(1) "Investment adviser" means any person who, for 344
compensation, engages in the business of advising others, either 345
directly or through publications or writings, as to the value of 346
securities or as to the advisability of investing in, purchasing, 347
or selling securities, or who, for compensation and as a part of 348
regular business, issues or promulgates analyses or reports 349
concerning securities.
(2) "Investment adviser" does not mean any of the 351
following:
(a) Any attorney, accountant, engineer, or teacher, whose 353
performance of investment advisory services described in division 355
(X)(1) of this section is solely incidental to the practice of 356
the attorney's, accountant's, engineer's, or teacher's 357
profession;
(b) A publisher of any bona fide newspaper, news magazine, 360
or business or financial publication of general and regular 361
circulation;
(c) A person who acts solely as an investment adviser 363
representative; 364
(d) A bank holding company, as defined in the "Bank 366
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Holding Company Act of 1956," 70 Stat. 133, 12 U.S.C. 1841, that 368
is not an investment company; 369
(e) A bank, or any receiver, conservator, or other 371
liquidating agent of a bank; 372
(f) Any licensed dealer or licensed salesperson whose 374
performance of investment advisory services described in division 375
(X)(1) of this section is solely incidental to the conduct of the 376
dealer's or salesperson's business as a licensed dealer or 377
licensed salesperson and who receives no special compensation for 378
the services;
(g) Any person, the advice, analyses, or reports of which 380
do not relate to securities other than securities that are direct 381
obligations of, or obligations guaranteed as to principal or 382
interest by, the United States, or securities issued or 383
guaranteed by corporations in which the United States has a 384
direct or indirect interest, and that have been designated by the 385
secretary of the treasury as exempt securities as defined in the 386
"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C. 78c; 387
(h) Any person that is excluded from the definition of 389
investment adviser pursuant to section 202(a)(11)(A) to (E) of 391
the "Investment Advisers Act of 1940," 15 U.S.C. 80b-2(a)(11), or 392
that has received an order from the securities and exchange 393
commission under section 202(a)(11)(F) of the "Investment 394
Advisers Act of 1940," 15 U.S.C. 80b-2(a)(11)(F), declaring that 395
the person is not within the intent of section 202(a)(11) of the 396
Investment Advisers Act of 1940.
(i) Any other person that the division designates by rule, 398
if the division finds that the designation is necessary or 399
appropriate in the public interest or for the protection of 400
investors or clients and consistent with the purposes fairly 401
intended by the policy and provisions of this chapter.
(Y)(1) "Subject company" means an issuer that satisfies 403
both of the following: 404
(a) Its principal place of business or its principal 406
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executive office is located in this state, or it owns or controls 407
assets located within this state that have a fair market value of 408
at least one million dollars. 409
(b) More than ten per cent of its beneficial or record 411
equity security holders are resident in this state, more than ten 412
per cent of its equity securities are owned beneficially or of 413
record by residents in this state, or more than one thousand of 414
its beneficial or record equity security holders are resident in 415
this state. 416
(2) The division of securities may adopt rules to 418
establish more specific application of the provisions set forth 419
in division (Y)(1) of this section. Notwithstanding the 420
provisions set forth in division (Y)(1) of this section and any 421
rules adopted under this division, the division, by rule or in an 422
adjudicatory proceeding, may make a determination that an issuer 423
does not constitute a "subject company" under division (Y)(1) of 424
this section if appropriate review of control bids involving the 425
issuer is to be made by any regulatory authority of another 426
jurisdiction. 427
(Z) "Beneficial owner" includes any person who directly or 429
indirectly through any contract, arrangement, understanding, or 430
relationship has or shares, or otherwise has or shares, the power 431
to vote or direct the voting of a security or the power to 432
dispose of, or direct the disposition of, the security. 433
"Beneficial ownership" includes the right, exercisable within 434
sixty days, to acquire any security through the exercise of any 435
option, warrant, or right, the conversion of any convertible 436
security, or otherwise. Any security subject to any such option, 437
warrant, right, or conversion privilege held by any person shall 438
be deemed to be outstanding for the purpose of computing the 439
percentage of outstanding securities of the class owned by that 440
person, but shall not be deemed to be outstanding for the purpose 441
of computing the percentage of the class owned by any other 442
person. A person shall be deemed the beneficial owner of any 443
12
security beneficially owned by any relative or spouse or relative 444
of the spouse residing in the home of that person, any trust or 445
estate in which that person owns ten per cent or more of the 446
total beneficial interest or serves as trustee or executor, any 447
corporation or entity in which that person owns ten per cent or 448
more of the equity, and any affiliate or associate of that 449
person. 450
(AA) "Offeree" means the beneficial or record owner of any 452
security that an offeror acquires or offers to acquire in 453
connection with a control bid. 454
(BB) "Equity security" means any share or similar 456
security, or any security convertible into any such security, or 457
carrying any warrant or right to subscribe to or purchase any 458
such security, or any such warrant or right, or any other 459
security that, for the protection of security holders, is treated 460
as an equity security pursuant to rules of the division of 461
securities. 462
(CC) "Investment company" has the same meaning as in 464
section 3(A) of the "Investment Company Act of 1940," 54 Stat. 465
789, 15 U.S.C. 80a-1 to 80a-52. 466
(DD) "Penny stock" has the same meaning as in section 469
3(A)(51) of the "Securities Exchange Act of 1934," 48 Stat. 881, 470
15 U.S.C. 78a-78jj, and the rules, regulations, and orders issued 471
pursuant to that section. 472
(EE) "Going concern transaction" has the same meaning 475
given that term under the rules or regulations on the securities 476
and exchange commission issued pursuant to section 13(c) of the 477
"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C.
78a-78jj. 478
(FF) "Person acting on behalf of an issuer" means an 481
officer, director, or employee of an issuer.
(GG) "Blank check company," "roll-up transaction," 484
"executive officer of an entity," and "direct participation
program" have the same meanings given those terms by rule or 485
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regulation of the securities and exchange commission. 486
(HH) "Forward-looking statement" means any of the 488
following:
(1) A statement containing a projection of revenues, 490
income including income loss, earnings per share including 491
earnings loss per share, capital expenditures, dividends, capital 492
structure, or other financial items;
(2) A statement of the plans and objectives of the 494
management of the issuer for future operations, including plans 495
or objectives relating to the products or services of the issuer; 496
(3) A statement of future economic performance, including 498
any statement of that nature contained in a discussion and 499
analysis of financial conditions by the management or in the 500
results of operations included pursuant to the rules and 501
regulations of the securities and exchange commission;
(4) Any disclosed statement of the assumptions underlying 503
or relating to a statement described in division (B)(1), (2), or 505
(3) of section 1707.437 of the Revised Code; 506
(5) Any report issued by an outside reviewer retained by 508
an issuer to the extent that the report relates to a 509
forward-looking statement made by the issuer; 510
(6) A statement containing a projection or estimate of any 512
other items that may be specified by rule or regulation of the 513
securities and exchange commission. 514
(II)(1) "Investment adviser representative" means a 516
supervised person of an investment adviser, provided that the 518
supervised person has more than five clients who are natural 519
persons other than excepted persons defined in division (KK) of 520
this section, and that more than ten per cent of the supervised 521
person's clients are natural persons other than excepted persons
defined in division (KK) of this section. "Investment adviser 522
representative" does not mean any of the following: 523
(a) A supervised person that does not on a regular basis 525
solicit, meet with, or otherwise communicate with clients of the 526
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investment adviser;
(b) A supervised person that provides only investment 528
advisory services described in division (X)(1) of this section by 529
means of written materials or oral statements that do not purport 530
to meet the objectives or needs of specific individuals or 531
accounts;
(c) Any other person that the division designates by rule, 534
if the division finds that the designation is necessary or 535
appropriate in the public interest or for the protection of
investors or clients and is consistent with the provisions fairly 537
intended by the policy and provisions of this chapter. 538
(2) For the purpose of the calculation of clients in 540
division (II)(1) of this section, a natural person and the 542
following persons are deemed a single client: Any minor child of 543
the natural person; any relative, spouse, or relative of the 544
spouse of the natural person who has the same principal residence 545
as the natural person; all accounts of which the natural person 546
or the persons referred to in division (II)(2) of this section 548
are the only primary beneficiaries; and all trusts of which the 549
natural person or persons referred to in division (II)(2) of this 550
section are the only primary beneficiaries. Persons who are not 551
residents of the United States need not be included in the 553
calculation of clients under division (II)(1) of this section. 554
(3) If subsequent to March 18, 1999, amendments are 556
enacted or adopted defining "investment adviser representative" 557
for purposes of the Investment Advisers Act of 1940 or additional 559
rules or regulations are promulgated by the securities and 560
exchange commission regarding the definition of "investment 561
adviser representative" for purposes of the Investment Advisers 563
Act of 1940, the division of securities shall, by rule, adopt the 564
substance of the amendments, rules, or regulations, unless the 565
division finds that the amendments, rules, or regulations are not 566
necessary for the protection of investors or in the public 567
interest.
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(JJ) "Supervised person" means a natural person who is any 569
of the following: 570
(1) A partner, officer, or director of an investment 572
adviser, or other person occupying a similar status or performing 573
similar functions with respect to an investment adviser; 574
(2) An employee of an investment adviser; 576
(3) A person who provides investment advisory services 578
described in division (X)(1) of this section on behalf of the 579
investment adviser and is subject to the supervision and control 580
of the investment adviser.
(KK) "Excepted person" means a natural person to whom any 582
of the following applies: 583
(1) Immediately after entering into the investment 585
advisory contract with the investment adviser, the person has at 586
least seven hundred fifty thousand dollars under the management 588
of the investment adviser.
(2) The investment adviser reasonably believes either of 590
the following at the time the investment advisory contract is 591
entered into with the person:
(a) The person has a net worth, together with assets held 594
jointly with a spouse, of more than one million five hundred 595
thousand dollars.
(b) The person is a qualified purchaser as defined in 598
division (LL) of this section.
(3) Immediately prior to entering into an investment 600
advisory contract with the investment adviser, the person is 601
either of the following: 602
(a) An executive officer, director, trustee, general 605
partner, or person serving in a similar capacity, of the 606
investment adviser;
(b) An employee of the investment adviser, other than an 609
employee performing solely clerical, secretarial, or 610
administrative functions or duties for the investment adviser, 611
which employee, in connection with the employee's regular 612
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functions or duties, participates in the investment activities of 613
the investment adviser, provided that, for at least twelve 614
months, the employee has been performing such nonclerical, 615
nonsecretarial, or nonadministrative functions or duties for or 616
on behalf of the investment adviser or performing substantially 617
similar functions or duties for or on behalf of another company. 618
If subsequent to March 18, 1999, amendments are enacted or 621
adopted defining "excepted person" for purposes of the Investment 622
Advisers Act of 1940 or additional rules or regulations are 624
promulgated by the securities and exchange commission regarding 625
the definition of "excepted person" for purposes of the 626
Investment Advisers Act of 1940, the division of securities 628
shall, by rule, adopt the substance of the amendments, rules, or 629
regulations, unless the division finds that the amendments, 630
rules, or regulations are not necessary for the protection of 631
investors or in the public interest.
(LL)(1) "Qualified purchaser" means either of the 633
following:
(a) A natural person who owns not less than five million 636
dollars in investments as defined by rule by the division of 637
securities;
(b) A natural person, acting for the person's own account 640
or accounts of other qualified purchasers, who in the aggregate 641
owns and invests on a discretionary basis, not less than 642
twenty-five million dollars in investments as defined by rule by 643
the division of securities. 644
(2) If subsequent to March 18, 1999, amendments are 646
enacted or adopted defining "qualified purchaser" for purposes of 647
the Investment Advisers Act of 1940 or additional rules or 649
regulations are promulgated by the securities and exchange
commission regarding the definition of "qualified purchaser" for 650
purposes of the Investment Advisers Act of 1940, the division of 651
securities shall, by rule, adopt the amendments, rules, or 652
regulations, unless the division finds that the amendments, 653
17
rules, or regulations are not necessary for the protection of 654
investors or in the public interest. 655
(MM)(1) "Purchase" has the full meaning of "purchase" as 657
applied by or accepted in courts of law or equity and includes 658
every acquisition of, or attempt to acquire, a security or an 659
interest in a security. "Purchase" also includes a contract to 660
purchase, an exchange, an attempt to purchase, an option to 661
purchase, a solicitation of a purchase, a solicitation of an 662
offer to sell, a subscription, or an offer to purchase, directly 663
or indirectly, by agent, circular, pamphlet, advertisement, or
otherwise. 664
(2) "Purchase" means any act by which a purchase is made. 666
(3) Any security given with, or as a bonus on account of, 668
any purchase of securities is conclusively presumed to constitute 669
a part of the subject of that purchase. 670
(NN) "LIFE SETTLEMENT INTEREST" MEANS THE ENTIRE INTEREST 672
OR ANY FRACTIONAL INTEREST IN AN INSURANCE POLICY OR CERTIFICATE 673
OF INSURANCE, OR IN AN INSURANCE BENEFIT UNDER SUCH A POLICY OR 674
CERTIFICATE, THAT IS THE SUBJECT OF A LIFE SETTLEMENT CONTRACT. 675
FOR PURPOSES OF THIS DIVISION, "LIFE SETTLEMENT CONTRACT" 677
MEANS AN AGREEMENT FOR THE PURCHASE, SALE, ASSIGNMENT, TRANSFER, 679
DEVISE, OR BEQUEST OF ANY PORTION OF THE DEATH BENEFIT OR 680
OWNERSHIP OF ANY LIFE INSURANCE POLICY OR CONTRACT, IN RETURN FOR 681
CONSIDERATION OR ANY OTHER THING OF VALUE THAT IS LESS THAN THE 682
EXPECTED DEATH BENEFIT OF THE LIFE INSURANCE POLICY OR CONTRACT. 683
"LIFE SETTLEMENT CONTRACT" INCLUDES A VIATICAL SETTLEMENT 684
CONTRACT AS DEFINED IN SECTION 3916.01 OF THE REVISED CODE, BUT 685
DOES NOT INCLUDE ANY OF THE FOLLOWING: 686
(1) A LOAN BY AN INSURER UNDER THE TERMS OF A LIFE 688
INSURANCE POLICY, INCLUDING, BUT NOT LIMITED TO, A LOAN SECURED 689
BY THE CASH VALUE OF THE POLICY; 690
(2) AN AGREEMENT WITH A BANK THAT TAKES AN ASSIGNMENT OF A 692
LIFE INSURANCE POLICY AS COLLATERAL FOR A LOAN; 693
(3) THE PROVISION OF ACCELERATED BENEFITS AS DEFINED IN 695
18
SECTION 3915.21 OF THE REVISED CODE; 696
(4) ANY AGREEMENT BETWEEN AN INSURER AND A REINSURER; 698
(5) AN AGREEMENT BY AN INDIVIDUAL TO PURCHASE AN EXISTING 700
LIFE INSURANCE POLICY OR CONTRACT FROM THE ORIGINAL OWNER OF THE 701
POLICY OR CONTRACT, IF THE INDIVIDUAL DOES NOT ENTER INTO MORE 702
THAN ONE LIFE SETTLEMENT CONTRACT PER CALENDAR YEAR; 703
(6) THE INITIAL PURCHASE OF AN INSURANCE POLICY OR 705
CERTIFICATE OF INSURANCE FROM ITS OWNER BY A VIATICAL SETTLEMENT 706
PROVIDER, AS DEFINED IN SECTION 3916.01 OF THE REVISED CODE, THAT 707
IS LICENSED UNDER CHAPTER 3916. OF THE REVISED CODE. 710
Sec. 1707.02. (A) "Exempt," as used in this section, 719
means exempt from sections 1707.08 to 1707.11 and 1707.39 of the 720
Revised Code. 721
(B)(1) Except as provided in division (B)(2) of this 723
section, the following securities are exempt, if the issuer or 724
guarantor has the power of taxation or assessment for the purpose 725
of paying the obligation represented by the security, or is in 726
specific terms empowered by the laws of the state of issuance to 727
issue securities payable as to principal or interest, or as to 728
both, out of revenues collected or administered by such issuer: 729
(a) Any security issued or guaranteed by the United 731
States; 732
(b) Any security issued or guaranteed by, and recognized, 734
at the time of sale, as its valid obligation by, any foreign 735
government with which the United States is, at the time of sale, 736
maintaining diplomatic relations; 737
(c) Any security issued or guaranteed, and recognized as 739
its valid obligation, by any political subdivision or any 740
governmental or other public body, corporation, or agency in or 741
of the United States, any state, territory, or possession of the 742
United States, or any foreign government with which the United 743
States is, at the time of sale, maintaining diplomatic relations. 744
(2) If a security described in division (B)(1) of this 746
section is not payable out of the proceeds of a general tax, the 748
19
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 750
or principal of the security, and there are no adjudications or 751
pending suits adversely affecting its validity. 752
(C) Any security issued by and representing an interest in 754
or an obligation of a state or nationally chartered bank, savings 755
and loan association, savings bank, or credit union, or a 757
governmental corporation or agency created by or under the laws 758
of the United States or of Canada is exempt, if it is under the 759
supervision of or subject to regulation by the government or 760
state under whose laws it was organized.
(D) Any interim certificate is exempt, if the securities 762
to be delivered therefor are themselves exempt, are the subject 763
matter of an exempt transaction, have been registered by 764
description or registered by qualification, or are the subject 765
matter of a transaction which has been registered by description. 766
(E)(1) Any A security, whether a preliminary or final 768
security, is exempt, which, at the time of sale within this 769
state, is listed, or listed upon notice of issuance, on the 770
Cincinnati stock exchange, the Midwest stock exchange, the New 771
York stock exchange, or the American stock exchange, or is 772
designated, or approved for designation upon notice of issuance, 773
as a national market system security on the national association 774
of securities dealers automated quotation system, or is listed or 775
designated on any other stock exchange or national quotation 776
system approved by the division as having listing requirements 777
substantially equivalent to those of any one of those exchanges 778
or systems, and any security senior to any security so listed or 779
designated is also exempt; but these exemptions shall apply only 780
so long as such security remains so listed or designated pursuant 781
to official action of such exchange or system and not under 782
suspension, and only so long as such exchange or system remains 783
approved under this section IF IT MEETS ANY OF THE FOLLOWING 785
REQUIREMENTS:
20
(a) THE SECURITY IS LISTED, OR AUTHORIZED FOR LISTING, ON 787
THE NEW YORK STOCK EXCHANGE, THE AMERICAN STOCK EXCHANGE, OR THE 789
NATIONAL MARKET SYSTEM OF THE NASDAQ STOCK MARKET, OR ANY 790
SUCCESSOR TO SUCH ENTITIES. 791
(b) THE SECURITY IS LISTED, OR AUTHORIZED FOR LISTING, ON 793
A NATIONAL SECURITIES EXCHANGE OR SYSTEM, OR ON A TIER OR SEGMENT 794
OF SUCH EXCHANGE OR SYSTEM, DESIGNATED BY THE SECURITIES AND 796
EXCHANGE COMMISSION IN RULE 146(b) PROMULGATED UNDER SECTION 797
18(b)(1) OF THE SECURITIES ACT OF 1933. 798
(c) THE SECURITY IS LISTED, OR AUTHORIZED FOR LISTING, ON 800
A NATIONAL SECURITIES EXCHANGE OR SYSTEM, OR ON A TIER OR SEGMENT 801
OF SUCH EXCHANGE OR SYSTEM, THAT HAS LISTING STANDARDS THAT THE 803
DIVISION OF SECURITIES, ON ITS OWN INITIATIVE OR ON THE BASIS OF 804
AN APPLICATION, DETERMINES BY RULE ARE SUBSTANTIALLY SIMILAR TO 805
THE LISTING STANDARDS APPLICABLE TO SECURITIES DESCRIBED IN 806
DIVISION (E)(1)(a) OF THIS SECTION.
(d) THE SECURITY IS A SECURITY OF THE SAME ISSUER THAT IS 808
EQUAL IN SENIORITY OR THAT IS A SENIOR SECURITY TO A SECURITY 809
DESCRIBED IN DIVISION (E)(1)(a), (b), OR (c) OF THIS SECTION. 811
(2) Application for approval of a stock exchange or system 813
not approved in this section may be made by any organized stock 814
exchange or system, or by any dealer who is a member of such 815
exchange, in such manner and upon such forms as are prescribed by 816
the division, accompanied by payment of an approval fee of two 817
hundred dollars, and the division shall make such investigation 818
and may hold such hearings as it deems necessary to determine the 819
propriety of giving approval. The cost of such investigation 820
shall be borne by the applicant. The division may enter an order 821
of approval, and if it does so, it shall notify the applicant of 822
such approval. 823
(3) The division may revoke the approval of an exchange or 825
system approved ENUMERATED in DIVISION (E)(1) OF this section or 828
approved by it upon finding, PROVIDED THAT THE EXCHANGE OR SYSTEM 829
IS NOT LISTED IN SECTION 18(b)(1) OF THE SECURITIES ACT OF 1933 830
21
OR ANY RULE PROMULGATED THEREUNDER. THE DIVISION MAY EFFECT A 831
REVOCATION after due notice, investigation, and A hearing, AND A 832
FINDING that the practices or requirements of such exchange or 834
system have been so changed or modified, or are, in their actual 835
operation, such that the contemplated protection is no longer 836
afforded. The principles of res adjudicata ordinarily applicable 837
in civil matters shall not be applicable to this matter, which is 838
hereby declared to be administrative rather than judicial. 839
Notice of the hearing may be given by certified mail at least ten 840
days before such hearing.
(4) The division may suspend the exemption of any security 842
described in division (E)(1) of this section, PROVIDED THAT THE 844
SECURITY IS LISTED OR AUTHORIZED FOR LISTING ON AN EXCHANGE OR 845
SYSTEM THAT IS NOT LISTED IN SECTION 18(b)(1) OF THE SECURITIES 846
ACT OF 1933 OR ANY RULE PROMULGATED THEREUNDER. THE DIVISION MAY 848
EFFECT A SUSPENSION by giving notice, by certified mail, to that 850
effect to the exchange or system upon which such security is 851
listed or designated and to the issuer of such security. After 852
notice and hearing, the division may revoke such exemption if it 853
appears to it that sales of such security have been fraudulent or 854
that future sales of it would be fraudulent. The division shall 855
set such hearing not later than ten days from the date of the 856
order of suspension, but may for good cause continue such hearing 857
upon application of the exchange or system upon which such 858
security is listed or designated or upon application of the 859
issuer of such security.
(F) Any security, issued or guaranteed as to principal, 861
interest, or dividend or distribution by a corporation owning or 862
operating any public utility, is exempt, if such corporation is, 863
as to its rates and charges or as to the issuance and 864
guaranteeing of securities, under the supervision of or regulated 865
by a public commission, board, or officer of the United States, 866
or of Canada, or of any state, province, or municipal corporation 867
in either of such countries. Equipment-trust securities based on 868
22
chattel mortgages, leases, or agreements for conditional sale, of 869
cars, locomotives, motor trucks, or other rolling stock or of 870
motor vehicles mortgaged, leased, or sold to, or finished for the 871
use of, a public utility, are exempt; and so are equipment 872
securities where the ownership or title of such equipment is 873
pledged or retained, in accordance with the laws of the United 874
States or of any state, or of Canada or any province thereof, to 875
secure the payment of such securities. 876
(G) Commercial paper and promissory notes are exempt when 878
they are not offered directly or indirectly for sale to the 879
public. 880
(H) Any security issued or guaranteed by an insurance 882
company, except as provided in section 1707.32 of the Revised 883
Code, is exempt if such company is under the supervision of, and 884
the issuance or guaranty of such security is regulated by, a 885
state. 886
(I) Any security, except notes, bonds, debentures, or 888
other evidences of indebtedness or of promises or agreements to 889
pay money, which is issued by a person, corporation, or 890
association organized not for profit, including persons, 891
corporations, and associations organized exclusively for 892
conducting county fairs, or for religious, educational, social, 896
recreational, athletic, benevolent, fraternal, charitable, or 897
reformatory purposes, and agricultural cooperatives as defined in 898
section 1729.01 of the Revised Code, is exempt, if no part of the 900
net earnings of such issuer inures to the benefit of any 901
shareholder or member of such issuer or of any individual, and if 902
the total commission, remuneration, expense, or discount in 903
connection with the sale of such securities does not exceed two 904
per cent of the total sale price thereof plus five hundred 905
dollars.
(J)(1) Any securities outstanding for a period of not less 907
than five years, on which there has occurred no default in 908
payment of principal, interest, or dividend or distribution for 909
23
the five years immediately preceding the sale, are exempt. 910
(2) For the purpose of division (J) of this section, the 912
dividend, distribution, or interest rate on securities in which 913
no such rate is specified shall be at the rate of at least four 914
per cent annually on the aggregate of the price at which such 915
securities are to be sold. 916
(K) All bonds issued under authority of Chapter 165. or 918
761., or section 4582.06 or 4582.31 of the Revised Code are 919
exempt. 920
Sec. 1707.11. For the purposes of this section, a 929
"person," or an "applicant" for registration or claim of 930
exemption, means every issuer. 931
Every applicant for registration or for claim of exemption 933
pursuant to division (Q), (W), (X), or (Y) of section 1707.03 of 935
the Revised Code, and every (A) EACH person submitting a notice 936
filing pursuant to section 1707.092 of the Revised Code, for the 939
sale of securities pursuant to this chapter, which THAT is an 940
incorporated applicant or person not domiciled in ORGANIZED UNDER 941
THE LAWS OF this state or, THAT IS not licensed under section 942
1703.03 of the Revised Code, or is an unincorporated applicant or 944
person having the situs of THAT DOES NOT HAVE its principal place 946
of business outside IN this state, shall file with its
application or notice filing its SUBMIT TO THE DIVISION OF 948
SECURITIES AN IRREVOCABLE CONSENT TO SERVICE OF PROCESS, AS 949
DESCRIBED IN DIVISION (B) OF THIS SECTION, IN CONNECTION WITH ANY 950
OF THE FOLLOWING:
(1) FILINGS TO CLAIM ANY OF THE EXEMPTIONS ENUMERATED IN 952
DIVISION (Q), (W), (X), OR (Y) OF SECTION 1707.03 OF THE REVISED 955
CODE;
(2) APPLICATIONS FOR REGISTRATION BY DESCRIPTION, 957
QUALIFICATION, OR COORDINATION; 958
(3) NOTICE FILINGS PURSUANT TO SECTION 1707.092 OR 960
1707.141 OF THE REVISED CODE; 961
(4) APPLICATIONS FOR LICENSURE AS A SECURITIES DEALER 963
24
UNDER SECTION 1707.15 OF THE REVISED CODE; 964
(5) APPLICATIONS FOR LICENSURE AS AN INVESTMENT ADVISER 966
UNDER SECTION 1707.151 OF THE REVISED CODE. 967
(B) THE irrevocable written consent, SHALL BE executed and 970
acknowledged by an individual duly authorized to give the 971
consent, AND SHALL DO ALL OF THE FOLLOWING: 972
(1) DESIGNATE THE SECRETARY OF STATE AS AGENT FOR SERVICE 974
OF PROCESS OR PLEADINGS; 975
(2) STATE that actions growing out of the sale of such 978
securities, THE GIVING OF INVESTMENT ADVICE, or fraud committed 979
by an applicant in this state A PERSON ON WHOSE BEHALF THE 980
CONSENT IS SUBMITTED may be commenced against it THE PERSON, in 981
the proper court of any county in this state in which a cause of 982
action for fraud may arise or in which the plaintiff in the 983
action may reside, by serving on the secretary of state any 984
proper process or pleading authorized by the laws of this state. 985
Such consent shall stipulate; 986
(3) STIPULATE that service of process or pleading on the 989
secretary of state shall be taken in all courts to be as valid 990
and binding as if service had been made upon the applicant itself 991
PERSON ON WHOSE BEHALF THE CONSENT IS SUBMITTED. 992
(C) Service of any process or pleadings may be made on the 994
secretary of state by duplicate copies, of which one shall be 995
filed in the office of the secretary of state, and the other 996
immediately forwarded by the secretary of state by certified mail 997
to the principal place of business of the applicant, PERSON ON 998
WHOSE BEHALF THE CONSENT IS SUBMITTED or TO the last known 1,000
address as shown on the application form filed FILING MADE with 1,001
the division, or if it has a principal office in this state, then 1,002
to the principal office; but. HOWEVER, failure to mail such copy 1,004
shall DOES not invalidate the service. 1,005
Sec. 1707.15. An application to act as dealer (A) 1,014
APPLICATION FOR A DEALER'S LICENSE shall be MADE in writing 1,016
ACCORDANCE WITH THIS SECTION and shall be filed BY FILING with 1,017
25
the division of securities. It shall be in such form as the 1,018
division prescribes, and verified by oath of the applicant, his 1,019
agent, or his attorney, and it shall set forth THE INFORMATION, 1,020
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION, 1,021
ALONG WITH ALL OF THE FOLLOWING INFORMATION:
(A)(1) The name and address of the applicant; 1,023
(B)(2) A description of the applicant, including, if the 1,025
applicant is a partnership, unincorporated association, or any 1,026
similar form of business organization, the names and the 1,027
residence and business addresses of all partners, officers, 1,028
directors, trustees, or managers of the organization, and the 1,029
limitation of the liability of any partner or member; and if the 1,030
applicant is a corporation, a list of its executive officers and 1,031
directors, and the residence and business addresses of each,; and 1,033
if it is a foreign corporation, a copy of its articles of 1,034
incorporation in addition thereto; 1,035
(C)(3) The location and addresses of the principal office 1,037
and all other offices of the applicant; 1,038
(D)(4) A general description of the business of the 1,040
applicant done prior to such THE application, including a list of 1,041
states in which the applicant is a licensed dealer; 1,043
(E) The names and addresses of all salesmen of the 1,045
applicant at the date of the application; 1,046
(F) The nature of the applicant's business, and its places 1,048
of business, for the period of ten years next preceding the date 1,049
of application. 1,050
Every (B) EACH applicant not a resident of this state 1,053
shall name a person within this state upon whom process against
such applicant may be served and shall give the complete 1,055
residence and business address of the person designated. 1,056
Every applicant shall file an irrevocable consent to 1,058
service of process on the secretary of state in the event that 1,059
such applicant, if a resident of this state, or the person 1,060
designated by the nonresident applicant, cannot be found at the 1,061
26
address given. Such consent shall be given and service 1,062
thereunder shall be made as provided in section 1707.11 of the 1,063
Revised Code. 1,064
(C)(1) The division may investigate any applicant for a 1,066
license, and may require such additional information as it deems 1,067
necessary to determine the applicant's business repute and 1,068
qualifications to act as a dealer in securities. 1,069
(2) If the application for any license involves 1,071
investigation outside of this state, the applicant may be 1,072
required by the division to advance sufficient funds to pay any 1,073
of the actual expenses of such examination. An itemized 1,074
statement of any such expenses which he THE APPLICANT is required 1,075
to pay shall be furnished the applicant by the division. 1,077
If the applicant is merely renewing his license for the 1,080
previous year the application need contain only the information
required by divisions (B), (C), and (E) of this section. 1,081
(D) The division shall by rule require an applicant ONE 1,083
NATURAL PERSON WHO IS A PRINCIPAL, OFFICER, DIRECTOR, GENERAL 1,084
PARTNER, MANAGER, OR EMPLOYEE OF A DEALER to pass an examination 1,086
which covers his knowledge of securities laws and practices 1,087
DESIGNATED BY THE DIVISION. EACH DEALER THAT IS NOT A NATURAL 1,088
PERSON SHALL NOTIFY THE DIVISION OF THE NAME AND RELATIONSHIP TO 1,089
THE DEALER OF THE NATURAL PERSON WHO HAS PASSED THE EXAMINATION 1,090
ON BEHALF OF THE DEALER AND WHO WILL SERVE AS THE DESIGNATED 1,091
PRINCIPAL ON BEHALF OF THE DEALER. 1,092
(E) DEALERS SHALL EMPLOY AS SALESPERSONS ONLY THOSE 1,094
SALESPERSONS WHO ARE LICENSED UNDER THIS CHAPTER. IF AT ANY TIME 1,095
A SALESPERSON RESIGNS OR IS DISCHARGED OR A NEW SALESPERSON IS 1,096
ADDED, THE DEALER SHALL PROMPTLY NOTIFY THE DIVISION. 1,097
(F) If the division finds that the applicant is of good 1,099
business repute, appears qualified to act as a dealer in 1,100
securities, and has fully complied with sections 1707.01 to 1,101
1707.45 of the Revised Code THIS CHAPTER AND RULES ADOPTED UNDER 1,102
THIS CHAPTER BY THE DIVISION, the division shall issue to such 1,103
27
applicant a license to act as dealer, upon payment by the 1,104
applicant of the fee FEES prescribed by DIVISION (B) OF section 1,106
1707.17 of the Revised Code.
The division may, after proper hearing, refuse, as provided 1,108
in section 1707.19 of the Revised Code, SHALL ISSUE to grant a 1,109
license to the applicant. 1,111
Dealers shall employ as salesmen only those who are 1,113
licensed under sections 1707.01 to 1707.45 of the Revised Code. 1,114
If at any time such salesmen resign or are discharged or new 1,115
salesmen are added, the dealer shall forthwith notify the 1,116
division and shall file with the division the names and addresses 1,117
of new salesmen A LICENSE AUTHORIZING THE APPLICANT TO ACT AS A 1,118
DEALER. 1,119
Sec. 1707.151. (A) Application for an investment 1,128
adviser's license shall be made in accordance with this section 1,129
and by filing with the division of securities the information, 1,130
materials, and forms specified in rules adopted by the division. 1,131
(B) Every applicant not a resident of this state shall 1,133
name a person within this state upon whom process against such 1,134
applicant may be served and shall give the complete residence and 1,135
business address or addresses of the person designated. 1,136
(C) Every EACH applicant shall file an irrevocable consent 1,138
to service of process naming the secretary of state for service 1,140
of process in the event that the applicant, if a resident of this 1,143
state, or the person designated pursuant to division (B) of this 1,144
section, cannot be found at the address given on the application. 1,145
The consent shall be given and service of process shall be made 1,146
as provided in section 1707.11 of the Revised Code. 1,147
(D)(C)(1) The division may investigate any applicant for a 1,149
license and may require any additional information as it 1,151
considers necessary to determine the applicant's business repute 1,152
and qualifications to act as an investment adviser. 1,153
(2) If the application for any license involves 1,155
investigation outside of this state, the applicant may be 1,156
28
required by the division to advance sufficient funds to pay any 1,157
of the actual expenses of the examination. The division shall 1,158
furnish the applicant with an itemized statement of such expenses 1,159
that the applicant is required to pay.
(E)(D) The division shall by rule require one natural 1,161
person who is a principal, officer, director, general partner, 1,163
manager, or employee of an investment adviser to pass an 1,164
examination designated by the division or achieve a specified 1,165
professional designation. Every EACH investment adviser that is 1,167
not a natural person shall notify the division of the name and
relationship to the investment adviser of the natural person who 1,169
has passed the examination or achieved the specified professional
designation on behalf of the investment adviser and who will 1,170
serve as the designated principal on behalf of the investment 1,171
adviser.
(F)(E) An investment adviser licensed under section 1,173
1707.141 of the Revised Code shall employ only investment adviser 1,175
representatives licensed, or exempted from licensure, under 1,176
section 1707.161 of the Revised Code.
(G)(F) If the division finds that the applicant is of good 1,178
business repute, appears to be qualified to act as an investment 1,180
adviser, and has complied with sections 1707.01 to 1707.45 of the 1,182
Revised Code THIS CHAPTER and rules adopted under those sections 1,183
THIS CHAPTER by the division, the division, upon payment of the 1,184
fees prescribed by division (B) of section 1707.17 of the Revised 1,185
Code, shall issue to the applicant a license authorizing the 1,187
applicant to act as an investment adviser.
Sec. 1707.16. (A) Every salesman SALESPERSON of 1,196
securities must be licensed by the division of securities and 1,198
shall be employed only by the licensed dealer specified in his 1,199
THE SALESPERSON'S license. IF THE SALESPERSON SEVERS THE 1,200
CONNECTION WITH THAT LICENSED DEALER, THE SALESPERSON'S LICENSE 1,201
IS VOID.
The application (B) APPLICATION for a salesman's 1,204
29
SALESPERSON'S license shall set forth BE MADE IN ACCORDANCE WITH 1,205
THIS SECTION AND BY FILING WITH THE DIVISION THE INFORMATION, 1,206
MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY THE DIVISION, 1,207
ALONG WITH ALL OF THE FOLLOWING INFORMATION: 1,208
(A)(1) The name and complete residence and business 1,210
addresses of the applicant; 1,211
(B)(2) The name of the dealer who is employing the 1,213
applicant or who intends to employ him THE APPLICANT; 1,214
(C)(3) The applicant's age and education, and his THE 1,217
APPLICANT'S experience in the sale of securities; whether he THE 1,219
APPLICANT has ever been licensed by the division, and if so, 1,221
when; whether he THE APPLICANT has ever been refused a license by 1,223
the division; and whether he THE APPLICANT has ever been licensed 1,224
or refused a license or any similar permit by any division or 1,225
commissioner of securities, whatsoever name known or designated, 1,226
anywhere;. 1,227
(C) THE DIVISION SHALL BY RULE REQUIRE AN APPLICANT TO 1,229
PASS AN EXAMINATION DESIGNATED BY THE DIVISION. 1,230
(D) The nature of the employment, and the names and 1,232
addresses of the employers, of the applicant for the period of 1,233
ten years immediately preceding the date of the application. 1,234
If the division finds that the applicant is of good 1,236
business repute, appears to be qualified to act as a salesman 1,237
SALESPERSON of securities, and has fully complied with sections 1,239
1707.01 to 1707.45 of the Revised Code THIS CHAPTER, and that the 1,240
dealer named in the application is a licensed dealer, the 1,241
division shall, upon payment of the fees prescribed by section 1,242
1707.17 of the Revised Code, issue a license to the applicant 1,243
authorizing him THE APPLICANT to act as salesman SALESPERSON for 1,244
the dealer named in the application. 1,245
If such salesman severs his connection with such dealer, 1,247
the salesman's license is void. 1,248
The division shall by rule require an applicant to pass an 1,250
examination which covers his knowledge of securities laws and 1,252
30
practices.
If the applicant is merely renewing his license for the 1,254
previous year or renewing his license upon change of employment, 1,255
only the information required under divisions (A) and (B) of this 1,256
section need be given. 1,257
Sec. 1707.17. (A)(1) The license of every dealer in and 1,266
salesperson of securities shall expire on the thirty-first day of 1,267
December of each year, and may be renewed upon the filing with 1,268
the division of securities of an application for renewal, and the 1,269
payment of the fee prescribed in this section, between the first 1,271
day of November and the fifteenth day of December of each year. 1,272
The division may accept an application for renewal filed between 1,273
the fifteenth and the thirty-first day of December of each year. 1,274
The division also may accept an application for renewal received 1,275
by the division not later than the tenth day of January of the 1,276
subsequent calendar year, provided that the application for 1,278
renewal is accompanied by the license renewal fee and the 1,279
additional fee prescribed in division (B) of this section. The 1,280
division shall give notice, without unreasonable delay, of its 1,282
action on any application for renewal of a dealer's or 1,283
salesperson's license. 1,284
(2) The license of every investment adviser and investment 1,287
adviser representative licensed under section 1707.141 or 1,288
1707.161 of the Revised Code shall expire on the thirty-first day 1,289
of December of each year. The licenses may be renewed upon the 1,290
filing with the division of an application for renewal, and the 1,291
payment of the fee prescribed in division (B) of this section, 1,292
between the fifteenth day of October and the thirtieth day of 1,293
November of each year. The division may accept an application 1,295
for renewal filed between the first and thirty-first day of 1,296
December of each year. The division also may accept an 1,297
application for renewal received by the division not later than 1,298
the tenth day of January of the subsequent calenar CALENDAR year, 1,299
provided that the application for renewal is accompanied by the 1,301
31
license renewal fee and the additional fee prescribed in division 1,303
(B) of this section. The division shall give notice, without 1,304
unreasonable delay, of its action on any application for renewal. 1,305
(3) An investment adviser required to make a notice filing 1,307
under division (B) of section 1707.141 of the Revised Code 1,309
annually shall file with the division the notice filing and the 1,310
fee prescribed in division (B) of this section, no later than the 1,311
thirty-first day of December of each year. The division may 1,312
accept a notice filing received by the division not later than 1,313
the tenth day of January of the subsequent calendar year, 1,314
provided that the notice filing is accompanied by the notice 1,316
filing fee and the additional fee prescribed in division (B) of 1,317
this section.
(B)(1) The fee for each dealer's license, and for each 1,319
annual renewal thereof that is received by the division not later 1,320
than the thirty-first day of December of each year, shall be 1,321
thirty dollars per salesperson, but not less than one hundred 1,323
fifty nor more than five thousand dollars. Upon payment of an 1,324
additional fee of one-half of the license renewal fee, the 1,325
division may accept an application for renewal received by the 1,326
division between the first and tenth day of January of the 1,327
subsequent calendar year. The fee for the examination of 1,328
applicant dealers, when administered by the division, shall be 1,330
seventy-five dollars.
(2) The fee for each salesperson's license, and for each 1,333
annual renewal thereof, shall be fifty dollars. The fee for the 1,335
examination of an applicant salesperson, when administered by the 1,337
division, shall be fifty dollars.
(3) The fee for each investment adviser's license, and for 1,340
each annual renewal thereof that is received by the division not
later than the thirty-first day of December of each year, shall 1,341
be two hundred dollars. Upon the payment of an additional fee of 1,343
one-half of the license fee, the division may accept a license 1,344
renewal application received by the division between the first 1,345
32
and tenth day of January of the subsequent calendar year. If the 1,347
fee for an investment adviser license is paid to the division on 1,348
or before October 1, 1999, that fee shall cover the issuance of 1,350
the initial license and also shall cover any fee for renewal of 1,351
the license for the period ending December 31, 2000. 1,352
(4) The fee for each investment adviser notice filing 1,354
required by division (B) of section 1707.141 of the Revised Code 1,356
and received by the division not later than the thirty-first day
of December of each year shall be one hundred dollars. Upon the 1,357
payment of an additional fee of one-half of the notice filing 1,359
fee, the division may accept a notice filing received by the 1,360
division between the first and tenth day of January of the 1,361
subsequent calendar year. A notice filing may be made at any 1,363
time during the calendar year. In that event, the notice filing 1,364
fee shall not be reduced. If the fee for an investment adviser
notice filing is paid to the division on or before October 1, 1,366
1999, that fee shall cover the initial notice filing and also 1,367
shall cover any fee for the notice filing for the period ending 1,368
December 31, 2000. 1,369
(5) The fee for each investment adviser representative's 1,371
license, and for each annual renewal thereof that is received by 1,372
the division not later than the thirty-first day of December of 1,373
each year, shall be thirty-five dollars; however, the fee shall 1,375
be waived for the investment adviser representative designated 1,376
the principal of the investment adviser pursuant to division 1,378
(E)(D) of section 1707.151 of the Revised Code. Upon the payment 1,379
of an additional fee of one-half of the license fee, the division 1,380
may accept a license renewal application received by the division 1,381
between the first and tenth day of January of the subsequent 1,382
calendar year. If the fee for an investment adviser 1,383
representative's license is paid to the division on or before 1,384
October 1, 1999, that fee shall cover the issuance of the initial 1,386
license and also shall cover any fee for renewal of the license 1,387
for the period ending December 31, 2000. 1,388
33
(C) A dealer's, salesperson's, investment adviser's, or 1,390
investment adviser representative's license may be issued at any 1,392
time for the remainder of the calendar year. In that event, the 1,393
annual fee shall not be reduced. 1,394
Sec. 1707.23. Whenever it appears to the division of 1,403
securities, from its files, upon complaint, or otherwise, that 1,404
any person has engaged in, is engaged in, or is about to engage 1,405
in any practice declared to be illegal or prohibited by Chapter 1,406
1707. of the Revised Code THIS CHAPTER or rules adopted under 1,407
that THIS chapter by the division, or defined as fraudulent in 1,409
that THIS chapter or rules adopted under that THIS chapter by the 1,410
division, or any other deceptive scheme or practice in connection 1,411
with the sale of securities, or acting as an investment adviser 1,412
or investment adviser representative, or when the division 1,413
believes it to be in the best interests of the public and 1,414
necessary for the protection of investors, the division may do 1,415
any of the following:
(A) Require any person to file with it, on such forms as 1,417
it prescribes, an original or additional statement or report in 1,418
writing, under oath or otherwise, as to any facts or 1,419
circumstances concerning the issuance, sale, or offer for sale of 1,420
securities within this state by the person, as to the person's 1,422
acts or practices as an investment adviser or investment adviser 1,423
representative within this state, and as to other information as 1,424
it deems material or relevant thereto;
(B) Examine any investment adviser, investment adviser 1,426
representative, or any seller, dealer, salesperson, or issuer of 1,428
any securities, and any of their agents, employees, partners, 1,429
officers, directors, members, or shareholders, wherever located, 1,430
under oath; and examine records, books, documents, accounts, and 1,432
papers as the division deems material or relevant to the inquiry; 1,433
(C) Require the attendance of witnesses, and the 1,435
production of books, records, and papers, as are required either 1,437
by the division or by any party to a hearing before the division, 1,438
34
and for that purpose issue a subpoena for any witness, or a 1,439
subpoena duces tecum to compel the production of any books,
records, or papers. The subpoena shall be served by PERSONAL 1,441
SERVICE OR BY certified mail, return receipt requested. If the 1,442
subpoena is returned because of inability to deliver, or if no 1,443
return is received within thirty days of the date of mailing, the 1,444
subpoena may be served by ordinary mail. If no return of 1,445
ordinary mail is received within thirty days after the date of 1,446
mailing, service shall be deemed to have been made. If the 1,447
subpoena is returned because of inability to deliver, the 1,448
division may designate a person or persons to effect either 1,449
personal or residence service upon the witness. The person 1,450
DESIGNATED TO EFFECT PERSONAL OR RESIDENCE SERVICE UNDER THIS 1,451
DIVISION may be the sheriff of the county in which the witness 1,452
resides or may be found or any other duly designated person. The 1,453
fees and mileage of the person serving the subpoena shall be the 1,454
same as those allowed by the courts of common pleas in criminal 1,455
cases, and shall be paid from the funds of the division. Fees 1,456
and mileage for the witness shall be the same as those allowed 1,457
for witnesses by the courts of common pleas in criminal cases, 1,458
and shall be paid from the funds of the division upon request of 1,459
the witness following the hearing.
(D) Proceed under section 1707.19 of the Revised Code to 1,461
suspend the license of any licensed dealer, licensed salesperson, 1,463
licensed investment adviser, or licensed investment adviser 1,464
representative and ultimately, if the division determines, revoke 1,465
such license under such sections; 1,466
(E) Initiate criminal proceedings under section 1707.042 1,468
or 1707.44 of the Revised Code or rules adopted under those 1,469
sections by the division by laying before the prosecuting 1,470
attorney of the proper county any evidence of criminality which 1,471
comes to its knowledge; and in the event of the neglect or 1,472
refusal of the prosecuting attorney to prosecute such violations, 1,473
or at the request of the prosecuting attorney, the division shall 1,474
35
submit the evidence to the attorney general, who may proceed in 1,476
the prosecution with all the rights, privileges, and powers 1,477
conferred by law on prosecuting attorneys, including the power to 1,478
appear before grand juries and to interrogate witnesses before 1,479
such grand juries. 1,480
(F) Require any dealers forthwith to furnish to the 1,482
division copies of prospectuses, circulars, or advertisements 1,483
respecting securities that they publish or generally distribute, 1,485
or require any investment advisers immediately to furnish to the 1,486
division copies of brochures, advertisements, publications, 1,487
analyses, reports, or other writings that they publish or 1,488
distribute;
(G) Require any dealers to mail to the division, prior to 1,490
sale, notices of intention to sell, in respect to all securities 1,491
which are not exempt under section 1707.02 of the Revised Code, 1,492
or which are sold in transactions not exempt under section 1,493
1707.03 or 1707.04 of the Revised Code; 1,494
(H) Issue and cause to be served by certified mail upon 1,496
all persons affected an order requiring the person or persons to 1,497
cease and desist from the acts or practices appearing to the 1,498
division to constitute violations of Chapter 1707. of the Revised 1,500
Code THIS CHAPTER or rules adopted under that THIS chapter by the 1,501
division. The order shall state specifically the section or 1,503
sections of Chapter 1707. of the Revised Code THIS CHAPTER or the 1,504
rule or rules adopted under that THIS chapter by the division 1,505
that appear to the division to have been violated and the facts 1,507
constituting the violation. If after the issuance of the order 1,508
it appears to the division that any person or persons affected by 1,509
the order have engaged in any act or practice from which the 1,510
person or persons shall have been required, by the order, to 1,511
cease and desist, the director of commerce may apply to the court 1,512
of common pleas of any county for, and upon proof of the validity 1,513
of the order of the division, the delivery of the order to the 1,514
person or persons affected, and of the illegality and the 1,515
36
continuation of the acts or practices that are the subject of the 1,516
order, the court may grant an injunction implementing the order 1,517
of the division.
(I) Issue and initiate contempt proceedings in this state 1,519
regarding subpoenas and subpoenas duces tecum at the request of 1,521
the securities administrator of another state, if it appears to 1,522
the division that the activities for which the information is 1,523
sought would violate Chapter 1707. of the Revised Code THIS 1,524
CHAPTER if the activities had occurred in this state. 1,525
Sec. 3916.01. AS USED IN THIS CHAPTER: 1,527
(A) "FINANCING ENTITY" MEANS AN UNDERWRITER, PLACEMENT 1,529
AGENT, LENDER, PURCHASER OF SECURITIES, PURCHASER OF A POLICY OR 1,530
CERTIFICATE FROM A VIATICAL SETTLEMENT PROVIDER, CREDIT ENHANCER, 1,531
OR ANY OTHER PERSON THAT IS A PARTY TO A VIATICAL SETTLEMENT 1,532
CONTRACT, HAS AN AGREEMENT IN WRITING WITH A VIATICAL SETTLEMENT 1,533
PROVIDER TO ACT AS A PARTICIPANT IN A FINANCING TRANSACTION, AND 1,534
HAS A DIRECT OWNERSHIP INTEREST IN THE POLICY OR CERTIFICATE THAT 1,535
IS THE SUBJECT OF THE VIATICAL SETTLEMENT CONTRACT, BUT WHOSE
SOLE ACTIVITY RELATED TO THE TRANSACTION IS PROVIDING FUNDS TO 1,536
EFFECT THE VIATICAL SETTLEMENT. 1,537
(B) "FINANCING TRANSACTION" MEANS A TRANSACTION IN WHICH A 1,539
LICENSED VIATICAL SETTLEMENT PROVIDER OR A FINANCING ENTITY 1,540
OBTAINS FINANCING FOR VIATICAL SETTLEMENT CONTRACTS, VIATICATED 1,541
POLICIES, OR INTERESTS THEREIN, WHICH FINANCING INCLUDES, BUT IS 1,542
NOT LIMITED TO, ANY SECURED OR UNSECURED FINANCING, ANY 1,543
SECURITIZATION TRANSACTION OR SECURITIES OFFERING THAT IS EITHER 1,544
REGISTERED OR EXEMPT FROM REGISTRATION UNDER FEDERAL SECURITIES
LAW AND CHAPTER 1707. OF THE REVISED CODE, OR ANY DIRECT PURCHASE 1,545
OF INTERESTS IN A POLICY OR CERTIFICATE, IF THE TRANSACTION 1,547
COMPLIES WITH FEDERAL SECURITIES LAW AND CHAPTER 1707. OF THE 1,548
REVISED CODE.
(C) "VIATICAL SETTLEMENT BROKER" MEANS A PERSON THAT, ON 1,550
BEHALF OF A VIATOR AND FOR A FEE, COMMISSION, OR OTHER VALUABLE 1,551
CONSIDERATION, OFFERS OR ATTEMPTS TO NEGOTIATE VIATICAL 1,552
37
SETTLEMENTS BETWEEN A VIATOR AND ONE OR MORE VIATICAL SETTLEMENT 1,553
PROVIDERS. "VIATICAL SETTLEMENT BROKER" DOES NOT INCLUDE AN 1,554
ATTORNEY, A CERTIFIED PUBLIC ACCOUNTANT, OR A FINANCIAL PLANNER
RETAINED TO REPRESENT THE VIATOR WHOSE COMPENSATION IS PAID 1,556
DIRECTLY BY, OR AT THE DIRECTION OF, THE VIATOR.
(D) "VIATICAL SETTLEMENT CONTRACT" MEANS EITHER OF THE 1,558
FOLLOWING:
(1) AN AGREEMENT BETWEEN A VIATICAL SETTLEMENT PROVIDER 1,560
AND A VIATOR UNDER WHICH THE VIATICAL SETTLEMENT PROVIDER PAYS 1,561
COMPENSATION OR ANY OTHER THING OF VALUE, WHICH COMPENSATION OR 1,562
OTHER THING OF VALUE IS LESS THAN THE EXPECTED DEATH BENEFIT OF 1,563
THE INSURANCE POLICY OR CERTIFICATE, IN RETURN FOR THE VIATOR'S 1,564
ASSIGNMENT, TRANSFER, SALE, DEVISE, OR BEQUEST OF THE DEATH
BENEFIT OR OWNERSHIP OF ALL OR A PORTION OF THE INSURANCE POLICY 1,565
OR CERTIFICATE TO THE VIATICAL SETTLEMENT PROVIDER; 1,566
(2) A CONTRACT FOR A LOAN OR ANY OTHER FINANCIAL 1,568
TRANSACTION SECURED PRIMARILY BY AN INDIVIDUAL OR GROUP LIFE 1,569
INSURANCE POLICY OR CERTIFICATE, OTHER THAN A LOAN BY A LIFE 1,571
INSURANCE COMPANY PURSUANT TO THE TERMS OF THE LIFE INSURANCE 1,572
CONTRACT OR A LOAN SECURED BY THE CASH VALUE OF A POLICY OR
CERTIFICATE. 1,573
(E)(1) "VIATICAL SETTLEMENT PROVIDER" MEANS EITHER OF THE 1,575
FOLLOWING: 1,576
(a) A PERSON, OTHER THAN A VIATOR, THAT ENTERS INTO A 1,578
VIATICAL SETTLEMENT CONTRACT; 1,579
(b) A PERSON THAT OBTAINS FINANCING FROM A FINANCING 1,581
ENTITY FOR THE PURCHASE, ACQUISITION, TRANSFER, OR OTHER 1,582
ASSIGNMENT OF ONE OR MORE VIATICAL SETTLEMENT CONTRACTS, 1,583
VIATICATED POLICIES, OR INTERESTS THEREIN, OR THAT OTHERWISE 1,584
SELLS, ASSIGNS, TRANSFERS, PLEDGES, HYPOTHECATES, OR OTHERWISE
DISPOSES OF ONE OR MORE VIATICAL SETTLEMENT CONTRACTS, VIATICATED 1,585
POLICIES, OR INTERESTS THEREIN. 1,586
(2) "VIATICAL SETTLEMENT PROVIDER" DOES NOT INCLUDE ANY OF 1,588
THE FOLLOWING:
38
(a) A BANK, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, 1,590
CREDIT UNION, OR OTHER FINANCIAL INSTITUTION THAT TAKES AN 1,591
ASSIGNMENT OF A LIFE INSURANCE POLICY OR CERTIFICATE AS 1,592
COLLATERAL FOR A LOAN;
(b) THE ISSUER OF A LIFE INSURANCE POLICY OR CERTIFICATE 1,594
PROVIDING ACCELERATED BENEFITS AS DEFINED IN SECTION 3915.21 OF 1,596
THE REVISED CODE;
(c) AN INDIVIDUAL WHO ENTERS INTO NOT MORE THAN ONE 1,598
AGREEMENT IN ANY CALENDAR YEAR FOR THE TRANSFER OF LIFE INSURANCE 1,599
POLICIES OR CERTIFICATES FOR ANY VALUE LESS THAN THE EXPECTED 1,601
DEATH BENEFIT.
(F) "VIATICAL SETTLEMENT REPRESENTATIVE" MEANS AN 1,603
APPOINTED AGENT OF A LICENSED VIATICAL SETTLEMENT PROVIDER OR 1,604
VIATICAL SETTLEMENT BROKER, AS APPLICABLE, THAT ACTS OR AIDS IN 1,605
ANY MANNER IN THE SOLICITATION OF A VIATICAL SETTLEMENT. 1,606
"VIATICAL SETTLEMENT REPRESENTATIVE" DOES NOT INCLUDE ANY OF THE
FOLLOWING: 1,607
(1) AN ATTORNEY, A CERTIFIED PUBLIC ACCOUNTANT, A 1,609
FINANCIAL PLANNER, OR ANY OTHER PERSON EXERCISING A POWER OF 1,611
ATTORNEY GRANTED BY A VIATOR;
(2) ANY PERSON THAT IS RETAINED TO REPRESENT A VIATOR AND 1,613
WHOSE COMPENSATION IS PAID BY OR AT THE DIRECTION OF THE VIATOR, 1,614
REGARDLESS OF WHETHER THE VIATICAL SETTLEMENT IS CONSUMMATED. 1,615
(G) "VIATICATED POLICY" MEANS A LIFE INSURANCE POLICY OR 1,617
CERTIFICATE THAT HAS BEEN ACQUIRED BY A VIATICAL SETTLEMENT 1,618
PROVIDER, OR BY A PERSON DESIGNATED BY THE VIATICAL SETTLEMENT 1,619
PROVIDER, PURSUANT TO A VIATICAL SETTLEMENT CONTRACT. 1,620
(H) "VIATOR" MEANS THE OWNER OF A LIFE INSURANCE POLICY OR 1,622
A CERTIFICATE HOLDER UNDER A GROUP POLICY INSURING THE LIFE OF AN 1,623
INDIVIDUAL WITH A TERMINAL OR CHRONIC ILLNESS OR CONDITION, WHO 1,624
ENTERS OR SEEKS TO ENTER INTO A VIATICAL SETTLEMENT CONTRACT. 1,625
Sec. 3916.02. NO PERSON SHALL ACT AS A VIATICAL SETTLEMENT 1,627
PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR VIATICAL 1,628
SETTLEMENT BROKER WITHOUT FIRST HAVING OBTAINED A LICENSE FROM 1,630
39
THE SUPERINTENDENT OF INSURANCE.
Sec. 3916.03. (A) AN APPLICANT FOR A LICENSE AS A 1,632
VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, 1,633
OR VIATICAL SETTLEMENT BROKER SHALL SUBMIT AN APPLICATION FOR THE 1,635
LICENSE IN A MANNER PRESCRIBED BY THE SUPERINTENDENT OF 1,636
INSURANCE. THE APPLICATION SHALL BE ACCOMPANIED BY A FEE
ESTABLISHED BY THE SUPERINTENDENT BY RULE ADOPTED IN ACCORDANCE 1,637
WITH CHAPTER 119. OF THE REVISED CODE. 1,638
(B) THE SUPERINTENDENT SHALL ISSUE TO AN APPLICANT A 1,640
LICENSE THAT STATES IN SUBSTANCE THAT THE PERSON IS AUTHORIZED TO 1,641
ACT AS A VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT 1,642
REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER, AS APPLICABLE, IF 1,643
BOTH OF THE FOLLOWING APPLY:
(1) THE APPLICANT PROVIDES A DETAILED PLAN OF OPERATION 1,645
AND, IF THE APPLICANT IS A LEGAL ENTITY, A CERTIFICATE OF GOOD 1,646
STANDING FROM THE SECRETARY OF STATE OR OTHER PROOF SATISFACTORY 1,647
TO THE SUPERINTENDENT.
(2) THE SUPERINTENDENT FINDS ALL OF THE FOLLOWING: 1,649
(a) THE APPLICANT IS COMPETENT AND TRUSTWORTHY AND INTENDS 1,651
TO ACT IN GOOD FAITH IN THE CAPACITY OF A VIATICAL SETTLEMENT 1,652
PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR VIATICAL 1,653
SETTLEMENT BROKER, AS APPLICABLE.
(b) THE APPLICANT HAS A GOOD BUSINESS REPUTATION AND HAS 1,655
HAD EXPERIENCE, TRAINING, OR EDUCATION SO AS TO BE QUALIFIED TO 1,656
ACT IN THE CAPACITY OF A VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,657
SETTLEMENT REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER, AS 1,658
APPLICABLE.
(C) AN APPLICANT SHALL PROVIDE ALL INFORMATION REQUESTED 1,660
BY THE SUPERINTENDENT. THE SUPERINTENDENT MAY, AT ANY TIME, 1,661
REQUIRE AN APPLICANT TO FULLY DISCLOSE THE IDENTITY OF ALL 1,662
STOCKHOLDERS, PARTNERS, OFFICERS, MEMBERS, AND EMPLOYEES, AND 1,663
MAY, IN THE EXERCISE OF THE SUPERINTENDENT'S DISCRETION, REFUSE 1,664
TO ISSUE A LICENSE TO A LEGAL ENTITY IF THE SUPERINTENDENT IS NOT
SATISFIED THAT EACH OFFICER, EMPLOYEE, STOCKHOLDER, PARTNER, OR 1,665
40
MEMBER WHO MAY MATERIALLY INFLUENCE THE APPLICANT'S CONDUCT MEETS 1,666
THE STANDARDS SET FORTH IN THIS CHAPTER. 1,667
(D) A LICENSE ISSUED TO A LEGAL ENTITY DOES NOT AUTHORIZE 1,669
ANY MEMBER, OFFICER, OR EMPLOYEE TO ACT AS A VIATICAL SETTLEMENT 1,670
PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR VIATICAL 1,671
SETTLEMENT BROKER, AS APPLICABLE, UNDER THE LICENSE. EACH 1,672
MEMBER, OFFICER, AND EMPLOYEE INVOLVED IN A VIATICAL SETTLEMENT 1,673
TRANSACTION SHALL BE LICENSED UNDER THIS CHAPTER, UNLESS THEY 1,674
PERFORM ONLY CLERICAL OR MINISTERIAL DUTIES.
(E) A LICENSE AS A VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,676
SETTLEMENT REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER MAY, IN 1,677
THE DISCRETION OF THE SUPERINTENDENT AND THE PAYMENT OF A RENEWAL 1,678
FEE ESTABLISHED BY THE SUPERINTENDENT BY RULE ADOPTED IN 1,679
ACCORDANCE WITH CHAPTER 119. OF THE REVISED CODE, BE CONTINUED 1,680
PAST THE LAST DAY OF FEBRUARY NEXT AFTER ITS ISSUE AND AFTER THE 1,681
LAST DAY OF FEBRUARY IN EACH SUCCEEDING YEAR. FAILURE TO PAY THE 1,682
RENEWAL FEE BY THE REQUIRED DATE RESULTS IN THE EXPIRATION OF THE
LICENSE. 1,683
(F) THE SUPERINTENDENT SHALL NOT ISSUE A LICENSE TO A 1,685
NONRESIDENT APPLICANT, UNLESS A WRITTEN DESIGNATION OF AN AGENT 1,686
FOR SERVICE OF PROCESS IS FILED AND MAINTAINED WITH THE 1,687
SUPERINTENDENT.
(G) ANY FEE COLLECTED UNDER THIS SECTION SHALL BE PAID 1,689
INTO THE STATE TREASURY TO THE CREDIT OF THE DEPARTMENT OF 1,690
INSURANCE OPERATING FUND CREATED BY SECTION 3901.021 OF THE 1,691
REVISED CODE.
Sec. 3916.05. (A) A VIATICAL SETTLEMENT REPRESENTATIVE 1,693
SHALL NOT SOLICIT A VIATICAL SETTLEMENT CONTRACT WITHOUT FIRST 1,694
OBTAINING AN APPOINTMENT FROM A VIATICAL SETTLEMENT PROVIDER OR 1,695
VIATICAL SETTLEMENT BROKER.
(B) A VIATICAL SETTLEMENT REPRESENTATIVE SHALL NOT 1,697
REPRESENT BOTH THE VIATICAL SETTLEMENT PROVIDER AND THE VIATICAL 1,698
SETTLEMENT BROKER WITH RESPECT TO THE SAME VIATOR. 1,699
Sec. 3916.07. (A) IF A VIATICAL SETTLEMENT PROVIDER, 1,701
41
VIATICAL SETTLEMENT BROKER, OR VIATICAL SETTLEMENT REPRESENTATIVE 1,702
SUSPECTS ANOTHER VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,703
SETTLEMENT BROKER, OR VIATICAL SETTLEMENT REPRESENTATIVE OF 1,704
FRAUD, FORGERY, MISREPRESENTATION, THEFT, CONVERSION, ANY OTHER 1,705
CULPABLE MISAPPROPRIATION, OR ANY VIOLATION OF TITLE XXXIX OF THE 1,706
REVISED CODE, THE VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,709
SETTLEMENT BROKER, OR VIATICAL SETTLEMENT REPRESENTATIVE PROMPTLY 1,710
SHALL NOTIFY THE SUPERINTENDENT OF INSURANCE OF THE SUSPICION. 1,711
THE NOTICE SHALL INCLUDE A COMPLETE STATEMENT OF THE FACTS AND 1,712
THE REASONS THAT GAVE RISE TO THE SUSPICION. 1,713
(B) IN THE ABSENCE OF FRAUD OR BAD FAITH, A VIATICAL 1,715
SETTLEMENT PROVIDER, VIATICAL SETTLEMENT BROKER, OR VIATICAL 1,716
SETTLEMENT REPRESENTATIVE IS IMMUNE FROM ANY CIVIL LIABILITY THAT 1,717
OTHERWISE MIGHT BE IMPOSED AS A RESULT OF ANY ACTION TAKEN BY THE 1,718
VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT BROKER, OR 1,719
VIATICAL SETTLEMENT REPRESENTATIVE TO COMPLY WITH DIVISION (A) OF 1,720
THIS SECTION.
Sec. 3916.08. IRRESPECTIVE OF THE MANNER IN WHICH THE 1,722
VIATICAL SETTLEMENT BROKER IS COMPENSATED, A VIATICAL SETTLEMENT 1,723
BROKER IS DEEMED TO REPRESENT ONLY THE VIATOR AND OWES A 1,724
FIDUCIARY DUTY TO THE VIATOR TO ACT ACCORDING TO THE VIATOR'S 1,725
INSTRUCTIONS AND IN THE BEST INTEREST OF THE VIATOR.
Sec. 3916.10. (A) A PERSON SHALL NOT USE A VIATICAL 1,727
SETTLEMENT CONTRACT FORM OR PROVIDE A DISCLOSURE STATEMENT FORM 1,728
TO A VIATOR IN THIS STATE UNLESS THE VIATICAL SETTLEMENT CONTRACT 1,729
FORM OR THE DISCLOSURE STATEMENT FORM IS FILED WITH AND APPROVED 1,730
BY THE SUPERINTENDENT OF INSURANCE. THE SUPERINTENDENT SHALL 1,732
DISAPPROVE A VIATICAL SETTLEMENT CONTRACT FORM OR A DISCLOSURE 1,733
STATEMENT FORM IF, IN THE SUPERINTENDENT'S OPINION, THE VIATICAL 1,734
SETTLEMENT CONTRACT FORM, THE DISCLOSURE STATEMENT FORM, OR ANY 1,735
PROVISION CONTAINED THEREIN IS UNREASONABLE, CONTRARY TO THE 1,736
INTERESTS OF THE PUBLIC, OR OTHERWISE MISLEADING OR UNFAIR TO THE 1,737
VIATOR.
(B) THE SUPERINTENDENT MAY ADOPT RULES IN ACCORDANCE WITH 1,739
42
CHAPTER 119. OF THE REVISED CODE TO ESTABLISH REASONABLE FEES FOR 1,740
ANY SERVICE OR TRANSACTION PERFORMED BY THE DEPARTMENT OF 1,741
INSURANCE PURSUANT TO DIVISION (A) OF THIS SECTION. ANY FEE 1,742
COLLECTED PURSUANT TO THOSE RULES SHALL BE PAID INTO THE STATE 1,743
TREASURY TO THE CREDIT OF THE DEPARTMENT OF INSURANCE OPERATING 1,744
FUND CREATED BY SECTION 3901.021 OF THE REVISED CODE.
Sec. 3916.12. (A) A VIATICAL SETTLEMENT PROVIDER, 1,746
VIATICAL SETTLEMENT REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER 1,747
SHALL DISCLOSE THE FOLLOWING TO A VIATOR NO LATER THAN THE TIME 1,748
OF APPLICATION:
(1) POSSIBLE ALTERNATIVES TO VIATICAL SETTLEMENT CONTRACTS 1,750
FOR INDIVIDUALS WITH CATASTROPHIC, LIFE-THREATENING, OR CHRONIC 1,751
ILLNESSES, INCLUDING ANY ACCELERATED DEATH BENEFITS OFFERED UNDER 1,752
THE VIATOR'S LIFE INSURANCE POLICY OR CERTIFICATE; 1,753
(2) THAT SOME OR ALL OF THE PROCEEDS OF THE VIATICAL 1,755
SETTLEMENT MAY BE SUBJECT TO FEDERAL INCOME TAXATION AND STATE 1,756
FRANCHISE AND INCOME TAXATION, AND THAT ASSISTANCE SHOULD BE 1,757
SOUGHT FROM A PROFESSIONAL TAX ADVISOR;
(3) THAT THE PROCEEDS OF THE VIATICAL SETTLEMENT COULD BE 1,759
SUBJECT TO THE CLAIMS OF CREDITORS; 1,760
(4) THAT RECEIPT OF THE PROCEEDS OF THE VIATICAL 1,762
SETTLEMENT MAY ADVERSELY AFFECT THE VIATOR'S ELIGIBILITY FOR 1,763
MEDICAL ASSISTANCE UNDER CHAPTER 5111. OF THE REVISED CODE OR 1,764
OTHER GOVERNMENT BENEFITS OR ENTITLEMENTS, AND THAT ADVICE SHOULD 1,765
BE OBTAINED FROM THE APPROPRIATE GOVERNMENT AGENCIES;
(5) THAT THE VIATOR HAS A RIGHT TO RESCIND THE VIATICAL 1,767
SETTLEMENT CONTRACT FOR AT LEAST FIFTEEN DAYS AFTER THE VIATOR 1,768
RECEIVES THE VIATICAL SETTLEMENT PROCEEDS; 1,769
(6) THAT FUNDS WILL BE SENT TO THE VIATOR WITHIN TWO 1,771
BUSINESS DAYS AFTER THE VIATICAL SETTLEMENT PROVIDER HAS RECEIVED 1,772
ACKNOWLEDGMENT FROM THE INSURER OR GROUP ADMINISTRATOR THAT 1,773
OWNERSHIP OF THE POLICY OR INTEREST IN THE CERTIFICATE HAS BEEN 1,774
TRANSFERRED AND THAT THE BENEFICIARY HAS BEEN DESIGNATED PURSUANT 1,775
TO THE VIATICAL SETTLEMENT CONTRACT;
43
(7) THAT ENTERING INTO A VIATICAL SETTLEMENT CONTRACT MAY 1,777
CAUSE OTHER RIGHTS OR BENEFITS, INCLUDING CONVERSION RIGHTS AND 1,778
WAIVER OF PREMIUM BENEFITS THAT MAY EXIST UNDER THE POLICY OR 1,779
CERTIFICATE, TO BE FORFEITED BY THE VIATOR AND THAT ASSISTANCE 1,780
SHOULD BE SOUGHT FROM A FINANCIAL ADVISOR.
(B) A VIATICAL SETTLEMENT PROVIDER SHALL DISCLOSE THE 1,782
FOLLOWING TO A VIATOR PRIOR TO THE DATE THE VIATICAL SETTLEMENT 1,783
CONTRACT IS SIGNED BY ALL THE NECESSARY PARTIES: 1,784
(1) THE AFFILIATION, IF ANY, BETWEEN THE VIATICAL 1,786
SETTLEMENT PROVIDER AND THE ISSUER OF THE INSURANCE POLICY OR 1,787
CERTIFICATE TO BE VIATICATED;
(2) IF AN INSURANCE POLICY OR CERTIFICATE TO BE VIATICATED 1,789
HAS BEEN ISSUED AS A JOINT POLICY OR CERTIFICATE OR INVOLVES 1,791
FAMILY RIDERS OR ANY COVERAGE OF A LIFE OTHER THAN THE INSURED, 1,793
THE POSSIBLE LOSS OF COVERAGE ON THE OTHER LIVES AND THAT ADVICE
SHOULD BE SOUGHT FROM THE VIATOR'S INSURANCE PRODUCER OR THE 1,794
COMPANY ISSUING THE POLICY OR CERTIFICATE; 1,795
(3) THE DOLLAR AMOUNT OF THE CURRENT DEATH BENEFIT PAYABLE 1,797
TO THE VIATICAL SETTLEMENT PROVIDER UNDER THE POLICY OR 1,798
CERTIFICATE, ALONG WITH THE AVAILABILITY OF ANY ADDITIONAL 1,799
GUARANTEED INSURANCE BENEFITS, THE DOLLAR AMOUNT OF ANY 1,800
ACCIDENTAL DEATH AND DISMEMBERMENT BENEFITS UNDER THE POLICY OR
CERTIFICATE, AND THE VIATICAL SETTLEMENT PROVIDER'S INTEREST IN 1,801
THOSE BENEFITS. 1,802
Sec. 3916.13. A VIATICAL SETTLEMENT PROVIDER ENTERING INTO 1,804
A VIATICAL SETTLEMENT CONTRACT SHALL FIRST OBTAIN ALL OF THE 1,805
FOLLOWING:
(A) IF THE VIATOR IS THE INSURED, A WRITTEN STATEMENT FROM 1,807
AN ATTENDING PHYSICIAN THAT THE VIATOR IS OF SOUND MIND AND UNDER 1,808
NO CONSTRAINT OR UNDUE INFLUENCE TO ENTER INTO A VIATICAL 1,809
SETTLEMENT CONTRACT. AS USED IN THIS DIVISION, "PHYSICIAN" MEANS 1,810
A PERSON AUTHORIZED UNDER CHAPTER 4731. OF THE REVISED CODE TO 1,811
PRACTICE MEDICINE AND SURGERY OR OSTEOPATHIC MEDICINE AND
SURGERY. 1,812
44
(B) A WITNESSED DOCUMENT IN WHICH THE VIATOR, IN WRITING, 1,814
CONSENTS TO THE VIATICAL SETTLEMENT CONTRACT, ACKNOWLEDGES THAT 1,815
THE INSURED HAS A TERMINAL OR CHRONIC ILLNESS OR CONDITION, 1,816
REPRESENTS THAT THE VIATOR HAS A FULL AND COMPLETE UNDERSTANDING 1,817
OF THE VIATICAL SETTLEMENT CONTRACT AND OF THE BENEFITS OF THE 1,818
LIFE INSURANCE POLICY OR CERTIFICATE, AND ACKNOWLEDGES THAT THE 1,819
VIATOR HAS ENTERED INTO THE VIATICAL SETTLEMENT CONTRACT FREELY 1,820
AND VOLUNTARILY;
(C) A DOCUMENT IN WHICH THE INSURED CONSENTS IN WRITING TO 1,822
THE RELEASE OF THE INSURED'S MEDICAL RECORDS TO A VIATICAL 1,823
SETTLEMENT PROVIDER OR VIATICAL SETTLEMENT BROKER. 1,824
Sec. 3916.15. EACH VIATICAL SETTLEMENT CONTRACT ENTERED 1,826
INTO IN THIS STATE SHALL PROVIDE THE VIATOR WITH AN UNCONDITIONAL 1,827
RIGHT TO RESCIND THE CONTRACT FOR AT LEAST FIFTEEN DAYS AFTER THE 1,828
RECEIPT OF THE VIATICAL SETTLEMENT PROCEEDS. IF THE INSURED DIES 1,829
DURING THE RESCISSION PERIOD, THE VIATICAL SETTLEMENT CONTRACT IS 1,830
DEEMED TO HAVE BEEN RESCINDED, SUBJECT TO REPAYMENT OF ALL 1,831
VIATICAL SETTLEMENT PROCEEDS TO THE VIATICAL SETTLEMENT PROVIDER.
IF A VIATICAL SETTLEMENT CONTRACT IS RESCINDED BY THE VIATOR 1,833
PURSUANT TO THIS SECTION, OWNERSHIP OF THE INSURANCE POLICY OR 1,834
CERTIFICATE REVERTS TO THE VIATOR OR TO THE VIATOR'S ESTATE IF 1,835
THE VIATOR IS DECEASED, IRRESPECTIVE OF ANY TRANSFER OF OWNERSHIP 1,836
OF THE POLICY OR CERTIFICATE BY THE VIATOR, VIATICAL SETTLEMENT 1,837
PROVIDER, OR ANY OTHER PERSON. 1,838
Sec. 3916.17. (A) A VIATICAL SETTLEMENT PROVIDER, 1,840
IMMEDIATELY UPON RECEIPT OF DOCUMENTS TO EFFECT THE TRANSFER OF 1,841
THE INSURANCE POLICY OR CERTIFICATE, SHALL PAY THE PROCEEDS OF 1,843
THE VIATICAL SETTLEMENT TO AN ESCROW OR TRUST ACCOUNT IN A STATE 1,844
OR FEDERALLY CHARTERED FINANCIAL INSTITUTION WHOSE DEPOSITS ARE 1,845
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION. THE
ACCOUNT SHALL BE MANAGED BY A TRUSTEE OR ESCROW AGENT INDEPENDENT 1,846
OF THE PARTIES TO THE CONTRACT. THE TRUSTEE OR ESCROW AGENT 1,847
SHALL TRANSFER THE PROCEEDS TO THE VIATOR IMMEDIATELY UPON THE 1,848
VIATICAL SETTLEMENT PROVIDER'S RECEIPT OF ACKNOWLEDGMENT OF THE 1,849
45
TRANSFER OF THE INSURANCE POLICY OR CERTIFICATE.
(B) FAILURE TO TRANSFER THE PROCEEDS TO THE VIATOR WITHIN 1,851
TWO BUSINESS DAYS AFTER THE VIATICAL SETTLEMENT PROVIDER RECEIVES 1,852
ACKNOWLEDGMENT OF THE TRANSFER OF THE INSURANCE POLICY OR 1,853
CERTIFICATE RENDERS THE VIATICAL SETTLEMENT CONTRACT VOIDABLE BY 1,855
THE VIATOR FOR LACK OF CONSIDERATION UNTIL THE TIME CONSIDERATION 1,856
IS TENDERED TO AND ACCEPTED BY THE VIATOR. IF A VIATICAL 1,857
SETTLEMENT CONTRACT IS VOIDED BY THE VIATOR PURSUANT TO THIS 1,858
DIVISION, OWNERSHIP OF THE INSURANCE POLICY OR CERTIFICATE 1,859
REVERTS TO THE VIATOR OR TO THE VIATOR'S ESTATE IF THE VIATOR IS 1,860
DECEASED, IRRESPECTIVE OF ANY TRANSFER OF OWNERSHIP OF THE POLICY 1,861
OR CERTIFICATE BY THE VIATOR, VIATICAL SETTLEMENT PROVIDER, OR 1,862
ANY OTHER PERSON.
Sec. 3916.19. AFTER A VIATICAL SETTLEMENT HAS OCCURRED, 1,864
THE VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT 1,865
REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER SHALL NOT CONTACT 1,866
THE INSURED FOR THE PURPOSE OF DETERMINING THE INSURED'S HEALTH 1,867
STATUS MORE THAN ONCE EVERY THREE MONTHS IF THE INSURED HAS A 1,868
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. 1,869
THE VIATICAL SETTLEMENT PROVIDER OR VIATICAL SETTLEMENT BROKER 1,870
SHALL EXPLAIN THE PROCEDURE FOR MAKING THESE CONTACTS AT THE TIME 1,871
THE VIATICAL SETTLEMENT CONTRACT IS ENTERED INTO. 1,872
THE LIMITATIONS SET FORTH IN THIS SECTION DO NOT APPLY TO 1,874
CONTACTS MADE WITH AN INSURED UNDER A VIATICATED POLICY FOR 1,875
PURPOSES OTHER THAN TO DETERMINE THE INSURED'S HEALTH STATUS. 1,876
Sec. 3916.21. (A) EACH VIATICAL SETTLEMENT PROVIDER SHALL 1,878
MAINTAIN RECORDS OF ALL TRANSACTIONS OF VIATICAL SETTLEMENT 1,879
CONTRACTS, INCLUDING THE NAME, INDIVIDUAL IDENTIFICATION, AND 1,880
MEDICAL RECORD OF THE VIATOR. SUCH RECORDS SHALL BE MADE 1,881
AVAILABLE TO THE SUPERINTENDENT OF INSURANCE FOR INSPECTION 1,882
DURING REASONABLE BUSINESS HOURS.
(B) A VIATICAL SETTLEMENT PROVIDER SHALL MAINTAIN THE 1,884
RECORD OF A VIATICAL SETTLEMENT FOR AT LEAST FIVE YEARS AFTER THE 1,885
46
DEATH OF THE INSURED.
Sec. 3916.22. EACH VIATICAL SETTLEMENT PROVIDER, VIATICAL 1,887
SETTLEMENT REPRESENTATIVE, AND VIATICAL SETTLEMENT BROKER 1,888
LICENSED UNDER THIS CHAPTER SHALL FILE WITH THE SUPERINTENDENT OF 1,889
INSURANCE, ON OR BEFORE THE FIRST DAY OF MARCH, AN ANNUAL 1,890
STATEMENT CONTAINING THE INFORMATION REQUIRED BY THE
SUPERINTENDENT BY RULE ADOPTED IN ACCORDANCE WITH CHAPTER 119. OF 1,891
THE REVISED CODE.
Sec. 3916.24. EXCEPT AS OTHERWISE PERMITTED OR REQUIRED BY 1,893
LAW, A VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT 1,894
REPRESENTATIVE, VIATICAL SETTLEMENT BROKER, INSURANCE COMPANY, 1,895
INSURANCE AGENT, INSURANCE BROKER, INFORMATION BUREAU, RATING 1,896
AGENCY OR COMPANY, OR ANY OTHER PERSON WITH ACTUAL KNOWLEDGE OF A 1,897
VIATOR'S IDENTITY, SHALL NOT DISCLOSE THAT IDENTITY AS A VIATOR,
INCLUDING THE VIATOR'S NAME, INDIVIDUAL IDENTIFICATION DATA, OR 1,898
MEDICAL RECORD, UNLESS ANY OF THE FOLLOWING APPLY: 1,899
(A) THE DISCLOSURE IS NECESSARY TO EFFECT A VIATICAL 1,901
SETTLEMENT BETWEEN THE VIATOR AND A VIATICAL SETTLEMENT PROVIDER, 1,902
AND THE VIATOR HAS PROVIDED PRIOR WRITTEN CONSENT TO THE 1,903
DISCLOSURE.
(B) THE DISCLOSURE IS PROVIDED IN RESPONSE TO AN 1,905
INVESTIGATION OR EXAMINATION BY THE SUPERINTENDENT OF INSURANCE 1,906
OR BY ANY OTHER GOVERNMENTAL OFFICER OR AGENCY. 1,907
(C) THE DISCLOSURE IS A TERM OF, OR CONDITION TO, THE 1,909
TRANSFER OF A VIATICATED POLICY BY ONE VIATICAL SETTLEMENT 1,910
PROVIDER TO ANOTHER VIATICAL SETTLEMENT PROVIDER. 1,911
Sec. 3916.26. (A) THE SUPERINTENDENT OF INSURANCE, OR ANY 1,913
PERSON APPOINTED BY THE SUPERINTENDENT, MAY EXAMINE, WHENEVER THE 1,914
SUPERINTENDENT CONSIDERS IT REASONABLY NECESSARY TO PROTECT THE 1,915
INTERESTS OF THE PUBLIC, THE BUSINESS AND AFFAIRS OF ANY VIATICAL 1,916
SETTLEMENT PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR 1,917
VIATICAL SETTLEMENT BROKER LICENSED UNDER THIS CHAPTER, OR ANY 1,918
APPLICANT FOR A LICENSE. THE SUPERINTENDENT MAY ORDER ANY
LICENSEE OR APPLICANT TO PRODUCE ANY RECORD, BOOK, FILE, OR OTHER 1,919
47
INFORMATION REASONABLY NECESSARY TO ASCERTAIN WHETHER THE 1,920
LICENSEE OR APPLICANT IS ACTING OR HAS ACTED IN VIOLATION OF THE 1,921
LAW OR IN A MANNER OTHERWISE CONTRARY TO THE INTERESTS OF THE 1,922
PUBLIC.
(B) THE LICENSEE OR APPLICANT SHALL PAY TO THE 1,924
SUPERINTENDENT ALL COSTS, ASSESSMENTS, FORFEITURES, OR FINES 1,925
INCURRED IN CONDUCTING AN EXAMINATION UNDER THIS SECTION. THE 1,926
SUPERINTENDENT SHALL DEPOSIT THE MONEY INTO THE STATE TREASURY TO 1,928
THE CREDIT OF THE DEPARTMENT OF INSURANCE OPERATING FUND CREATED
BY SECTION 3901.021 OF THE REVISED CODE. 1,929
(C) THE WORK PAPERS OF THE SUPERINTENDENT, OR OF ANY 1,931
PERSON APPOINTED BY THE SUPERINTENDENT, RESULTING FROM THE 1,932
CONDUCT OF AN EXAMINATION MADE UNDER THIS SECTION, ARE 1,933
CONFIDENTIAL AND ARE NOT A PUBLIC RECORD AS DEFINED IN SECTION 1,934
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 1,935
PUBLIC BY THE SUPERINTENDENT OR ANY OTHER PERSON. HOWEVER, THE 1,936
ORIGINAL WORK PAPERS AND ANY COPIES OF THEM MAY BE RELEASED BY 1,937
THE SUPERINTENDENT TO THE INSURANCE REGULATORY AUTHORITY OF ANY 1,938
OTHER STATE IF THAT AUTHORITY AGREES TO MAINTAIN THE 1,939
CONFIDENTIALITY OF THE WORK PAPERS OR COPIES AND IF THE WORK
PAPERS AND COPIES ARE NOT PUBLIC RECORDS UNDER THE LAWS OF THAT 1,940
STATE.
(D) ANY NAME, INDIVIDUAL IDENTIFICATION DATA, OR MEDICAL 1,942
RECORD OF A VIATOR THAT IS OBTAINED BY OR DISCLOSED TO THE 1,943
SUPERINTENDENT OR ANY OTHER PERSON IN THE COURSE OF AN 1,944
EXAMINATION MADE UNDER THIS SECTION IS CONFIDENTIAL AND IS NOT A 1,945
PUBLIC RECORD AS DEFINED IN SECTION 149.43 OF THE REVISED CODE.
THE SUPERINTENDENT OR OTHER PERSON SHALL NOT DISCLOSE SUCH 1,946
INFORMATION, EXCEPT IN THE FURTHERANCE OF THE SUPERINTENDENT'S 1,947
OFFICIAL DUTIES, OR TO ANOTHER REGULATOR OR A LAW ENFORCEMENT 1,948
AGENCY.
Sec. 3916.28. (A) THE SUPERINTENDENT OF INSURANCE MAY 1,950
SUSPEND, REVOKE, OR REFUSE TO RENEW THE LICENSE OF A VIATICAL 1,951
48
SETTLEMENT PROVIDER, VIATICAL SETTLEMENT REPRESENTATIVE, OR 1,952
VIATICAL SETTLEMENT BROKER, IF THE SUPERINTENDENT FINDS THAT ANY 1,953
OF THE FOLLOWING APPLY:
(1) THERE WAS A MATERIAL MISREPRESENTATION IN THE 1,955
APPLICATION FOR THE LICENSE. 1,956
(2) THE LICENSEE OR ANY OFFICER, PARTNER, MEMBER, OR KEY 1,958
MANAGEMENT PERSONNEL HAS BEEN CONVICTED OF FRAUDULENT OR 1,959
DISHONEST PRACTICES, IS SUBJECT TO A FINAL ADMINISTRATIVE ACTION 1,960
IN ANOTHER STATE, OR IS OTHERWISE SHOWN TO BE UNTRUSTWORTHY OR 1,961
INCOMPETENT.
(3) THE VIATICAL SETTLEMENT PROVIDER MADE AN UNREASONABLE 1,963
PAYMENT TO A VIATOR. 1,964
(4) THE LICENSEE HAS BEEN CONVICTED OF OR HAS PLEADED 1,966
GUILTY OR NO CONTEST TO A FELONY, A CRIME INVOLVING MORAL 1,967
TURPITUDE, OR A MISDEMEANOR INVOLVING FRAUD. 1,968
(5) THE VIATICAL SETTLEMENT PROVIDER HAS USED A VIATICAL 1,970
SETTLEMENT CONTRACT FORM THAT HAS NOT BEEN APPROVED UNDER THIS 1,971
CHAPTER.
(6) THE VIATICAL SETTLEMENT PROVIDER HAS FAILED TO HONOR 1,973
CONTRACTUAL OBLIGATIONS SET OUT IN A VIATICAL SETTLEMENT 1,974
CONTRACT.
(7) THE LICENSEE NO LONGER MEETS THE REQUIREMENTS FOR 1,976
INITIAL LICENSURE.
(8) THE VIATICAL SETTLEMENT PROVIDER HAS ASSIGNED, 1,978
TRANSFERRED, OR PLEDGED A VIATICATED POLICY TO A PERSON THAT IS 1,979
NOT A VIATICAL SETTLEMENT PROVIDER LICENSED IN THIS STATE OR A 1,980
FINANCING ENTITY.
(9) THE LICENSEE HAS VIOLATED ANY PROVISION OF THIS 1,982
CHAPTER OR ANY RULE ADOPTED UNDER THIS CHAPTER. 1,983
(10) THE LICENSEE HAS COMMITTED ANY COERCIVE, FRAUDULENT, 1,985
OR DISHONEST ACT, OR MADE ANY UNTRUE, DECEPTIVE, OR MISLEADING 1,986
STATEMENT, IN CONNECTION WITH A VIATICAL TRANSACTION OR A 1,987
PROPOSED VIATICAL TRANSACTION.
(B) BEFORE THE SUPERINTENDENT REFUSES TO ISSUE A LICENSE 1,989
49
UNDER THIS CHAPTER, OR SUSPENDS, REVOKES, OR REFUSES TO RENEW THE 1,990
LICENSE OF A VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT 1,991
REPRESENTATIVE, OR VIATICAL SETTLEMENT BROKER, THE SUPERINTENDENT 1,992
SHALL PROVIDE THE LICENSEE OR APPLICANT WITH NOTICE AND AN 1,993
OPPORTUNITY FOR HEARING AS PROVIDED IN CHAPTER 119. OF THE 1,994
REVISED CODE, EXCEPT AS FOLLOWS:
(1)(a) ANY NOTICE OF OPPORTUNITY FOR HEARING, THE HEARING 1,996
OFFICER'S FINDINGS AND RECOMMENDATIONS, OR THE SUPERINTENDENT'S 1,997
ORDER SHALL BE SERVED BY CERTIFIED MAIL AT THE LAST KNOWN ADDRESS 1,998
OF THE LICENSEE OR APPLICANT. SERVICE SHALL BE EVIDENCED BY 1,999
RETURN RECEIPT SIGNED BY ANY PERSON.
FOR PURPOSES OF THIS SECTION, THE "LAST KNOWN ADDRESS" IS 2,001
THE ADDRESS THAT APPEARS IN THE LICENSING RECORDS OF THE 2,002
DEPARTMENT OF INSURANCE.
(b) IF THE CERTIFIED MAIL ENVELOPE IS RETURNED WITH AN 2,004
ENDORSEMENT SHOWING THAT SERVICE WAS REFUSED, OR THAT THE 2,005
ENVELOPE WAS UNCLAIMED, THE NOTICE AND ALL SUBSEQUENT NOTICES 2,006
REQUIRED BY CHAPTER 119. OF THE REVISED CODE MAY BE SERVED BY 2,007
ORDINARY MAIL TO THE LAST KNOWN ADDRESS OF THE LICENSEE OR 2,008
APPLICANT. THE MAILING SHALL BE EVIDENCED BY A CERTIFICATE OF
MAILING. SERVICE IS DEEMED COMPLETE AS OF THE DATE OF SUCH 2,009
CERTIFICATE PROVIDED THAT THE ORDINARY MAIL ENVELOPE IS NOT 2,010
RETURNED BY THE POSTAL AUTHORITIES WITH AN ENDORSEMENT SHOWING 2,011
FAILURE OF DELIVERY. THE TIME PERIOD IN WHICH TO REQUEST A 2,012
HEARING, AS PROVIDED IN CHAPTER 119. OF THE REVISED CODE, BEGINS 2,013
TO RUN ON THE DATE OF MAILING.
(c) IF SERVICE BY ORDINARY MAIL FAILS, THE SUPERINTENDENT 2,015
MAY CAUSE A SUMMARY OF THE SUBSTANTIVE PROVISIONS OF THE NOTICE 2,016
TO BE PUBLISHED ONCE A WEEK FOR THREE CONSECUTIVE WEEKS IN A 2,017
NEWSPAPER OF GENERAL CIRCULATION IN THE COUNTY WHERE THE LAST 2,018
KNOWN PLACE OF RESIDENCE OR BUSINESS OF THE LICENSEE OR APPLICANT 2,019
IS LOCATED. THE NOTICE IS CONSIDERED SERVED ON THE DATE OF THE 2,020
THIRD PUBLICATION. 2,021
(d) ANY NOTICE REQUIRED TO BE SERVED UNDER CHAPTER 119. OF 2,024
50
THE REVISED CODE SHALL ALSO BE SERVED UPON THE ATTORNEY OF THE
LICENSEE OR APPLICANT BY ORDINARY MAIL IF THE ATTORNEY HAS 2,026
ENTERED AN APPEARANCE IN THE MATTER.
(e) THE SUPERINTENDENT MAY, AT ANY TIME, PERFECT SERVICE 2,028
ON A LICENSEE OR APPLICANT BY PERSONAL DELIVERY OF THE NOTICE BY 2,029
AN EMPLOYEE OF THE DEPARTMENT. 2,030
(f) NOTICES REGARDING THE SCHEDULING OF HEARINGS AND ALL 2,032
OTHER MATTERS NOT DESCRIBED IN DIVISION (B)(1)(a) OF THIS SECTION 2,034
SHALL BE SENT BY ORDINARY MAIL TO THE LICENSEE OR APPLICANT AND
TO THE ATTORNEY OF THE LICENSEE OR APPLICANT. 2,035
(2) ANY SUBPOENA FOR THE APPEARANCE OF A WITNESS OR THE 2,037
PRODUCTION OF DOCUMENTS OR OTHER EVIDENCE AT A HEARING, OR FOR 2,038
THE PURPOSE OF TAKING TESTIMONY FOR USE AT A HEARING, SHALL BE 2,039
SERVED BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, BY AN 2,040
ATTORNEY OR BY AN EMPLOYEE OF THE DEPARTMENT DESIGNATED BY THE 2,041
SUPERINTENDENT. SUCH SUBPOENAS SHALL BE ENFORCED IN THE MANNER 2,042
PROVIDED IN SECTION 119.09 OF THE REVISED CODE. NOTHING IN THIS
SECTION SHALL BE CONSTRUED AS LIMITING THE SUPERINTENDENT'S OTHER 2,043
STATUTORY POWERS TO ISSUE SUBPOENAS. 2,044
Sec. 3916.30. (A) THE SUPERINTENDENT OF INSURANCE MAY 2,046
ADOPT RULES IN ACCORDANCE WITH CHAPTER 119. OF THE REVISED CODE 2,047
FOR PURPOSES OF IMPLEMENTING THIS CHAPTER, INCLUDING RULES 2,048
GOVERNING THE RELATIONSHIP AND RESPONSIBILITIES OF BOTH INSURERS 2,049
AND VIATICAL SETTLEMENT PROVIDERS, VIATICAL SETTLEMENT 2,050
REPRESENTATIVES, AND VIATICAL SETTLEMENT BROKERS DURING THE 2,052
VIATICATION OF A LIFE INSURANCE POLICY OR CERTIFICATE.
(B) THE SUPERINTENDENT MAY ALSO DO THE FOLLOWING: 2,054
(1) ESTABLISH STANDARDS FOR EVALUATING THE REASONABLENESS 2,056
OF PAYMENTS UNDER VIATICAL SETTLEMENT CONTRACTS. THIS AUTHORITY 2,058
INCLUDES, BUT IS NOT LIMITED TO, THE REGULATION OF DISCOUNT RATES 2,060
USED TO DETERMINE THE AMOUNT PAID IN EXCHANGE FOR THE ASSIGNMENT, 2,061
TRANSFER, SALE, DEVISE, OR BEQUEST OF A BENEFIT UNDER A LIFE 2,062
INSURANCE POLICY OR CERTIFICATE.
(2) ESTABLISH APPROPRIATE LICENSING REQUIREMENTS AND 2,064
51
STANDARDS FOR CONTINUED LICENSURE FOR VIATICAL SETTLEMENT 2,065
PROVIDERS, VIATICAL SETTLEMENT REPRESENTATIVES, AND VIATICAL 2,066
SETTLEMENT BROKERS;
(3) REQUIRE A BOND OR OTHER MECHANISM FOR ENSURING THE 2,068
FINANCIAL ACCOUNTABILITY OF VIATICAL SETTLEMENT PROVIDERS. 2,069
Sec. 3916.32. (A) NO PERSON SHALL FAIL TO COMPLY WITH 2,071
THIS CHAPTER. 2,072
(B) WHOEVER VIOLATES DIVISION (A) OF THIS SECTION IS 2,074
DEEMED TO HAVE ENGAGED IN AN UNFAIR AND DECEPTIVE ACT OR PRACTICE 2,075
IN THE BUSINESS OF INSURANCE UNDER SECTIONS 3901.19 TO 3901.26 OF 2,076
THE REVISED CODE. 2,077
Sec. 3916.99. WHOEVER VIOLATES SECTION 3916.02 OF THE 2,079
REVISED CODE IS GUILTY OF A FELONY OF THE THIRD DEGREE. 2,080
Section 2. That existing sections 1707.01, 1707.02, 2,083
1707.11, 1707.15, 1707.151, 1707.16, 1707.17, and 1707.23 and 2,084
sections 1707.432, 1707.433, 1707.434, 1707.435, 1707.436,
1707.437, 1707.438, and 1707.439 of the Revised Code are hereby 2,085
repealed.
Section 3. Sections 1 and 2 of this act shall take effect 2,087
six months after the effective date of this act. 2,088
Section 4. Any person that, on the effective date of this 2,090
act, transacts business in this state as a viatical settlement 2,091
provider, viatical settlement representative, or viatical 2,092
settlement broker may continue to do so pending approval of the 2,093
person's application for a license, if the person applies for the 2,094
license during the six-month period immediately following the 2,095
effective date of this act. 2,096