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
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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
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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
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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
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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
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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
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(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
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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.
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(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
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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
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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
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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
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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
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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
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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
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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