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(123rd General Assembly)(Amended Substitute House Bill Number 551)
AN ACT
To amend sections 1707.01, 1707.02, 1707.11, 1707.15, 1707.151, 1707.16,
1707.17, 1707.20, 1707.23, and 1707.44; to enact sections 3916.01, 3916.02,
3916.03,
3916.04, 3916.05, 3916.06, 3916.07, 3916.08, 3916.09, 3916.10, 3916.11,
3916.12, 3916.13, 3916.14, 3916.15, 3916.16,
3916.17, 3916.18, 3916.19, 3916.20, 3916.21, and 3916.99; and to repeal
sections 1707.432,
1707.433, 1707.434, 1707.435, 1707.436, 1707.437, 1707.438, and
1707.439 of the Revised Code to adopt the Viatical Settlements
Model Act of the National Association of Insurance Commissioners,
to make life settlement interests subject to the Ohio Securities
Law, and to make other changes in the Securities Law, including
changes relative to exempt securities, consent to service of
process, application for a dealer's, investment adviser's, or
salesperson's license, private civil actions seeking damages
arising from the sale of a security, and expedited rulemaking authority.
Be it enacted by the General Assembly of the State of Ohio:
SECTION 1 . That sections 1707.01, 1707.02, 1707.11, 1707.15, 1707.151,
1707.16, 1707.17, 1707.20,
1707.23, and 1707.44 be amended and sections 3916.01, 3916.02, 3916.03,
3916.04,
3916.05, 3916.06, 3916.07, 3916.08, 3916.09, 3916.10, 3916.11, 3916.12,
3916.13, 3916.14, 3916.15,
3916.16, 3916.17, 3916.18, 3916.19, 3916.20, 3916.21, and 3916.99 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 life settlement
interest, 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
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
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 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 of the United States,
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, who is 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 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 salesperson" means a
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," "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
purchase or sale of securities that is fraudulent or that has operated
or
would operate as a fraud upon the seller or 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, 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," 48 Stat. 74, 15 U.S.C.
77a, "Securities Exchange Act of 1934," 48 Stat. 881,
15 U.S.C. 78a, "Internal Revenue Code of
1986," 100 Stat. 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 March 18, 1999. (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 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 adviser" does not mean any of the following: (a) Any attorney, accountant, engineer, or teacher, whose
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, or teacher's profession; (b) A publisher of any bona fide
newspaper, news magazine, or business or financial publication of
general and regular circulation; (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 person that is excluded from the definition of
investment adviser pursuant to section
202(a)(11)(A) to (E) of the "Investment Advisers Act of 1940," 15 U.S.C.
80b-2(a)(11), or that has received an
order from the securities and exchange commission under section
202(a)(11)(F) of the "Investment Advisers Act of 1940," 15 U.S.C.
80b-2(a)(11)(F), declaring that the person is not within the intent of section
202(a)(11) of the Investment Advisers Act of 1940. (i) 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
the supervised person has more than five clients who are
natural persons other than excepted persons defined in division
(KK) of this section, and 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) For the purpose of the calculation of clients in division
(II)(1) of this section, a
natural person and the following persons are deemed a single
client: Any minor child of the natural person; any relative,
spouse, or relative of the spouse of the natural person who has
the same principal residence as the natural person; all accounts
of which the natural person or the persons referred to in
division (II)(2) of this
section are the only primary beneficiaries; and all trusts of
which the natural person or persons referred to in division
(II)(2) of this section are the
only primary beneficiaries. Persons who are not residents of the
United States
need not be included in the calculation of clients
under division (II)(1) of this section. (3) If subsequent to March 18, 1999, amendments are enacted
or adopted defining "investment adviser representative" for purposes of the
Investment
Advisers Act of 1940 or additional rules
or regulations are promulgated by the securities and exchange
commission regarding the definition of "investment adviser
representative" for purposes of the
Investment Advisers Act of 1940, the division of
securities shall, by rule, adopt the substance of 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. (JJ) "Supervised person" means a natural person who is 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 any of
the following applies: (1) Immediately after entering into the investment advisory contract with
the investment adviser, the person has at least seven hundred fifty thousand
dollars
under the management of the investment adviser. (2) The investment adviser reasonably believes either of the following at
the time the investment advisory contract is entered into with the person: (a) The person has a net
worth, together with assets held jointly with a spouse, of more than one
million five hundred thousand dollars. (b) The person is a qualified purchaser as
defined in division (LL) of this section. (3) Immediately prior to entering into an investment
advisory contract with the investment adviser, the person is
either of the following: (a) An executive officer, director,
trustee, general partner, or person serving in a similar
capacity, of the investment adviser; (b) An employee of the investment
adviser, other than an employee performing solely clerical,
secretarial, or administrative functions or duties for the
investment adviser, which employee, in connection with the
employee's regular functions or duties, participates in the
investment activities of the investment adviser, provided that,
for at least twelve months, the employee has been performing
such nonclerical, nonsecretarial, or nonadministrative functions
or duties for or on behalf of the investment adviser or
performing substantially similar functions or duties for or on
behalf of another company. If subsequent to March 18, 1999,
amendments are enacted or adopted defining "excepted person" for
purposes of the Investment
Advisers Act of 1940 or additional rules
or regulations are promulgated by the securities and exchange
commission regarding the definition of "excepted person" for
purposes of the Investment Advisers
Act of 1940, the division of
securities shall, by rule, adopt the substance of 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. (LL)(1) "Qualified purchaser" means either of the following: (a) A natural person who owns
not less than five million dollars in investments as defined by
rule by the division of securities; (b) A natural person, acting for
the person's own account or accounts of other qualified
purchasers, who in the aggregate owns and invests on a
discretionary basis, not less than twenty-five million dollars
in investments as defined by rule by the division of
securities. (2) If subsequent to March 18, 1999, amendments are
enacted or adopted defining "qualified purchaser" for purposes of the
Investment Advisers Act of 1940 or additional rules
or regulations are promulgated by the securities and exchange
commission regarding the definition of "qualified purchaser" for
purposes of the Investment Advisers Act of 1940, 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. (MM)(1) "Purchase" has the full meaning of "purchase" as applied
by or accepted in courts of law or equity and includes every acquisition of,
or attempt to acquire, a security or an interest in a security. "Purchase"
also includes a contract to purchase, an exchange, an attempt to purchase, an
option to purchase, a solicitation of a purchase, a
solicitation of an offer to sell, a subscription, or an offer to purchase,
directly or indirectly, by agent, circular, pamphlet, advertisement, or
otherwise. (2) "Purchase" means any act by which a purchase is made. (3) 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. (NN) "Life settlement interest" means the entire interest or
any fractional interest in an insurance policy or certificate of
insurance, or in an insurance benefit under such a policy or certificate,
that is the subject of a life settlement contract. For purposes of this division, "life settlement contract"
means an
agreement for the purchase, sale, assignment, transfer, devise, or
bequest of any portion of the death benefit or ownership of any life
insurance policy or contract, in return for consideration or any other
thing of value that is less than the expected death benefit of the
life insurance policy or contract. "Life settlement contract"
includes a viatical settlement contract as defined in section
3916.01 of the Revised Code, but does not include any of the
following: (1) A loan by an insurer under the terms of a life insurance
policy, including, but not limited to, a loan secured by the cash value of
the policy; (2) An agreement with a bank that takes an assignment of a life
insurance policy as collateral for a loan; (3) The provision of accelerated benefits as defined in section
3915.21 of the Revised Code; (4) Any agreement between an insurer and a reinsurer; (5) An agreement by an individual to purchase an existing life
insurance policy or contract from the original owner of the policy
or contract, if the individual does not enter into more than one
life settlement contract per calendar year; (6) The initial purchase of an insurance policy or certificate of
insurance from its owner by a viatical settlement provider, as defined
in section 3916.01 of the Revised Code, that is
licensed under
Chapter 3916. of the Revised
Code. Sec. 1707.02. (A) "Exempt," as used in this section,
means exempt from sections 1707.08 to 1707.11 and 1707.39 of the
Revised Code. (B)(1) Except as provided in division (B)(2) of this section, the following
securities are exempt, if the issuer or
guarantor has the power of taxation or assessment for the purpose
of paying the obligation represented by the security, or is in
specific terms empowered by the laws of the state of issuance to
issue securities payable as to principal or interest, or as to
both, out of revenues collected or administered by such issuer: (a) Any security issued or guaranteed by the United
States; (b) Any security issued or guaranteed by, and recognized,
at the time of sale, as its valid obligation by, any foreign
government with which the United States is, at the time of sale,
maintaining diplomatic relations; (c) Any security issued or guaranteed, and recognized as
its valid obligation, by any political subdivision or any
governmental or other public body, corporation, or agency in or
of the United States, any state, territory, or possession of the
United States, or any foreign government with which the United
States is, at the time of sale, maintaining diplomatic relations. (2) If a security described in division (B)(1) of this section
is not payable out of the proceeds of a general tax,
the security is exempt only if, at the time of its first sale in this state,
there is no default in the payment
of any of the interest or principal of the security, and
there are no adjudications or pending suits adversely affecting
its validity. (C) Any security issued by and representing an interest in
or an obligation of a state or nationally chartered bank, savings and loan
association, savings bank, or
credit union, or a governmental corporation or agency created by
or under the laws of the United States or of Canada is exempt, if
it is under the supervision of or subject to regulation by the
government or state under whose laws it was organized. (D) Any interim certificate is exempt, if the securities
to be delivered therefor are themselves exempt, are the subject
matter of an exempt transaction, have been registered by
description or registered by qualification, or are the subject
matter of a transaction which has been registered by description. (E)(1) Any A security, whether a preliminary or final
security, is exempt, which, at the time of sale within this
state, is listed, or listed upon notice of issuance, on the
Cincinnati stock exchange, the Midwest stock exchange, the New
York stock exchange, or the American stock exchange, or is
designated, or approved for designation upon notice of issuance,
as a national market system security on the national association
of securities dealers automated quotation system, or is listed or
designated on any other stock exchange or national quotation
system approved by the division as having listing requirements
substantially equivalent to those of any one of those exchanges
or systems, and any security senior to any security so listed or
designated is also exempt; but these exemptions shall apply only
so long as such security remains so listed or designated pursuant
to official action of such exchange or system and not under
suspension, and only so long as such exchange or system remains
approved under this section
if it meets any of the following requirements: (a) The security is listed, or authorized for listing, on the
New York stock exchange, the
American stock exchange, or the national
market system of the NASDAQ stock market, or any successor
to such entities. (b) The security is listed, or authorized for listing, on a
national securities exchange or system, or on a tier or segment of such
exchange or system, designated
by the securities and exchange commission in rule 146(b)
promulgated under section 18(b)(1) of the
Securities Act of 1933. (c) The security is listed, or authorized for listing, on a
national securities exchange or system, or on a tier or segment of such
exchange or system, that has
listing standards that the division of securities, on its own
initiative or on the basis of an application, determines by rule
are substantially similar to the listing standards applicable to securities
described in division (E)(1)(a) of this section. (d) The security is a security of the same issuer that is equal
in seniority or that is a senior security to a security described
in division (E)(1)(a), (b), or
(c) of this section. (2) Application for approval of a stock exchange or system
not approved in this section may be made by any organized stock
exchange or system, or by any dealer who is a member of such
exchange, in such manner and upon such forms as are prescribed by
the division, accompanied by payment of an approval fee of two
hundred dollars, and the division shall make such investigation
and may hold such hearings as it deems necessary to determine the
propriety of giving approval. The cost of such investigation
shall be borne by the applicant. The division may enter an order
of approval, and if it does so, it shall notify the applicant of
such approval. (3) The division may revoke the approval of an exchange or
system approved enumerated in division (E)(1) of
this section
or approved by it upon finding,
provided that the exchange or system is not listed in section
18(b)(1) of the Securities Act of 1933 or any
rule promulgated thereunder. The division may effect a revocation
after due notice, investigation, and a hearing, and a
finding that the practices
or requirements of such exchange or system have been so changed
or modified, or are, in their actual operation, such that the
contemplated protection is no longer afforded. The principles of
res adjudicata ordinarily applicable in civil matters shall not
be applicable to this matter, which is hereby declared to be
administrative rather than judicial. Notice of the hearing may
be given by certified mail at least ten days before such hearing. (4) The division may suspend the exemption of any security
described in division (E)(1) of this section,
provided that the security is listed or authorized for listing
on an exchange or system that is not listed in section
18(b)(1) of the Securities Act of 1933 or any
rule promulgated
thereunder. The division may effect a suspension
by giving notice, by
certified mail, to that effect to the exchange or system upon
which such security is listed or designated and to the issuer of
such security. After notice and hearing, the division may revoke
such exemption if it appears to it that sales of such security
have been fraudulent or that future sales of it would be
fraudulent. The division shall set such hearing not later than
ten days from the date of the order of suspension, but may for
good cause continue such hearing upon application of the exchange
or system upon which such security is listed or designated or
upon application of the issuer of such security. (F) Any security, issued or guaranteed as to principal,
interest, or dividend or distribution by a corporation owning or
operating any public utility, is exempt, if such corporation is,
as to its rates and charges or as to the issuance and
guaranteeing of securities, under the supervision of or regulated
by a public commission, board, or officer of the United States,
or of Canada, or of any state, province, or municipal corporation
in either of such countries. Equipment-trust securities based on
chattel mortgages, leases, or agreements for conditional sale, of
cars, locomotives, motor trucks, or other rolling stock or of
motor vehicles mortgaged, leased, or sold to, or finished for the
use of, a public utility, are exempt; and so are equipment
securities where the ownership or title of such equipment is
pledged or retained, in accordance with the laws of the United
States or of any state, or of Canada or any province thereof, to
secure the payment of such securities. (G) Commercial paper and promissory notes are exempt when
they are not offered directly or indirectly for sale to the
public. (H) Any security issued or guaranteed by an insurance
company, except as provided in section 1707.32 of the Revised
Code, is exempt if such company is under the supervision of, and
the issuance or guaranty of such security is regulated by, a
state. (I) Any security, except notes, bonds, debentures, or
other evidences of indebtedness or of promises or agreements to
pay money, which is issued by a person, corporation, or
association organized not for profit, including persons,
corporations, and associations organized exclusively for
conducting county fairs,
or
for
religious, educational, social, recreational, athletic,
benevolent, fraternal, charitable, or reformatory purposes, and agricultural
cooperatives as defined in section 1729.01 of the Revised
Code, is
exempt, if no part of the net earnings of such issuer inures to
the benefit of any shareholder or member of such issuer or of any
individual, and if the total commission, remuneration, expense,
or discount in connection with the sale of such securities does
not exceed two per cent of the total sale price thereof plus five
hundred dollars. (J)(1) Any securities outstanding for a period of not less
than five years, on which there has occurred no default in
payment of principal, interest, or dividend or distribution for
the five years immediately preceding the sale, are exempt. (2) For the purpose of division (J) of this section, the
dividend, distribution, or interest rate on securities in which
no such rate is specified shall be at the rate of at least four
per cent annually on the aggregate of the price at which such
securities are to be sold. (K) All bonds issued under authority of Chapter 165. or
761., or section 4582.06 or 4582.31 of the Revised Code are
exempt. 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 (Q), (W), (X),
or (Y) of section 1707.03 of the Revised Code,
and every (A) Each person submitting a notice filing
pursuant to
section 1707.092 of the Revised Code,
for the sale of securities pursuant to this chapter, which that
is an incorporated applicant or person not domiciled in
organized under the laws of this state or, that is
not licensed under section 1703.03 of the
Revised Code, or is an
unincorporated applicant or person having the situs of that does not
have its principal
place of business outside in this state, shall file with its
application or notice filing its
submit to the division of securities an irrevocable consent to
service of process, as described in division (B) of this section,
in connection with any of the following:
(1) Filings to claim any of the exemptions enumerated in
division (Q), (W), (X), or (Y) of section
1707.03 of
the Revised Code; (2) Applications for registration by description, qualification,
or coordination; (3) Notice filings pursuant to section 1707.092 or 1707.141 of
the Revised Code; (4) Applications for licensure as a securities dealer under
section 1707.15 of the Revised Code; (5) Applications for licensure as an investment adviser under
section 1707.151 of the Revised Code. (B) The irrevocable written consent, shall be
executed and acknowledged by an
individual duly authorized to give the consent, and shall do all of
the following: (1) Designate the secretary of state as agent for service of process or
pleadings; (2) State that
actions growing out of the sale of such securities, the giving of
investment advice, or fraud committed by
an applicant in this state a person on whose behalf the consent is
submitted may be commenced against it the person, in the
proper court of any county in this state in which a cause of
action for fraud may arise or in which the plaintiff in 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; (3) Stipulate that service of 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 person on whose behalf the consent is
submitted. (C) 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 the applicant, person on whose
behalf the consent is submitted or to the
last known address as shown on the application form filed filing
made with the
division, or if it has a principal office in this state, then to
the principal office; but. However, failure to mail
such copy shall does
not invalidate the service. (D) Notwithstanding any provision of this chapter, or of any
rule adopted by the division of securities under this chapter, that requires
the submission of a consent to service of process, the division may provide by
rule for the electronic filing or submission of a consent to service of
process. Sec. 1707.15. An application to act as dealer (A)
Application for a dealer's license shall be made in
writing accordance with this section and shall be filed
by filing with the division of securities. It
shall be in such form as the division prescribes, and verified by
oath of the applicant, his agent, or his attorney, and it shall
set forth the information, materials, and forms specified in rules
adopted by the division, along with all of the following information: (A)(1) The name and address of the applicant;
(B)(2) A description of the applicant, including, if the
applicant is a partnership, unincorporated association, or any
similar form of business organization, the names and the
residence and business addresses of all partners, officers,
directors, trustees, or managers of the organization, and the
limitation of the liability of any partner or member; and if the
applicant is a corporation, a list of its executive officers and
directors, and the residence and business addresses of each,;
and
if it is a foreign corporation, a copy of its articles of
incorporation in addition thereto;
(C)(3) The location and addresses of the principal office and
all other offices of the applicant;
(D)(4) A general description of the business of the applicant
done prior to such the application, including a list of states
in
which the applicant is a licensed dealer;
(E) The names and addresses of all salesmen of the
applicant at the date of the application;
(F) The nature of the applicant's business, and its places
of business, for the period of ten years next preceding the date
of application.
Every (B) Each 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 of the person designated.
Every applicant shall file an irrevocable consent to
service of process on the secretary of state in the event that
such applicant, if a resident of this state, or the person
designated by the nonresident applicant, cannot be found at the
address given. Such consent shall be given and service
thereunder shall be made as provided in section 1707.11 of the
Revised Code.
(C)(1) The division may investigate any applicant for a license,
and may require such additional information as it deems necessary
to determine the applicant's business repute and qualifications
to act as a dealer in securities. (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 such examination. An itemized statement of any such
expenses which he the applicant is required to pay shall be
furnished the
applicant by the division. If the applicant is merely renewing his license
for the previous year the application need contain only the information
required by divisions (B), (C), and (E) of this section.
(D) The division shall by rule require an applicant one
natural person who is a principal, officer, director, general partner,
manager, or employee of a dealer to pass an
examination which covers his knowledge of
securities laws and practices
designated by the division. Each dealer that is not a natural
person shall notify the division of the name and relationship to the
dealer of the natural person who has passed the examination on behalf of
the dealer and who will serve as the designated principal on
behalf of the dealer. (E) Dealers shall employ as salespersons only those salespersons
who are licensed under this chapter. If at any time a salesperson
resigns or is discharged or a new salesperson is added, the dealer
shall promptly notify the division. (F) If the division finds that the applicant is of good
business repute, appears qualified to act as a dealer in
securities, and has fully complied with sections 1707.01 to
1707.45 of the Revised Code this chapter and rules adopted under this
chapter by the division, the division shall issue to such
applicant a license to act as dealer, upon payment by the applicant
of the fee fees prescribed by division (B) of
section 1707.17 of the Revised Code. The division may, after proper hearing, refuse, as provided
in section 1707.19 of the Revised Code, shall issue to grant a
license to the
applicant.
Dealers shall employ as salesmen only those who are
licensed under sections 1707.01 to 1707.45 of the Revised Code.
If at any time such salesmen resign or are discharged or new
salesmen are added, the dealer shall forthwith notify the
division and shall file with the division the names and addresses
of new salesmen a license authorizing the applicant to act as a
dealer.
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 Each applicant shall file an irrevocable consent to
service
of process naming the secretary of state for service of process 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)(C)(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)(D) 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 Each 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)(E) 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)(F) 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 this chapter and rules adopted under those
sections this chapter 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. 1707.16. (A) Every salesman salesperson of
securities must be
licensed by the division of securities and shall be employed only
by the licensed dealer specified in his the salesperson's
license. If the salesperson severs the connection with that licensed
dealer, the salesperson's license is void. The application (B) Application for a
salesman's salesperson's license shall set forth
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, along with all of the following
information:
(A)(1) The name and complete residence and business addresses
of the applicant;
(B)(2) The name of the dealer who is employing the applicant
or who intends to employ him the applicant;
(C)(3) The applicant's age and education, and his
the applicant's
experience
in the sale of securities; whether he the applicant has ever
been licensed by
the division, and if so, when; whether he the applicant has ever
been refused a
license by the division; and whether he the applicant has ever
been licensed or
refused a license or any similar permit by any division or
commissioner of securities, whatsoever name known or designated,
anywhere;.
(C) The division shall by rule require an applicant to pass an
examination designated by the division. (D) The nature of the employment, and the names and
addresses of the employers, of the applicant for the period of
ten years immediately preceding the date of the application. If the division finds that the applicant is of good
business repute, appears to be qualified to act as a salesman
salesperson of
securities, and has fully complied with sections 1707.01 to
1707.45 of the Revised Code this chapter, and that the dealer named
in the application is a licensed dealer, the division shall, upon
payment of the fees prescribed by section 1707.17 of the Revised
Code, issue a license to the applicant authorizing him the
applicant to act as salesman salesperson for the dealer
named in the application. If such salesman severs his connection with such dealer,
the salesman's license is void.
The division shall by rule require an applicant to pass an
examination which covers his knowledge of
securities laws and practices.
If the applicant is merely renewing his license for the
previous year or renewing his license upon change of employment,
only the information required under divisions (A) and (B) of this
section need be given.
Sec. 1707.17. (A)(1) The license of every dealer in and
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, between
the first day of November and the fifteenth day of December
of each year. The division
may accept an application for renewal filed between the
fifteenth and the thirty-first day of December of each year.
The division also may accept an application for renewal received by the
division not later than the tenth day of January of the subsequent
calendar year, 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
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
an application for renewal, and the payment of the
fee prescribed in division (B) of this section,
between the fifteenth day of October and the thirtieth day of
November of each year.
The division may accept an application for renewal
filed between the first and thirty-first day of December of each
year. The division also may accept an application
for renewal received by the division not later than the tenth day of
January of the subsequent calenar calendar year, 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. (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 received by the division not later than the tenth day of
January of the subsequent calendar 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 that is received by the division not later than the
thirty-first day of December of each year, shall be
thirty dollars per
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 received by the division between the first and tenth day of
January of the subsequent calendar year. The fee for the
examination of applicant
dealers, when
administered by the division, shall be seventy-five dollars. (2) The fee for each salesperson's license,
and for each
annual
renewal thereof, shall be fifty dollars. The fee for the
examination of an applicant 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 that is received by the division not later
than the thirty-first day of December of each year, 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
received by the division between the first and tenth day
of January of the subsequent
calendar year. If the fee for an investment adviser license is
paid to the division on or before
October 1, 1999, that fee shall
cover the issuance of the initial license and also shall cover
any fee for renewal of the license for the period ending
December 31, 2000. (4) The fee for each investment adviser notice filing required
by division (B) of section 1707.141 of the Revised
Code and received by the division not later than the thirty-first day
of December of each year shall be one hundred dollars. Upon the
payment of
an additional fee of one-half of the notice filing fee, the division may
accept a notice filing received by the division between the first and tenth
day of January of the subsequent calendar year. A notice filing may
be
made at any time during the calendar year. In that event, the
notice filing fee shall not be reduced. If the fee for an investment adviser
notice filing is paid to the division on or before
October 1, 1999, that fee shall
cover the initial notice filing and also shall cover any fee for
the notice filing for the period ending
December 31, 2000. (5) The fee for each investment adviser representative's
license, and for each annual renewal thereof that is received by the division
not later than the thirty-first day of December of each year, shall
be thirty-five
dollars; however, the fee shall be waived for the investment
adviser representative designated the principal of the
investment adviser pursuant to division
(E)(D) 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
received by the division between the first and tenth day
of January of the subsequent
calendar year. If the fee for an investment adviser
representative's license is paid to the division on or before
October 1, 1999, that fee shall
cover the issuance of the initial license and also shall cover
any fee for renewal of the license for the period ending
December 31, 2000. (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. 1707.20. (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 these
sections. For
the purpose of rules and forms, the division 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 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 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 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
shall be published; and in addition to fulfilling the
requirements of 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.. (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. (F) Notwithstanding any provision of the Revised Code, if the
"Securities Act of 1933," the
"Securities Exchange
Act of 1934,"
the "Investment Company Act of
1940," the
"Investment Advisers Act of 1940,"
and any amendments to any of those federal acts, if any
rule, regulation, release, statement, or position promulgated or
adopted under the authority of any of those federal acts, and any
amendments to those federal acts, or if any rule, regulation, or guideline of
a self-regulatory organization registered under the "Securities and
Exchange Act of 1934," and any
amendments to that act, contains a
provision that is not contained in this chapter or the rules
adopted under this chapter and that affects any matter within the scope of
this
chapter, the division by rule may promulgate a similar provision. A rule adopted under the authority granted in this division may
delete, modify, or replace an existing rule of the division. a rule
adopted under the authority granted in this division becomes effective
on the later of the date on which the division issues the rule or
the date on which the federal statute or the rule, regulation, release,
statement, or position on which the division's rule
is based becomes effective. The division, upon thirty days
written notice, may revoke any rule adopted under the authority
granted in this division. a rule adopted under the authority
granted in this division, and not revoked by the commissioner,
lapses and has no further force and effect thirty months after the
rule's effective date. 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 this chapter or rules adopted under
that this chapter by the
division, or defined as fraudulent in that this chapter or rules
adopted under that this chapter by the division, 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 the person,
as to the person's acts or practices as an investment adviser or investment
adviser representative within this state, and as to other
information as it deems material or relevant thereto; (B) Examine any investment adviser, investment adviser representative, or
any
seller, dealer, salesperson, or issuer of any
securities, and any of their agents, employees, partners,
officers, directors, members, or shareholders, wherever located,
under oath; and examine records, books, documents, accounts,
and papers as the division deems material or relevant to the
inquiry; (C) Require the attendance of witnesses, and the
production of 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. The subpoena shall be served by
personal service or 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 the witness. The person designated to effect personal or residence
service under this division 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 the person serving
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 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 the witness following the hearing. (D) Proceed under section 1707.19 of the Revised Code to
suspend the license of any licensed dealer,
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 or rules adopted under those sections by the
division by laying before the prosecuting
attorney of the proper county any evidence of criminality which
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 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 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 to constitute violations of Chapter 1707.
of the Revised Code this chapter or rules adopted under that
this chapter by the
division. The order shall state specifically the
section or sections of Chapter 1707. of the Revised Code this
chapter or the rule or
rules adopted under that this chapter by the division that
appear to the division to have been violated and
the facts constituting the violation. If after the issuance of
the order it appears to the division 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,
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. (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 this chapter if
the activities had occurred in this state. 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,
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 section 1707.03, 1707.04, and or
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 the 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 the issuer
exceed
its assets, taken at their fair market value. (G) No person in purchasing or selling securities shall knowingly
engage in any act or practice that 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
of those securities, 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
to the securities, upon demand and tender of any amount
due on the securities. (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) In acting as principal for the investment adviser's or
investment adviser representative's own account, knowingly sell
any security to or purchase any security from a client, or in
acting as salesperson for a person other than such client,
knowingly effect any sale or purchase of any security for the
account of such client, without disclosing to the client in
writing before the completion of the transaction the capacity in
which the investment adviser or investment adviser
representative is acting and obtaining the consent of the client
to the transaction. Division (M)(1)(c)
of this section does not apply to any investment adviser
registered with the securities and exchange commission under
section 203 of the "Investment Advisers Act of 1940," 15 U.S.C. 80b-3, or to
any transaction with a customer
of a licensed dealer or salesperson if the licensed dealer or
salesperson is not acting as an investment adviser or investment
adviser representative in relation to the transaction. (d) Engage in any act, practice, or
course of business that is fraudulent, deceptive, or
manipulative. The division of securities may adopt rules
reasonably designed to prevent such acts, practices, or courses
of business as are fraudulent, deceptive, or manipulative. (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. 3916.01. As used in this chapter: (A) "ADVERTISING" MEANS ANY
WRITTEN, ELECTRONIC, OR PRINTED COMMUNICATION OR ANY COMMUNICATION BY MEANS OF
RECORDED TELEPHONE MESSAGES OR
TRANSMITTED ON RADIO, TELEVISION, THE INTERNET, OR SIMILAR
COMMUNICATIONS MEDIA, INCLUDING, but not LIMITED to, FILM STRIPS,
MOTION PICTURES, AND VIDEOS, that is DIRECTLY OR INDIRECTLY
PUBLISHED, DISSEMINATED, CIRCULATED, OR PLACED BEFORE THE PUBLIC
FOR THE PURPOSE OF CREATING AN INTEREST IN OR INDUCING A PERSON TO
SELL A LIFE INSURANCE POLICY PURSUANT TO A VIATICAL SETTLEMENT
CONTRACT. (B) "BUSINESS OF VIATICAL SETTLEMENTS" MEANS AN ACTIVITY INVOLVED
IN THE OFFERING, SOLICITATION, NEGOTIATION, PROCUREMENT, EFFECTUATION, PURCHASING, INVESTING, FINANCING, MONITORING, TRACKING,
UNDERWRITING, SELLING, TRANSFERRING, ASSIGNING, PLEDGING, or
HYPOTHECATING OF VIATICAL SETTLEMENT CONTRACTS OR PURCHASE
AGREEMENTS or any similar activity related to viatical settlement
contracts or purchase agreements. (C) "CHRONICALLY ILL" MEANS any of the following: (1) BEING UNABLE TO PERFORM AT LEAST TWO ACTIVITIES OF DAILY
LIVING, including, but not limited to, EATING, TOILETING, TRANSFERRING,
BATHING, DRESSING, oR CONTINENCE; (2) REQUIRING SUBSTANTIAL SUPERVISION TO PROTECT THE INDIVIDUAL
FROM THREATS TO HEALTH AND SAFETY DUE TO SEVERE COGNITIVE
IMPAIRMENT; (3) HAVING A LEVEL OF DISABILITY SIMILAR TO THAT DESCRIBED IN
division (c)(1) of this section, AS DETERMINED BY THE United
States SECRETARY OF HEALTH AND HUMAN
SERVICES; (D)(1) "Financing entity" means an underwriter, placement agent,
lender, purchaser of securities, purchaser of a policy or certificate from a
viatical settlement provider, credit enhancer, or any other person that
has a direct ownership interest in a policy or certificate
that is the subject of a viatical settlement contract and to which both of the
following apply: (a) Its principal activity related to the transaction is
providing funds to effect the viatical
settlement or the purchase of one
or more viaticated policies. (b) It HAS AN AGREEMENT IN WRITING WITH ONE OR MORE LICENSED
VIATICAL SETTLEMENT PROVIDERS TO FINANCE THE ACQUISITION OF VIATICAL
SETTLEMENT CONTRACTS. (2) "FINANCING ENTITY" DOES NOT INCLUDE A NON-ACCREDITED INVESTOR
OR VIATICAL SETTLEMENT PURCHASER. (e) "FRAUDULENT VIATICAL SETTLEMENT ACT" MEANS AN ACT OR OMISSION
COMMITTED BY ANY PERSON WHO, KNOWINGLY OR WITH INTENT TO DEFRAUD
and FOR THE PURPosE OF DEPRIVING ANOTHER OF PROPERTY OR FOR
PECUNIARY GAIN, COMMITS, OR PERMITS any of ITS EMPLOYEES OR AGENTS
TO COMMIT, ANY OF THE FOLLOWING ACTS: (1) PRESENTING, CAUSING TO BE PRESENTED, OR PREPARING WITH
KNOWLEDGE OR BELIEF THAT IT WILL BE PRESENTED TO OR BY A VIATICAL
SETTLEMENT PROVIDER, VIATICAL SETTLEMENT BROKER, VIATICAL SETTLEMENT
PURCHASER, FINANCING ENTITY, INSURER, INSURanCE BROKER, INSURANCE
AGENT, OR ANY OTHER PERSON, any FALSE MATERIAL INFORMATION, OR
CONCEALING any MATERIAL INFORMATION, AS PART OF, IN SUPPORT of, OR
CONCERNING A FACT MATERIAL TO, ONE OR MORE OF THE FOLLOWING: (a) AN APPLICATION FOR THE ISSUANCE OF A VIATICAL
SETTLEMENT CONTRACT OR INSURANCE POLICY or certificate; (b) THE UNDERWRITING OF A VIATICAL SETTLEMENT CONTRACT OR
INSURANCE POLICY or certificate; (c) A CLAIM FOR PAYMENT OR BENEFIT PURSUANT TO A VIATICAL
SETTLEMENT CONTRACT OR INSURANCE POLICY or certificate; (d) any PREMIUMS PAID ON AN INSURANCE POLICY or certificate; (e) any PAYMENTS AND CHANGES IN OWNERSHIP OR BENEFICIARY MADE IN
ACCORDANCE WITH THE TERMS OF A VIATICAL SETTLEMENT CONTRACT OR INSURANCE
POLICY or certificate; (f) THE REINSTATEMENT OR CONVERSION OF AN INSURANCE POLICY or
certificate; (g) THE SOLICITATION, OFFER, EFFECTUATION, OR SALE OF A VIATICAL
SETTLEMENT CONTRACT or INSURANCE POLICY or certificate; (h) THE ISSUANCE OF WRITTEN EVIDENCE OF a VIATICAL SETTLEMENT
CONTRACT OR INSURANCE policy or certificate; (i) A FINANCING TRANSACTION. (2) IN THE FURTHERANCE OF A FRAUD OR TO PREVENT THE DETECTION OF
A FRAUD, doing any of the following: (a) REMOVing, CONCEALing, ALTERing, DESTROYing, OR SEQUESTERing
FROM THE SUPERINTENDENT THE ASSETS OR RECORDS OF A LICENSEE OR anOTHER PERSON ENGAGED IN THE BUSINESS OF vIATICAL
SETTLEMENTS; (b) MISREPRESENTing OR CONCEALing THE FINANCIAL CONDITION
OF A
LICENSEE, FINANCING ENTITY, INSURER, OR any OTHER PERSON; (c) TRANSACTing THE BUSINESS OF viatical SETTLEMENTS IN
VIOLATION
OF any law of this state REQUIRING A LICENSE, CERTIFICATE OF
AUTHORITY, OR OTHER LEGAL AUTHORITY FOR THE TRANSACTION OF THE
BUSINESS OF VIATICAL SETTLEMENTS; (d) FILing WITH THE SUPERINTENDENT of insurance OR THE
CHIEF INSURANCE REGULATORY OFFICIAL OF ANOTHER JURISDICTION A DOCUMENT
CONTAINING FALSE INFORMATION OR OTHERWISE
CONCEALing FROM THE SUPERINTENDENT any INFORMATION ABOUT A MATERIAL
FACT. (3) PRESENTING, CAUSING TO BE PRESENTED, OR PREPARING WITH
KNOWLEDGE OR REASON TO BELIEVE THAT IT WILL BE PRESENTED, TO OR BY A
VIATICAL SETTLEMENT PROVIDER, VIATICAL SETTLEMENT BROKER, INSURER,
INSURANCE AGENT, FINANCING ENTITY, VIATICAL SETTLEMENT PURCHASER,
OR ANY OTHER PERSON, IN CONNECTION WITH A VIATICAL SETTLEMENT
TRANSACTION OR INSURANCE TRANSACTION, AN INSURANCE POLICY or
certificate that the actor knows was FRAUDULENTLY OBTAINED BY THE
INSURED, the OWNER, OR ANY AGENT of the insured or owner; (4) committing any EMBEZZLEMENT, THEFT, MISAPPROPRIATION, OR
CONVERSION OF MONEYS, FUNDS, PREMIUMS, CREDITS OR OTHER PROPERTY OF A
VIATICAL SETTLEMENT PROVIDER, INSURER, INSURED, VIATOR, INSURANCE
POLICYOWNER, OR ANY OTHER PERSON ENGAGED IN THE BUSINESS OF
VIATICAL SETTLEMENTS OR INSURANCE; (5) ATTEMPTING TO COMMIT, ASSISTING, AIDING OR ABETTING IN THE
COMMISSION OF, OR CONSPIRACY TO COMMIT any ACT OR OMISSION SPECIFIED IN
divisions (e)(1) to (4) of this section. (F) notwithstanding section 1.59 of the Revised Code, "Person"
means a natural person or a legal entity, including, but not limited to,
an individual, partnership, limited liability company, association,
trust, or corporation. (G) "policy" means an individual or group policy, group
certificate, contract, or arrangement of insurance affecting the rights of a resident of this state or bearing a reasonable
relation to this state, regardless of whether delivered or issued
for delivery in this state. (H) "related provider trust" means a titling trust or any other
trust established by a licensed viatical settlement provider or a financing entity for the sole purpose of holding ownership or
beneficial interest in purchased policies in connection with a
financing transaction, provided that the trust has a written
agreement with the licensed viatical settlement provider under
which the licensed VIATICal settlement provider is responsible for
ensuring compliance with all statutory and regulatory requirements
and under which the trust agrees to make all records and files
related to viatical settlement transactions available to the
SUPERINTENDENT as if those records and files were maintained
directly by the licensed viatical settlement provider. (I) "special purpose entity" means a corporation, partnership,
trust, limited liability company or other SIMILAR entity formed solely to
provide access, either directly or indirectly, to
INSTITUTIONAL capital markets for a financing entity or licensed
viatical settlement provider. (J) "terminally ill" means having an illness or sickness that can
reasonably be expected to result in death in twenty-four months or
less. (K) "Viatical settlement broker" means a person that, on behalf
of a viator and for a fee, commission, or other valuable consideration, offers
or attempts to negotiate viatical settlements between a viator and one or more
viatical settlement providers. "Viatical settlement broker" does not include
an attorney, a certified public accountant, or a financial planner accredited
by a nationally recognized accreditation agency, who is retained to
represent the viator and whose compensation is not paid directly or indirectly
by the viatical settlement provider or purchaser. (L) "Viatical settlement contract" means any of the following: (1) A written agreement establishing the terms under which
compensation or any thing of value, that is less than the expected death
benefit of the insurance policy or certificate will be paid in return
for the viator's assignment, transfer, sale, devise, or bequest of
the death benefit or ownership of any portion of the insurance policy or
certificate of insurance; (2) A contract for a loan or any other financing
transaction secured primarily by an individual or group life insurance policy
or certificate,
other than a loan by a life insurance company pursuant to the terms of the
life insurance contract or a loan secured by the cash value of a policy or
certificate; (3) An agreement to transfer ownership or change the beneficiary
designation of the policy or certificate at a later date, regardless of
the date that compensation is paid to the viator. (M)(1) "Viatical settlement provider" means
a person, other than a viator, that enters into or effectuates a viatical
settlement contract. (2) "Viatical settlement provider" does not include any of the following: (a) A bank, savings bank, savings and loan association, credit
union, or other financial institution that takes an assignment of a life
insurance policy or certificate as collateral for a loan; (b) The issuer of a life insurance policy or certificate
providing accelerated
benefits as defined in section 3915.21 of the Revised Code and pursuant to the contract; (c) An individual who enters into or effectuates not more than
one agreement in
any calendar year for the transfer of life insurance policies or certificates
for any value
less than the expected death benefit; (d) an authorized or eligible insurer that provides stop
loss
coverage to a viatical settlement provider, PURCHASER, financing entity,
special purpose entity, or related
provider trust; (e) a financing entity; (f) special purpose entity; (g) a related provider trust; (h) a viatical settlement purchaser. (N) "Viaticated policy" means a life insurance policy or
certificate that has been acquired by a viatical settlement provider pursuant
to a viatical settlement contract. (O) "Viator" means the owner of a life insurance policy or a
certificate holder under a group policy
who, in return for
compensation or any thing of value that is less than the expected death
benefit of the policy or certificate, assigns, transfers, sells,
devises, or bequests the death benefit or ownership of any portion of
the insurance policy or certificate of insurance. for the
purposes of this chapter, a "viator" is not limited to an owner of
a life insurance policy or a certificate holder under a group
policy insuring the life of an individual with a terminal or
chronic illness or condition except where specifically addressed.
"viator" does not include any of the following: (1) a licensee under this chapter; (2) an accredited investor or qualified institutional buyer as
defined respectively in
regulation
d,
rule 501 or
rule 144a of the
securities act of 1933, as
amended; (3) a financing entity; (4) a special purpose entity; (5) A related provider trust. (P) "viatical settlement purchaser" means a person who gives a
sum of money as consideration for a life insurance policy or an interest in the death benefits of a life insurance policy, or a
person who owns, acquires, or is entitled to a beneficial interest
in a trust that owns a VIATICAL settlement contract or is the
beneficiary of a life insurance policy that has been or will be
the subject of a viatical settlement contract, for the purpose of
deriving an economic benefit. "viatical settlement purchaser"
does not include any of the following: (1) a licensee under this chapter; (2) an accredited investor or qualified institutional buyer as
defined respectively in
regulation
d,
rule 501 or
rule 144a of the
securities act of 1933, as
amended; (3) a financing entity; (4) a special purpose entity; (5) a related provider trust. (q) "licensee" means a person licensed under this chapter. (r) "naic" means the national association of insurance
commissioners. (s) "securities act of 1933" has the same
meaning as in section
1707.01 of the REVISED code. Sec. 3916.02. No person shall operate in this state as a viatical
settlement provider or viatical settlement broker without first
having obtained a license from the superintendent of insurance
and, if different from
this state, from the comparable official of the state of residence
of the viator. If there is more than one viator on a single policy or
certificate and the viators are residents of different states, the
viatical settlement shall be governed by the law of the state in
which the viator having the largest percentage ownership of the
policy or certificate resides or, if the viators hold equal
ownership, the state of residence of one viator agreed upon in
writing by all viators. Sec. 3916.03. (A) An applicant for a license as a viatical
settlement provider or viatical
settlement
broker shall submit an application for the license in a manner prescribed by
the superintendent of insurance. The application shall be accompanied by a
fee
established by the superintendent by rule adopted in accordance with
Chapter 119. of the Revised Code. (B) A license issued under
this
chapter to a person other than an individual authorizeS aLL
partnerS, officerS, memberS, OR DESIGNATED employeeS of the person
to act as viatical settlement providerS OR viatical settlement
brokerS, as applicable, AND ALL THOSE partnerS, officerS, memberS,
OR DESIGNATED employeeS SHALL BE NAMED IN THE APPLICATION AND ANY
SUPPLEMENTS TO THE APPLICATION. (C) Upon the filing of an application under this section and the
payment of the license fee,
the superintendent shall make an investigation of the applicant and issue to
the applicant a license that
states in substance that the person is authorized to act as a viatical
settlement provider or viatical settlement
broker, as applicable, if all of the following apply: (1) Regarding an application for a license as a viatical settlement
provider, the applicant provides a detailed plan of operation. (2) The superintendent finds all of the following: (a) The applicant is competent and trustworthy and intends to act
in good faith in the capacity of a viatical settlement provider
or viatical settlement broker, as applicable. (b) The applicant has a good business reputation and has had
experience, training, or education so as to be qualified to act in the
capacity of a viatical settlement provider
or viatical settlement broker, as applicable. (3) If THE APPLICANT IS a person other than an individual, THE
APPLICANT provides a certificate of good standing from the state of its
domicile. (4) The applicant provides an antifraud plan that
meets the
requirements of division (g) of section 3916.18 of the Revised Code. (D) An applicant shall provide all information requested by the
superintendent. The superintendent may, at any time, require an applicant to
fully disclose the identity of all stockholders, partners, officers, members,
and employees, and may, in the exercise of the superintendent's discretion,
refuse to issue a license to an applicant that is not an individual if the
superintendent is not
satisfied that each officer, employee, stockholder, partner, or member who may
materially influence the applicant's conduct meets the standards set forth in
this chapter. (E) Except as otherwise provided in this division, a license as a
viatical settlement provider or viatical settlement broker expires on the last
day of March next after its issuance or continuance. A license as a
viatical settlement provider
or viatical settlement broker may, in the
discretion of the superintendent and the payment of an annual renewal fee
established
by the superintendent by rule adopted in accordance with Chapter 119.
of the Revised Code, be continued past the last day of March next after its issue
and after the last day of March in each succeeding year. Failure
to pay the renewal fee by the required date results in the expiration of the
license. (F) The superintendent shall not issue a license to a nonresident
applicant, unless either of the following applies: (1) The applicant files and maintains a written designation of an agent
for service of process with the superintendent. (2) the applicant has filed with the superintendent the
applicant's written irrevocable consent that any action against the
applicant may be commenced against the applicant by service of process
on the superintendent. (G) A viatical settlement
provider
or viatical settlement broker shall provide to the superintendent new or
revised information regarding any change
in its officers, ten per cent or more of its stockholders, or its partners,
directors, members, or designated
employees within thirty days of the change. (H) Any fee collected under this section shall be paid into the
state treasury to the credit of the department of insurance operating fund
created by section 3901.021 of the Revised Code. Sec. 3916.04. Irrespective of the manner in which the viatical settlement
broker is compensated, a viatical settlement broker is deemed to represent
only the viator and owes a fiduciary duty to the viator to act according to
the viator's instructions and in the best interest of the viator. Sec. 3916.05. (A) A person shall not use a viatical settlement
contract form or provide a disclosure statement form to a viator in this state
unless the viatical settlement contract form or the disclosure statement form
is filed with and approved by the superintendent of
insurance. The superintendent shall disapprove a viatical settlement contract
form or a disclosure statement form if, in the superintendent's opinion, the
viatical settlement contract
form, the disclosure statement form, or any provision contained therein is
unreasonable, contrary to the
interests of the public, or otherwise misleading or unfair to the viator.
At the superintendent's
discretion, the superintendent may require the submission of advertising
material to which section 3916.17 of the Revised Code applies. (B) The superintendent may adopt rules in accordance with
Chapter 119. of the Revised Code to establish reasonable fees for any service or
transaction performed by the department of insurance pursuant to division
(A) of this section. Any fee collected pursuant to those rules shall
be paid into the state treasury to the credit of the department of insurance
operating fund created by section 3901.021 of the Revised Code. Sec. 3916.06. (A)(1) With each application for a viatical
settlement, a viatical settlement provider or viatical settlement broker shall
disclose at least the following to a viator no later than the time all parties
sign the application for the viatical settlement contract: (a) That there are possible alternatives to viatical settlement
contracts, including any
accelerated death benefits offered under the viator's life insurance policy or
certificate; (b) That some or all of the proceeds of the viatical settlement
may be
subject to federal income taxation and state franchise and income taxation,
and that assistance should be sought from a professional tax advisor; (c) That the proceeds of the viatical settlement could be subject
to the
claims of creditors; (d) That receipt of the proceeds of the viatical settlement may
adversely
affect the viator's eligibility for medical assistance under Chapter
5111. of the Revised Code or other government benefits or entitlements, and that advice
should be obtained from the appropriate government agencies; (e) That the viator has a right to rescind the viatical
settlement
contract for at least fifteen calendar days after the viator receives the
viatical
settlement proceeds, as provided in
section 3916.08 of the Revised Code. if the insured dies during
the reScIssion period, the settlement contract shall be deemed to have been
rescinded, subject to repayment of all viatical settlement proceeds to the
viatical settlement company. (f) That funds will be sent to the viator within three business
days after
the viatical settlement provider has received acknowledgment from the insurer
or group administrator that ownership of the policy or interest in the
certificate has been transferred and that the beneficiary has been designated
pursuant to the viatical settlement contract; (g) That entering into a viatical settlement contract may cause
other
rights or benefits, including conversion rights and waiver of premium benefits
that may exist under the policy or certificate, to be forfeited by the viator
and that assistance should be sought from a financial advisor. (2) The viatical settlement provider or viatical settlement
broker shall provide the disclosures under division (a)(1) of this
section in a separate document that is signed by the viator and the viatical
settlement provider or viatical settlement
broker. (3) Disclosure to a viator under division (a)(1) of this
sectionshall include distribution of a brochure describing the process of
viatical settlements. The viatical settlement provider or viatical
settlement broker shall use The NAIC's form for the brochure
unless one is developed by the superintendent. (4) the disclosure document under division (a)(1) of this
section
shall contain the following language: "All medical, financial, or personal information solicited or
obtained by a viatical settlement provider or viatical settlement broker
about an insured, including the insured's identity or the identity
of family members, a spouse, or a significant other may be disclosed as
necessary to effect the viatical settlement between the viator and
the viatical settlement provider. If you are asked to provide
this information, you will be asked to consent to the disclosure.
The information may be provided to someone who buys the policy or
provides funds for the purchase. You may be asked to renew your
permission to share information every two years." (B)(1) A viatical settlement provider shall disclose at least the
following
to a viator prior to the date the viatical settlement contract is signed by
all the necessary parties: (a) The affiliation, if any, between the viatical settlement
provider and
the issuer of the insurance policy or certificate to be viaticated; (b) The name, address, and telephone number of the viatical
settlement provider; (c) regarding a viatical settlement broker, the amount and
method
of calculating the broker's compensation. as used in this
division, "compensation" includes anything of value paid or given
to a viatical settlement broker for the placement of a policy or
certificate. (d) If an insurance policy or certificate to be viaticated has
been issued
as a joint
policy or certificate or involves family riders or any coverage of a life
other than the
insured under the policy or certificate to be viaticated, the possible loss of
coverage on the other lives under the policy or certificate and that advice
should be sought from the viator's insurance producer or the company issuing
the policy or certificate; (e) The dollar amount of the current death benefit payable to the
viatical
settlement provider under the policy or certificate, and, if known, the
availability of any additional guaranteed insurance benefits, the dollar
amount of any accidental death and dismemberment benefits under the policy or
certificate, and the viatical settlement provider's interest in those
benefits. (f) the name, business address, and telephone number of the
independent third-party escrow agent, and the fact that the viator or owner
may inspect or receive
copies of the relevant escrow or trust agreements or documents. (2) the viatical settlement provider or viatical settlement broker
shall conspicuously display The disclosures under division (b)(1)
of this section in a separate document signed by the viator and the viatical
settlement provider or viatical settlement
broker. (C) If the provider transfers ownership or changes the
beneficiary of the insurance policy or certificate, the provider shall
communicate the change in ownership or beneficiary to the
insured within twenty days after the change. Sec. 3916.07. (A) A viatical settlement provider entering into a
viatical
settlement contract shall first obtain all of the following: (1) If the viator is the insured, a written statement from an
attending physician that the viator is of sound mind and under no constraint
or undue influence to enter into a viatical settlement contract. As used in
this division, "physician" means a person authorized under Chapter
4731. of the Revised Code to practice medicine and surgery or osteopathic medicine and
surgery. (2) A document in which the insured consents in writing, as required by
division (E) of section 3916.13 of the Revised Code, to the
release of the insured's medical records to a viatical settlement provider or
viatical settlement broker and to the insurance company that issued the life
insurance policy or certificate covering the life of the insured. (B) Within twenty days after a viator executes documentsnecessary to transfer any rights under an insurance policy or
certificate or within twenty days of entering any expressed or implied
agreement, option,
promise, or other form of understanding to viaticate the policy,
the viatical settlement provider shall give written notice to the
insurer that issued that insurance policy or certificate that the
policy or certificate has or will become a viaticated policy or
certificate. The notice shall be accompanied by the documents
required by division (c) of this section. (C) The viatical provider shall deliver a copy of the medical
release required under division (a)(2) of this section, a copy of
the viator's application for the viatical settlement contract, the
notice required under division (b) of this section, and a request
for verification of coverage to the insurer that issued the life
insurance policy or certificate that is the subject of the
viatical transaction. The viatical provider shall use the NAIC's
form for verification unless standards for verification are developed by
the superintendent. (d) The insurer shall respond to a request for verification of
coverage submitted on an approved form by a viatical settlement provider
within thirty calendar days after the date the request
is received and shall indicate whether, based on the medical
evidence and documents provided, the insurer intends to pursue an
investigation at that time regarding the validity of the life
insurance contract or certificate that is the subject of the
request. (e) Prior to or at the time of execution of the viatical
settlement contract, the viatical settlement provider shall obtain a witnessed
document in which the viator consents to the
viatical settlement contract, represents that the viator has a
full and complete understanding of the viatical settlement
contract and a full and complete understanding of the benefits of
the life insurance policy or certificate, and acknowledges that
the viator is entering into the viatical settlement contract
freely and voluntarily and, for persons with a terminal or chronic
illness or condition, acknowledges that the insured has a terminal
or chronic illness and that the terminal or chronic illness or
condition was diagnosed after the life insurance policy or
certificate was issued. (f) If a viatical settlement broker performs any of the
activities SPECIFIED in this section on behalf of the viatical
settlement provider, the provider is deemed to have fulfilled the
requirements of this section. (g) All medical information solicited or obtained by any licensee
shall be subject to the applicable provisions of state law relating to
confidentiality of medical information. Sec. 3916.08. Each viatical settlement contract entered into in this state
shall provide the viator with an unconditional right to rescind the contract
for at least fifteen calendar days after the receipt of the viatical
settlement
proceeds. If the insured dies during the rescission period, the viatical
settlement contract is deemed to have been rescinded, subject to repayment of
all viatical settlement proceeds to the viatical settlement provider.
If a viatical settlement
contract is rescinded by the viator pursuant to this section,
ownership of the insurance policy or certificate reverts to the
viator or to the viator's estate if the viator is deceased,
irrespective of any transfer of ownership of the policy or
certificate by the viator, viatical settlement provider, or any
other person. Sec. 3916.09. (A) The viatical settlement provider shall
instruct
the viator to send the executed documents required to effect the change in
ownership, assignment, or
change in beneficiary directly to the independent escrow agent. Within three
business days after the
date the escrow agent receives the documents, or from the date the
viatical settlement provider receives the documents if the viator
erroneously provides the documents directly to the provider, the
provider shall pay or transfer
the proceeds of the viatical settlement to an escrow or trust
account in a state or federally chartered financial institution whose deposits
are insured by the federal deposit insurance corporation.
Upon payment of the
settlement proceeds into the escrow or trust account, the escrow agent
or trustee shall deliver the original change in ownership, assignment,
or change in beneficiary forms to the viatical settlement provider or
related provider trust. Upon the licensed provider's receipt of
the acknowledgment of the properly completed transfer of ownership,
assignment, or designation of beneficiary from the insurance
company, the licensed provider shall instruct the escrow agent to
pay the settlement proceeds to the viator. the escrow agent shall
make Payment within three business days of the date the provider
received the acknowledged forms from the insurance company. (B) Failure to transfer the proceeds to the viator within the
period of time disclosed pursuant to division (A)(1)(f)
of section 3916.06 of the Revised Code renders the viatical
settlement
contract voidable by the viator for lack of consideration until the time
consideration is tendered to and accepted by the viator.
If a viatical settlement
contract is voided by the viator pursuant to this division, ownership of
the insurance policy or certificate reverts to the viator or to
the viator's estate if the viator is deceased, irrespective of any
transfer of ownership of the policy or certificate by the viator,
viatical settlement provider, or any other person. Sec. 3916.10. After a viatical settlement has occurred,
contact with the insured for the purpose of
determining the health status of the INSURED BY the viatical settlement
provider or viatical settlement broker shall be made only by the
viatical settlement provider or broker licensed in this state.
The viatical settlement provider or viatical
settlement broker shall not contact the insured for the purpose of determining
the insured's health status more than once every three months if the insured
has a life expectancy of more than one year, or more than once per month if
the insured has a life expectancy of one year or less. The viatical
settlement provider or viatical settlement broker shall explain the procedure
for making these contacts at the time the viatical settlement contract is
entered into. The limitations set forth in this section do not apply to contacts made
with an insured under a viaticated policy for purposes other than to determine
the insured's health status. Viatical settlement providers and viatical settlement brokers are
RESPONSIBLE for the actions of their authorized representatives, for the
purposes of this SECTION. Sec. 3916.11. (A)(1) A licensee under this chapter shall, for
five years, retain copies of all of the following: (a) all Proposed, offered, or executed contracts,
purchase
agreements, underwriting documents, policy forms, and applications from the
date of the proposal, offer, or
execution of the contract or purchase agreement, whichever is
later; (b) All checks, drafts, or other evidence and
documentation
related to the payment, transfer, deposit, or release of funds from the
date of the transaction; (c) All other records and documents related to the
requirements
of this chapter. (2) This section does not relieve a person of the obligation to
produce the documents described in division (a)(1) of this section
to the superintendent after the retention period specified in that division has expired if the person has retained the
documents. (3) Records required to be retained by this section must be
legible and complete and may be retained in paper, photograph,
microprocess, magnetic, mechanical, or electronic media, or by any
process that accurately reproduces or forms a durable medium for the
reproduction of a record. (b)(1) Upon determining that an examination should be conducted,
subject to division (e) of this section, the superintendent shall
appoint one or more examiners to perform the examination and instruct them as to the scope of the
examination. The superintendent may employ any guidelines or
procedures for purposes of this division that the superintendent
considers appropriate. (2) Every licensee or person from whom information is sought, AND
all officers, directors, employees, and agents of any licensee or person
from whom information is sought, shall provide to the examiners timely,
convenient, and free access at all reasonable hours at the
licensee's or person's offices to all books, records, accounts,
papers, documents, assets, and computer or other recordings
relating to the property, assets, business, and affairs of the
licensee being examined. The officers, directors, employees, and
agents of the licensee or person shall facilitate the examination
and aid in the examination so far as it is in their power to do
so. The refusal of a licensee, by its officers, directors, employees,
or agents, to submit to examination or to comply with any reasonable
written request of the superintendent shall be grounds for suspension,
revocation, denial of issuance, or nonrenewal of any license or
authority held by the licensee to engage in the viatical
settlement business or other business subject to the
superintendent's jurisdiction. Any proceedings for suspension,
revocation, denial, or nonrenewal of any license or authority is subject
to chapter 119. of the Revised Code. (3) The superintendent has the power to issue subpoenas, to
administer oaths, and to examine under oath any person as to any matter
pertinent to the examination. Upon the failure or refusal of a
person to obey a subpoena, the superintendent may petition a court
of competent jurisdiction, and, upon proper showing, the Court may
enter an order compelling the witness to appear and testify or
produce documentary evidence. Failure to obey the court order
shall be punishable as contempt of court. (4) When making an examination under this chapter, the
superintendent may retain attorneys, appraisers, independent actuaries,
independent certified public accountants, or other professionals and
specialists as examiners, and the licensee that is the subject of
the examination shall bear the cost of those examiners. EXAMINERS
WHo ARE APPOINTED BY THE SUPERINTENDENT, BUT who ARE NOT EMPLOYEES
OF THE DEPARTMENT OF INSURANCE, SHALL BE COMPENSATED FOR THEIR
WORK, TRAVEL, AND LIVING EXPENSES AT REASONABLE AND CUSTOMARY
RATES. (5) Nothing contained in this chapter limits the superintendent's
authority to terminate or suspend an examination in order to pursue other
legal or regulatory action pursuant to the insurance laws of this
state. Findings of fact and conclusions made pursuant to any
examination shall be prima-facie evidence in any legal or
regulatory action. (6) Nothing contained in this chapter limits the superintendent's
authority to use and, if appropriate, to make public any final or preliminary
examination report, any examiner or licensee working papers or other
documents, or any other information discovered or developed during
the course of any examination in the furtherance of any legal or
regulatory action that the superintendent, in the superintendent's
sole discretion, considers appropriate. (c)(1) Examination reports shall be comprised of only facts
appearing upon the books, records, or other documents of the licensee, its
agents, or other persons examined, or as ascertained
from the testimony of its officers, agents, or other persons
examined concerning its affairs, and the conclusions and
recommendations that the examiners find reasonably warranted from
the facts. (2) UPON completion of the examination, the examiner in charge
shall file with the superintendent a verified written report of
examination. Upon receipt of the verified report, the superintendent
shall transmit the report to the licensee examined, together with a
notice that shall afford the licensee examined a reasonable
opportunity of not more than thirty days FROM RECEIPT OF THE
REPORT to make a written submission or rebuttal with respect to
any matters contained in the examination report. (3) IF the superintendent determines that regulatory action is
appropriate as a result of an examination, the superintendent may
initiate any proceedings or actions provided by law. (d)(1) Names and individual identification data for all viators
shall be considered private and confidential information and shall not be disclosed by the superintendent, unless required by
law. (2) Except as otherwise provided in this chapter or in the law of
another state or jurisdiction that is substantially similar to this
chapter, all examination reports, working papers, recorded
information, documents, and copies of those reports, papers,
information, documents, and copies produced by, obtained by, or
disclosed to the superintendent or to any other person in the
course of an examination made under this chapter or under the law
of another state or jurisdiction that is substantially similar to
this chapter, or in the course of the superintendent's analysis or
investigation of the financial condition or market conduct of a
licensee are confidential by law and privileged, are not a public
record open for inspection under section 149.43 of the Revised Code, are not subject to subpoena, and are not subject to discovery or admissible in evidence in any private civil action.
The superintendent may use the documents, materials, or other
information in the furtherance of any regulatory or legal action
brought as part of the superintendent's official duties. (3) Documents, materials, or other information, including, but
not limited to, all working papers, and copies of working papers, in the
possession or control of the NAIC and its affiliates and
subsidiaries are confidential by law and privileged, are not subject to subpoena, and are not subject to discovery or
admissible in evidence in any private civil action, if either of the
following applies: (a) they are Created, produced, or obtained by or disclosed to
the NAIC and its affiliates and subsidiaries in the course of
assisting an examination made under this chapter or assisting the
superintendent or the comparable official in another state in the analysis or
investigation of the financial condition or market conduct of a
licensee. (b) The superintendent or the comparable official in
another state discloses them to the NAIC and its affiliates
and subsidiaries under division (d)(5) of this section or under a
comparable provision in the law of the other state. (4) Neither the superintendent nor any person that received the
documents, material, or other information while acting under the
authority of the superintendent, including the NAIC and its
affiliates and subsidiaries, shall be permitted to testify in any private
civil action concerning any confidential
documents, materials, or information subject to division (d)(1) of
this section. (5)(a) In order to assist in the performance of the
superintendent's duties, the superintendent may do any of the
following: (i) share documents, materials, or other information, including
the confidential and privileged documents, materials, or information
subject to division (d)(1) of this section, with other
state, federal, and international regulatory agencies, with the
NAIC and its affiliates and subsidiaries, and with
state, federal, and international law enforcement authorities, if
the recipient agrees to maintain the confidentiality and
privileged status of the document, material, communication, or
other information; (ii) receive documents, materials, communications, or
information, including otherwise confidential and privileged documents,
materials, or information, from the NAIC and its affiliates
and subsidiaries, and from regulatory and law enforcement officials of other foreign or
domestic jurisdictions; (iii) enter into agreements governing sharing and use of
information consistent with this section. (b) the superintendent shall maintain as confidential or
privileged any document, material, or information received under division
(d)(5)(a)(ii) of this section with notice or the
understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the
document, material, or information. (6) No waiver of any applicable privilege or claim of
confidentiality in the documents, materials, or information shall occur
as a result of disclosure to the superintendent under this section or as
a result of sharing as authorized in division (d)(5) of this
section. (7) A privilege established under the law of any state or
jurisdiction that is substantially similar to the privilege established
under division (d) of this section shall be available and enforced
in any proceeding in, and in any court of, this state. (8) Nothing contained in this chapter prevents or prohibits the
superintendent from disclosing the content of an examination
report, preliminary examination report or results, or any matter
relating to those reports or results, to the official of any other
state or country that is comparable to the superintendent, or to
law enforcement officials of this or any other state or agency of
the federal government at any time, or to the NAIC, if the agency
or office receiving the report or matters relating to it agrees in writing to hold it confidential and in a manner
consistent with this chapter. (e)(1) the superintendent may not appoint An examiner if the
examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of, or owns a pecuniary
interest in, any person subject to examination under this chapter.
This division does not automatically preclude any of the
following from being an examiner: (a) A viator; (b) An insured in a viaticated insurance policy or certificate; (c) A beneficiary in an insurance policy or certificate that is
proposed to be viaticated. (2) Notwithstanding the requirements of division (e) of this
section, the superintendent may retain from time to time, on an individual basis, qualified actuaries, certified public
accountants, or other similar individuals who are independently
practicing their professions, even though these persons may from
time to time be similarly employed or retained by persons subject
to examination under this chapter. (f)(1) As used in division (f) of this section, "expenses"
include all of the following: (a) Compensation of examiners for each day or portion of a day
worked; (b) Travel and living expenses of examiners; (c) All other incidental expenses incurred by or on behalf of
examiners; (d) An allocated share of all expenses not described in division
(f)(1), (2), or (3) of this section that are necessarily incurred
in the performance of a market conduct examination, including the expenses of direct overhead and
support staff for examiners. (2) When a market conduct examination is made of an insurer, the
insurer shall pay the expenses of the examination. The expenses of an
examination include those incurred on or after the date on which the
superintendent notifies the insurer of the examination through the
issuance of the final examination report. (3) upon an insurer's failure to comply with division (a) of this
section, The superintendent may initiate proceedings in accordance with
chapter 119. of the Revised Code to revoke, suspend, or
refuse to renew the certificate of authority or license of the insurer. Additionally, the superintendent may request the attorney general to initiate a civil
action in the court of common pleas of franklin County to obtain
and enforce a judgment for expenses incurred in the performance of a
market conduct examination. (g)(1) No cause of action shall arise nor shall any liability be
imposed against the superintendent, any authorized representative of the superintendent, or any examiner appointed by the
superintendent for any statements made or conduct performed in
good faith while carrying out the provisions of this chapter. (2) No cause of action shall arise nor shall any liability be
imposed against any person for the act of communicating or delivering
information or data to the superintendent, any authorized representative
of the superintendent, or any examiner appointed by the
superintendent pursuant to an examination made under this chapter,
if the act of communication or delivery was performed in good
faith and without fraudulent intent or the intent to deceive.
division (g)(2) of this section does not abrogate or modify in any
way any common law or statutory privilege or immunity previously enjoyed
by any person identified in division (g)(1) of this
section. (3) A person identified in division (g)(1) or (2) of this section
shall be entitled to an award of attorney's fees and costs if the
person is the prevailing party in a civil action for libel, slander, or
any other relevant tort arising out of activities in carrying out the
provisions of this chapter and the party bringing the action was
not substantially justified in bringing the action. For purposes
of division (g)(3) of this section, a proceeding is "substantially
justified" if it had a reasonable basis in law or fact at the time that
it was initiated. (H) the superintendent may investigate suspected fraudulent
viatical settlement acts and persons engaged in the business of viatical
settlements. Sec. 3916.12. Each viatical settlement provider
and viatical settlement broker licensed under this chapter
shall file with the superintendent of insurance, on or before the first day of
March of each year, an annual statement containing the information
required by the
superintendent by rule adopted in accordance with Chapter 119. of the Revised Code. Sec. 3916.13. Except as otherwise permitted or required by law, a viatical
settlement provider, viatical settlement
broker, insurance company, insurance agent, insurance broker, information
bureau, rating agency or company, or any other person with actual knowledge of
an insured's identity, shall not disclose that identity as an insured,
including
the insured's name and individual identification data, or the insured's
financial or medical information, unless
any of the following apply: (A) The disclosure is necessary to effect a viatical settlement
between the viator and a viatical settlement provider, and the viator
and insured have provided prior written consent to the disclosure. (B) The disclosure is provided in response to an investigation or
examination by the superintendent of insurance or by any other governmental
officer or agency or pursuant to the requirements of division (C) of
section 3916.18 of the Revised Code. (C) The disclosure is a term of, or condition to, the transfer of
a viaticated policy by one viatical settlement provider to another viatical
settlement provider. (d) the disclosure Is necessary to permit a financing
entity,
related provider trust, or special purpose entity to finance the purchase
of policies or certificates by a viatical settlement
provider, and the viator and insured have provided prior written consent to
the
disclosure. (e) the disclosure Is necessary to allow the viatical settlement
provider or viatical settlement broker or their authorized representatives to
make contacts for the purpose of determining
health status. (f) the disclosure Is required to purchase stop-loss
coverage. Sec. 3916.14. (A)(1) The superintendent of insurance
may conduct an
examination UNDER this chapter of a licensee as often as the
superintendent in the superintendent's sole DISCRETION considers
appropriate. (2) for the purposes of completing an examination of a licensee
under this chapter, the superintendent may examine or INVESTIGATE any
person, or the business of any person, insofar as the EXAMINATION or
investigation, in the sole DISCRETION of the superintendent, is
necessary or material to the EXAMINATION of the licensee. (3) in lieu of an examination under this chapter of any foreign
or alien licensee licensed under this chapter, the superintendent,
at the superintendent's DISCRETION, may ACCEPT an examination
report on the licensee as prepared by the official of the
licensee's state of domicile or port-of-entry state who is
comparable to the superintendent. (B) The licensee or applicant shall pay to the superintendent all
costs, assessments, forfeitures, or fines incurred in conducting an
examination under this section. The superintendent
shall deposit the money into the state treasury
to the credit of the department of insurance operating fund created by section
3901.021 of the Revised Code. Sec. 3916.15. (A) The superintendent of insurance may refuse to
issue or may suspend,
revoke, or refuse to renew the license of a viatical settlement provider or
viatical settlement broker, if the
superintendent finds that any of the following apply: (1) There was a material misrepresentation in the application for the
license. (2) The applicant or licensee or any officer, partner, member, key
management
personnel, or designee of the applicant or licensee has been convicted of
fraudulent or
dishonest practices, is subject
to a final administrative action in another state, or is otherwise shown to be
untrustworthy or incompetent. (3) The licensee is a viatical settlement provider that demonstrates a
pattern of unreasonable payments to viators. (4) The licensee or any officer, partner, member, key management
personnel, or designee of the licensee has been convicted of or has pleaded
guilty or no
contest
to a felony or to a misdemeanor involving fraud, moral turpitude, dishonesty,
or breach of trust, regardless of whether a judgment of conviction has been
entered by the court. (5) The licensee is a viatical settlement provider that has used a
viatical
settlement contract form that has not been approved under this chapter. (6) The licensee is a viatical settlement provider that has failed to
honor contractual
obligations set out in a viatical settlement contract. (7) The licensee no longer meets the requirements for initial licensure. (8) The licensee is a viatical settlement provider that has assigned,
transferred, or pledged
a viaticated policy to a person that is not a viatical settlement provider
licensed in this state, a financing entity, a special purpose entity, or a
related provider trust. (9) The licensee or any officer, partner, member, key management
personnel, or designee of the licensee has violated any provision of this
chapter or any rule
adopted under this chapter. (10) The licensee or any officer, partner, member, key management
personnel, or designee of the licensee has committed any coercive, fraudulent,
or dishonest
act, or made any untrue, deceptive, or misleading statement, in connection
with a viatical transaction or a proposed viatical transaction. (B) Before the superintendent refuses to issue a license under
this chapter, or suspends, revokes, or refuses to renew the license of a
viatical settlement provider or viatical
settlement broker, the superintendent shall provide the licensee or applicant
with notice and an opportunity for hearing as provided in Chapter
119. of the Revised Code, except as follows: (1)(a) Any notice of opportunity for hearing, the hearing
officer's findings and recommendations, or the superintendent's order shall be
served by certified mail at the last known address of the licensee or
applicant. Service shall be evidenced by return receipt signed by any person. For purposes of this section, the "last known address" is the address that
appears in the licensing records of the department of insurance. (b) If the certified mail envelope is returned with an
endorsement showing that service was refused, or that the envelope was
unclaimed, the notice and all subsequent notices required by Chapter
119. of the Revised Code may be served by ordinary mail to the last known address of the
licensee or applicant. The mailing shall be evidenced by a certificate of
mailing. Service is deemed complete as of the date of such certificate
provided that the ordinary mail envelope is not returned by the postal
authorities with an endorsement showing failure of delivery. The time period
in which to request a hearing, as provided in Chapter 119. of the Revised Code,
begins to run on the date of mailing. (c) If service by ordinary mail fails, the superintendent may
cause a summary of the substantive provisions of the notice to be published
once a week for three consecutive weeks in a newspaper of general circulation
in the county where the last known place of residence or business of the
licensee or applicant
is located. The notice is considered served on the date of the third
publication. (d) Any notice required to be served under Chapter 119.
of the Revised Code shall also be served upon the attorney of the licensee or applicant by
ordinary mail if the
attorney has entered an appearance in the matter. (e) The superintendent may, at any time, perfect service on a
licensee or applicant by personal delivery of the notice by an employee of the
department. (f) Notices regarding the scheduling of hearings and all other
matters not described in division (B)(1)(a) of this
section shall be sent by ordinary mail to the licensee or applicant and to the
attorney of the licensee or applicant. (2) Any subpoena for the appearance of a witness or the production of
documents or other evidence at a hearing, or for the purpose of taking
testimony for use at a hearing, shall be served by certified mail, return
receipt requested, by an attorney or by an employee of the department
designated by the superintendent. Such subpoenas shall be enforced in the
manner provided in section 119.09 of the Revised Code. Nothing in this section shall be
construed as limiting the superintendent's other statutory powers to issue
subpoenas. Sec. 3916.16. (a) it is a violation of this chapter for
any
person to enter into a viatical settlement contract within a
two-year period commencing with the date of issuance of the
insurance policy or certificate unless the viator certifies to the
viatical settlement provider that one or more of the following
conditions have been met within that two-year period: (1) The policy or certificate was issued upon the viator's
exercise of conversion rights arising out of a group policy or certificate,
provided the total of the time covered under the conversion policy or
certificate plus the time covered under the group policy or
certificate is at least twenty-four months. The time covered
under the group policy or certificate shall be calculated without
regard to any change in insurance carriers, provided the coverage
has been continuous and under the same group sponsorship. (2) The viator is a charitable organization exempt from taxation
under 26 U.S.C. section 501(c)(3). (3) The viator is not an individual. (4) The viator submits independent evidence to the viatical
settlement provider that one or more of the following conditions have
been met within that two-year period: (a) The viator or insured is terminally or chronically ill. (b) The viator's spouse dies. (c) The viator divorces the viator's spouse. (d) The viator retires from full-time employment. (e) The viator becomes physically or mentally disabled, and a
physician determines that the disability prevents the viator from
maintaining full-time employment. (f) The viator was the insured's employer at the time the policy
or certificate was issued and the employment relationship
terminated. (g) a court of competent jurisdiction enters a final order,
judgment, or decree on the application of a creditor of the viator and adjudicates the viator bankrupt or insolvent
or approves a petition seeking reorganization of the viator or
appointing a receiver, trustee, or liquidator to all or a
substantial part of the viator's assets. (h) The viator experiences a significant decrease in income that
is unexpected and that impairs the viator's reasonable ability to
pay the policy premium. (i) The viator or insured disposes of the viator's or insured's
ownership interests in a closely held corporation. (B) Copies of the independent evidence described in DIVISION
(A)(4) OF THIS SECTION and documents
required by Section 3916.07 OF THE REVISED CODE shall be
submitted to the insurer when the viatical settlement provider submits a request to the insurer for verification of coverage.
The copies shall be accompanied by a letter of attestation from
the viatical settlement provider that the copies are true and
correct copies of the documents received by the viatical
settlement provider. (C) If the viatical settlement provider submits to the insurer a
copy of the owner or insured's certification described in DIVISION
(A)(4) OF THIS SECTION when the provider submits a request to the
insurer to effect the transfer of the policy or certificate to the viatical settlement provider,
the copy conclusively establishes that the viatical settlement
contract satisfies the requirements of this section, and the
insurer shall timely respond to the request. Sec. 3916.17. (a) the general assembly hereby declares that the
purpose of this section is to provide prospective viators with clear and unambiguous statements in the advertisement of viatical
settlements and to assure the clear, truthful, and adequate
disclosure of the benefits, risks, limitations, and exclusions of
any viatical settlement contract. This purpose is intended to be
accomplished by the establishment of guidelines and standards of
permissible and impermissible conduct in the advertising of
viatical settlements to assure that product descriptions are
presented in a manner that prevents unfair, deceptive, or
misleading advertising and is conducive to accurate presentation
and description of viatical settlements through the advertising
media and material used by viatical settlement licensees. divisions (b) to (p) of this section apply to any advertising of
viatical settlement contracts, or any related products or services
intended for dissemination in this state, including, but not
limited to, Internet advertising viewed by persons located in this
state. in cases in which disclosure requirements are established
pursuant to federal regulation, this section shall be interpreted
so as to minimize or eliminate conflict with federal regulation
wherever possible. (b) Every viatical settlement licensee shall establish and at all
times shall maintain a system of control over the content, form,
and method of dissemination of all advertisements of its
contracts, products, and services. All advertisements, regardless
of by whom they are written, created, designed, or presented,
shall be the responsibility of the viatical settlement licensee
and of the individual who created or presented the advertisement.
A system of control shall include regular routine notification, at
least once a year, to agents and others authorized by the viatical
settlement licensee who disseminate advertisements of the
requirements and procedures for approval prior to the use of any
advertisements not furnished by the viatical settlement licensee. (c) all Advertisements that are subject to this section shall be
truthful and not misleading in fact or by implication. The form and content of an advertisement of a viatical settlement
contract shall be sufficiently complete and clear so as to avoid
deception and shall not have the capacity or tendency to mislead
or deceive. the DETERMINATION of Whether an advertisement has the
capacity or tendency to mislead or deceive shall be made by the
SUPERINTENDENT of insurance, from the overall impression that the
advertisement may be reasonably expected to create upon a person
of average education or intelligence within the segment of the
public to which it is directed. (d) viatical settlement advertisements containing any
REPRESENTATION set forth in this division are deemed false and misleading on their face and are prohibited. False and
misleading viatical settlement advertisements include, but are not
limited to, those including any of the following representations: (1) "Guaranteed," "fully secured," "100 percent secured," "fully
insured," "secure," "safe," "backed by rated insurance companies,"
"backed by federal law," "backed by state law," or "state guaranty
funds," or similar representations; (2) "No risk," "minimal risk," "low risk," "no speculation," "no
fluctuation," or similar representations; (3) "Qualified or approved for individual retirement accounts
(iras), Roth IRAs, 401(k)
plans, simplified employee pensions (SEPs), 403(b), Keogh plans,
TSA, or other retirement account rollovers," "tax
deferred," or similar representations; (4) Utilization of the word "guaranteed" to describe the fixed
return, annual return, principal, earnings, profits, investment, or
similar representations; (5) "No sales charges or fees" or similar representations; (6) "High yield," "superior return," "excellent return," "high
return," "quick profit," or similar representations; (7) Purported favorable representations or testimonials about the
benefits of viatical settlement contracts or viatical settlement
purchase agreements as an investment, taken out of context from
any newspaper, trade paper, journal, radio or television program,
or any other form of print and electronic media. (e)(1) the information required to be disclosed under this
section shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the
advertisement so as to be confusing or misleading. An advertisement shall not omit material information or use any
words, phrases, statements, references, or illustrations if the omission
or use has the capacity, tendency, or effect of misleading or deceiving
viators, as to the nature or extent of any benefit, loss covered,
premium payable, or state or federal tax consequence. The fact
that the viatical settlement contract offered is made available
for inspection prior to consummation of the sale, that an offer is
made to refund the payment if the viator is not satisfied, or that
the viatical settlement contract includes a "free look" period
that satisfies or exceeds legal requirements, does not remedy any
misleading statements. (2) An advertisement shall not use the name or title of a life
insurance company or a life insurance policy unless the advertisement
has been approved by the insurer. (3) An advertisement shall not represent that any premium
payments will not be required to be paid on the life insurance policy
that is the subject of a viatical settlement contract or viatical
settlement purchase agreement in order to maintain that policy,
unless that is the fact. (4) An advertisement shall not state or imply that interest
charged on an accelerated death benefit or a policy loan is unfair,
inequitable, or in any manner an incorrect or improper practice. (5) The words "free," "no cost," "without cost," "no additional
cost," "at no extra cost," or words of similar import shall not be used
with respect to any benefit or service unless true. An advertisement may
specify the charge for a benefit or a service or may state that a
charge is included in the payment or use other appropriate
language. (6)(a) Testimonials, appraisals, analyses, or endorsements used
in advertisements must satisfy all of the following: (i) they must be genuine. (ii) they must represent the current opinion of the author. (iii) they must be applicable to the viatical settlement contract
product or service advertised, if any. (iv) they must be accurately reproduced with sufficient
completeness to avoid misleading or deceiving prospective viators as to the nature or scope of the testimonials,
appraisals, analyses, or endorsements. (b) In using testimonials, appraisals, analyses, or endorsements,
the viatical settlement licensee makes as its own all the statements contained in the testimonials, appraisals,
analyses, or endorsements, and the statements are subject to all
the provisions of this section. (c) If the individual making a testimonial, appraisal, analysis,
or endorsement has a financial interest in the viatical settlement
provider or related entity as a stockholder, director, officer,
employee, or otherwise, or receives any benefit directly or
indirectly other than required union scale wages, that fact shall
be prominently disclosed in the advertisement. (d) An advertisement shall not state or imply that a viatical
settlement contract benefit or service has been approved or endorsed by a group of individuals, society,
association, or other organization unless that is the fact and
unless any relationship between the individual, society,
association, or organization and the viatical settlement provider
is disclosed. If the entity making the endorsement or testimonial
is owned, controlled, or managed by the viatical settlement
provider, or receives any payment or other consideration from the
viatical settlement provider for making an endorsement or
testimonial, that fact shall be disclosed in the advertisement. (e) When an endorsement refers to benefits received under a
viatical settlement contract, all pertinent information shall be retained for a period of at least five years after
its use. (f) An advertisement shall not contain statistical information
unless the INFORMATION accurately reflects recent and relevant facts. The source of all statistics used in an advertisement
shall be identified. (g) an advertisement shall not disparage any insurer, viatical
settlement provider, viatical settlement broker, viatical settlement investment agent, insurance producer, policy, service, or
method of marketing. (h) all advertisements about a viatical settlement provider or
its viatical settlement contract, products, or services shall clearly identify the viatical settlement provider's name. if any
specific viatical settlement contract is advertised, the viatical
settlement contract shall be identified either by form number or
some other appropriate description. If an application is part of
the advertisement, the name of the viatical settlement provider
shall be shown on the application. (i) An advertisement shall not use a trade name, group
designation, name of the parent company of a viatical settlement licensee, name of a particular division of the viatical
settlement licensee, service mark, slogan, symbol, or other device
or reference without disclosing the name of the viatical
settlement licensee, if either of the following applies regarding
the advertisement: (1) it would have the capacity or tendency to mislead or deceive
as to the true identity of the viatical settlement licensee. (2) it would have the capacity or tendency to create the
impression that a company other than the viatical settlement licensee
would have any responsibility for the financial obligation under a
viatical settlement contract. (j) An advertisement shall not use any combination of words,
symbols, or physical materials that, by their content, phraseology, shape, color, or other characteristics, are so similar to a
combination of words, symbols, or physical materials used by a
government program or agency or otherwise appear to be of such a
nature that they tend to mislead prospective viators into
believing that the solicitation is in some manner connected with a
government program or agency. (k) an advertisement may state that a viatical settlement
provider is licensed in the state in which the advertisement appears, provided it does not exaggerate that fact or suggest or
imply that competing viatical settlement providers may not be so
licensed. The advertisement may ask the audience to consult the
licensee's web site or contact the department of insurance to find
out if the state in which the advertisement appears requires licensing
and, if it does, whether the viatical settlement provider or viatical
settlement broker is licensed. (l) An advertisement shall not create the impression that the
viatical settlement provider, its financial condition or status, the payment of its claims, or the merits, desirability, or
advisability of its viatical settlement contracts are recommended
or endorsed by any government entity. (m) all advertisements of an actual licensee shall state The name
of the actual licensee. An advertisement shall not use a trade name, any group designation, name of any affiliate or
controlling entity of the licensee, service mark, slogan, symbol,
or other device in a manner that would have the capacity or
tendency to mislead or deceive as to the true identity of the
actual licensee or create the false impression that an affiliate
or controlling entity would have any responsibility for the
financial obligation of the licensee. (n) an advertisement shall not directly or indirectly create the
impression that any division or agency of this state, any other state, or
the United States government endorses, approves, or favors
any of the following: (1) Any viatical settlement licensee or its business practices or
methods of operation; (2) The merits, desirability, or advisability of any viatical
settlement contract, or viatical settlement program; (3) Any viatical settlement contract, or viatical settlement
program; (4) Any life insurance policy or certificate or life insurance
company. (o) If the advertiser emphasizes the speed with which the
viatication will occur, the advertising must disclose the average time frame, from completed application to the date of offer
and from acceptance of the offer to receipt of the funds by the
viator. (p) If the advertising emphasizes the dollar amounts available to
viators, the advertising shall disclose the average purchase price
as a per cent of face value obtained by viators contracting with
the licensee during the past six months. Sec. 3916.18. (a)(1) no person shall commit a fraudulent
viatical settlement act. (2) No person shall knowingly or intentionally interfere with the
enforcement of the provisions of this chapter or investigations of suspected
or actual violations of this chapter. (3) No person in the business of viatical settlements shall
knowingly or intentionally permit any person convicted of a felony
involving dishonesty or breach of trust to participate in the business
of viatical settlements. (b)(1) each Viatical settlement contract and each application for
a viatical settlement, regardless of the form of transmission, shall contain
the following statement or a substantially similar
statement: "Any person who knowingly presents false information in an
application for insurance or viatical settlement contract is guilty of a
crime and may be subject to fines and imprisonment." (2) The lack of a statement as required in division (b)(1) of
this section does not constitute a defense in any prosecution for a
fraudulent viatical settlement act. (c)(1) every person engaged in the business of viatical
settlements having knowledge or a reasonable belief that a fraudulent viatical settlement act is being, will be, or has been
committed shall provide to the superintendent of insurance the
information required by the superintendent. the person shall
provide the information in a manner prescribed by the
superintendent. (2) every person having knowledge or a reasonable belief that a
fraudulent viatical settlement act is being, will be, or has been
committed may provide to the superintendent the information required BY
the superintendent. The person shall provide the information under this
division in a manner prescribed by the superintendent. (d)(1) No civil liability shall be imposed on, and no cause of
action shall arise from, a person's furnishing information
concerning suspected, anticipated, or completed fraudulent viatical
settlement acts or suspected or completed fraudulent insurance acts, if
the information is provided to or received from any of the
following: (a) The superintendent, or the superintendent's employees,
agents, or representatives; (b) law enforcement or regulatory officials of this state,
another state, the united states, or a political SUBDIVISION of
this state or another state, or any employee, agent, or representative of
any of those officials; (c) A person involved in the prevention and detection of
fraudulent viatical settlement acts or any agent, employee, or
representative of any person so involved; (d) The NAIC, National Association of Securities Dealers (NASD),
the North American Securities Administrators Association (NASAA),
any employee, agent, or representative of any OF THOSE ASSOCIATIONS, or other regulatory body overseeing life insurance, viatical settlements, securities, or
investment fraud; (e) The life insurer that issued the life insurance policy OR
CERTIFICATE covering the life of the insured. (2) the immunity provided in division (d)(1) of this SECTION
shall not apply to any statement made with actual malice. In an action brought against a person for filing a report or
furnishing other information concerning a fraudulent viatical
settlement act or a fraudulent insurance act, the party bringing
the action shall plead specifically any allegation that the
immunity provided in division (d)(1) of this section does not
apply because the person filing the report or furnishing the information
did so with actual malice. (3) if a person is the prevailing party in a civil action for
libel, slander, or any other relevant tort arising out of activities in
carrying out the provisions of this chapter, if the prevailing party is
a person identified in division (d)(1) of this section and the
immunity described in that division applies to the person, and if the party who brought the action was not substantially
justified in doing so, the person who is the prevailing party is
entitled to an award of attorney's fees and costs arising out of
the ACTION. For purposes of this division, an action is "substantially
justified" if it had a reasonable basis in law or fact at the time that
it was initiated. (4) This section does not abrogate or modify any common law or
statutory privilege or immunity enjoyed by a person described in
division (d)(1) of this section. (e)(1) The documents and evidence provided pursuant to division
(d) of this section or obtained by the
superintendent in an investigation of any suspected or actual
fraudulent viatical settlement act is privileged and confidential,
is not a public record open for inspection under section 149.43 of the Revised Code, and is not subject to discovery or subpoena in a
civil or criminal action. (2) division (e)(1) of this SECTION does not prohibit release by
the superintendent of any document or evidence obtained in an investigation of suspected or actual fraudulent viatical
settlement acts, in any of the following manners or circumstances: (a) In any administrative or judicial proceeding to enforce any
laws administered by the superintendent; (b) To any law enforcement or regulatory agency of this state,
another state, the united states, or a political SUBDIVISION of
this state or another state, to an organization established for the purpose of detecting and preventing fraudulent viatical
settlement acts, or to the NAIC; (c) At the discretion of the superintendent, to a person in the
business of viatical settlements that is aggrieved by a fraudulent
viatical settlement act. (3) Release of documents and evidence under division (e)(2) of
this SECTION does not abrogate or modify the privilege granted in
division (e)(1) of this SECTION. (f) the provisions of this chapter do not do any of the
following: (1) Preempt the authority or relieve the duty of any other law
enforcement or regulatory agencies to investigate, examine, or prosecute
suspected violations of law; (2) Prevent or prohibit a person from disclosing voluntarily any
information concerning viatical settlement fraud to a law enforcement or
regulatory agency other than the department of insurance; (3) Limit any power granted elsewhere by the law of this state to
the superintendent or an insurance fraud unit to investigate and examine
possible violations of law and to take appropriate action against
wrongdoers. (g)(1) Viatical settlement providers and viatical settlement
brokers shall adopt and have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent fraudulent
viatical settlement acts. At the discretion of the
superintendent, the superintendent may order, or a licensee may
request and the superintendent may grant, ANY modifications of the
following required initiatives described in divisions (g)(1)(a)
and (b) of this section THAT are necessary to ensure an effective
antifraud program. The modifications may be more or less restrictive than the
required initiatives so long as the modifications may reasonably be expected to
accomplish the purpose of this section. Antifraud initiatives
under this division shall include all of the following: (a) Fraud investigators, who may be viatical settlement provider
or viatical settlement broker employees or independent
contractors; (b) An antifraud plan THAT includeS, but not is not limited to,
all of the following: (i) A description of the procedures for detecting and
investigating possible fraudulent viatical settlement acts and procedures for resolving material inconsistencies
between medical records and insurance applications; (ii) A description of the procedures for reporting possible
fraudulent viatical settlement acts to the superintendent; (iii) a description of the plan for antifraud education and
training of underwriters and other personnel; (iv) A description or chart outlining the organizational
arrangement of the antifraud personnel who are responsible for the investigation and reporting of possible
fraudulent viatical settlement acts and investigating unresolved
material inconsistencies between medical records and insurance
applications. (2) THE SUPERINTENDENT, BY RULE ADOPTED IN ACCORDANCE WITH
CHAPTER 119. OF
THE REVISED CODE, MAY REQUIRE THAT Antifraud plans required
under division (g)(1) of this section be submitted to the
superintendent. IF the superintendent requires that ANTIFRAUD PLANs BE SUBMITTED TO THE
SUPERINTENDENT, THE PLANs so submitted are privileged and confidential, are not a public record
OPEN for inspection under section 149.43 of the Revised Code, and
are not subject to discovery or subpoena in a civil or criminal
action. Sec. 3916.19. (a) In addition to the penalties and other
enforcement provisions contained in this chapter, if any person violates any provision of this chapter or any rule or regulation
implementing any provision of this chapter, the superintendent of
insurance may seek an injunction in a court of competent
jurisdiction and may apply for any temporary or permanent order
that the superintendent determines is necessary to restrain the
person from committing the violation. (b) Any person damaged by any act of a person in violation of any
provision of this chapter may bring a civil action against the person
committing the violation in a court of competent
jurisdiction. a CIVIL ACTION brought under this division DOES NOT
PRECLUDE THE SUPERINTENDENT FROM EXERCISING ANY REGULATORY,
ENFORCEMENT, OR OTHER AUTHORITY AVAILABLE TO THE SUPERINTENDENT
UNDER THIS CHAPTER. (c) In addition to the penalties and other enforcement provisions
contained in this chapter, any person who violates any provision
of this chapter is subject to a civil penalty of up to ten
thousand dollars per violation. Imposition of civil penalties
described in this division shall be pursuant to an order of the
superintendent issued under CHAPTER 119. OF THE REVISED
CODE. The
superintendent'S order may require a person found to be in
violation of this chapter to make restitution to persons aggrieved by
violations of this chapter. Sec. 3916.20. The superintendent of insurance may adopt rules
in accordance with Chapter 119. of the Revised Code
for purposes of implementing this chapter, including, but not limited to,
rules that do the following: (A) Govern the
relationship and responsibilities of both insurers and viatical settlement
providers and viatical settlement
brokers
during the viatication of a life insurance policy or certificate. (B) Establish standards for evaluating the reasonableness of
payments
under
viatical settlement contracts for persons with a terminal or chronic illness
or condition. This authority includes, but is not limited
to,
the regulation of discount rates used to determine the amount paid in exchange
for the assignment, transfer, sale, devise, or bequest of a benefit under a
life insurance policy or certificate. (C) Establish appropriate licensing requirements, fees, and
standards for
continued licensure for viatical settlement providers and viatical settlement
brokers; (D) Require a bond or other mechanism for ensuring the financial
accountability of viatical settlement providers and viatical settlement
brokers. Sec. 3916.21. (A) No person shall fail to comply with this
chapter. (B) Whoever violates division (A) of this section is
deemed to have engaged in an unfair and deceptive act or practice in the
business of insurance under sections 3901.19 to 3901.26 of the
Revised Code. Sec. 3916.99. (A) Whoever violates section 3916.02 of the
Revised
Code is guilty of a felony of the third degree. (B) whoever violates division (a)(1) of section 3916.18
of the Revised Code is guilty of a
violation of section 2913.02 of the REVISED code. SECTION 2 . That existing sections 1707.01,
1707.02, 1707.11, 1707.15, 1707.151, 1707.16, 1707.17, 1707.20, 1707.23, and
1707.44 and sections 1707.432, 1707.433, 1707.434, 1707.435, 1707.436,
1707.437, 1707.438, and 1707.439 of the Revised Code are hereby repealed.
SECTION 3 . Sections 1 and 2 of this act shall take effect six
months after the effective date of this act.
SECTION 4 . Any person that, on the effective date of this act,
transacts business in this state as a viatical settlement
provider, viatical settlement representative, or viatical
settlement broker may continue to do so pending approval of the
person's application for a license, if the person applies for the
license during the six-month period immediately following the
effective date of this act.
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