As Reported by House Civil and Commercial Law            1            

123rd General Assembly                                             4            

   Regular Session                            Sub. H. B. No. 6     5            

      1999-2000                                                    6            


     REPRESENTATIVES D.MILLER-SCHULER-DePIERO-OPFER-TRAKAS-        8            

      FORD-SULLIVAN-GERBERRY-BOYD-JONES-STAPLETON-O'BRIEN-         9            

       WINKLER-MOTTLEY-SCHUCK-ALLEN-WILLAMOWSKI-JACOBSON-          10           

         CALLENDER-WOMER BENJAMIN-SALERNO-PETERSON-BUCHY           11           


_________________________________________________________________   12           

                          A   B I L L                                           

             To amend sections 1701.48, 1707.01, and 1707.44 of    14           

                the Revised Code to include electronic             15           

                transmissions as a method of appointing a voting   16           

                proxy and to apply the Ohio Securities Law's       18           

                prohibitions against fraud to the purchase of                   

                securities.                                                     




BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:        20           

      Section 1.  That sections 1701.48, 1707.01, and 1707.44 of   22           

the Revised Code be amended to read as follows:                    23           

      Sec. 1701.48.  (A)  A person who is entitled to attend a     32           

shareholders' meeting, to vote thereat AT A SHAREHOLDERS'          34           

MEETING, or to execute consents, waivers, or releases, may be      35           

represented at such THE meeting or vote thereat AT THE MEETING,    38           

and MAY execute consents, waivers, and releases, and MAY exercise  40           

any of his THE PERSON'S other rights, by proxy or proxies          42           

appointed by a writing signed by such THE person OR APPOINTED BY   43           

A VERIFIABLE COMMUNICATION AUTHORIZED BY THE PERSON.               44           

      (B)  A ANY TRANSMISSION THAT CREATES A RECORD CAPABLE OF     46           

AUTHENTICATION, INCLUDING, BUT NOT LIMITED TO, A telegram or, A    48           

cablegram appearing, ELECTRONIC MAIL, OR AN ELECTRONIC,            49           

TELEPHONIC, OR OTHER TRANSMISSION, THAT APPEARS to have been       50           

transmitted by such A person, or a DESCRIBED IN DIVISION (A) OF    52           

THIS SECTION, AND THAT APPOINTS A PROXY IS A SUFFICIENT            53           

                                                          2      


                                                                 
VERIFIABLE COMMUNICATION TO APPOINT A PROXY.  A photographic,                   

photostatic, FACSIMILE TRANSMISSION, or equivalent reproduction    55           

of a writing, appointing THAT IS SIGNED BY A PERSON DESCRIBED IN   56           

DIVISION (A) OF THIS SECTION AND THAT APPOINTS a proxy is a        57           

sufficient writing TO APPOINT A PROXY.                             58           

      (C)  No appointment of a proxy is valid after the            60           

expiration of eleven months after it is made unless the writing    61           

OR VERIFIABLE COMMUNICATION specifies the date on which it is to   63           

expire or the length of time it is to continue in force.  No       64           

proxy appointed for or in connection with the shareholder          65           

authorization of a control share acquisition pursuant to section   66           

1701.831 of the Revised Code is valid if it provides that it is    67           

irrevocable or if it is sought, appointed, and received other      68           

than both:                                                                      

      (1)  In accordance with all applicable requirements of the   70           

law of this state and the law of the United States;                71           

      (2)  Separate and apart from the sale or purchase, contract  73           

or tender for sale or purchase, or request or invitation for       74           

tender for sale or purchase, of shares of the issuing public       75           

corporation.                                                       76           

      (D)  Every appointment of a proxy shall be revocable unless  78           

such THAT appointment is coupled with an interest, except that,    79           

as provided in division (C) of this section, proxies appointed     81           

for or in connection with the shareholder authorization of a       82           

control share acquisition pursuant to section 1701.831 of the      83           

Revised Code shall be revocable at all times prior to the          84           

obtaining of such THAT shareholder authorization, whether or not   85           

coupled with an interest.  A revocation of a revocable             87           

appointment may be made only as provided in this section.          88           

Without affecting any vote previously taken, the person            89           

appointing a proxy may revoke a revocable appointment by a later   90           

appointment received by the corporation or by giving notice of     91           

revocation to the corporation in writing, IN A VERIFIABLE          92           

COMMUNICATION, or in open meeting.  The presence at a meeting of   93           

                                                          3      


                                                                 
the person appointing a proxy does not revoke the appointment.     94           

      (E)  A revocable appointment of a proxy is not revoked by    96           

the death or incompetency of the maker unless, before the vote is  97           

taken or the authority granted is otherwise exercised, written     98           

notice of such THE death or incompetency OF THE MAKER is received  100          

by the corporation from the executor or administrator of the       101          

estate of such THE maker or from the fiduciary having control of   102          

the shares in respect of which the proxy was appointed.            104          

      (F)  Unless the writing OR VERIFIABLE COMMUNICATION          106          

appointing a proxy otherwise provides:                             108          

      (1)   Each proxy has the power of substitution, and, when    110          

IF three or more proxies are appointed, a majority of them or of   112          

their substitutes may appoint one or more substitutes to act for   113          

all;.                                                              114          

      (2)  If more than one proxy is appointed, then (a) with      116          

respect to voting or executing consents, waivers, or releases, or  117          

objections to consents at a shareholders' meeting, a majority of   118          

such THE proxies as THAT attend the meeting, or if only one        120          

attends then that one, may exercise all the voting and consenting  121          

authority thereat AT THE MEETING; and if one or more attend and a  122          

majority do not agree on any particular issue, each proxy so       124          

attending shall be entitled to exercise such THAT authority with   125          

respect to an equal number of shares; (b) with respect to          127          

exercising any other authority, a majority may act for all.        128          

      Sec. 1707.01.  As used in this chapter:                      137          

      (A)  Whenever the context requires it, "division" or         139          

"division of securities" may be read as "director of commerce" or  140          

as "commissioner of securities."                                   141          

      (B)  "Security" means any certificate or instrument that     143          

represents title to or interest in, or is secured by any lien or   144          

charge upon, the capital, assets, profits, property, or credit of  145          

any person or of any public or governmental body, subdivision, or  146          

agency.  It includes shares of stock, certificates for shares of   147          

stock, membership interests in limited liability companies,        148          

                                                          4      


                                                                 
voting-trust certificates, warrants and options to purchase        149          

securities, subscription rights, interim receipts, interim         150          

certificates, promissory notes, all forms of commercial paper,     151          

evidences of indebtedness, bonds, debentures, land trust           152          

certificates, fee certificates, leasehold certificates, syndicate  153          

certificates, endowment certificates, certificates or written      154          

instruments in or under profit-sharing or participation            155          

agreements or in or under oil, gas, or mining leases, or           156          

certificates or written instruments of any interest in or under    157          

the same, receipts evidencing preorganization or reorganization    158          

subscriptions, preorganization certificates, reorganization        159          

certificates, certificates evidencing an interest in any trust or  160          

pretended trust, any investment contract, any instrument           161          

evidencing a promise or an agreement to pay money, warehouse       162          

receipts for intoxicating liquor, and the currency of any          163          

government other than those of the United States and Canada, but   164          

sections 1707.01 to 1707.45 of the Revised Code do not apply to    165          

the sale of real estate.                                           166          

      (C)(1)  "Sale" has the full meaning of "sale" as applied by  168          

or accepted in courts of law or equity, and includes every         169          

disposition, or attempt to dispose, of a security or of an         170          

interest in a security.  "Sale" also includes a contract to sell,  171          

an exchange, an attempt to sell, an option of sale, a              172          

solicitation of a sale, a solicitation of an offer to buy, a       173          

subscription, or an offer to sell, directly or indirectly, by      174          

agent, circular, pamphlet, advertisement, or otherwise.            175          

      (2)  "Sell" means any act by which a sale is made.           177          

      (3)  The use of advertisements, circulars, or pamphlets in   179          

connection with the sale of securities in this state exclusively   180          

to the purchasers specified in division (D) of section 1707.03 of  181          

the Revised Code is not a sale when the advertisements,            182          

circulars, and pamphlets describing and offering those securities  183          

bear a readily legible legend in substance as follows:  "This      184          

offer is made on behalf of dealers licensed under sections         185          

                                                          5      


                                                                 
1707.01 to 1707.45 of the Revised Code, and is confined in this    186          

state exclusively to institutional investors and licensed          187          

dealers."                                                          188          

      (4)  The offering of securities by any person in             190          

conjunction with a licensed dealer by use of advertisement,        191          

circular, or pamphlet is not a sale if that person does not        192          

otherwise attempt to sell securities in this state.                193          

      (5)  Any security given with, or as a bonus on account of,   195          

any purchase of securities is conclusively presumed to constitute  196          

a part of the subject of that purchase and has been "sold."        197          

      (6)  "Sale" by an owner, pledgee, or mortgagee, or by a      199          

person acting in a representative capacity, includes sale on       200          

behalf of such party by an agent, including a licensed dealer or   201          

salesperson.                                                       202          

      (D)  "Person," except as otherwise provided in this          204          

chapter, means a natural person, firm, partnership, limited        206          

partnership, partnership association, syndicate, joint-stock       207          

company, unincorporated association, trust or trustee except       208          

where the trust was created or the trustee designated by law or    209          

judicial authority or by a will, and a corporation or limited      210          

liability company organized under the laws of any state, any       211          

foreign government, or any political subdivision of a state or     212          

foreign government.                                                             

      (E)(1)  "Dealer," except as otherwise provided in this       214          

chapter, means every person, other than a salesperson, who         216          

engages or professes to engage, in this state, for either all or                

part of the person's time, directly or indirectly, either in the   217          

business of the sale of securities for the person's own account,   218          

or in the business of the purchase or sale of securities for the   219          

account of others in the reasonable expectation of receiving a     220          

commission, fee, or other remuneration as a result of engaging in  221          

the purchase and sale of securities.  "Dealer" does not mean any   222          

of the following:                                                               

      (a)  Any issuer, including any officer, director, employee,  224          

                                                          6      


                                                                 
or trustee of, or member or manager of, or partner in, or any      225          

general partner of, any issuer, that sells, offers for sale, or    227          

does any act in furtherance of the sale of a security that         228          

represents an economic interest in that issuer, provided no        229          

commission, fee, or other similar remuneration is paid to or       230          

received by the issuer for the sale;                               231          

      (b)  Any licensed attorney, public accountant, or firm of    233          

such attorneys or accountants, whose activities are incidental to  234          

the practice of the attorney's, accountant's, or firm's            235          

profession;                                                                     

      (c)  Any person that, for the account of others, engages in  237          

the purchase or sale of securities that are issued and             238          

outstanding before such purchase and sale, if a majority or more   239          

of the equity interest of an issuer is sold in that transaction,   240          

and if, in the case of a corporation, the securities sold in that  241          

transaction represent a majority or more of the voting power of    242          

the corporation in the election of directors;                      243          

      (d)  Any person that brings an issuer together with a        245          

potential investor and whose compensation is not directly or       246          

indirectly based on the sale of any securities by the issuer to    247          

the investor;                                                      248          

      (e)  Any bank, savings and loan association, savings bank,   250          

or credit union chartered under the laws of the United States or   251          

any state thereof OF THE UNITED STATES, provided that all          253          

transactions are consummated by or through a person licensed       254          

pursuant to section 1707.14 of the Revised Code;                   255          

      (f)  Any person that the division of securities by rule      257          

exempts from the definition of "dealer" under division (E)(1) of   258          

this section.                                                      259          

      (2)  "Licensed dealer" means a dealer licensed under this    262          

chapter.                                                                        

      (F)(1)  "Salesman" or "salesperson" means every natural      264          

person, other than a dealer, WHO IS employed, authorized, or       267          

appointed by a dealer to sell securities within this state.        268          

                                                          7      


                                                                 
      (2)  The general partners of a partnership, and the          270          

executive officers of a corporation or unincorporated              271          

association, licensed as a dealer are not salespersons within the  273          

meaning of this definition, nor are such clerical or other                      

employees of an issuer or dealer as are employed for work to       274          

which the sale of securities is secondary and incidental; but the  275          

division of securities may require a license from any such         276          

partner, executive officer, or employee if it determines that      277          

protection of the public necessitates the licensing.               278          

      (3)  "Licensed salesperson" means a salesperson licensed     281          

under this chapter.                                                             

      (G)  "Issuer" means every person who has issued, proposes    283          

to issue, or issues any security.                                  284          

      (H)  "Director" means each director or trustee of a          286          

corporation, each trustee of a trust, each general partner of a    287          

partnership, except a partnership association, each manager of a   288          

partnership association, and any person vested with managerial or  289          

directory power over an issuer not having a board of directors or  290          

trustees.                                                          291          

      (I)  "Incorporator" means any incorporator of a corporation  293          

and any organizer of, or any person participating, other than in   294          

a representative or professional capacity, in the organization of  295          

an unincorporated issuer.                                          296          

      (J)  "Fraud," "fraudulent," "fraudulent acts," "fraudulent   299          

practices," or "fraudulent transactions" means anything            300          

recognized on or after July 22, 1929, as such in courts of law or  301          

equity; any device, scheme, or artifice to defraud or to obtain    302          

money or property by means of any false pretense, representation,  303          

or promise; any fictitious or pretended purchase or sale of        304          

securities; and any act, practice, transaction, or course of       305          

business relating to the PURCHASE OR sale of securities that is    306          

fraudulent or that has operated or would operate as a fraud upon   308          

the SELLER OR purchaser.                                                        

      (K)  Except as otherwise specifically provided, whenever     310          

                                                          8      


                                                                 
any classification or computation is based upon "par value," as    311          

applied to securities without par value, the average of the        312          

aggregate consideration received or to be received by the issuer   313          

for each class of those securities shall be used as the basis for  314          

that classification or computation.                                315          

      (L)(1)  "Intangible property" means patents, copyrights,     317          

secret processes, formulas, services, good will, promotion and     318          

organization fees and expenses, trademarks, trade brands, trade    319          

names, licenses, franchises, any other assets treated as           320          

intangible according to generally accepted accounting principles,  321          

and securities, accounts receivable, or contract rights having no  322          

readily determinable value.                                        323          

      (2)  "Tangible property" means all property other than       325          

intangible property and includes securities, accounts receivable,  326          

and contract rights, when the securities, accounts receivable, or  327          

contract rights have a readily determinable value.                 328          

      (M)  "Public utilities" means those utilities defined in     330          

sections 4905.02, 4905.03, 4907.02, and 4907.03 of the Revised     331          

Code; in the case of a foreign corporation, it means those         332          

utilities defined as public utilities by the laws of its           333          

domicile; and in the case of any other foreign issuer, it means    334          

those utilities defined as public utilities by the laws of the     335          

situs of its principal place of business.  The term always         336          

includes railroads whether or not they are so defined as public    337          

utilities.                                                         338          

      (N)  "State" means any state of the United States, any       340          

territory or possession of the United States, the District of      341          

Columbia, and any province of Canada.                              342          

      (O)  "Bank" means any bank, trust company, savings and loan  344          

association, savings bank, or credit union that is incorporated    346          

or organized under the laws of the United States, any state of     347          

the United States, Canada, or any province of Canada and that is   348          

subject to regulation or supervision by that country, state, or    349          

province.                                                                       

                                                          9      


                                                                 
      (P)  "Include," when used in a definition, does not exclude  351          

other things or persons otherwise within the meaning of the term   352          

defined.                                                           353          

      (Q)(1)  "Registration by description" means that the         355          

requirements of section 1707.08 of the Revised Code have been      356          

complied with.                                                     357          

      (2)  "Registration by qualification" means that the          359          

requirements of sections 1707.09 and 1707.11 of the Revised Code   360          

have been complied with.                                           361          

      (3)  "Registration by coordination" means that there has     363          

been compliance with section 1707.091 of the Revised Code.         364          

Reference in this chapter to registration by qualification also    365          

shall be deemed to include registration by coordination unless     366          

the context otherwise indicates.                                   367          

      (R)  "Intoxicating liquor" includes all liquids and          369          

compounds that contain more than three and two-tenths per cent of  370          

alcohol by weight and are fit for use for beverage purposes.       371          

      (S)  "Institutional investor" means any corporation, bank,   373          

insurance company, pension fund or pension fund trust, employees'  374          

profit-sharing fund or employees' profit-sharing trust, any        375          

association engaged, as a substantial part of its business or      376          

operations, in purchasing or holding securities, or any trust in   377          

respect of which a bank is trustee or cotrustee.  "Institutional   378          

investor" does not include any business entity formed for the      379          

primary purpose of evading sections 1707.01 to 1707.45 of the      380          

Revised Code.                                                      381          

      (T)  "Securities Act of 1933," 48 Stat. 74, 15 U.S.C. 77a,   384          

"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C. 78a,    386          

"Internal Revenue Code of 1986," 100 Stat. 2085, 26 U.S.C. 1,      388          

"Investment Advisers Act of 1940," 54 Stat. 847, 15 U.S.C. 80b,    390          

and "Investment Company Act of 1940," 54 Stat. 789, 15 U.S.C. 80a  392          

mean the federal statutes of those names as amended before or      394          

after the effective date of this amendment MARCH 18, 1999.         395          

      (U)  "Securities and exchange commission" means the          397          

                                                          10     


                                                                 
securities and exchange commission established by the Securities   398          

Exchange Act of 1934.                                              399          

      (V)(1)  "Control bid" means the purchase of or offer to      401          

purchase any equity security of a subject company from a resident  402          

of this state if either of the following applies:                  403          

      (a)  After the purchase of that security, the offeror would  405          

be directly or indirectly the beneficial owner of more than ten    406          

per cent of any class of the issued and outstanding equity         407          

securities of the issuer.                                          408          

      (b)  The offeror is the subject company, there is a pending  410          

control bid by a person other than the issuer, and the number of   411          

the issued and outstanding shares of the subject company would be  412          

reduced by more than ten per cent.                                 413          

      (2)  For purposes of division (V)(1) of this section,        415          

"control bid" does not include any of the following:               416          

      (a)  A bid made by a dealer for the dealer's own account in  418          

the ordinary course of business of buying and selling securities;  419          

      (b)  An offer to acquire any equity security solely in       421          

exchange for any other security, or the acquisition of any equity  422          

security pursuant to an offer, for the sole account of the         423          

offeror, in good faith and not for the purpose of avoiding the     424          

provisions of this chapter, and not involving any public offering  425          

of the other security within the meaning of Section 4 of Title I   426          

of the "Securities Act of 1933," 48 Stat. 77, 15 U.S.C.A. 77d(2),  427          

as amended;                                                        428          

      (c)  Any other offer to acquire any equity security, or the  430          

acquisition of any equity security pursuant to an offer, for the   431          

sole account of the offeror, from not more than fifty persons, in  432          

good faith and not for the purpose of avoiding the provisions of   433          

this chapter.                                                      434          

      (W)  "Offeror" means a person who makes, or in any way       436          

participates or aids in making, a control bid and includes         437          

persons acting jointly or in concert, or who intend to exercise    438          

jointly or in concert any voting rights attached to the            439          

                                                          11     


                                                                 
securities for which the control bid is made and also includes     440          

any subject company making a control bid for its own securities.   441          

      (X)(1)  "Investment adviser" means any person who, for       444          

compensation, engages in the business of advising others, either   445          

directly or through publications or writings, as to the value of   446          

securities or as to the advisability of investing in, purchasing,  447          

or selling securities, or who, for compensation and as a part of   448          

regular business, issues or promulgates analyses or reports        449          

concerning securities.                                                          

      (2)  "Investment adviser" does not mean any of the           452          

following:                                                                      

      (a)  Any attorney, accountant, engineer, or teacher, whose   455          

performance of investment advisory services described in division  457          

(X)(1) of this section is solely incidental to the practice of     459          

the attorney's, accountant's, engineer's, or teacher's             460          

profession;                                                        461          

      (b)  A publisher of any bona fide newspaper, news magazine,  465          

or business or financial publication of general and regular        466          

circulation;                                                                    

      (c)  A person who acts solely as an investment adviser       468          

representative;                                                    469          

      (d)  A bank holding company, as defined in the "Bank         471          

Holding Company Act of 1956," 70 Stat. 133, 12 U.S.C. 1841, that   473          

is not an investment company;                                      474          

      (e)  A bank, or any receiver, conservator, or other          476          

liquidating agent of a bank;                                       477          

      (f)  Any licensed dealer or licensed salesperson whose       479          

performance of investment advisory services described in division  480          

(X)(1) of this section is solely incidental to the conduct of the  481          

dealer's or salesperson's business as a licensed dealer or         482          

licensed salesperson and who receives no special compensation for  483          

the services;                                                                   

      (g)  Any person, the advice, analyses, or reports of which   485          

do not relate to securities other than securities that are direct  486          

                                                          12     


                                                                 
obligations of, or obligations guaranteed as to principal or       487          

interest by, the United States, or securities issued or            488          

guaranteed by corporations in which the United States has a        489          

direct or indirect interest, and that have been designated by the  490          

secretary of the treasury as exempt securities as defined in the   491          

"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C. 78c;    493          

      (h)  Any person that is excluded from the definition of      495          

investment adviser pursuant to section 202(a)(11)(A) to (E) of     498          

the "Investment Advisers Act of 1940," 15 U.S.C. 80b-2(a)(11), or  503          

that has received an order from the securities and exchange        504          

commission under section 202(a)(11)(F) of the "Investment          506          

Advisers Act of 1940," 15 U.S.C. 80b-2(a)(11)(F), declaring that   511          

the person is not within the intent of section 202(a)(11) of the   512          

Investment Advisers Act of 1940.                                   515          

      (i)  Any other person that the division designates by rule,  517          

if the division finds that the designation is necessary or         518          

appropriate in the public interest or for the protection of        519          

investors or clients and consistent with the purposes fairly       520          

intended by the policy and provisions of this chapter.                          

      (Y)(1)  "Subject company" means an issuer that satisfies     522          

both of the following:                                             523          

      (a)  Its principal place of business or its principal        525          

executive office is located in this state, or it owns or controls  526          

assets located within this state that have a fair market value of  527          

at least one million dollars.                                      528          

      (b)  More than ten per cent of its beneficial or record      530          

equity security holders are resident in this state, more than ten  531          

per cent of its equity securities are owned beneficially or of     532          

record by residents in this state, or more than one thousand of    533          

its beneficial or record equity security holders are resident in   534          

this state.                                                        535          

      (2)  The division of securities may adopt rules to           537          

establish more specific application of the provisions set forth    538          

in division (Y)(1) of this section.  Notwithstanding the           539          

                                                          13     


                                                                 
provisions set forth in division (Y)(1) of this section and any    540          

rules adopted under this division, the division, by rule or in an  541          

adjudicatory proceeding, may make a determination that an issuer   542          

does not constitute a "subject company" under division (Y)(1) of   543          

this section if appropriate review of control bids involving the   544          

issuer is to be made by any regulatory authority of another        545          

jurisdiction.                                                      546          

      (Z)  "Beneficial owner" includes any person who directly or  548          

indirectly through any contract, arrangement, understanding, or    549          

relationship has or shares, or otherwise has or shares, the power  550          

to vote or direct the voting of a security or the power to         551          

dispose of, or direct the disposition of, the security.            552          

"Beneficial ownership" includes the right, exercisable within      553          

sixty days, to acquire any security through the exercise of any    554          

option, warrant, or right, the conversion of any convertible       555          

security, or otherwise.  Any security subject to any such option,  556          

warrant, right, or conversion privilege held by any person shall   557          

be deemed to be outstanding for the purpose of computing the       558          

percentage of outstanding securities of the class owned by that    559          

person, but shall not be deemed to be outstanding for the purpose  560          

of computing the percentage of the class owned by any other        561          

person.  A person shall be deemed the beneficial owner of any      562          

security beneficially owned by any relative or spouse or relative  563          

of the spouse residing in the home of that person, any trust or    564          

estate in which that person owns ten per cent or more of the       565          

total beneficial interest or serves as trustee or executor, any    566          

corporation or entity in which that person owns ten per cent or    567          

more of the equity, and any affiliate or associate of that         568          

person.                                                            569          

      (AA)  "Offeree" means the beneficial or record owner of any  571          

security that an offeror acquires or offers to acquire in          572          

connection with a control bid.                                     573          

      (BB)  "Equity security" means any share or similar           575          

security, or any security convertible into any such security, or   576          

                                                          14     


                                                                 
carrying any warrant or right to subscribe to or purchase any      577          

such security, or any such warrant or right, or any other          578          

security that, for the protection of security holders, is treated  579          

as an equity security pursuant to rules of the division of         580          

securities.                                                        581          

      (CC)  "Investment company" has the same meaning as in        583          

section 3(A) of the "Investment Company Act of 1940," 54 Stat.     584          

789, 15 U.S.C. 80a-1 to 80a-52.                                    585          

      (DD)  "Penny stock" has the same meaning as in section       588          

3(A)(51) of the "Securities Exchange Act of 1934," 48 Stat. 881,   589          

15 U.S.C. 78a-78jj, and the rules, regulations, and orders issued  590          

pursuant to that section.                                          591          

      (EE)  "Going concern transaction" has the same meaning       594          

given that term under the rules or regulations on the securities   595          

and exchange commission issued pursuant to section 13(c) of the    596          

"Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C.                      

78a-78jj.                                                          597          

      (FF)  "Person acting on behalf of an issuer" means an        600          

officer, director, or employee of an issuer.                                    

      (GG)  "Blank check company," "roll-up transaction,"          603          

"executive officer of an entity," and "direct participation                     

program" have the same meanings given those terms by rule or       604          

regulation of the securities and exchange commission.              605          

      (HH)  "Forward-looking statement" means any of the           607          

following:                                                                      

      (1)  A statement containing a projection of revenues,        609          

income including income loss, earnings per share including         610          

earnings loss per share, capital expenditures, dividends, capital  611          

structure, or other financial items;                                            

      (2)  A statement of the plans and objectives of the          613          

management of the issuer for future operations, including plans    614          

or objectives relating to the products or services of the issuer;  615          

      (3)  A statement of future economic performance, including   617          

any statement of that nature contained in a discussion and         618          

                                                          15     


                                                                 
analysis of financial conditions by the management or in the       619          

results of operations included pursuant to the rules and           620          

regulations of the securities and exchange commission;                          

      (4)  Any disclosed statement of the assumptions underlying   622          

or relating to a statement described in division (B)(1), (2), or   624          

(3) of section 1707.437 of the Revised Code;                       625          

      (5)  Any report issued by an outside reviewer retained by    627          

an issuer to the extent that the report relates to a               628          

forward-looking statement made by the issuer;                      629          

      (6)  A statement containing a projection or estimate of any  631          

other items that may be specified by rule or regulation of the     632          

securities and exchange commission.                                633          

      (II)(1)  "Investment adviser representative" means a         635          

supervised person of an investment adviser, provided that the      637          

supervised person has more than five clients who are natural       638          

persons other than excepted persons defined in division (KK) of    639          

this section, and that more than ten per cent of the supervised    640          

person's clients are natural persons other than excepted persons                

defined in division (KK) of this section.  "Investment adviser     641          

representative" does not mean any of the following:                642          

      (a)  A supervised person that does not on a regular basis    644          

solicit, meet with, or otherwise communicate with clients of the   645          

investment adviser;                                                             

      (b)  A supervised person that provides only investment       647          

advisory services described in division (X)(1) of this section by  648          

means of written materials or oral statements that do not purport  649          

to meet the objectives or needs of specific individuals or         650          

accounts;                                                                       

      (c)  Any other person that the division designates by rule,  653          

if the division finds that the designation is necessary or         654          

appropriate in the public interest or for the protection of                     

investors or clients and is consistent with the provisions fairly  656          

intended by the policy and provisions of this chapter.             657          

      (2)  For the purpose of the calculation of clients in        659          

                                                          16     


                                                                 
division (II)(1) of this section, a natural person and the         661          

following persons are deemed a single client:  Any minor child of  662          

the natural person; any  relative, spouse, or relative of the      663          

spouse of the natural person who has the same principal residence  664          

as the natural person; all accounts of which the natural person    665          

or the persons referred to in division (II)(2) of this section     667          

are the only primary beneficiaries; and all trusts of which the    668          

natural person or persons referred to in division (II)(2) of this  669          

section are the only primary beneficiaries.  Persons who are not   670          

residents of the United States need not be included in the         672          

calculation of clients under division (II)(1) of this section.     673          

      (3)  If subsequent to the effective date of this amendment   676          

MARCH 18, 1999, amendments are enacted or adopted defining         677          

"investment adviser representative" for purposes of the            678          

Investment Advisers Act of 1940 or additional rules or             682          

regulations are promulgated by the securities and exchange                      

commission regarding the definition of "investment adviser         683          

representative" for purposes of the Investment Advisers Act of     687          

1940, the division of securities shall, by rule, adopt the         688          

substance of the amendments, rules, or regulations, unless the     689          

division finds that the amendments, rules, or regulations are not  690          

necessary for the protection of investors or in the public         691          

interest.                                                                       

      (JJ)  "Supervised person" means a natural person who is any  693          

of the following:                                                  694          

      (1)  A partner, officer, or director of an investment        696          

adviser, or other person occupying a similar status or performing  697          

similar functions with respect to an investment adviser;           698          

      (2)  An employee of an investment adviser;                   700          

      (3)  A person who provides investment advisory services      702          

described in division (X)(1) of this section on behalf of the      703          

investment adviser and is subject to the supervision and control   704          

of the investment adviser.                                                      

      (KK)  "Excepted person" means a natural person to whom any   706          

                                                          17     


                                                                 
of the following applies:                                          707          

      (1)  Immediately after entering into the investment          709          

advisory contract with the investment adviser, the person has at   710          

least seven hundred fifty thousand dollars under the management    712          

of the investment adviser.                                                      

      (2)  The investment adviser reasonably believes either of    714          

the following at the time the investment advisory contract is      715          

entered into with the person:                                                   

      (a)  The person has a net worth, together with assets held   718          

jointly with a spouse, of more than one million five hundred       719          

thousand dollars.                                                               

      (b)  The person is a qualified purchaser as defined in       722          

division (LL) of this section.                                     723          

      (3)  Immediately prior to entering into an investment        725          

advisory contract with the investment adviser, the person is       726          

either of the following:                                           727          

      (a)  An executive officer, director, trustee, general        730          

partner, or person serving in a similar capacity, of the           731          

investment adviser;                                                             

      (b)  An employee of the investment adviser, other than an    734          

employee performing solely clerical, secretarial, or               735          

administrative functions or duties for the investment adviser,     736          

which employee, in connection with the employee's regular          737          

functions or duties, participates in the investment activities of  738          

the investment adviser, provided that, for at least twelve         739          

months, the employee has been performing such nonclerical,         740          

nonsecretarial, or nonadministrative functions or duties for or    741          

on behalf of the investment adviser or performing substantially    742          

similar functions or duties for or on behalf of another company.   743          

      If subsequent to the effective date of this amendment MARCH  746          

18, 1999, amendments are enacted or adopted defining "excepted     747          

person" for purposes of the Investment Advisers Act of 1940 or     750          

additional rules or regulations are promulgated by the securities  751          

and exchange commission regarding the definition of "excepted      752          

                                                          18     


                                                                 
person" for purposes of the Investment Advisers Act of 1940, the   755          

division of securities shall, by rule, adopt the substance of the  756          

amendments, rules, or regulations, unless the division finds that  758          

the amendments, rules, or regulations are not necessary for the    759          

protection of investors or in the public interest.                              

      (LL)(1)  "Qualified purchaser" means either of the           762          

following:                                                                      

      (a)  A natural person who owns not less than five million    765          

dollars in investments as defined by rule by the division of       766          

securities;                                                                     

      (b)  A natural person, acting for the person's own account   769          

or accounts of other qualified purchasers, who in the aggregate    770          

owns and invests on a discretionary basis, not less than           771          

twenty-five million dollars in investments as defined by rule by   772          

the division of securities.                                        773          

      (2)  If subsequent to the effective date of this amendment   776          

MARCH 18, 1999, amendments are enacted or adopted defining         777          

"qualified purchaser" for purposes of the Investment Advisers Act  781          

of 1940 or additional rules or regulations are promulgated by the  782          

securities and exchange commission regarding the definition of     783          

"qualified purchaser" for purposes of the Investment Advisers Act  786          

of 1940, the division of securities shall, by rule, adopt the      787          

amendments, rules, or regulations, unless the division finds that  788          

the amendments, rules, or regulations are not necessary for the    789          

protection of investors or in the public interest.                 790          

      (MM)(1)  "PURCHASE" HAS THE FULL MEANING OF "PURCHASE" AS    792          

APPLIED BY OR ACCEPTED IN COURTS OF LAW OR EQUITY AND INCLUDES     793          

EVERY ACQUISITION OF, OR ATTEMPT TO ACQUIRE, A SECURITY OR AN      794          

INTEREST IN A SECURITY.  "PURCHASE" ALSO INCLUDES A CONTRACT TO    795          

PURCHASE, AN EXCHANGE, AN ATTEMPT TO PURCHASE, AN OPTION TO        796          

PURCHASE, A SOLICITATION OF A PURCHASE, A SOLICITATION OF AN       797          

OFFER TO SELL, A SUBSCRIPTION, OR AN OFFER TO PURCHASE, DIRECTLY   798          

OR INDIRECTLY, BY AGENT, CIRCULAR, PAMPHLET, ADVERTISEMENT, OR                  

OTHERWISE.                                                         799          

                                                          19     


                                                                 
      (2)  "PURCHASE" MEANS ANY ACT BY WHICH A PURCHASE IS MADE.   801          

      (3)  ANY SECURITY GIVEN WITH, OR AS A BONUS ON ACCOUNT OF,   803          

ANY PURCHASE OF SECURITIES IS CONCLUSIVELY PRESUMED TO CONSTITUTE  804          

A PART OF THE SUBJECT OF THAT PURCHASE.                            805          

      Sec. 1707.44.  (A)(1)  No person shall engage in any act or  814          

practice that violates division (A), (B), or (C) of section        816          

1707.14 of the Revised Code, and no salesperson shall sell         817          

securities in this state without being licensed pursuant to        818          

section 1707.16 of the Revised Code.                                            

      (2)  No person shall engage in any act or practice that      820          

violates division (A) of section 1707.141 or section 1707.161 of   821          

the Revised Code.                                                               

      (B)  No person shall knowingly make or cause to be made any  823          

false representation concerning a material and relevant fact, in   824          

any oral statement or in any prospectus, circular, description,    825          

application, or written statement, for any of the following        826          

purposes:                                                          827          

      (1)  Complying with this chapter, in regard to registering   829          

securities by description;                                         830          

      (2)  Securing the qualification of any securities under      832          

this chapter;                                                      833          

      (3)  Procuring the licensing of any dealer, salesperson,     836          

investment adviser, or investment adviser representative under     838          

this chapter;                                                                   

      (4)  Selling any securities in this state;                   840          

      (5)  Advising for compensation, as to the value of           842          

securities or as to the advisability of investing in, purchasing,  843          

or selling securities.                                                          

      (C)  No person shall knowingly and intentionally sell,       845          

cause to be sold, offer for sale, or cause to be offered for       846          

sale, any security which comes under any of the following          847          

descriptions:                                                      848          

      (1)  Is not exempt under section 1707.02 of the Revised      850          

Code, nor the subject matter of one of the transactions exempted   851          

                                                          20     


                                                                 
in sections 1707.03, 1707.04, and 1707.34 of the Revised Code,     852          

has not been registered by description, coordination, or           853          

qualification, and is not the subject matter of a transaction      854          

that has been registered by description;                           855          

      (2)  The prescribed fees for registering by description, by  857          

coordination, or by qualification have not been paid in respect    858          

to such security;                                                  859          

      (3)  Such person has been notified by the division, or has   861          

knowledge of the notice, that the right to buy, sell, or deal in   863          

such security has been suspended or revoked, or that the           864          

registration by description, by coordination, or by qualification  865          

under which it may be sold has been suspended or revoked;          866          

      (4)  The offer or sale is accompanied by a statement that    868          

the security offered or sold has been or is to be in any manner    869          

indorsed by the division.                                          870          

      (D)  No person who is an officer, director, or trustee of,   872          

or a dealer for, any issuer, and who knows such issuer to be       873          

insolvent in that the liabilities of such THE issuer exceed its    874          

assets, shall sell any securities of or for any such issuer,       875          

without disclosing the fact of the insolvency to the purchaser.    877          

      (E)  No person with intent to aid in the sale of any         879          

securities on behalf of the issuer, shall knowingly make any       880          

representation not authorized by such issuer or at material        881          

variance with statements and documents filed with the division by  882          

such issuer.                                                       883          

      (F)  No person, with intent to deceive, shall sell, cause    885          

to be sold, offer for sale, or cause to be offered for sale, any   886          

securities of an insolvent issuer, with knowledge that such        887          

issuer is insolvent in that the liabilities of such THE issuer     888          

exceed its assets, taken at their fair market value.               890          

      (G)  No person in PURCHASING OR selling securities shall     892          

knowingly engage in any act or practice which THAT is, in this     894          

chapter, declared illegal, defined as fraudulent, or prohibited.   897          

      (H)  No licensed dealer shall refuse to buy from, sell to,   899          

                                                          21     


                                                                 
or trade with any person because the person appears on a           900          

blacklist issued by, or is being boycotted by, any foreign         901          

corporate or governmental entity, nor sell any securities of or    902          

for any issuer who is known in relation to the issuance or sale    903          

of such securities to have engaged in such practices.              904          

      (I)  No dealer in securities, knowing that the dealer's      906          

liabilities exceed the reasonable value of the dealer's assets,    908          

shall accept money or securities, except in payment of or as       909          

security for an existing debt, from a customer who is ignorant of  910          

the dealer's insolvency, and thereby cause the customer to lose    913          

any part of the customer's securities or the value thereof OF      914          

THOSE SECURITIES, by doing either of the following without the     915          

customer's consent:                                                             

      (1)  Pledging, selling, or otherwise disposing of such       917          

securities, when the dealer has no lien on or any special          919          

property in such securities;                                                    

      (2)  Pledging such securities for more than the amount due,  921          

or otherwise disposing of such securities for the dealer's own     923          

benefit, when the dealer has a lien or indebtedness on such        924          

securities.                                                        925          

      It is an affirmative defense to a charge under this          927          

division that, at the time the securities involved were pledged,   928          

sold, or disposed of, the dealer had in the dealer's possession    930          

or control, and available for delivery, securities of the same     931          

kinds and in amounts sufficient to satisfy all customers entitled  932          

thereto TO THE SECURITIES, upon demand and tender of any amount    933          

due thereon ON THE SECURITIES.                                     934          

      (J)  No person, with purpose to deceive, shall make, issue,  936          

publish, or cause to be made, issued, or published any statement   937          

or advertisement as to the value of securities, or as to alleged   938          

facts affecting the value of securities, or as to the financial    939          

condition of any issuer of securities, when the person knows that  942          

such statement or advertisement is false in any material respect.  943          

      (K)  No person, with purpose to deceive, shall make,         945          

                                                          22     


                                                                 
record, or publish or cause to be made, recorded, or published, a  946          

report of any transaction in securities which is false in any      947          

material respect.                                                  948          

      (L)  No dealer shall engage in any act that violates the     950          

provisions of section 15(c) or 15(g) of the "Securities Exchange   951          

Act of 1934," 48 Stat. 881, 15 U.S.C.A. 78o(c) or (g), or any      952          

rule or regulation promulgated by the securities and exchange      953          

commission thereunder.  If, subsequent to October 11, 1994,        954          

additional amendments to section 15(c) or 15(g) are adopted, or    955          

additional rules or regulations are promulgated pursuant to such   956          

sections, the division of securities shall, by rule, adopt the     957          

amendments, rules, or regulations, unless the division finds that  958          

the amendments, rules, or regulations are not necessary for the    959          

protection of investors or in the public interest.                              

      (M)(1)  No investment adviser or investment adviser          961          

representative shall do any of the following:                      962          

      (a)  Employ any device, scheme, or artifice to defraud any   965          

person;                                                                         

      (b)  Engage in any act, practice, or course of business      967          

that operates or would operate as a fraud or deceit upon any       968          

person;                                                            969          

      (c)  In acting as principal for the investment adviser's or  971          

investment adviser representative's own account, knowingly sell    972          

any security to or purchase any security from a client, or in      973          

acting as salesperson for a person other than such client,         974          

knowingly effect any sale or purchase of any security for the      975          

account of such client, without disclosing to the client in        976          

writing before the completion of the transaction the capacity in   977          

which the investment adviser or investment adviser representative  979          

is acting and obtaining the consent of the client to the           980          

transaction.  Division (M)(1)(c) of this section does not apply    982          

to any investment adviser registered with the securities and       983          

exchange commission under section 203 of the "Investment Advisers  985          

Act of 1940," 15 U.S.C. 80b-3, or to any transaction with a        988          

                                                          23     


                                                                 
customer of a licensed dealer or salesperson if the licensed       989          

dealer or salesperson is not acting as an investment adviser or    990          

investment adviser representative in relation to the transaction.  991          

      (d)  Engage in any act, practice, or course of business      994          

that is fraudulent, deceptive, or manipulative.  The division of   995          

securities may adopt rules reasonably designed to prevent such     996          

acts, practices, or courses of business as are fraudulent,         997          

deceptive, or manipulative.                                                     

      (2)  No investment adviser or investment adviser             999          

representative licensed or required to be licensed under this      1,000        

chapter shall take or have custody of any securities or funds of   1,001        

any person, except as provided in rules adopted by the division.   1,002        

      (3)  In the solicitation of clients or prospective clients,  1,004        

no person shall make any untrue statement of a material fact or    1,005        

omit to state a material fact necessary in order to make the       1,006        

statements made not misleading in light of the circumstances       1,007        

under which the statements were made.                              1,008        

      Section 2.  That existing sections 1701.48, 1707.01, and     1,010        

1707.44 of the Revised Code are hereby repealed.                   1,012