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As Reported by the House Financial Institutions Committee
122nd General Assembly
Regular Session
1997-1998 | Sub. H. B. No. 695 |
REPRESENTATIVES STAPLETON-THOMAS-WILLAMOWSKI-HARRIS-
GARCIA-OLMAN-VAN VYVEN-SALERNO-TAYLOR-TIBERI-
EVANS-HOUSEHOLDER-JACOBSON-MYERS
A BILL
To amend sections 1707.01, 1707.03, 1707.11, 1707.14, 1707.17, 1707.18,
1707.19, 1707.20, 1707.22,
1707.23, 1707.25, 1707.27, 1707.36,
1707.391, 1707.42, 1707.431, 1707.44, 1707.46,
1707.48, and 1707.99,
and to enact sections 1707.092, 1707.093, 1707.141,
1707.151, and 1707.161 of
the Revised Code to
modify the Securities Law, including modifications
to the list
of securities transactions exempt from
registration, provisions
for notice filings by investment companies and in connection
with covered security offerings, provisions
for electronic
filing,
provisions for the registration and regulation of
investment advisers and
investment adviser representatives,
provisions applying to investigation of alleged
violations of
the Securities Law by the Office of the Attorney-Inspector and
increasing the penalties that apply to
violations of the
Securities Law,
and other provisions
for related
changes.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1707.01, 1707.03, 1707.11, 1707.14, 1707.17, 1707.18,
1707.19, 1707.20, 1707.22,
1707.23, 1707.25, 1707.27, 1707.36, 1707.391, 1707.42, 1707.431, 1707.44,
1707.46,
1707.48, and 1707.99 be
amended and sections 1707.092, 1707.093, 1707.141, 1707.151, and 1707.161 of
the Revised Code be
enacted to read as follows:
Sec. 1707.01. As used in this chapter:
(A) Whenever the context requires it, "division" or
"division of securities" may be read as "director of commerce" or
as "commissioner of securities."
(B) "Security" means any certificate or instrument that
represents title to or interest in, or is secured by any lien or
charge upon, the capital, assets, profits, property, or credit of
any person or of any public or governmental body, subdivision, or
agency. It includes shares of stock, certificates for shares of
stock, membership interests in limited liability companies,
voting-trust certificates, warrants and options to purchase
securities, subscription rights, interim receipts, interim
certificates, promissory notes, all forms of commercial paper,
evidences of indebtedness, bonds, debentures, land trust
certificates, fee certificates, leasehold certificates, syndicate
certificates, endowment certificates, certificates or written
instruments in or under profit-sharing or participation
agreements or in or under oil, gas, or mining leases, or
certificates or written instruments of any interest in or under
the same, receipts evidencing preorganization or reorganization
subscriptions, preorganization certificates, reorganization
certificates, certificates evidencing an interest in any trust or
pretended trust, any investment contract, any instrument
evidencing a promise or an agreement to pay money, warehouse
receipts for intoxicating liquor, and the currency of any
government other than those of the United States and Canada, but
sections 1707.01 to 1707.45 of the Revised Code do not apply to
bond investment companies or to the sale of real estate.
(C)(1) "Sale" has the full meaning of "sale" as applied by
or accepted in courts of law or equity, and includes every
disposition, or attempt to dispose, of a security or of an
interest in a security. "Sale" also includes a contract to sell,
an exchange, an attempt to sell, an option of sale, a
solicitation of a sale, a solicitation of an offer to buy, a
subscription, or an offer to sell, directly or indirectly, by
agent, circular, pamphlet, advertisement, or otherwise.
(2) "Sell" means any act by which a sale is made.
(3) The use of advertisements, circulars, or pamphlets in
connection with the sale of securities in this state exclusively
to the purchasers specified in division (D) of section 1707.03 of
the Revised Code is not a sale when the advertisements,
circulars, and pamphlets describing and offering those securities
bear a readily legible legend in substance as follows: "This
offer is made on behalf of dealers licensed under sections
1707.01 to 1707.45 of the Revised Code, and is confined in this
state exclusively to institutional investors and licensed
dealers."
(4) The offering of securities by any person in
conjunction with a licensed dealer by use of advertisement,
circular, or pamphlet is not a sale if that person does not
otherwise attempt to sell securities in this state.
(5) Any security given with, or as a bonus on account of,
any purchase of securities is conclusively presumed to constitute
a part of the subject of that purchase and has been "sold."
(6) "Sale" by an owner, pledgee, or mortgagee, or by a
person acting in a representative capacity, includes sale on
behalf of such party by an agent, including a licensed dealer or
salesman SALESPERSON.
(D) "Person"," EXCEPT AS OTHERWISE PROVIDED IN THIS
CHAPTER, means a natural person, firm, partnership,
limited partnership, partnership association, syndicate,
joint-stock company, unincorporated association, trust or trustee
except where the trust was created or the trustee designated by
law or judicial authority or by a will, and a corporation or
limited liability company organized under the laws of any state,
any foreign government, or any political subdivision of a state
or foreign government.
(E)(1) "Dealer," except as otherwise provided in this
chapter, means every person, other than a salesman SALESPERSON,
who engages or professes to engage, in this state, for either all or part of
the person's time, directly or indirectly, either in the business
of the sale of securities for the person's own account, or in the business
of the purchase or sale of securities for the account of others in the
reasonable expectation of receiving a commission, fee, or other
remuneration as a result of engaging in the purchase and sale of
securities. "Dealer" does not mean any of the following:
(a) Any issuer, including any officer, director, employee,
or trustee of, OR MEMBER OR MANAGER OF, or partner in, or any
general partner of, any
issuer, that sells, offers for sale, or does any act in
furtherance of the sale of a security that represents an economic
interest in that issuer, provided no commission, fee, or other
similar remuneration is paid to or received by the issuer for the
sale;
(b) Any licensed attorney, public accountant, or firm of
such attorneys or accountants, whose activities are incidental to
the practice of the attorney's, accountant's or firm's profession;
(c) Any person that, for the account of others, engages in
the purchase or sale of securities that are issued and
outstanding before such purchase and sale, if a majority or more
of the equity interest of an issuer is sold in that transaction,
and if, in the case of a corporation, the securities sold in that
transaction represent a majority or more of the voting power of
the corporation in the election of directors;
(d) Any person that brings an issuer together with a
potential investor and whose compensation is not directly or
indirectly based on the sale of any securities by the issuer to
the investor;
(e) Any bank, savings and loan association, savings bank,
or credit union chartered under the laws of the United States or
any state thereof, provided that all transactions are consummated
by or through a person licensed pursuant to section 1707.14 of
the Revised Code;
(f) Any person that the division of securities by rule
exempts from the definition of "dealer" under division (E)(1) of
this section.
(2) "Licensed dealer" means a dealer licensed under
this chapter.
(F)(1) "Salesman" OR "SALESPERSON" means every natural person,
other
than a
dealer, employed, authorized, or appointed by a dealer to sell
securities within this state.
(2) The general partners of a partnership, and the
executive officers of a corporation or unincorporated
association, licensed as a dealer are not salesmen SALESPERSONS
within the meaning of this definition, nor are such clerical or other
employees of an issuer or dealer as are employed for work to
which the sale of securities is secondary and incidental; but the
division of securities may require a license from any such
partner, executive officer, or employee if it determines that
protection of the public necessitates the licensing.
(3) "Licensed salesman SALESPERSON" means a salesman
SALESPERSON licensed under this chapter.
(G) "Issuer" means every person who has issued, proposes
to issue, or issues any security.
(H) "Director" means each director or trustee of a
corporation, each trustee of a trust, each general partner of a
partnership, except a partnership association, each manager of a
partnership association, and any person vested with managerial or
directory power over an issuer not having a board of directors or
trustees.
(I) "Incorporator" means any incorporator of a corporation
and any organizer of, or any person participating, other than in
a representative or professional capacity, in the organization of
an unincorporated issuer.
(J) "Fraud," "fraudulent acts," "fraudulent practices," or
"fraudulent transactions" means anything recognized on or after
July 22, 1929, as such in courts of law or equity; any device,
scheme, or artifice to defraud or to obtain money or property by
means of any false pretense, representation, or promise; any
fictitious or pretended purchase or sale of securities; and any
act, practice, transaction, or course of business relating to the
sale of securities that is fraudulent or that has operated or
would operate as a fraud upon the purchaser.
(K) Except as otherwise specifically provided, whenever
any classification or computation is based upon "par value," as
applied to securities without par value, the average of the
aggregate consideration received or to be received by the issuer
for each class of those securities shall be used as the basis for
that classification or computation.
(L)(1) "Intangible property" means patents, copyrights,
secret processes, formulas, services, good will, promotion and
organization fees and expenses, trademarks, trade brands, trade
names, licenses, franchises, any other assets treated as
intangible according to generally accepted accounting principles,
and securities, accounts receivable, or contract rights having no
readily determinable value.
(2) "Tangible property" means all property other than
intangible property and includes securities, accounts receivable,
and contract rights, when the securities, accounts receivable, or
contract rights have a readily determinable value.
(M) "Public utilities" means those utilities defined in
sections 4905.02, 4905.03, 4907.02, and 4907.03 of the Revised
Code; in the case of a foreign corporation, it means those
utilities defined as public utilities by the laws of its
domicile; and in the case of any other foreign issuer, it means
those utilities defined as public utilities by the laws of the
situs of its principal place of business. The term always
includes railroads whether or not they are so defined as public
utilities.
(N) "State" means any state of the United States, any
territory or possession of the United States, the District of
Columbia, and any province of Canada.
(O) "Bank" means any bank, trust company, savings and loan
association, or savings bank, OR CREDIT UNION that is
incorporated or organized
under the laws of the United States, any state of the United
States, Canada, or any province of Canada and that is subject to
regulation or supervision by that country, state, or province.
(P) "Include," when used in a definition, does not exclude
other things or persons otherwise within the meaning of the term
defined.
(Q)(1) "Registration by description" means that the
requirements of section 1707.08 of the Revised Code have been
complied with.
(2) "Registration by qualification" means that the
requirements of sections 1707.09 and 1707.11 of the Revised Code
have been complied with.
(3) "Registration by coordination" means that there has
been compliance with section 1707.091 of the Revised Code.
Reference in this chapter to registration by qualification also
shall be deemed to include registration by coordination unless
the context otherwise indicates.
(R) "Intoxicating liquor" includes all liquids and
compounds that contain more than three and two-tenths per cent of
alcohol by weight and are fit for use for beverage purposes.
(S) "Institutional investor" means any corporation, bank,
insurance company, pension fund or pension fund trust, employees'
profit-sharing fund or employees' profit-sharing trust, any
association engaged, as a substantial part of its business or
operations, in purchasing or holding securities, or any trust in
respect of which a bank is trustee or cotrustee. "Institutional
investor" does not include any business entity formed for the
primary purpose of evading sections 1707.01 to 1707.45 of the
Revised Code.
(T) "Securities Act of 1933," 84 48 Stat. 74, 15 U.S.C.
77a-77aa 77a, "Securities Exchange Act of 1934," 48 Stat. 881,
15
U.S.C. 78a-78jj, and "Internal Revenue Code of 1954
1986," 68a 100 Stat. 3 2085, 26
U.S.C. 1, "INVESTMENT ADVISERS
ACT OF 1940," 54 STAT. 847, 15
U.S.C. 80b, AND
"INVESTMENT COMPANY ACT OF 1940," 54 STAT.
789, 15 U.S.C. 80a mean the federal
statutes of those names as
amended before or after July 20, 1978 THE EFFECTIVE DATE OF THIS
AMENDMENT.
(U) "Securities and exchange commission" means the
securities and exchange commission established by the Securities
Exchange Act of 1934.
(V)(1) "Control bid" means the purchase of or offer to
purchase any equity security of a subject company from a resident
of this state if either of the following applies:
(a) After the purchase of that security, the offeror would
be directly or indirectly the beneficial owner of more than ten
per cent of any class of the issued and outstanding equity
securities of the issuer.
(b) The offeror is the subject company, there is a pending
control bid by a person other than the issuer, and the number of
the issued and outstanding shares of the subject company would be
reduced by more than ten per cent.
(2) For purposes of division (V)(1) of this section,
"control bid" does not include any of the following:
(a) A bid made by a dealer for the dealer's own account in the
ordinary course of business of buying and selling securities;
(b) An offer to acquire any equity security solely in
exchange for any other security, or the acquisition of any equity
security pursuant to an offer, for the sole account of the
offeror, in good faith and not for the purpose of avoiding the
provisions of this chapter, and not involving any public offering
of the other security within the meaning of Section 4 of Title I
of the "Securities Act of 1933," 48 Stat. 77, 15 U.S.C.A. 77d(2),
as amended;
(c) Any other offer to acquire any equity security, or the
acquisition of any equity security pursuant to an offer, for the
sole account of the offeror, from not more than fifty persons, in
good faith and not for the purpose of avoiding the provisions of
this chapter.
(W) "Offeror" means a person who makes, or in any way
participates or aids in making, a control bid and includes
persons acting jointly or in concert, or who intend to exercise
jointly or in concert any voting rights attached to the
securities for which the control bid is made and also includes
any subject company making a control bid for its own securities.
(X)(1) "Investment advisor ADVISER" means any person
who, for compensation, engages in the business of advising
others, either directly or through publications or writings, as
to the value of securities or as to the advisability of investing
in, purchasing, or selling securities, or who, for compensation
and as a part of regular business, issues or promulgates analyses
or reports concerning securities. "
(2) "Investment advisor ADVISER" does not
mean any of the following:
(1)(a) Any licensed attorney, public
accountant, or firm of
such attorneys or accountants, engineer, any bank, savings and
loan association, or savings bank, or any director, officer, or
employee of a bank, savings and loan association, or savings
bank OR TEACHER, whose activities are PERFORMANCE OF
INVESTMENT ADVISORY SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS
SECTION IS SOLELY incidental to the
practice of the attorney's,
accountant's, engineer's, director's, officer's,
employee's, firm's, bank's, or association's TEACHER'S
profession or occupation;
(2)(b) A publisher or bona fide employee of any bona
fide
newspaper, news magazine, or business or financial publication of
general, regular, and paid REGULAR circulation;
(3) Any issuer, including any officer, director, employee,
or partner in, or trustee of, any issuer whose performance of
these services occurs in furtherance of the sale of a security
that represents an economic interest in that issuer, provided
that no commission, fee, or remuneration is paid to or received
by such person for such advisory services
(c) A PERSON WHO ACTS SOLELY AS AN INVESTMENT ADVISER
REPRESENTATIVE;
(d) A BANK HOLDING COMPANY, AS DEFINED IN THE "BANK
HOLDING COMPANY ACT OF 1956," 70 STAT.
133, 12 U.S.C. 1841, THAT IS NOT AN INVESTMENT
COMPANY;
(e) A BANK, OR ANY RECEIVER, CONSERVATOR, OR OTHER LIQUIDATING
AGENT OF A BANK;
(f) ANY LICENSED DEALER OR LICENSED SALESPERSON WHOSE PERFORMANCE
OF INVESTMENT ADVISORY SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS
SECTION IS SOLELY INCIDENTAL TO THE CONDUCT OF THE DEALER'S OR SALESPERSON'S
BUSINESS AS A LICENSED DEALER OR LICENSED SALESPERSON AND WHO RECEIVES NO
SPECIAL COMPENSATION FOR THE SERVICES;
(g) ANY PERSON, THE ADVICE, ANALYSES, OR REPORTS OF WHICH DO NOT
RELATE TO SECURITIES OTHER THAN SECURITIES THAT ARE DIRECT OBLIGATIONS OF, OR
OBLIGATIONS GUARANTEED AS TO PRINCIPAL OR INTEREST BY, THE UNITED
STATES, OR SECURITIES ISSUED OR GUARANTEED BY CORPORATIONS IN WHICH
THE UNITED STATES HAS A DIRECT OR INDIRECT INTEREST, AND
THAT HAVE BEEN DESIGNATED BY THE SECRETARY OF THE TREASURY AS EXEMPT
SECURITIES AS DEFINED IN THE "SECURITIES EXCHANGE
ACT OF 1934," 48 STAT. 881, 15
U.S.C. 78c;
(h) ANY OTHER PERSON THAT THE DIVISION DESIGNATES BY RULE, IF THE
DIVISION FINDS THAT THE DESIGNATION IS NECESSARY OR APPROPRIATE IN THE PUBLIC
INTEREST OR FOR THE PROTECTION OF INVESTORS OR CLIENTS AND CONSISTENT WITH THE
PURPOSES FAIRLY INTENDED BY THE POLICY AND PROVISIONS OF THIS CHAPTER.
(Y)(1) "Subject company" means an issuer that satisfies
both of the following:
(a) Its principal place of business or its principal
executive office is located in this state, or it owns or controls
assets located within this state that have a fair market value of
at least one million dollars.
(b) More than ten per cent of its beneficial or record
equity security holders are resident in this state, more than ten
per cent of its equity securities are owned beneficially or of
record by residents in this state, or more than one thousand of
its beneficial or record equity security holders are resident in
this state.
(2) The division of securities may adopt rules to
establish more specific application of the provisions set forth
in division (Y)(1) of this section. Notwithstanding the
provisions set forth in division (Y)(1) of this section and any
rules adopted under this division, the division, by rule or in an
adjudicatory proceeding, may make a determination that an issuer
does not constitute a "subject company" under division (Y)(1) of
this section if appropriate review of control bids involving the
issuer is to be made by any regulatory authority of another
jurisdiction.
(Z) "Beneficial owner" includes any person who directly or
indirectly through any contract, arrangement, understanding, or
relationship has or shares, or otherwise has or shares, the power
to vote or direct the voting of a security or the power to
dispose of, or direct the disposition of, the security.
"Beneficial ownership" includes the right, exercisable within
sixty days, to acquire any security through the exercise of any
option, warrant, or right, the conversion of any convertible
security, or otherwise. Any security subject to any such option,
warrant, right, or conversion privilege held by any person shall
be deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by that
person, but shall not be deemed to be outstanding for the purpose
of computing the percentage of the class owned by any other
person. A person shall be deemed the beneficial owner of any
security beneficially owned by any relative or spouse or relative
of the spouse residing in the home of that person, any trust or
estate in which that person owns ten per cent or more of the
total beneficial interest or serves as trustee or executor, any
corporation or entity in which that person owns ten per cent or
more of the equity, and any affiliate or associate of that
person.
(AA) "Offeree" means the beneficial or record owner of any
security that an offeror acquires or offers to acquire in
connection with a control bid.
(BB) "Equity security" means any share or similar
security, or any security convertible into any such security, or
carrying any warrant or right to subscribe to or purchase any
such security, or any such warrant or right, or any other
security that, for the protection of security holders, is treated
as an equity security pursuant to rules of the division of
securities.
(CC) "Investment company" has the same meaning as in section 3(A) of the
"Investment Company Act of 1940," 54 Stat. 789, 15 U.S.C.
80a-1 to 80a-52.
(DD) "Penny stock" has the same meaning
as in section 3(A)(51) of the "Securities Exchange Act
of 1934," 48 Stat. 881, 15 U.S.C.
78a-78jj, and the rules, regulations, and orders issued
pursuant to that section.
(EE) "Going concern transaction" has
the same meaning given that term under the rules or regulations on the
securities and exchange commission issued pursuant to section
13(c) of the "Securities Exchange Act of 1934," 48 Stat. 881, 15 U.S.C.
78a-78jj.
(FF) "Person acting on behalf of an
issuer" means an officer, director, or employee of an issuer.
(GG) "Blank check company," "roll-up
transaction," "executive officer of an entity," and "direct participation
program" have the same meanings given those terms by rule or regulation of the
securities and exchange commission.
(HH) "Forward-looking statement" means any of the following:
(1) A statement containing a projection of revenues, income including
income loss, earnings per share including earnings loss per share, capital
expenditures, dividends, capital structure, or other financial items;
(2) A statement of the plans and objectives of the management of the
issuer for future operations, including plans or objectives relating to the
products or services of the issuer;
(3) A statement of future economic performance, including any statement
of that nature contained in a discussion and analysis of financial conditions
by the management or in the results of operations included pursuant to the
rules and regulations of the securities and exchange commission;
(4) Any disclosed statement of the assumptions underlying or relating to
a statement described in division (B)(1), (2),
or (3) of section 1707.437 of the Revised
Code;
(5) Any report issued by an outside reviewer retained by an issuer to
the extent that the report relates to a forward-looking statement made by the
issuer;
(6) A statement containing a projection or estimate of any other items
that may be specified by rule or regulation of the securities and exchange
commission.
(II)(1) "INVESTMENT ADVISER REPRESENTATIVE" MEANS A SUPERVISED
PERSON OF AN INVESTMENT ADVISER, PROVIDED THAT MORE THAN TEN PER CENT OF THE
SUPERVISED PERSON'S CLIENTS ARE NATURAL PERSONS OTHER THAN EXCEPTED PERSONS
DEFINED IN DIVISION (KK) OF THIS SECTION. "INVESTMENT ADVISER
REPRESENTATIVE" DOES NOT MEAN ANY OF THE FOLLOWING:
(a) A SUPERVISED PERSON THAT DOES NOT ON A REGULAR BASIS SOLICIT,
MEET WITH, OR OTHERWISE COMMUNICATE WITH CLIENTS OF THE INVESTMENT ADVISER;
(b) A SUPERVISED PERSON THAT PROVIDES ONLY INVESTMENT ADVISORY
SERVICES DESCRIBED IN DIVISION (X)(1) OF THIS SECTION BY MEANS OF
WRITTEN MATERIALS OR ORAL STATEMENTS THAT DO NOT PURPORT TO MEET THE
OBJECTIVES OR NEEDS OF SPECIFIC INDIVIDUALS OR ACCOUNTS;
(c) ANY OTHER PERSON THAT THE DIVISION DESIGNATES
BY RULE, IF THE DIVISION FINDS THAT THE DESIGNATION IS NECESSARY
OR APPROPRIATE IN THE PUBLIC INTEREST OR FOR THE PROTECTION OF
INVESTORS OR CLIENTS AND IS CONSISTENT WITH THE PROVISIONS
FAIRLY INTENDED BY THE POLICY AND PROVISIONS OF THIS
CHAPTER.
(2) CLIENTS WHO ARE NOT RESIDENTS OF THE UNITED STATES
NEED NOT BE INCLUDED IN THE CALCULATION OF THE PERCENTAGE OF REQUIRED CLIENTS
UNDER DIVISION (II)(1) OF THIS SECTION.
(JJ) "SUPERVISED PERSON" MEANS ANY OF THE FOLLOWING:
(1) A PARTNER, OFFICER, OR DIRECTOR OF AN INVESTMENT ADVISER, OR OTHER
PERSON OCCUPYING A SIMILAR STATUS OR PERFORMING SIMILAR FUNCTIONS WITH RESPECT
TO AN INVESTMENT ADVISER;
(2) AN EMPLOYEE OF AN INVESTMENT ADVISER;
(3) A PERSON WHO PROVIDES INVESTMENT ADVISORY SERVICES DESCRIBED IN
DIVISION (X)(1) OF THIS SECTION ON BEHALF OF THE INVESTMENT ADVISER
AND IS SUBJECT TO THE SUPERVISION AND CONTROL OF THE INVESTMENT ADVISER.
(KK) "EXCEPTED PERSON" MEANS A NATURAL PERSON TO WHOM EITHER OF
THE FOLLOWING APPLIES:
(1) IMMEDIATELY AFTER ENTERING INTO THE INVESTMENT ADVISORY CONTRACT WITH
THE INVESTMENT ADVISER, THE PERSON HAS AT LEAST FIVE HUNDRED THOUSAND DOLLARS
UNDER MANAGEMENT WITH THE INVESTMENT ADVISER.
(2) THE INVESTMENT ADVISER REASONABLY BELIEVES, IMMEDIATELY PRIOR TO
ENTERING INTO AN ADVISORY CONTRACT WITH THE PERSON, THE PERSON HAS A NET
WORTH, TOGETHER WITH ASSETS HELD JOINTLY WITH A SPOUSE, OF MORE THAN ONE
MILLION DOLLARS.
Sec. 1707.03. (A) As used in this section, "exempt" means
that, except in the case of securities the right to buy, sell, or
deal in which has been suspended or revoked under an existing
order of the division of securities under section 1707.13 of the
Revised Code or under a cease and desist order under division (H)
of section 1707.23 of the Revised Code, transactions in
securities may be carried on and completed without compliance
with sections 1707.08 to 1707.11 of the Revised Code.
(B) A sale of securities made by or on behalf of a bona
fide owner, neither the issuer nor a dealer, is exempt if the
sale is made in good faith and not for the purpose of avoiding
this chapter and is not made in the course of repeated and
successive transactions of a similar character. Any sale of
securities over a stock exchange that is lawfully conducted in
this state and regularly open for public patronage and that has
been established and operated for a period of at least five years
prior to the sale at a commission not exceeding the commission
regularly charged in such transactions also is exempt.
(C) The sale of securities by executors, administrators,
receivers, trustees, or anyone acting in a fiduciary capacity is
exempt, where such relationship was created by law, by a will, or
by judicial authority, and where such sales are subject to
approval by, or are made in pursuance to authority granted by,
any court of competent jurisdiction or are otherwise authorized
and lawfully made by such fiduciary.
(D) A sale to the issuer, to a dealer, or to an
institutional investor is exempt.
(E) A sale in good faith, and not for the purpose of
avoiding this chapter, by a pledgee of a security pledged for a
bona fide debt is exempt.
(F) The sale at public auction by a corporation of shares
of its stock because of delinquency in payment for the shares is
exempt.
(G)(1) The giving of any conversion right with, or on
account of the purchase of, any security that is exempt, is the
subject matter of an exempt transaction, has been registered by
description, by coordination, or by qualification, or is the
subject matter of a transaction that has been registered by
description is exempt.
(2) The giving of any subscription right, warrant, or
option to purchase a security or right to receive a security upon
exchange, which security is exempt at the time the right,
warrant, or option to purchase or right to receive is given, is
the subject matter of an exempt transaction, is registered by
description, by coordination, or by qualification, or is the
subject matter of a transaction that has been registered by
description is exempt.
(3) The giving of any subscription right or any warrant or
option to purchase a security, which right, warrant, or option
expressly provides that it shall not be exercisable except for a
security that at the time of the exercise is exempt, is the
subject matter of an exempt transaction, is registered by
description, by coordination, or by qualification, or at such
time is the subject matter of a transaction that has been
registered by description is exempt.
(H) The sale of notes, bonds, or other evidences of
indebtedness that are secured by a mortgage lien upon real
estate, leasehold estate other than oil, gas, or mining
leasehold, or tangible personal property, or which evidence of
indebtedness is due under or based upon a conditional-sale
contract, if all such notes, bonds, or other evidences of
indebtedness are sold to a single purchaser at a single sale, is
exempt.
(I) The delivery of securities by the issuer on the
exercise of conversion rights, the sale of securities by the
issuer on exercise of subscription rights or of warrants or
options to purchase securities, the delivery of voting-trust
certificates for securities deposited under a voting-trust
agreement, the delivery of deposited securities on surrender of
voting-trust certificates, and the delivery of final certificates
on surrender of interim certificates are exempt; but the sale of
securities on exercise of subscription rights, warrants, or
options is not an exempt transaction unless those rights,
warrants, or options when granted were the subject matter of an
exempt transaction under division (G) of this section or were
registered by description, by coordination, or by qualification.
(J) The sale of securities by a bank, savings and loan
association, savings bank, or credit union organized under the
laws of the United States or of this state is exempt if at a
profit to that seller of not more than two per cent of the total
sale price of the securities.
(K)(1) The distribution by a corporation of its securities
to its security holders as a share dividend or other distribution
out of earnings or surplus is exempt.
(2) The exchange or distribution by the issuer of any of
its securities or of the securities of any of the issuer's wholly
owned subsidiaries exclusively with or to its existing security
holders, if no commission or other remuneration is given directly
or indirectly for soliciting the exchange, is exempt.
(3) The sale of preorganization subscriptions for shares
of stock of a corporation prior to the incorporation of the corporation is
exempt, when the sale is evidenced by a written agreement, no
remuneration is given, or promised, directly or indirectly, for
or in connection with the sale of those securities, and no
consideration is received, directly or indirectly, by any person
from the purchasers of those securities until registration by
qualification, by coordination, or by description of those
securities is made under this chapter.
(L) The issuance of securities in exchange for one or more
bona fide outstanding securities, claims, or property interests,
not including securities sold for a consideration payable in
whole or in part in cash, under a plan of reorganization,
recapitalization, or refinancing approved by a court pursuant to
the Bankruptcy Act of the United States or to any other federal
act giving any federal court jurisdiction over such plan of
reorganization, or under a plan of reorganization approved by a
court of competent jurisdiction of any state of the United States
is exempt. As used in this division, "reorganization,"
"recapitalization," and "refinancing" have the same meanings as
in section 1707.04 of the Revised Code.
(M) A sale by a licensed dealer, acting either as
principal or as agent, of securities issued and outstanding
before the sale is exempt, unless the sale is of one or more of
the following:
(1) Securities constituting the whole or a part of an
unsold allotment to or subscription by a dealer as an underwriter
or other participant in the distribution of those securities by
the issuer, whether that distribution is direct or through an
underwriter, provided that, if the issuer is such by reason of
owning one-fourth or more of those securities, such THE dealer
has
knowledge of such THIS fact or reasonable cause to believe
such THIS fact;
(2) Any class of shares issued by a corporation when the
number of beneficial owners of that class is less than
twenty-five, with the record owner of securities being deemed the
beneficial owner for this purpose, in the absence of actual
knowledge to the contrary;
(3) Securities that within one year were purchased outside
this state or within one year were transported into this state,
if the dealer has knowledge or reasonable cause to believe,
before the sale of those securities, that within one year they
were purchased outside this state or within one year were
transported into this state; but such a sale of those securities
is exempt if any of the following occurs:
(a) A recognized securities manual contains the names of
the issuer's officers and directors, a balance sheet of the
issuer as of a date within eighteen months, and a profit and loss
statement for either the fiscal year preceding that date or the
most recent year of operations;
(b) Those securities, or securities of the same class,
were registered within one year on the basis provided in section
1707.05 of the Revised Code, or within one year were qualified
under section 1707.09 or 1707.091 of the Revised Code, and that
registration or qualification is in full force and effect;
(c) Those securities at the time of sale could be
registered on the basis provided in section 1707.05 of the
Revised Code;
(d) The sale is made by a licensed dealer on behalf of the
bona fide owner of those securities in accordance with division
(B) of this section;
(e) Those securities were transported into Ohio in a
transaction of the type described in division (L), (K), or (I) of
this section, or in a transaction registered under division (A)
of section 1707.06 of the Revised Code.
(N) For the purpose of this division and division (M) of
this section, "underwriter" means any person who has purchased
from an issuer with a view to, or sells for an issuer in
connection with, the distribution of any security, or who
participates directly or indirectly in any such undertaking or in
the underwriting thereof, but "underwriter" does not include a
person whose interest is limited to a discount, commission, or
profit from the underwriter or from a dealer that is not in
excess of the customary distributors' or sellers' discount,
commission, or profit; and "issuer" includes any person or any
group of persons acting in concert in the sale of such
securities, owning beneficially one-fourth or more of the
outstanding securities of the class involved in the transactions
in question, with the record owner of securities being deemed the
beneficial owner for this purpose, in the absence of actual
knowledge to the contrary.
(O)(1) The sale of any equity security is exempt if all
the following conditions are satisfied:
(a) The sale is by the issuer of the security.
(b) The total number of purchasers in this state of all
securities issued or sold by the issuer in reliance upon this
exemption during the period of one year ending with the date of
the sale does not exceed ten. A sale of securities registered
under this chapter or sold pursuant to an exemption under this
chapter other than this exemption shall not be integrated with a
sale pursuant to this exemption in computing the number of
purchasers under this exemption.
(c) No advertisement, article, notice, or other
communication published in any newspaper, magazine, or similar
medium or broadcast over television or radio is used in
connection with the sale, but the use of an offering circular or
other communication delivered by the issuer to selected
individuals does not destroy this exemption.
(d) The issuer reasonably believes after reasonable
investigation that the purchaser is purchasing for investment.
(e) The aggregate commission, discount, and other
remuneration, excluding legal, accounting, and printing fees,
paid or given directly or indirectly does not exceed ten per cent
of the initial offering price.
(f) Any such commission, discount, or other remuneration
for sales in this state is paid or given only to dealers or
salesmen SALESPERSONS registered pursuant to this chapter.
(2) For the purposes of division (O)(1) of this section,
each of the following is deemed to be a single purchaser of a
security: husband and wife, a child and its parent or guardian
when the parent or guardian holds the security for the benefit of
the child, a corporation, a limited liability company, a
partnership, an association or other unincorporated entity, a
joint-stock company, or a trust, but only if the corporation,
limited liability company, partnership, association, entity,
joint-stock company, or trust was not formed for the purpose of
purchasing the security.
(3) As used in division (O)(1) of this section, "equity
security" means any stock or similar security of a corporation or
any membership interest in a limited liability company; or any
security convertible, with or without consideration, into such a
security, or carrying any warrant or right to subscribe to or
purchase such a security; or any such warrant or right; or any
other security that the division considers necessary or
appropriate, by such rules as it may prescribe in the public
interest or for the protection of investors, to treat as an
equity security.
(P) The sale of securities representing interests in or
under profit-sharing or participation agreements relating to oil
or gas wells located in this state, or representing interests in
or under oil or gas leases of real estate situated in this state,
is exempt if the securities are issued by an individual,
partnership, limited partnership, partnership association,
syndicate, pool, trust or trust fund, or other unincorporated
association and if each of the following conditions is complied
with:
(1) The beneficial owners of the securities do not, and
will not after the sale, exceed five natural persons;
(2) The securities constitute or represent interests in
not more than one oil or gas well;
(3) A certificate or other instrument in writing is
furnished to each purchaser of the securities at or before the
consummation of the sale, disclosing the maximum commission,
compensation for services, cost of lease, and expenses with
respect to the sale of such interests and with respect to the
promotion, development, and management of the oil or gas well,
and the total of that commission, compensation, costs, and
expenses does not exceed twenty-five per cent of the aggregate
interests in the oil or gas well, exclusive of any landowner's
rental or royalty;
(4) The sale is made in good faith and not for the purpose
of avoiding this chapter.
(Q) The sale of any security is exempt if all of the
following conditions are satisfied:
(1) The provisions of section 5 of the Securities Act of
1933 do not apply to the sale by reason of an exemption under
either section 4 (2) of that act or any rule of the securities
and exchange commission made to carry out section 4 (2) of that
act in effect at the time of the sale.
(2) The aggregate commission, discount, and other
remuneration, excluding legal, accounting, and printing fees,
paid or given directly or indirectly does not exceed ten per cent
of the initial offering price.
(3) Any such commission, discount, or other remuneration
for sales in this state is paid or given only to dealers or
salesmen SALESPERSONS registered under this chapter.
(4) The issuer or dealer files with the division of
securities, not later than sixty days after the sale, a report
setting forth the name and address of the issuer, the total
amount of the securities sold under this division, the number of
persons to whom the securities were sold, the price at which the
securities were sold, and the commissions or discounts paid or
given.
(5) The issuer pays a filing fee of one hundred dollars
for the first filing and fifty dollars for every subsequent
filing during each calendar year.
(R) A sale of a money order, travelers' check, or other
instrument for the transmission of money by a person qualified to
engage in such business under section 1109.60 or
Chapter 1315. of
the Revised Code is exempt.
(S) A sale by a licensed dealer of securities that are in
the process of registration under the "Securities Act of 1933,"
48 Stat. 74, 15 U.S.C. 77a, as amended, unless exempt under that
act, and that are in the process of registration, if registration
is required under this chapter, is exempt, provided that no sale
of that nature shall be consummated prior to the registration by
description or qualification of the securities.
(T) The execution by a licensed dealer of orders for the
purchase of any security is exempt, provided that the dealer acts
only as agent for the purchaser, has made no solicitation of the
order to purchase the security, has no interest in the
distribution of the security, and delivers to the purchaser
written confirmation of the transaction that clearly itemizes his
commission. "Solicitation," as used in this division, means
solicitation of the order for the specific security purchased and
does not include general solicitations or advertisements of any
kind.
(U) The sale insofar as the security holders of a person
are concerned, where, pursuant to statutory provisions of the
jurisdiction under which that person is organized or pursuant to
provisions contained in its articles of incorporation,
certificate of incorporation, partnership agreement, declaration
of trust, trust indenture, or similar controlling instrument,
there is submitted to the security holders, for their vote or
consent, (1) a plan or agreement for a reclassification of
securities of that person that involves the substitution of a
security of that person for another security of that person, (2)
a plan or agreement of merger or consolidation or a similar plan
or agreement of acquisition in which the securities of that
person held by the security holders will become or be exchanged
for securities of any other person, or (3) a plan or agreement
for a combination as defined in division (Q) of section 1701.01
of the Revised Code or a similar plan or agreement for the
transfer of assets of that person to another person in
consideration of the issuance of securities of any person, is
exempt if, with respect to any of the foregoing transactions,
either of the following conditions is satisfied:
(a) The securities to be issued to the security holders
are effectively registered under sections 6 to 8 of the
Securities Act of 1933 and offered and sold in compliance with
section 5 of that act;
(b) At least twenty days prior to the date on which a
meeting of the security holders is held or the earliest date on
which corporate action may be taken when no meeting is held,
there is submitted to the security holders, by that person, or by
the person whose securities are to be issued in the transaction,
information substantially equivalent to the information that
would be required to be included in a proxy statement or
information statement prepared by or on behalf of the management
of an issuer subject to section 14(a) or 14(c) of the
Securities Exchange Act of 1934.
(V) The sale of any security is exempt if the division by
rule finds that registration is not necessary or appropriate in
the public interest or for the protection of investors.
(W) Any offer or sale of securities made in reliance on
the exemptions provided by Rule 505 of Regulation D made pursuant
to the Securities Act of 1933 and the conditions and definitions
provided by Rules 501 to 503 thereunder is exempt if the offer or
sale satisfies all of the following conditions:
(1) No commission or other remuneration is given, directly
or indirectly, to any person for soliciting or selling to any
person in this state in reliance on the exemption under this
division, except to dealers licensed in this state.
(2)(a) Unless the cause for disqualification is waived
under division (W)(2)(b) of this section, no exemption under this
section is available for the securities of an issuer unless the
issuer did not know and in the exercise of reasonable care could
not have known that any of the following applies to any of the
persons described in Rule 252(c) 262(a) to
(f)(c) of Regulation A under the
Securities Act of 1933:
(i) The person has filed an application for registration
or qualification that is the subject of an effective order
entered against the issuer, its officers, directors, general
partners, controlling persons or affiliates thereof, pursuant to
the law of any state within five years before the filing of a
notice required under division (W)(3) of this section denying
effectiveness to, or suspending or revoking the effectiveness of,
the registration statement.
(ii) The person has been convicted of any offense in
connection with the offer, sale, or purchase of any security or
franchise, or any felony involving fraud or deceit, including,
but not limited to, forgery, embezzlement, fraud, theft, or
conspiracy to defraud.
(iii) The person is subject to an effective administrative
order or judgment that was entered by a state securities
administrator within five years before the filing of a notice
required under division (W)(3) of this section and that
prohibits, denies, or revokes the use of any exemption from
securities registration, prohibits the transaction of business by
the person as a dealer, or is based on fraud, deceit, an untrue
statement of a material fact, or an omission to state a material
fact.
(iv) The person is subject to any order, judgment, or
decree of any court entered within five years before the filing
of a notice required under division (W)(3) of this section,
temporarily, preliminarily, or permanently restraining or
enjoining the person from engaging in or continuing any conduct
or practice in connection with the offer, sale, or purchase of
any security, or the making of any false filing with any state.
(b)(i) Any disqualification under this division involving
a dealer may be waived if the dealer is or continues to be
licensed in this state as a dealer after notifying the
commissioner of the act or event causing disqualification.
(ii) The commissioner may waive any disqualification under
this paragraph upon a showing of good cause that it is not
necessary under the circumstances that use of the exemption be
denied.
(3) Not later than five business days before the earlier
of the date on which the first use of an offering document or the
first sale is made in this state in reliance on the exemption
under this division, there is filed with the commissioner a
notice comprised of offering material in compliance with the
requirements of Rule 502 of Regulation D under the Securities Act
of 1933 and a fee of one hundred dollars. Material amendments to
the offering document shall be filed with the commissioner not
later than the date of their first use in this state.
(4) The aggregate commission, discount, and other
remuneration paid or given, directly or indirectly, does not
exceed twelve per cent of the initial offering price, excluding
legal, accounting, and printing fees.
(5) The commissioner, by rule, may increase the number of
purchasers or waive any other conditions of the exemption under
this division for a particular offering. The commissioner may
require the filing of advertising used in connection with offers
or sales in reliance on the exemption.
(X) ANY OFFER OR SALE OF SECURITIES MADE IN
RELIANCE ON THE EXEMPTION PROVIDED IN
RULE 506 OF
REGULATION
D UNDER THE
SECURITIES
ACT OF 1933, AND IN ACCORDANCE
WITH RULES 501 TO 503 OF
REGULATION
D UNDER THE
SECURITIES
ACT OF 1933, IS EXEMPT PROVIDED
THAT ALL OF THE FOLLOWING APPLY:
(1) THE ISSUER MAKES A NOTICE FILING WITH THE DIVISION ON
FORM D OF THE SECURITIES AND
EXCHANGE COMMISSION WITHIN FIFTEEN DAYS OF THE FIRST SALE IN
THIS STATE;
(2) ANY COMMISSION, DISCOUNT, OR OTHER REMUNERATION FOR
SALES OF SECURITIES IN THIS STATE IS PAID OR GIVEN ONLY TO
DEALERS OR SALESPERSONS LICENSED UNDER THIS CHAPTER;
(3) THE ISSUER PAYS A FILING FEE OF ONE HUNDRED DOLLARS TO
THE DIVISION; HOWEVER, NO FILING FEE SHALL BE REQUIRED TO FILE
AMENDMENTS TO THE FORM D OF THE
SECURITIES AND EXCHANGE COMMISSION.
(Y) THE OFFER OR SALE OF SECURITIES IS EXEMPT
PROVIDED THAT ALL OF THE FOLLOWING APPLY:
(1) THE SALE OF SECURITIES IS MADE ONLY TO PERSONS WHO
ARE, OR WHO THE ISSUER REASONABLY BELIEVES ARE, ACCREDITED
INVESTORS AS DEFINED IN RULE
501 OF REGULATION
D UNDER THE
SECURITIES
ACT OF 1933.
(2) THE ISSUER REASONABLY BELIEVES THAT ALL PURCHASERS ARE
PURCHASING FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH A DISTRIBUTION OF THE SECURITY. ANY RESALE OF A
SECURITY SOLD IN RELIANCE ON THIS EXEMPTION WITHIN TWELVE MONTHS
OF SALE SHALL BE PRESUMED TO BE WITH A VIEW TO DISTRIBUTION AND
NOT FOR INVESTMENT, EXCEPT A RESALE TO WHICH ANY OF THE
FOLLOWING APPLIES:
(a)THE RESALE IS PURSUANT TO A
REGISTRATION STATEMENT EFFECTIVE UNDER SECTION 1707.09 OR
1707.091 OF THE REVISED
CODE.
(b)THE RESALE IS TO AN ACCREDITED
INVESTOR, AS DEFINED IN RULE
501 OF REGULATION
D UNDER THE
SECURITIES
ACT OF 1933.
(c)THE RESALE IS TO AN INSTITUTIONAL
INVESTOR PURSUANT TO THE EXEMPTIONS UNDER DIVISION
(B) OR
(D) OF THIS SECTION.
(3) THE EXEMPTION UNDER THIS DIVISION IS NOT AVAILABLE TO
AN ISSUER THAT IS IN THE DEVELOPMENT STAGE AND THAT EITHER HAS
NO SPECIFIC BUSINESS PLAN OR PURPOSE OR HAS INDICATED THAT ITS
BUSINESS PLAN IS TO ENGAGE IN A MERGER OR ACQUISITION WITH AN
UNIDENTIFIED COMPANY OR COMPANIES, OR OTHER ENTITIES OR
PERSONS.
(4) THE EXEMPTION UNDER THIS DIVISION IS NOT AVAILABLE TO
AN ISSUER, IF THE ISSUER, ANY OF THE ISSUER'S PREDECESSORS, ANY
AFFILIATED ISSUER, ANY OF THE ISSUER'S DIRECTORS, OFFICERS,
GENERAL PARTNERS, OR BENEFICIAL OWNERS OF TEN PER CENT OR MORE
OF ANY CLASS OF ITS EQUITY SECURITIES, ANY OF THE ISSUER'S
PROMOTERS PRESENTLY CONNECTED WITH THE ISSUER IN ANY CAPACITY,
ANY UNDERWRITER OF THE SECURITIES TO BE OFFERED, OR ANY PARTNER,
DIRECTOR, OR OFFICER OF SUCH UNDERWRITER:
(a) WITHIN THE PAST FIVE YEARS, HAS
FILED A REGISTRATION STATEMENT THAT IS THE SUBJECT OF A
CURRENTLY EFFECTIVE REGISTRATION STOP ORDER ENTERED BY ANY STATE
SECURITIES ADMINISTRATOR OR THE SECURITIES AND EXCHANGE
COMMISSION;
(b) WITHIN THE PAST FIVE YEARS, HAS
BEEN CONVICTED OF ANY CRIMINAL OFFENSE IN CONNECTION WITH THE
OFFER, PURCHASE, OR SALE OF ANY SECURITY, OR INVOLVING FRAUD OR
DECEIT;
(c) IS CURRENTLY SUBJECT TO ANY STATE
OR FEDERAL ADMINISTRATIVE ENFORCEMENT ORDER OR JUDGMENT, ENTERED
WITHIN THE PAST FIVE YEARS, FINDING FRAUD OR DECEIT IN
CONNECTION WITH THE PURCHASE OR SALE OF ANY SECURITY;
(d) IS CURRENTLY SUBJECT TO ANY ORDER,
JUDGMENT, OR DECREE OF ANY COURT OF COMPETENT JURISDICTION,
ENTERED WITHIN THE PAST FIVE YEARS, THAT TEMPORARILY,
PRELIMINARILY, OR PERMANENTLY RESTRAINS OR ENJOINS THE PARTY
FROM ENGAGING IN OR CONTINUING TO ENGAGE IN ANY CONDUCT OR
PRACTICE INVOLVING FRAUD OR DECEIT IN CONNECTION WITH THE
PURCHASE OR SALE OF ANY SECURITY.
(5) DIVISION (Y)(4) OF
THIS SECTION IS INAPPLICABLE IF ANY OF THE FOLLOWING
APPLIES:
(a) THE PARTY SUBJECT TO THE
DISQUALIFICATION IS LICENSED OR REGISTERED TO CONDUCT SECURITIES
BUSINESS IN THE STATE IN WHICH THE ORDER, JUDGMENT, OR DECREE
CREATING THE DISQUALIFICATION WAS ENTERED AGAINST THE PARTY
DESCRIBED IN DIVISION (Y)(4) OF
THIS SECTION.
(b) BEFORE THE
FIRST OFFER IS MADE
UNDER THIS EXEMPTION, THE STATE SECURITIES ADMINISTRATOR,
OR THE COURT OR REGULATORY AUTHORITY THAT ENTERED THE ORDER,
JUDGMENT, OR DECREE, WAIVES THE DISQUALIFICATION.
(c) THE ISSUER DID NOT KNOW AND, IN
THE EXERCISE OF REASONABLE CARE BASED ON REASONABLE
INVESTIGATION, COULD NOT HAVE KNOWN THAT A DISQUALIFICATION FROM
THE EXEMPTION EXISTED UNDER DIVISION
(Y)(4) OF THIS SECTION.
(6) A GENERAL ANNOUNCEMENT OF THE PROPOSED OFFERING MAY BE
MADE BY ANY MEANS; HOWEVER, THE GENERAL ANNOUNCEMENT SHALL
INCLUDE ONLY THE FOLLOWING INFORMATION, UNLESS ADDITIONAL
INFORMATION IS SPECIFICALLY PERMITTED BY THE DIVISION BY
RULE:
(a) THE NAME, ADDRESS, AND TELEPHONE
NUMBER OF THE ISSUER OF THE SECURITIES;
(b) THE NAME, A BRIEF DESCRIPTION, AND
PRICE OF ANY SECURITY TO BE ISSUED;
(c) A BRIEF DESCRIPTION OF THE
BUSINESS OF THE ISSUER;
(d) THE TYPE, NUMBER, AND AGGREGATE
AMOUNT OF SECURITIES BEING OFFERED;
(e) THE NAME, ADDRESS, AND TELEPHONE
NUMBER OF THE PERSON TO CONTACT FOR ADDITIONAL INFORMATION; AND
(f) A STATEMENT INDICATING ALL OF THE
FOLLOWING:
(i) SALES WILL ONLY BE MADE TO
ACCREDITED INVESTORS AS DEFINED IN
RULE 501 OF
REGULATION
D UNDER THE
SECURITIES
ACT OF 1933;
(ii) NO MONEY OR OTHER CONSIDERATION
IS BEING SOLICITED OR WILL BE ACCEPTED BY WAY OF THIS GENERAL
ANNOUNCEMENT;
(iii) THE SECURITIES HAVE NOT BEEN
REGISTERED WITH OR APPROVED BY ANY STATE SECURITIES
ADMINISTRATOR OR THE SECURITIES AND EXCHANGE COMMISSION AND ARE
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM
REGISTRATION.
(7) THE ISSUER, IN CONNECTION WITH AN OFFER, MAY PROVIDE
INFORMATION IN ADDITION TO THE GENERAL ANNOUNCEMENT DESCRIBED IN
DIVISION (Y)(6) OF THIS
SECTION, PROVIDED THAT EITHER OF THE FOLLOWING APPLIES:
(a) THE INFORMATION IS DELIVERED
THROUGH AN ELECTRONIC DATABASE THAT IS RESTRICTED TO PERSONS
THAT ARE ACCREDITED INVESTORS AS DEFINED IN
RULE 501 OF
REGULATION
D UNDER THE
SECURITIES
ACT OF 1933.
(b) THE INFORMATION IS DELIVERED AFTER
THE ISSUER REASONABLY BELIEVES THAT THE PROSPECTIVE PURCHASER IS
AN ACCREDITED INVESTOR AS DEFINED IN
RULE 501 OF
REGULATION
D UNDER THE
SECURITIES
ACT OF 1933.
(8) NO TELEPHONE SOLICITATION SHALL BE DONE, UNLESS PRIOR
TO PLACING THE TELEPHONE CALL, THE ISSUER REASONABLY BELIEVES
THAT THE PROSPECTIVE PURCHASER TO BE SOLICITED IS AN ACCREDITED
INVESTOR AS DEFINED IN RULE 501
OF REGULATION
D UNDER THE
SECURITIES
ACT OF 1933.
(9) DISSEMINATION OF THE GENERAL ANNOUNCEMENT DESCRIBED IN
DIVISION (Y)(6) OF THIS SECTION
TO PERSONS THAT ARE NOT ACCREDITED INVESTORS, AS DEFINED IN
RULE 501 OF
REGULATION
D UNDER THE
SECURITIES
ACT OF 1933, DOES NOT
DISQUALIFY THE ISSUER FROM CLAIMING AN EXEMPTION UNDER THIS
DIVISION.
(10) THE ISSUER SHALL FILE WITH THE DIVISION NOTICE OF THE
OFFERING OF SECURITIES WITHIN FIFTEEN DAYS AFTER NOTICE OF THE
OFFERING IS MADE TO THE PUBLIC OR A GENERAL ANNOUNCEMENT IS MADE
TO THE PUBLIC IN THIS STATE. THE FILING SHALL BE ON FORMS
ADOPTED BY THE DIVISION AND SHALL INCLUDE A COPY OF THE GENERAL
ANNOUNCEMENT, IF ONE IS MADE REGARDING THE PROPOSED OFFERING,
AND COPIES OF ANY OFFERING MATERIALS, CIRCULARS, OR
PROSPECTUSES. A FILING FEE OF ONE HUNDRED DOLLARS ALSO SHALL BE
INCLUDED.
Sec. 1707.092. (A) FOR THE
PURPOSES OF SELLING SECURITIES IN THIS STATE, AN INVESTMENT
COMPANY, AS DEFINED BY THE
INVESTMENT
COMPANY
ACT OF 1940, THAT IS REGISTERED
OR HAS FILED A REGISTRATION STATEMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE
INVESTMENT
COMPANY
ACT OF 1940, SHALL FILE THE
FOLLOWING WITH THE DIVISION OF SECURITIES:
(1) FOR THE PURPOSES OF THE SALE OF SECURITIES BY A
MANAGED INVESTMENT COMPANY, AS DEFINED IN THE
INVESTMENT
COMPANY
ACT OF 1940:
(a) A NOTICE FILING CONSISTING OF
EITHER OF THE FOLLOWING:
(i) A COPY OF THE INVESTMENT
COMPANY'S FEDERAL REGISTRATION STATEMENT AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION;
(ii) A FORM
U-1 OR FORM
NF OF THE
NORTH
AMERICAN SECURITIES
ADMINISTRATORS ASSOCIATION AND A COPY OF THE INVESTMENT
COMPANY'S PROSPECTUS AND STATEMENT OF ADDITIONAL
INFORMATION.
(b) APPROPRIATE FILING
FEES CONSISTING OF BOTH OF THE FOLLOWING:
(i) A FLAT FEE OF ONE HUNDRED
DOLLARS;
(ii) A FEE CALCULATED AT ONE-TENTH OF
ONE PER CENT OF THE AGGREGATE PRICE AT WHICH THE SECURITIES ARE
TO BE SOLD TO THE PUBLIC IN THIS STATE, WHICH CALCULATED FEE,
HOWEVER, SHALL IN NO CASE BE LESS THAN ONE HUNDRED OR MORE THAN
ONE THOUSAND DOLLARS.
(c) UPON THE REGISTRATION OF THE
SECURITIES WITH THE SECURITIES AND EXCHANGE COMMISSION, A
MANAGED INVESTMENT COMPANY WITH AN INITIAL NOTICE FILING ON FILE
WITH THE DIVISION SHALL SUBMIT TO THE DIVISION A COPY OF ITS
FINAL PROSPECTUS.
(2) FOR THE PURPOSES OF THE SALE OF SECURITIES BY A
NON-MANAGED INVESTMENT COMPANY, AS DEFINED IN THE
INVESTMENT
COMPANY
ACT OF 1940:
(a)A NOTICE FILING CONSISTING OF
EITHER A COPY OF THE INVESTMENT COMPANY'S FEDERAL REGISTRATION
STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR A FORM U-1 OR FORM
NF OF THE
NORTH
AMERICAN SECURITIES
ADMINISTRATORS ASSOCIATION.
(b) APPROPRIATE FILING
FEES, AS PROVIDED IN DIVISION
(A)(1)(b)
OF THIS SECTION.
(c)UPON THE EFFECTIVENESS OF THE
REGISTRATION OF THE SECURITIES WITH THE SECURITIES AND EXCHANGE
COMMISSION, A NON-MANAGED INVESTMENT COMPANY SHALL SUBMIT TO THE
DIVISION A COPY OF ITS FINAL PROSPECTUS.
(B)(1) UPON PAYMENT OF
THE MAXIMUM FILING FEES AS PROVIDED IN DIVISION
(A)(1)(b)
OR (2)(b) OF THIS SECTION, A MANAGED
OR NON-MANAGED INVESTMENT COMPANY MAY SELL AN INDEFINITE AMOUNT
OF SECURITIES IN THIS STATE.
(2) A MANAGED OR NON-MANAGED INVESTMENT COMPANY MAKING A
NOTICE FILING AS PROVIDED IN THIS SECTION SHALL COMPLY WITH
SECTION 1707.11 OF THE REVISED
CODE. AN INVESTMENT COMPANY
THAT PREVIOUSLY FILED WITH THE DIVISION A VALID CONSENT TO
SERVICE OF PROCESS PURSUANT TO SECTION 1707.11 OF THE
REVISED
CODE MAY INCORPORATE THAT
CONSENT BY REFERENCE.
(C)(1) FOR
OFFERINGS INVOLVING COVERED SECURITIES, AS DEFINED IN SECTION 18
OF THE "SECURITIES
ACT OF 1933," 15
U.S.C.77r, THAT ARE NOT SUBJECT TO SECTION
1707.02, 1707.03, 1707.04, 1707.05, 1707.06, 1707.07, 1707.08,
1707.09, OR 1707.091 OF THE REVISED CODE, OR DIVISION
(A) OF THIS SECTION,
A NOTICE FILING SHALL BE
SUBMITTED TO THE DIVISION TOGETHER WITH A CONSENT TO SERVICE OF
PROCESS PURSUANT TO SECTION 1707.11 OF THE
REVISED
CODE AND A FILING FEE AS
PROVIDED IN DIVISION
(A)(1)(b)
OF THIS SECTION.
(2) THE NOTICE FILING DESCRIBED IN DIVISION
(C)(1) OF THIS SECTION SHALL
CONSIST OF ANY DOCUMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO THE
SECURITIES
ACT OF 1933, TOGETHER WITH
ANNUAL OR PERIODIC REPORTS OF THE VALUE OF THE SECURITIES SOLD
OR OFFERED TO BE SOLD TO PERSONS LOCATED IN THIS STATE.
(D) A NOTICE FILING
SUBMITTED UNDER THIS SECTION SHALL BE EFFECTIVE FOR THIRTEEN
MONTHS.
Sec. 1707.093. NOTWITHSTANDING ANY PROVISION OF
CHAPTER 1707. OF THE
REVISED
CODE, OR ANY RULE ADOPTED BY
THE DIVISION OF SECURITIES UNDER THAT CHAPTER, REQUIRING A
SIGNATURE OR VERIFICATION, THE DIVISION MAY PROVIDE BY RULE FOR
THE ELECTRONIC FILING OR SUBMISSION OF ANY FORM, DOCUMENT,
MATERIAL, OR INFORMATION THAT IS REQUIRED OR PERMITTED TO BE
FILED WITH OR SUBMITTED TO THE DIVISION.
Sec. 1707.11. For the purposes of this section, A "PERSON," OR an
"applicant" for registration or claim of exemption, means every
issuer.
Every applicant for registration, or for claim of exemption
pursuant to division (O) or (Q), (W), (X),
OR (Y) of section 1707.03 of the Revised
Code,
AND EVERY PERSON SUBMITTING A NOTICE FILING PURSUANT TO
SECTION 1707.092 OF THE REVISED
CODE,
for the sale of securities pursuant to this chapter, which
is an incorporated applicant OR PERSON not domiciled in this state or
NOT LICENSED UNDER SECTION 1703.03 OF THE
REVISED
CODE, OR IS
an
unincorporated applicant OR PERSON having the situs of its principal
place
of business outside this state, shall file with its application OR NOTICE
FILING
its irrevocable written consent, executed and acknowledged by an
individual duly authorized to give such THE consent, that
actions
growing out of the sale of such securities or fraud committed by
an applicant in this state may be commenced against it, in the
proper court of any county in this state in which a cause of
action for such fraud may arise or in which the plaintiff in
such THE
action may reside, by serving on the secretary of state any
proper process or pleading authorized by the laws of this state.
Such consent shall stipulate that such service of such process
or
pleading on the secretary of state shall be taken in all courts
to be as valid and binding as if service had been made upon the
applicant itself.
Service of any process or pleadings may be made on the
secretary of state by duplicate copies, of which one shall be
filed in the office of the secretary of state, and the other
immediately forwarded by the secretary of state by certified mail
to the principal place of business of such THE applicant, or the
last
known address as shown on the application form filed with the
division, or if it has a principal office in this state, then to
such THE principal office; but failure to mail such copy shall
not
invalidate such THE service.
Sec. 1707.14. (A)(1) No person shall act as a dealer,
unless the person is licensed as a dealer by the division of
securities, except in the following cases:
(a) When the person is transacting business through or
with a licensed dealer;
(b) When the securities are the subject matter of one or
more transactions enumerated in divisions (B) to (L), (O) to (R),
and (U) to (W)(Y) of section 1707.03, or in section 1707.06 of
the
Revised Code, except when a commission, discount, or other
remuneration is paid or given in consideration with transactions
enumerated in divisions (O), (Q), and (W), (X),
AND (Y) of section 1707.03, or
in section 1707.06 of the Revised Code;
(c) When the person is an issuer selling securities issued
by it or by its subsidiary, if such securities are specified
under division (G) or (I) of section 1707.02, or under section
1707.04 of the Revised Code;
(d) When the person is participating in transactions
exempt, under section 1707.34 of the Revised Code, from this
chapter.
(2) Notwithstanding the exceptions to licensure set forth
in divisions (A)(1)(a) to (d) of this section, no person other
than an issuer selling its own securities shall engage in the
business of selling securities to an institutional investor
unless such THE person is licensed as a dealer or the division,
by
rule, finds that such licensure is not necessary for the
protection of investors or in the public interest.
(B) Each dealer that in any twelve-month or shorter
period, alone or with any other dealer with which it is
affiliated, has total revenues of one hundred fifty thousand
dollars or more derived from the business of buying, selling, or
otherwise dealing in securities, and that at any time during such
period has one hundred or more retail securities customers, shall
be registered as a broker or dealer with the securities and
exchange commission under the Securities Exchange Act of 1934,
except the following entities:
(1) A bank, savings and loan association, savings bank, or
credit union chartered under the laws of the United States or any
state thereof;
(2) A dealer that enters into and is in compliance with an
undertaking accepted by the division, in which the dealer agrees
that it will not engage in any transaction involving the buying,
selling, or otherwise dealing in securities with any natural
person in this state, except for transactions involving either of
the following:
(a) Securities of corporations or associations that have
qualified for treatment as nonprofit organizations pursuant to
section 501(c)(3) of the "Internal Revenue Code of 1986," 100
Stat. 2085, 26 U.S.C.A. 501, as amended;
(b) Securities or transactions that are described in
divisions (A)(1)(a) to (d) of this section.
(C) Every dealer that must be registered as a broker or
dealer with the securities and exchange commission pursuant to
division (B) of this section shall become so registered no later
than ninety days after the date on which the dealer meets the
requirements for such registration.
(D) The division by rule may exempt any dealer from
complying with the licensing or registration requirements of this
section, if the division finds that such licensing or
registration is not necessary for the protection of investors or
in the public interest.
(E) As used in division (B) of this section, "retail
securities customer" means a person that purchases from or
through or sells securities to or through a dealer, and that is
not an officer, a director, a principal, a general partner, or an
employee of, the dealer. Each of the following is deemed to be a
single retail securities customer:
(1) A husband and wife;
(2) A minor child and his or her parent or legal guardian;
(3) A corporation, a partnership, an association or other
unincorporated entity, a joint stock company, or a trust.
Sec. 1707.141. (A) NO PERSON SHALL ACT AS AN INVESTMENT ADVISER,
UNLESS ONE OF THE FOLLOWING APPLIES:
(1) THE PERSON IS LICENSED AS AN INVESTMENT ADVISER BY THE DIVISION OF
SECURITIES; HOWEVER, NOTHING IN THIS SECTION SHALL BE CONSTRUED TO
PROHIBIT A PERSON FROM BEING LICENSED BY THE DIVISION AS BOTH AN
INVESTMENT ADVISER AND A DEALER OR SALESPERSON.
(2) THE PERSON IS REGISTERED UNDER SECTION 203 OF THE "INVESTMENT
ADVISERS ACT OF 1940," 15
U.S.C. 80b-3, AS AN INVESTMENT
ADVISER AND IS IN COMPLIANCE WITH THE NOTICE FILING REQUIREMENTS OF DIVISION
(B) OF THIS SECTION.
(3) THE PERSON HAS NO PLACE OF BUSINESS IN THIS STATE, AND THE PERSON'S
ONLY CLIENTS IN THIS STATE ARE ANY OF THE FOLLOWING:
(a) INVESTMENT COMPANIES AS DEFINED IN THE INVESTMENT
COMPANY ACT OF 1940;
(b) OTHER INVESTMENT ADVISERS;
(c) LICENSED DEALERS;
(d) BANKS;
(e) INSURANCE COMPANIES SUBJECT TO REGULATION UNDER
TITLE XXXIX of the Revised Code AND HEALTH INSURING CORPORATIONS REGULATED
UNDER CHAPTER 1751. of the Revised Code;
(f) EMPLOYEE BENEFIT PLANS WITH ASSETS OF NOT LESS THAN ONE
MILLION DOLLARS;
(g) GOVERNMENT AGENCIES OR INSTRUMENTALITIES, WHETHER ACTING FOR
THEMSELVES OR TRUSTEES WITH INVESTMENT CONTROL;
(h) OTHER INSTITUTIONAL INVESTORS AS THE DIVISION MAY DESIGNATE
BY RULE.
(4) THE PERSON HAS NO PLACE OF BUSINESS IN THIS STATE, AND DURING THE
PRECEDING TWELVE-MONTH PERIOD, THE PERSON HAS HAD NOT MORE
THAN FIVE CLIENTS, OTHER THAN THOSE DESCRIBED IN DIVISION (A)(3) OF
THIS SECTION, THAT ARE RESIDENTS OF THIS STATE.
(B)(1) NO PERSON WHO IS REGISTERED UNDER SECTION 203 OF THE
"INVESTMENT
ADVISERS ACT OF 1940," 15
U.S.C. 80b-3, AS AN INVESTMENT
ADVISER SHALL ACT AS AN INVESTMENT ADVISER, UNLESS THE PERSON
HAS DONE BOTH OF THE FOLLOWING:
(a) FILED WITH THE DIVISION A
CONSENT TO SERVICE OF PROCESS TOGETHER WITH EITHER A
NOTICE FILING FORM AS SPECIFIED IN RULES ADOPTED BY THE DIVISION
OR A COPY OF THOSE DOCUMENTS THAT HAVE BEEN FILED BY THE
INVESTMENT ADVISER WITH THE SECURITIES AND EXCHANGE COMMISSION
AS SPECIFIED IN RULES ADOPTED BY THE
DIVISION;
(b) PAID THE NOTICE FILING FEE SPECIFIED IN DIVISION (B)
OF SECTION 1707.17 of the Revised Code.
(2) UPON COMPLIANCE WITH DIVISION (B)(1) OF THIS SECTION, THE
DIVISION SHALL ISSUE TO THE PERSON AN ACKNOWLEDGMENT OF NOTICE FILING.
(3) THE NOTICE FILING AND FEE REQUIREMENTS OF DIVISION (B)(1) OF
THIS SECTION DO NOT APPLY TO A PERSON DESCRIBED IN DIVISION (A)(3) OR
(4) OF THIS SECTION.
Sec. 1707.151. (A) APPLICATION FOR AN INVESTMENT ADVISER'S
LICENSE SHALL BE MADE IN ACCORDANCE WITH THIS SECTION AND BY FILING WITH THE
DIVISION OF SECURITIES THE INFORMATION, MATERIALS, AND FORMS SPECIFIED IN
RULES ADOPTED BY THE DIVISION.
(B) EVERY APPLICANT NOT A RESIDENT OF THIS STATE SHALL NAME A
PERSON WITHIN THIS STATE UPON WHOM PROCESS AGAINST SUCH APPLICANT MAY BE
SERVED AND SHALL GIVE THE COMPLETE RESIDENCE AND BUSINESS
ADDRESS OR ADDRESSES OF THE PERSON DESIGNATED.
(C) EVERY APPLICANT SHALL FILE AN IRREVOCABLE CONSENT TO SERVICE
OF PROCESS WITH THE SECRETARY OF STATE IN THE EVENT THAT THE APPLICANT, IF A
RESIDENT OF THIS STATE, OR THE PERSON DESIGNATED
PURSUANT TO DIVISION (B) OF THIS SECTION, CANNOT BE FOUND
AT THE ADDRESS GIVEN ON THE APPLICATION. THE CONSENT SHALL BE GIVEN AND
SERVICE OF PROCESS SHALL BE MADE AS PROVIDED IN SECTION 1707.11 of the Revised Code.
(D)(1) THE DIVISION MAY INVESTIGATE ANY APPLICANT FOR A LICENSE
AND MAY REQUIRE ANY ADDITIONAL INFORMATION AS IT CONSIDERS NECESSARY TO
DETERMINE THE APPLICANT'S BUSINESS REPUTE AND QUALIFICATIONS TO ACT AS AN
INVESTMENT ADVISER.
(2) IF THE APPLICATION FOR ANY LICENSE INVOLVES INVESTIGATION OUTSIDE OF
THIS STATE, THE APPLICANT MAY BE REQUIRED BY THE DIVISION TO ADVANCE
SUFFICIENT FUNDS TO PAY ANY OF THE ACTUAL EXPENSES OF THE EXAMINATION. THE
DIVISION SHALL FURNISH THE APPLICANT WITH AN ITEMIZED STATEMENT OF SUCH
EXPENSES THAT THE APPLICANT IS REQUIRED TO PAY.
(E) THE DIVISION SHALL BY RULE REQUIRE ONE NATURAL PERSON WHO IS
A PRINCIPAL, OFFICER, DIRECTOR, GENERAL PARTNER, MANAGER, OR EMPLOYEE OF
AN INVESTMENT ADVISER TO PASS AN EXAMINATION DESIGNATED BY THE DIVISION OR
ACHIEVE A SPECIFIED
PROFESSIONAL DESIGNATION. EVERY INVESTMENT
ADVISER THAT IS NOT A NATURAL PERSON SHALL NOTIFY THE DIVISION OF THE NAME AND
RELATIONSHIP TO THE INVESTMENT ADVISER OF THE NATURAL
PERSON WHO HAS PASSED THE EXAMINATION OR ACHIEVED THE SPECIFIED PROFESSIONAL
DESIGNATION ON BEHALF OF THE INVESTMENT ADVISER AND WHO WILL SERVE AS THE
DESIGNATED PRINCIPAL ON BEHALF OF THE INVESTMENT ADVISER.
(F) AN INVESTMENT ADVISER LICENSED UNDER SECTION 1707.141 of the Revised Code
SHALL EMPLOY ONLY INVESTMENT ADVISER REPRESENTATIVES LICENSED, OR EXEMPTED
FROM LICENSURE, UNDER SECTION 1707.161 of the Revised Code.
(G) IF THE DIVISION FINDS THAT THE APPLICANT IS OF GOOD BUSINESS
REPUTE, APPEARS TO BE QUALIFIED TO ACT AS AN INVESTMENT ADVISER, AND HAS
COMPLIED WITH SECTIONS 1707.01 TO 1707.45 of the Revised Code AND RULES ADOPTED UNDER THOSE
SECTIONS BY THE DIVISION, THE DIVISION, UPON PAYMENT OF THE FEES PRESCRIBED BY
DIVISION (B) OF SECTION 1707.17 of the Revised Code, SHALL ISSUE TO THE APPLICANT A
LICENSE AUTHORIZING THE APPLICANT TO ACT AS AN INVESTMENT ADVISER.
Sec. 1707.161. (A) NO PERSON SHALL ACT AS AN INVESTMENT ADVISER
REPRESENTATIVE, UNLESS ONE OF THE FOLLOWING APPLIES:
(1) THE PERSON IS LICENSED AS AN INVESTMENT ADVISER REPRESENTATIVE BY THE
DIVISION OF SECURITIES.
(2) THE PERSON IS A NATURAL PERSON WHO IS LICENSED AS AN INVESTMENT
ADVISER BY THE DIVISION, AND DOES NOT ACT AS AN INVESTMENT ADVISER
REPRESENTATIVE FOR ANOTHER INVESTMENT ADVISER; HOWEVER, A NATURAL PERSON WHO
IS LICENSED AS AN
INVESTMENT ADVISER BY THE DIVISION MAY ACT AS AN INVESTMENT
ADVISER REPRESENTATIVE FOR ANOTHER INVESTMENT ADVISER IF THE
NATURAL PERSON ALSO IS LICENSED BY THE DIVISION AS AN INVESTMENT
ADVISER REPRESENTATIVE OF THE OTHER INVESTMENT ADVISER.
(3) THE PERSON IS EMPLOYED BY OR ASSOCIATED WITH AN INVESTMENT ADVISER
REGISTERED UNDER SECTION 203 OF THE "INVESTMENT ADVISERS
ACT OF 1940," 15
U.S.C. 80b-3, AND DOES NOT HAVE A
PLACE OF BUSINESS IN THIS STATE.
(4) THE PERSON IS EMPLOYED BY OR ASSOCIATED WITH AN INVESTMENT ADVISER
THAT IS EXEMPTED FROM LICENSURE PURSUANT TO DIVISION (A)(3) OR (4) OF
SECTION 1707.141 of the Revised Code.
(B)(1) NO INVESTMENT ADVISER REPRESENTATIVE REQUIRED TO BE
LICENSED UNDER THIS SECTION SHALL ACT AS AN INVESTMENT ADVISER
REPRESENTATIVE FOR MORE THAN TWO INVESTMENT ADVISERS. AN
INVESTMENT ADVISER REPRESENTATIVE THAT ACTS AS AN INVESTMENT
ADVISER REPRESENTATIVE FOR TWO INVESTMENT ADVISERS SHALL DO SO
ONLY AFTER THE OCCURRENCE OF BOTH OF THE FOLLOWING:
(a) BEING PROPERLY LICENSED, OR
PROPERLY EXCEPTED FROM LICENSURE UNDER THIS SECTION, AS AN
INVESTMENT ADVISER REPRESENTATIVE FOR BOTH INVESTMENT
ADVISERS;
(b) COMPLYING WITH THE
REQUIREMENTS SET FORTH IN RULES ADOPTED BY THE DIVISION
REGARDING CONSENT OF BOTH INVESTMENT ADVISERS AND NOTICE.
(2) NOTHING IN THIS SECTION SHALL BE CONSTRUED TO PROHIBIT A NATURAL
PERSON
FROM
BEING LICENSED BY THE DIVISION AS BOTH AN INVESTMENT ADVISER AND AN INVESTMENT
ADVISER REPRESENTATIVE.
(3) NOTHING IS THIS SECTION SHALL BE CONSTRUED TO
PROHIBIT A NATURAL PERSON FROM BEING LICENSED BY THE DIVISION AS
BOTH A SALESPERSON AND AN INVESTMENT ADVISER
REPRESENTATIVE.
(C) AN INVESTMENT ADVISER REPRESENTATIVE'S LICENSE ISSUED UNDER
THIS SECTION SHALL NOT BE EFFECTIVE DURING ANY PERIOD WHEN THE INVESTMENT
ADVISER REPRESENTATIVE IS NOT EMPLOYED BY OR ASSOCIATED WITH AN INVESTMENT
ADVISER THAT IS LICENSED BY THE DIVISION OR THAT IS IN COMPLIANCE WITH THE
NOTICE FILING REQUIREMENTS OF DIVISION (B) OF SECTION 1707.141 of the Revised Code.
NOTICE OF THE COMMENCEMENT AND TERMINATION OF THE EMPLOYMENT OR ASSOCIATION OF
AN INVESTMENT
ADVISER REPRESENTATIVE LICENSED UNDER THIS SECTION SHALL BE GIVEN TO THE
DIVISION WITHIN THIRTY DAYS AFTER THE COMMENCEMENT OR TERMINATION BY EITHER OF
THE FOLLOWING:
(1) THE INVESTMENT ADVISER, IN THE CASE OF AN INVESTMENT ADVISER
REPRESENTATIVE LICENSED UNDER THIS SECTION AND EMPLOYED BY OR ASSOCIATED WITH,
OR FORMERLY EMPLOYED
BY OR ASSOCIATED WITH, AN INVESTMENT ADVISER LICENSED UNDER SECTION 1707.141
of the Revised Code;
(2) THE INVESTMENT ADVISER REPRESENTATIVE, IN THE CASE OF AN INVESTMENT
ADVISER REPRESENTATIVE LICENSED UNDER THIS SECTION AND EMPLOYED BY OR
ASSOCIATED WITH, OR FORMERLY
EMPLOYED BY OR ASSOCIATED WITH, AN INVESTMENT ADVISER THAT IS SUBJECT TO THE
NOTICE FILINGS
REQUIREMENTS OF DIVISION (B) OF SECTION 1707.141 of the Revised Code.
(D)(1) APPLICATION FOR AN INVESTMENT ADVISER REPRESENTATIVE
LICENSE SHALL BE MADE IN ACCORDANCE WITH THIS SECTION AND BY FILING WITH THE
DIVISION THE INFORMATION, MATERIALS, AND FORMS SPECIFIED IN RULES ADOPTED BY
THE DIVISION.
(2) THE DIVISION SHALL BY RULE REQUIRE AN APPLICANT TO PASS AN EXAMINATION
DESIGNATED BY THE DIVISION OR ACHIEVE A SPECIFIED PROFESSIONAL DESIGNATION.
(3) PRIOR TO ISSUING THE INVESTMENT ADVISER
REPRESENTATIVE LICENSE, THE DIVISION MAY REQUIRE THE APPLICANT TO REIMBURSE
THE DIVISION
FOR THE ACTUAL EXPENSES INCURRED IN INVESTIGATING THE APPLICANT. AN ITEMIZED
STATEMENT OF ANY SUCH EXPENSES THAT
THE APPLICANT IS REQUIRED TO PAY SHALL BE FURNISHED TO THE APPLICANT BY THE
DIVISION.
(E) IF THE DIVISION FINDS THAT THE APPLICANT IS OF GOOD BUSINESS
REPUTE, APPEARS TO BE QUALIFIED TO ACT AS AN INVESTMENT ADVISER
REPRESENTATIVE, AND HAS COMPLIED WITH SECTIONS 1707.01 TO 1707.45 of the Revised Code AND THE
RULES ADOPTED UNDER THOSE SECTIONS BY THE DIVISION, THE DIVISION, UPON PAYMENT
OF THE FEES PRESCRIBED BY DIVISION (B) OF SECTION 1707.17 of the Revised Code, SHALL
ISSUE TO THE APPLICANT A LICENSE AUTHORIZING THE APPLICANT TO ACT AS AN
INVESTMENT ADVISER REPRESENTATIVE FOR THE INVESTMENT ADVISER, OR INVESTMENT
ADVISERS THAT ARE UNDER COMMON OWNERSHIP OR CONTROL, NAMED IN THE APPLICATION.
Sec. 1707.17. (A)(1) The license of every dealer in and
salesman
SALESPERSON of securities shall expire on the thirty-first day of
December of each year, and may be renewed upon the filing with the division
of securities of an application for renewal, and the payment of
the fee prescribed in this section, not less than fifteen nor
more than sixty days before the expiration of the old license. The division
may accept an application for renewal less than
fifteen days before the expiration of any calendar year. It
THE DIVISION ALSO MAY ACCEPT AN APPLICATION FOR RENEWAL UP
TO TEN DAYS AFTER EXPIRATION OF A LICENSE, PROVIDED THAT THE
APPLICATION FOR RENEWAL IS ACCOMPANIED BY THE LICENSE RENEWAL
FEE AND THE ADDITIONAL FEE PRESCRIBED IN DIVISION
(B) OF THIS SECTION. THE
DIVISION
shall give notice, without unreasonable delay, of its action on
any application for renewal of a dealer's or salesman's
SALESPERSON'S license.
(2) THE LICENSE OF EVERY INVESTMENT ADVISER AND
INVESTMENT ADVISER REPRESENTATIVE LICENSED UNDER SECTION
1707.141 OR 1707.161 OF THE REVISED CODE SHALL
EXPIRE ON THE THIRTY-FIRST DAY OF DECEMBER OF EACH YEAR.
THE LICENSES MAY BE RENEWED UPON THE FILING WITH THE DIVISION OF
A COMPLETED LICENSE RENEWAL APPLICATION, AND THE PAYMENT OF THE
FEE PRESCRIBED IN DIVISION (B) OF THIS SECTION, NOT LESS THAN THIRTY
NOR MORE
THAN SEVENTY-FIVE DAYS BEFORE THE EXPIRATION OF THE OLD LICENSE.
THE DIVISION MAY ACCEPT A LICENSE RENEWAL APPLICATION
FILED LESS THAN THIRTY DAYS BEFORE THE EXPIRATION OF ANY
CALENDAR YEAR. THE DIVISION ALSO MAY ACCEPT A LICENSE RENEWAL APPLICATION
UP
TO TEN
DAYS AFTER EXPIRATION OF A LICENSE, PROVIDED THAT THE LICENSE
RENEWAL APPLICATION IS ACCOMPANIED BY THE LICENSE RENEWAL FEE AND THE
ADDITIONAL
FEE PRESCRIBED IN DIVISION (B) OF THIS SECTION. THE
DIVISION SHALL GIVE NOTICE, WITHOUT UNREASONABLE DELAY, OF ITS
ACTION ON ANY LICENSE RENEWAL APPLICATION.
(3) AN INVESTMENT ADVISER REQUIRED TO MAKE A NOTICE FILING
UNDER DIVISION (B) OF SECTION 1707.141 OF THE
REVISED CODE ANNUALLY SHALL FILE WITH THE DIVISION
THE NOTICE FILING AND THE FEE PRESCRIBED IN DIVISION (B)
OF THIS SECTION, NO LATER THAN THE THIRTY-FIRST DAY OF
DECEMBER OF EACH YEAR. THE DIVISION MAY ACCEPT A NOTICE
FILING UP TO TEN DAYS AFTER THE THIRTY-FIRST DAY OF
DECEMBER OF EACH YEAR, PROVIDED THAT THE NOTICE FILING IS
ACCOMPANIED BY THE NOTICE FILING FEE AND THE ADDITIONAL FEE PRESCRIBED IN
DIVISION (B) OF THIS SECTION.
(B)(1) The fee for each dealer's license, and for each annual
renewal thereof, shall be, thirty dollars per salesman
SALESPERSON, but not less than one hundred fifty nor more than five
thousand dollars. UPON PAYMENT OF AN ADDITIONAL FEE OF ONE-HALF OF THE
LICENSE RENEWAL FEE, THE DIVISION MAY ACCEPT AN APPLICATION FOR
RENEWAL FILED UP TO TEN DAYS AFTER THE EXPIRATION OF A LICENSE
ON THE THIRTY-FIRST DAY OF
DECEMBER. The fee for the examination of applicant
dealers, when
administered by the division, shall be seventy-five dollars.
A dealer's license may be issued at any time for the
remainder of the calendar year. In such event, the annual fee
shall not be reduced.
(2) The fee for each salesman's SALESPERSON'S license,
and for each
annual
renewal thereof, shall be fifty dollars. The fee for the
examination of an applicant salesman SALESPERSON, when
administered by the division, shall be fifty dollars.
(3) THE FEE FOR EACH INVESTMENT ADVISER'S LICENSE, AND
FOR EACH ANNUAL RENEWAL THEREOF, SHALL BE TWO HUNDRED DOLLARS.
UPON THE PAYMENT OF AN ADDITIONAL FEE OF ONE-HALF OF THE LICENSE FEE,
THE DIVISION MAY ACCEPT A LICENSE RENEWAL APPLICATION FILED UP
TO TEN DAYS AFTER EXPIRATION OF A LICENSE ON THE THIRTY-FIRST
DAY OF DECEMBER.
(4) THE FEE FOR EACH INVESTMENT ADVISER NOTICE FILING REQUIRED
BY DIVISION (B) OF SECTION 1707.141 OF THE REVISED
CODE SHALL BE TWO HUNDRED DOLLARS. UPON THE PAYMENT OF
AN ADDITIONAL FEE OF ONE-HALF OF THE NOTICE FILING FEE, THE DIVISION MAY
ACCEPT A NOTICE FILING FILED UP TO TEN DAYS AFTER THE
THIRTY-FIRST DAY OF DECEMBER. A NOTICE FILING MAY BE
MADE AT ANY TIME DURING THE CALENDAR YEAR. IN THAT EVENT, THE
NOTICE FILING FEE SHALL NOT BE REDUCED.
(5) THE FEE FOR EACH INVESTMENT ADVISER REPRESENTATIVE'S
LICENSE, AND FOR EACH ANNUAL RENEWAL THEREOF, SHALL BE FIFTY
DOLLARS; HOWEVER, THE FEE SHALL BE WAIVED FOR THE INVESTMENT
ADVISER REPRESENTATIVE DESIGNATED THE PRINCIPAL OF THE
INVESTMENT ADVISER PURSUANT TO DIVISION
(E) OF SECTION 1707.151 OF THE
REVISED
CODE. UPON THE PAYMENT OF AN ADDITIONAL FEE OF ONE-HALF OF THE
LICENSE
FEE, THE DIVISION MAY ACCEPT A LICENSE RENEWAL APPLICATION
FILED UP TO TEN DAYS AFTER EXPIRATION OF A LICENSE ON THE
THIRTY-FIRST DAY OF DECEMBER.
(C) A DEALER'S, SALESPERSON'S, INVESTMENT ADVISER'S, OR
INVESTMENT
ADVISER REPRESENTATIVE'S LICENSE MAY BE ISSUED AT ANY TIME FOR
THE REMAINDER OF THE CALENDAR YEAR. IN THAT EVENT, THE ANNUAL
FEE SHALL NOT BE REDUCED.
Sec. 1707.18. (A)(1) If a partnership licensed as a dealer
is terminated under the laws of the state where such THE
partnership
is organized, or by death, resignation, withdrawal, or addition
of a general partner, the license of the partnership shall be
automatically extended for a period of thirty days after such
THE
termination. The license of such THE partnership and the
licenses of
its salesmen SALESPERSONS may be transferred to the successor
partnership
within such THAT period if the division of securities finds that
the
successor partnership is substantially similar to its predecessor
partnership, and if an application for transfer of license has
been filed. The fee for such a transfer shall be fifty dollars,
plus ten dollars for every salesman's SALESPERSON'S license
which THAT is
transferred.
(2) IF A PARTNERSHIP LICENSED AS AN INVESTMENT
ADVISER IS TERMINATED UNDER THE LAWS OF THE STATE WHERE THE
PARTNERSHIP IS ORGANIZED, OR BY DEATH, RESIGNATION, WITHDRAWAL,
OR ADDITION OF A GENERAL PARTNER, THE LICENSE OF THE PARTNERSHIP
SHALL BE AUTOMATICALLY EXTENDED FOR A PERIOD OF THIRTY DAYS
AFTER THE TERMINATION. THE LICENSE OF THE PARTNERSHIP SHALL,
AND THE LICENSES OF ITS INVESTMENT ADVISER REPRESENTATIVES MAY,
BE TRANSFERRED TO THE SUCCESSOR PARTNERSHIP WITHIN THAT PERIOD
IF THE DIVISION FINDS THAT THE SUCCESSOR PARTNERSHIP IS
SUBSTANTIALLY SIMILAR TO ITS PREDECESSOR PARTNERSHIP, AND IF AN
APPLICATION FOR TRANSFER OF LICENSE HAS BEEN FILED. THE FEE FOR
SUCH TRANSFER SHALL BE FIFTY DOLLARS, PLUS TEN DOLLARS FOR EVERY
INVESTMENT ADVISER REPRESENTATIVE'S LICENSE THAT IS TRANSFERRED.
(B)(1) If a licensed dealer changes its business form,
reincorporates, or by merger or otherwise becomes a different
person, as person is defined in section 1707.01 of the Revised
Code, upon application the division of securities may transfer
the dealer's license and the licenses of its salesmen
SALESPERSONS to the
successor entity, if the division of securities finds that the
successor entity is substantially similar to the predecessor
entity. The fee for such a transfer shall be fifty dollars plus
ten dollars for every salesman's SALESPERSON'S license
transferred.
(2) IF A LICENSED INVESTMENT ADVISER CHANGES ITS
BUSINESS FORM, REINCORPORATES, OR BY MERGER OR OTHERWISE BECOMES
A DIFFERENT PERSON, AS PERSON IS DEFINED IN SECTION 1707.01 OF
THE REVISED CODE, UPON APPLICATION, THE DIVISION
MAY TRANSFER THE INVESTMENT ADVISER LICENSE AND THE LICENSES OF
ITS INVESTMENT ADVISER REPRESENTATIVES TO THE SUCCESSOR ENTITY,
IF THE DIVISION FINDS THAT THE SUCCESSOR ENTITY IS SUBSTANTIALLY
SIMILAR TO THE PREDECESSOR ENTITY. THE FEE FOR THE TRANSFER
SHALL BE FIFTY DOLLARS PLUS TEN DOLLARS FOR EVERY INVESTMENT
ADVISER REPRESENTATIVE'S LICENSE TRANSFERRED.
Sec. 1707.19. (A) An original license, or a renewal thereof,
applied for by a dealer or salesman SALESPERSON of securities,
OR BY AN INVESTMENT ADVISER OR AN INVESTMENT ADVISER
REPRESENTATIVE, may be
refused, and any such license granted may be suspended and, after
notice and hearing in accordance with sections 119.01 to 119.13,
inclusive, CHAPTER 119. of the Revised Code, may
be revoked, by the division
of securities, if the division determines that such THE
applicant or
such THE licensed dealer or salesman,
SALESPERSON, INVESTMENT ADVISER, OR INVESTMENT ADVISER REPRESENTATIVE:
(A)(1) Is not of good business repute;
(B)(2) Is conducting an illegitimate or fraudulent business;
(C)(3) Is, in the case of a dealer OR INVESTMENT
ADVISER, insolvent;
(D)(4) Has intentionally violated any provision of sections
1707.01 to 1707.45, inclusive, of the Revised Code, or any
regulation or order made thereunder;
(E)(5) Has knowingly and intentionally made a false statement
of a material fact in an application for a license, in a
description or application that has been filed, or in any
statement made to the division under such sections;
(F)(6) Has refused to comply with any lawful order or
requirement of the division under section 1707.23 of the Revised
Code;
(G)(7) Has been guilty of any fraudulent act in connection
with the sale of any securities OR IN CONNECTION WITH ACTING AS AN
INVESTMENT ADVISER OR INVESTMENT ADVISER REPRESENTATIVE;
(H)(8) Conducts business in purchasing or selling securities
at such variations from the existing market as in the light of
all the circumstances are unconscionable;
(I)(9) Conducts business in violation of such rules and
regulations as the division prescribes for the protection of
investors, CLIENTS, OR POTENTIAL CLIENTS;
(J)(10)(a) Has failed to furnish to the division any
information
with respect to his THE
purchases or sales of securities within this
state in his capacity as a licensed dealer or
salesman which THAT may
be reasonably requested by the division as pertinent to the
protection of investors in this state.
(b) HAS FAILED TO FURNISH TO THE DIVISION ANY
INFORMATION WITH RESPECT TO ACTING AS AN INVESTMENT ADVISER OR
AN INVESTMENT ADVISER REPRESENTATIVE WITHIN THIS STATE
THAT MAY BE REASONABLY REQUESTED BY THE DIVISION.
(B) For the protection of investors the division may prescribe
reasonable rules defining fraudulent, evasive, deceptive, or
grossly unfair practices or devices in the purchase or sale of
securities.
(C) FOR THE PROTECTION OF INVESTORS, CLIENTS, OR
POTENTIAL CLIENTS, THE DIVISION MAY PRESCRIBE REASONABLE RULES
REGARDING THE ACTS AND PRACTICES OF AN INVESTMENT ADVISER OR AN
INVESTMENT ADVISER REPRESENTATIVE.
(D) Pending any investigation or hearing provided for in
sections 1707.01 to 1707.45, inclusive, of the Revised Code, the
division may order the suspension of any dealer's or salesman's,
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER
REPRESENTATIVE'S
license by notifying the party concerned of such suspension and
the cause for it. If it is a salesman SALESPERSON whose license
is
suspended, the division shall also notify the dealer employing
him THE SALESPERSON. IF IT IS AN INVESTMENT ADVISER REPRESENTATIVE
WHOSE LICENSE IS SUSPENDED, THE DIVISION ALSO SHALL NOTIFY THE INVESTMENT
ADVISER WITH WHOM THE INVESTMENT ADVISER REPRESENTATIVE IS EMPLOYED OR
ASSOCIATED.
(E)(1) The suspension or revocation of the dealer's license
suspends those THE LICENSES of all his salesmen THE
DEALER'S SALESPERSONS.
(2) THE SUSPENSION OR REVOCATION OF THE INVESTMENT
ADVISER'S LICENSE SUSPENDS THE LICENSES OF ALL THE INVESTMENT ADVISER'S
INVESTMENT ADVISER REPRESENTATIVES. THE SUSPENSION OR
REVOCATION OF AN INVESTMENT ADVISER'S REGISTRATION UNDER
SECTION 203 OF THE "INVESTMENT ADVISERS ACT
OF 1940," 15 U.S.C.
80b-3, SUSPENDS THE LICENSES OF ALL THE INVESTMENT
ADVISER'S INVESTMENT ADVISER REPRESENTATIVES.
(F) It is sufficient cause for refusal, revocation, or
suspension of the license in case of a partnership, partnership
association, corporation, or unincorporated association if any
general partner of such THE partnership, manager of such
THE partnership
association, or executive officer of such THE corporation or
unincorporated association is not of good business repute or has
been guilty of any act or omission which would be cause for
refusing or revoking the license of an individual dealer or
salesman, SALESPERSON, INVESTMENT ADVISER, OR INVESTMENT
ADVISER REPRESENTATIVE.
Sec. 1707.20. (A) The division of securities may adopt,
amend, and rescind such rules, forms, and orders as are necessary
to carry out sections 1707.01 to 1707.45 of the Revised Code,
including rules and forms governing registration statements,
applications, and reports, and defining any terms, whether or not
used in sections 1707.01 to 1707.45 of the Revised Code, insofar
as the definitions are not inconsistent with said THESE
sections. For
the purpose of rules and forms, the division of securities may
classify securities, persons, and matters within its
jurisdiction, and prescribe different requirements for different
classes.
(B) No rule, form, or order may be made, amended, or
rescinded unless the division of securities finds that the action
is necessary or appropriate in the public interest or for the
protection of investors, CLIENTS, OR PROSPECTIVE CLIENTS and
consistent with the purposes fairly
intended by the policy and provisions of sections 1707.01 to
1707.45 of the Revised Code. In prescribing rules and forms and
in otherwise administering sections 1707.01 to 1707.45 of the
Revised Code, the division of securities may cooperate with the
securities administrators of the other states and the securities
and exchange commission with a view of effectuating the policy of
this section to achieve maximum uniformity in the form and
content of registration statements, applications, reports, and
overall securities regulation wherever practicable.
(C) The division of securities may by rule or order
prescribe:
(1) The form and content of financial statements required
under sections 1707.01 to 1707.45 of the Revised Code;
(2) The circumstances under which consolidated financial
statements shall be filed;
(3) Whether any required financial statements shall be
certified by independent or certified public accountants. All
financial statements shall be prepared in accordance with
generally accepted accounting practices.
(D) All rules and forms of the division of securities
shall be published; and in addition to fulfilling the
requirements of sections 119.01 to 119.13 CHAPTER
119. of the Revised Code,
the division shall prescribe, and shall publish and make
available its rules regarding the sale of securities, the
administration of sections 1707.01 to 1707.45 of the Revised
Code, and the procedure and practice before the division.
The division may also publish and distribute annually a
list of licensed dealers and salesmen.
(E) No provision of sections 1707.01 to 1707.45 of the
Revised Code imposing any liability applies to any act done or
omitted in good faith in conformity with any rule, form, or order
of the division of securities, notwithstanding that the rule,
form, or order may later be amended or rescinded or be determined
by judicial or other authority to be invalid for any reason,
except that the issuance of an order granting effectiveness to a
registration under section 1707.09 or 1707.091 of the Revised
Code for the purposes of this division shall not be deemed an
order other than as the establishment of the fact of
registration.
Sec. 1707.22. Whenever a dealer's or salesman's,
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER
REPRESENTATIVE'S
license has been refused,
suspended, or revoked, or a renewal thereof has been denied, by the division
of securities, or whenever the division has refused to qualify securities or
has suspended or revoked the registration of any particular security by
description or by qualification, or the right to buy, sell, or deal in any
particular security whether it is registered or qualified or exempt, or
whether the transactions in it are registered or exempt, the aggrieved party
may appeal in accordance with sections 119.01 to 119.13, inclusive,
CHAPTER 119. of the
Revised Code.
An order sustaining the refusal of the division to grant or renew a dealer's
or salesman's, SALESPERSON'S, INVESTMENT ADVISER'S, OR
INVESTMENT ADVISER REPRESENTATIVE'S license or to grant qualification of
securities, or AN ORDER sustaining
the division in suspending or revoking a dealer's or salesman's,
SALESPERSON'S, INVESTMENT ADVISER'S, OR INVESTMENT ADVISER
REPRESENTATIVE'S license, the
registration of any particular security by description or by qualification, or
the right to buy, sell, or deal in any particular security, shall not bar,
after ten days from such THE order, a new registration by
description, or a new
application of the plaintiff for such a license or qualification or for a
withdrawal of such A revocation or suspension; nor shall an
order in favor of
the plaintiff prevent the division, after proper notice and hearing, from
thereafter revoking or suspending such license, registration, or right to buy,
sell, or deal in a particular security, for any proper cause which may, after
such THE order, accrue or be discovered.
Sec. 1707.23. Whenever it appears to the division of
securities, from its files, upon complaint, or otherwise, that
any person has engaged in, is engaged in, or is about to engage
in any practice declared to be illegal or prohibited by Chapter
1707. of the Revised Code, or defined as fraudulent in such
chapter OR CONSIDERED A DISHONEST OR UNETHICAL PRACTICE,
or any other deceptive scheme or practice in connection
with the sale of securities, OR ACTING AS AN INVESTMENT ADVISER OR
INVESTMENT ADVISER REPRESENTATIVE, or when the division believes it
to
be in the best interests of the public and necessary for the
protection of investors, the division may DO ANY OF THE FOLLOWING:
(A) Require any person to file with it, on such forms as
it prescribes, an original or additional statement or report in
writing, under oath or otherwise, as to any facts or
circumstances concerning the issuance, sale, or offer for sale of
securities within this state by said THE person,
AS TO THE PERSON'S ACTS OR PRACTICES AS AN INVESTMENT ADVISER OR INVESTMENT
ADVISER REPRESENTATIVE WITHIN THIS STATE, and as to such
other
information as it deems material or relevant thereto.
(B) Examine any INVESTMENT ADVISER, INVESTMENT ADVISER REPRESENTATIVE, OR
ANY
seller, dealer, salesman SALESPERSON, or issuer
of any
such securities, and any of their agents, employees, partners,
officers, directors, members, or shareholders, wherever located,
under oath; and examine such records, books, documents, accounts,
and papers as the division deems material or relevant to the
inquiry.
(C) Require the attendance of such witnesses, and the
production of such books, records, and papers, as are required
either by the division or by any party to a hearing before the
division, and for that purpose issue a subpoena for any witness,
or a subpoena duces tecum to compel the production of any books,
records, or papers. Such THE subpoena shall be served by
certified
mail, return receipt requested. If the subpoena is returned
because of inability to deliver, or if no return is received
within thirty days of the date of mailing, the subpoena may be
served by ordinary mail. If no return of ordinary mail is
received within thirty days after the date of mailing, service
shall be deemed to have been made. If the subpoena is returned
because of inability to deliver, the division may designate a
person or persons to effect either personal or residence service
upon such THE witness. Such THE person may be the
sheriff of the county
in which the witness resides or may be found or any other duly
designated person. The fees and mileage of such THE person
serving
such THE subpoena shall be the same as those allowed by the
courts of
common pleas in criminal cases, and shall be paid from the funds
of the division. Fees and mileage for such THE witness shall be
the
same as those allowed for witnesses by the courts of common pleas
in criminal cases, and shall be paid from the funds of the
division upon request of such THE witness following the hearing.
(D) Proceed under section 1707.19 of the Revised Code to
suspend the license of any licensed dealer or salesman,
LICENSED SALESPERSON, LICENSED INVESTMENT ADVISER, OR LICENSED INVESTMENT
ADVISER REPRESENTATIVE and
ultimately, if the division determines, revoke such license under
such sections.
(E) Initiate criminal proceedings under section 1707.042
or 1707.44 of the Revised Code by laying before the prosecuting
attorney of the proper county any evidence of criminality which
shall come COMES to its knowledge; and in the event of the
neglect or
refusal of the prosecuting attorney to prosecute such violations,
or at the request of the prosecuting attorney, the division shall
submit such THE evidence to the attorney general, who may
proceed in
the prosecution with all the rights, privileges, and powers
conferred by law on prosecuting attorneys, including the power to
appear before grand juries and to interrogate witnesses before
such grand juries.
(F) Require any dealers forthwith to furnish to the
division copies of prospectuses, circulars, or advertisements
respecting securities, which THAT they publish or generally
distribute, OR REQUIRE ANY INVESTMENT ADVISERS IMMEDIATELY TO
FURNISH TO THE DIVISION COPIES OF BROCHURES, ADVERTISEMENTS,
PUBLICATIONS, ANALYSES, REPORTS, OR OTHER WRITINGS THAT THEY
PUBLISH OR DISTRIBUTE.
(G) Require any dealers to mail to the division, prior to
sale, notices of intention to sell, in respect to all securities
which are not exempt under section 1707.02 of the Revised Code,
or which are sold in transactions not exempt under section
1707.03 or 1707.04 of the Revised Code.
(H) Issue and cause to be served by certified mail upon
all persons affected an order requiring the person or persons to
cease and desist from the acts or practices appearing to the
division of securities to constitute violations of Chapter 1707.
of the Revised Code OR RULES ADOPTED UNDER THAT CHAPTER BY THE
DIVISION. The order shall state specifically the
section or sections of Chapter 1707. of the Revised Code OR THE RULE OR
RULES ADOPTED UNDER THAT CHAPTER BY THE DIVISION that
appear to the division of securities to have been violated and
the facts constituting the violation. If after the issuance of
the order it appears to the division of securities that any
person or persons affected by the order have engaged in any act
or practice from which the person or persons shall have been
required, by the order, to cease and desist, the director of
commerce may apply to the court of common pleas of any county
for, and upon proof of the validity of the order of the division
of securities, the delivery of the order to the person or persons
affected, and of the illegality and the continuation of the acts
or practices that are the subject of the order, the court may
grant an injunction implementing the order of the division of
securities.
(I) ISSUE AND INITIATE CONTEMPT PROCEEDINGS IN THIS STATE
REGARDING
SUBPOENAS AND SUBPOENAS DUCES TECUM AT THE REQUEST OF THE
SECURITIES ADMINISTRATOR OF ANOTHER STATE, IF IT APPEARS TO THE
DIVISION THAT THE ACTIVITIES FOR WHICH THE INFORMATION IS SOUGHT
WOULD VIOLATE CHAPTER
1707. of the Revised Code IF THE ACTIVITIES HAD OCCURRED IN THIS STATE.
Sec. 1707.25. In case any person fails to file any
statement or report required by sections 1707.01 to 1707.45,
inclusive, of the Revised Code, to obey any subpoena the issuance
of which is provided for in such THOSE sections, or to produce
books,
records, or papers, give testimony, or answer questions, as
required by such THOSE sections, the director of commerce may
apply to
a court of common pleas of any county for, and upon proof of such
failure such THE court may grant an injunction restraining the
ACTING AS AN INVESTMENT ADVISER OR INVESTMENT ADVISER REPRESENTATIVE, OR
THE issuance, sale, or offer for sale of any securities by such
THE
person or by its agents, employees, partners, officers,
directors, or shareholders, until such failure has been remedied
and such other relief as the facts may warrant has been had.
Such injunctive relief is available in addition to the other
remedies provided for in such sections 1707.01 TO
1707.45 of the Revised Code.
Where the person refusing to comply with such order of
court is an issuer of securities, the court may enjoin the sale
by any dealer of any securities of said THE issuer, and the
division
of securities may revoke the qualification of the securities of
said THE issuer, or suspend or revoke the sale of any securities
of
said THE issuer which have been registered by description, and
such
securities shall not thereafter be sold by any dealer until such
THE order of the court or of the division is withdrawn.
Sec. 1707.27. If the court of common pleas is satisfied with the sufficiency
of the application for a receivership, and of the sufficiency of the proof of
substantial violation of sections 1707.01 to 1707.45, inclusive, of the
Revised Code, or of the use of any act, practice, or transaction declared to
be illegal, OR prohibited, or declared DEFINED AS
fraudulent, OR CONSIDERED TO BE DISHONEST OR UNETHICAL,
by such THOSE sections, to the
material prejudice of a purchaser or holder of securities, such OR
CLIENT OF AN INVESTMENT ADVISER OR INVESTMENT ADVISER REPRESENTATIVE, THE
court may
appoint a receiver, for any person so violating sections 1707.01 to
1707.45,
inclusive, of the Revised Code, with power to sue for, collect, receive,
and
take into his THE RECEIVER'S possession all the books, records,
and papers of such THE person and
all rights, credits, property, and choses in action acquired by such
THE person by
means of any such act, practice, or transaction, and also all property with
which such THE property has been mingled, if such
THE property cannot be identified in
kind because of such THE commingling, and with power to sell,
convey, and assign
such THE property, and to hold and dispose of the proceeds under
the direction of
the court of common pleas. Such THE court shall have
jurisdiction of all
questions arising in said THE proceedings and may make
such orders and decrees
therein as justice and equity require.
Sec. 1707.36. (A) There is hereby created in the division
of securities a position to be known as attorney-inspector, which
shall be held only by an attorney at law. The duties of this
position are to investigate and report upon all complaints and
alleged violations of laws relating to the issue and sale of
securities and to represent the division in prosecutions arising
from such complaints and alleged violations.
THE OFFICE OF THE ATTORNEY-INSPECTOR IS HEREBY
DESIGNATED A CRIMINAL JUSTICE AGENCY IN INVESTIGATING REPORTED
VIOLATIONS OF LAW RELATING TO SECURITIES AND INVESTMENT ADVICE,
AND AS SUCH IS AUTHORIZED BY THIS STATE TO APPLY FOR ACCESS TO
THE COMPUTERIZED DATABASES ADMINISTERED BY THE NATIONAL CRIME
INFORMATION CENTER OR THE LAW ENFORCEMENT AUTOMATED DATA SYSTEM
IN OHIO, AND TO OTHER
COMPUTERIZED DATABASES ADMINISTERED FOR THE PURPOSE OF MAKING
CRIMINAL JUSTICE INFORMATION ACCESSIBLE TO STATE CRIMINAL
JUSTICE AGENCIES.
(B) There is hereby created in the division of securities
two positions to be known as control-bid attorneys, which shall
be held only by attorneys at law. The duties of these positions
are to investigate and report upon all matters relating to
control-bids and related matters and to represent the division in
the regulatory matters arising under the Ohio control-bid law.
(C) The attorney-inspector and each control-bid attorney
shall be paid at a rate not less than pay range 47 set out in
schedule E-2 of section 124.152 of the Revised Code, to be paid
as other operating expenses of the division.
Sec. 1707.391. When any securities have been sold in
reliance upon division (O)
or, (Q), (W),
(X), OR (Y) of section 1707.03 of the
Revised Code, section 1707.08 of the Revised Code, or any other
section of Chapter 1707. of the Revised Code that the division of
securities may specify by rule, but such reliance was improper
because the required filings were not timely or properly made due
to excusable neglect, upon the effective date of an application,
made to the division and payment of the required fee, if not
already paid, plus a penalty fee equal to such THE required fee,
the
sale of the securities shall be deemed exempt, qualified, or
registered, as though timely and properly filed. Such
application shall become effective upon the expiration of
fourteen days after the date of the filing in question if prior
thereto the division did not give notice to the applicant that
the application was denied based on a finding of lack of
excusable neglect. The division shall promptly adopt and
promulgate rules establishing provisions defining excusable
neglect and otherwise establishing reasonable standards for
determining excusable neglect.
The effectiveness of an application under this section does
not relieve anyone who has, other than for excusable neglect,
violated sections 1707.01 to 1707.45 of the Revised Code, or any
previous law in force at the time of sale, from prosecution
thereunder.
Sec. 1707.42. (A) Whoever, with intent to secure financial gain to
himself SELF,
advises and procures any person to purchase any security, and receives any
commission or reward for such THE advice or services without
disclosing to the
purchaser the fact of his THE PERSON'S agency or his
interest in such sales, shall be
liable to such THE purchaser for the amount of such
THE purchaser's damage thereby,
upon tender of such THE security to, and suit brought against,
such THE adviser, by
such THE purchaser. No such suit shall be brought more
than one year subsequent
to such THE purchase.
(B) WHOEVER ACTS AS AN INVESTMENT ADVISER OR INVESTMENT ADVISER
REPRESENTATIVE IN VIOLATION OF CHAPTER 1707. of the Revised Code SHALL BE LIABLE FOR
DAMAGES RESULTING FROM THE VIOLATION IN AN ACTION AT LAW IN A COURT OF
COMPETENT JURISDICTION. DAMAGES MAY INCLUDE CONSIDERATION PAID FOR THE
ADVICE, ANY LOSS DUE TO THE ADVICE, AND ALL COURT COSTS, LESS THE AMOUNT OF
ANY INCOME RECEIVED FROM THE ADVICE. NO PERSON MAY BRING AN ACTION UNDER THIS
DIVISION MORE THAN FOUR YEARS AFTER THE RENDERING OF INVESTMENT ADVICE OR TWO
YEARS AFTER DISCOVERY OF FACTS CONSTITUTING THE VIOLATION, WHICHEVER IS THE
SHORTER PERIOD.
Sec. 1707.431. For purposes of this section, the following
persons shall not be deemed to have effected, participated in, or
aided the seller in any way in making, a sale or contract of sale
in violation of sections 1707.01 to 1707.45 of the Revised Code:
(A) Any attorney, accountant, or engineer whose
performance is incidental to the practice of his THE PERSON'S
profession;
(B) Any person, OTHER THAN AN INVESTMENT ADVISER OR AN INVESTMENT
ADVISER REPRESENTATIVE, who brings any issuer together with any
potential investor, without receiving, directly or indirectly, a
commission, fee, or other remuneration based on the sale of any
securities by any such THE issuer to any such THE
investor. Remuneration
received by such THE person solely for the purpose of offsetting
the
reasonable out-of-pocket costs incurred by the person shall not
be deemed such a commission, fee, or other remuneration.
Any person claiming exemption under this division for a
publicly advertised meeting shall file a notice with the division
of securities indicating an intent to cause or hold such a
meeting at least twenty-one days prior to the meeting. The
division may, upon receipt of such notice, issue an order denying
the availability of an exemption under this division not more
than fourteen days after receipt of such THE notice based on a
finding that the applicant is not entitled to the exemption.
Notwithstanding the notice described in this section, a failure
to file such a THE notice does not create a presumption that a
person
was participating in or aiding in the making of a sale or
contract of sale in violation of this chapter.
(C) Any person whom the division exempts from this
provision by rule.
Sec. 1707.44. (A)(1) No person shall engage in any act or practice
that
violates division (A), (B), or (C) of section 1707.14 of the Revised
Code, and no salesperson shall sell securities in this state without
being licensed pursuant to section 1707.16 of the Revised Code.
(2) NO PERSON SHALL ENGAGE IN ANY ACT OR PRACTICE THAT VIOLATES
DIVISION (A) OF SECTION 1707.141 OR SECTION 1707.161 of the Revised Code.
(B) No person shall knowingly make or cause to be made any
false representation concerning a material and relevant fact, in
any oral statement or in any prospectus, circular, description,
application, or written statement, for any of the following
purposes:
(1) Complying with this chapter, in regard to registering securities by
description;
(2) Securing the qualification of any securities under
this chapter;
(3) Procuring the licensing of any dealer or,
salesperson, INVESTMENT ADVISER, OR INVESTMENT ADVISER
REPRESENTATIVE
under this chapter;
(4) Selling any securities in this state;
(5) ADVISING FOR COMPENSATION, AS TO THE VALUE OF SECURITIES OR AS TO THE
ADVISABILITY OF INVESTING IN, PURCHASING, OR SELLING SECURITIES.
(C) No person shall knowingly and intentionally sell,
cause to be sold, offer for sale, or cause to be offered for
sale, any security which comes under any of the following
descriptions:
(1) Is not exempt under section 1707.02 of the Revised
Code, nor the subject matter of one of the transactions exempted
in sections 1707.03, 1707.04, and 1707.34 of the Revised Code,
has not been registered by description, coordination, or
qualification, and is not the subject matter of a transaction
that has been registered by description;
(2) The prescribed fees for registering by description, by
coordination, or by qualification have not been paid in respect
to such security;
(3) Such person has been notified by the division, or has
knowledge of the notice, that the right to buy, sell, or
deal in
such security has been suspended or revoked, or that the
registration by description, by coordination, or by qualification
under which it may be sold has been suspended or revoked;
(4) The offer or sale is accompanied by a statement that
the security offered or sold has been or is to be in any manner
indorsed by the division.
(D) No person who is an officer, director, or trustee of,
or a dealer for, any issuer, and who knows such issuer to be
insolvent in that the liabilities of such issuer exceed its
assets, shall sell any securities of or for any such issuer,
without disclosing the fact of the insolvency to the
purchaser.
(E) No person with intent to aid in the sale of any
securities on behalf of the issuer, shall knowingly make any
representation not authorized by such issuer or at material
variance with statements and documents filed with the division by
such issuer.
(F) No person, with intent to deceive, shall sell, cause
to be sold, offer for sale, or cause to be offered for sale, any
securities of an insolvent issuer, with knowledge that such
issuer is insolvent in that the liabilities of such issuer exceed
its assets, taken at their fair market value.
(G) No person in selling securities shall knowingly engage
in any act or practice which is, in this chapter, declared illegal, defined as
fraudulent, or
prohibited.
(H) No licensed dealer shall refuse to buy from, sell to,
or trade with any person because the person appears on a
blacklist issued by, or is being boycotted by, any foreign
corporate or governmental entity, nor sell any securities of or
for any issuer who is known in relation to the issuance or sale
of such securities to have engaged in such practices.
(I) No dealer in securities, knowing that the dealer's
liabilities exceed the reasonable value of the dealer's
assets, shall
accept money or securities, except in payment of or as security
for an existing debt, from a customer who is ignorant of
the
dealer's insolvency, and thereby cause the customer
to lose any part of the customer's securities or the value
thereof, by doing
either of the following without the customer's consent:
(1) Pledging, selling, or otherwise disposing of such
securities, when the dealer has no lien on or any
special property in such securities;
(2) Pledging such securities for more than the amount due,
or otherwise disposing of such securities for the dealer's
own benefit,
when the dealer has a lien or indebtedness on such
securities.
It is an affirmative defense to a charge under this
division that, at the time the securities involved were pledged,
sold, or disposed of, the dealer had in the dealer's
possession
or control, and available for delivery, securities of the same
kinds and in amounts sufficient to satisfy all customers entitled
thereto, upon demand and tender of any amount due thereon.
(J) No person, with purpose to deceive, shall make, issue,
publish, or cause to be made, issued, or published any statement
or advertisement as to the value of securities, or as to alleged
facts affecting the value of securities, or as to the financial
condition of any issuer of securities, when the person
knows
that such statement or advertisement is false in any material
respect.
(K) No person, with purpose to deceive, shall make,
record, or publish or cause to be made, recorded, or published, a
report of any transaction in securities which is false in any
material respect.
(L) No dealer shall engage in any act that violates the provisions of section
15(c) or 15(g) of the "Securities Exchange Act of 1934," 48 Stat. 881, 15
U.S.C.A. 78o(c) or (g), or any rule or regulation promulgated by the
securities and exchange commission thereunder. If, subsequent to
October 11, 1994,
additional amendments to section 15(c) or 15(g) are adopted, or additional
rules or regulations are promulgated pursuant to such sections, the division
of securities shall, by rule, adopt the amendments, rules, or regulations,
unless the division finds that the amendments, rules, or regulations are not
necessary for the protection of investors or in the public interest.
(M)(1) NO INVESTMENT ADVISER OR INVESTMENT ADVISER
REPRESENTATIVE SHALL DO ANY OF THE FOLLOWING:
(a) EMPLOY ANY DEVICE, SCHEME, OR ARTIFICE TO DEFRAUD
ANY PERSON;
(b) ENGAGE IN ANY ACT, PRACTICE, OR COURSE OF BUSINESS
THAT OPERATES OR WOULD OPERATE AS A FRAUD OR DECEIT UPON ANY
PERSON;
(c) ENGAGE IN DISHONEST OR UNETHICAL PRACTICES IN
VIOLATION OF RULES ADOPTED BY THE DIVISION.
(2) NO INVESTMENT ADVISER OR INVESTMENT ADVISER
REPRESENTATIVE LICENSED OR REQUIRED TO BE LICENSED UNDER THIS
CHAPTER SHALL TAKE OR HAVE CUSTODY OF ANY SECURITIES OR FUNDS OF
ANY PERSON, EXCEPT AS PROVIDED IN RULES ADOPTED BY THE DIVISION.
(3) IN THE SOLICITATION OF CLIENTS OR PROSPECTIVE CLIENTS, NO
PERSON SHALL MAKE ANY UNTRUE STATEMENT OF A MATERIAL FACT OR
OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
STATEMENTS MADE NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES
UNDER WHICH THE STATEMENTS WERE MADE.
Sec. 1707.46. The principal executive officer of the division of securities
shall be the commissioner of securities, who shall be appointed by the
director of commerce. The commissioner of securities shall enforce all the
laws and administrative rules enacted OR ADOPTED to regulate the sale
of bonds, stocks,
and other securities and to prevent fraud in such sales.
THE COMMISSIONER ALSO SHALL ENFORCE ALL THE LAWS AND ADMINISTRATIVE RULES
ENACTED OR ADOPTED TO REGULATE INVESTMENT ADVISERS AND INVESTMENT ADVISER
REPRESENTATIVES AND TO PREVENT FRAUD IN THEIR ACTS, PRACTICES, AND
TRANSACTIONS.
The commissioner shall be paid at a rate not less than pay range 47 set out in
schedule E-2 of section 124.152 of the Revised Code, to be paid as other
operating expenses of the division.
Sec. 1707.48. The division of securities shall retain the originals or copies
of all documents filed with the division pertaining to registration by
description, qualification, or coordination and all filings for claims of
exemption for eight years from the date of the initial filing. For purposes
of this section, the date of the initial filing shall be the date upon which
the first fee for such filing was received by the division.
The division shall retain all documents, testimony transcripts, investigative
reports, and investigative notes that the division has compiled in original or
copy form for five years from the date of the alleged or suspected violation
of any provision of this chapter.
All other documents filed with the division shall be retained in original or
copy form for five years.
THE DIVISION MAY BY RULE EXEMPT ANY DOCUMENT OR RECORD FROM THIS SECTION,
PROVIDED THAT ANY DOCUMENT OR RECORD EXEMPTED IS RETAINED BY THE DIVISION FOR
AT LEAST AS LONG AS IT WOULD HAVE BEEN RETAINED HAD IT BEEN SUBJECT TO THIS
SECTION.
Sec. 1707.99. Whoever commits any act described in division (A)
of section
1707.042 or section 1707.44 of the Revised Code is guilty of a
violation of sections 1707.01 to 1707.45 of the Revised Code and
THE FOLLOWING APPLY TO THE OFFENDER:
(A) IF THE VALUE OF
THE FUNDS OR SECURITIES INVOLVED IN THE OFFENSE OR THE LOSS TO
THE VICTIM IS LESS THAN FIVE HUNDRED DOLLARS, THE
OFFENDER
is guilty of
a felony of the fifth degree, and the court
may impose
upon the offender an
additional fine of not more than two thousand five hundred dollars.
(B) IF
THE VALUE OF THE FUNDS OR SECURITIES INVOLVED IN THE OFFENSE OR
THE LOSS TO THE VICTIM IS FIVE HUNDRED DOLLARS OR MORE BUT LESS
THAN FIVE THOUSAND DOLLARS, THE OFFENDER IS GUILTY OF A FELONY
OF THE FOURTH DEGREE, AND THE COURT MAY IMPOSE UPON THE OFFENDER
AN ADDITIONAL FINE OF NOT MORE THAN FIVE THOUSAND
DOLLARS.
(C) IF THE VALUE OF
THE FUNDS OR SECURITIES INVOLVED IN THE OFFENSE OR THE LOSS TO
THE VICTIM IS FIVE THOUSAND DOLLARS OR MORE BUT LESS THAN
TWENTY-FIVE THOUSAND DOLLARS, THE OFFENDER IS GUILTY OF A FELONY
OF THE THIRD DEGREE, AND THE COURT MAY IMPOSE UPON THE OFFENDER
AN ADDITIONAL FINE OF NOT MORE THAN TEN THOUSAND DOLLARS.
(D) IF THE VALUE OF
THE FUNDS OR SECURITIES INVOLVED IN THE OFFENSE OR THE LOSS TO
THE VICTIM IS TWENTY-FIVE THOUSAND DOLLARS OR MORE BUT LESS THAN
ONE HUNDRED THOUSAND DOLLARS, THE OFFENDER IS GUILTY OF A FELONY
OF THE SECOND DEGREE, AND THE COURT MAY IMPOSE UPON THE OFFENDER
AN ADDITIONAL FINE OF NOT MORE THAN FIFTEEN THOUSAND
DOLLARS.
(E) IF THE VALUE OF
THE FUNDS OR SECURITIES INVOLVED IN THE OFFENSE OR THE LOSS TO
THE VICTIM IS ONE HUNDRED THOUSAND DOLLARS OR MORE, THE OFFENDER
IS GUILTY OF A FELONY OF THE FIRST DEGREE, AND THE COURT MAY
IMPOSE UPON THE OFFENDER AN ADDITIONAL FINE OF NOT MORE THAN
TWENTY THOUSAND DOLLARS.
Section 2. That existing sections 1707.01, 1707.03, 1707.11, 1707.14, 1707.17,
1707.18, 1707.19, 1707.20,
1707.22, 1707.23, 1707.25, 1707.27, 1707.36, 1707.391, 1707.42, 1707.431,
1707.44, 1707.46, 1707.48, and 1707.99
of the Revised Code are hereby repealed.
Section 3. It is the intent of the General Assembly that the Commissioner of
Securities take action reasonably necessary to provide for the timely and
orderly licensure of investment advisers and investment adviser
representatives consistent with sections 1707.141, 1707.161, and 1707.17 of
the Revised Code.
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