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(123rd General Assembly)(Amended Substitute House Bill Number 6)
AN ACT
To amend sections 1701.48, 1707.01, 1707.03, 1707.161, 1707.36, and 1707.44
and to enact section 1707.439 of the Revised Code to include
electronic
transmissions as a method of appointing a voting proxy,
to apply the Ohio
Securities Law's prohibitions against fraud to the purchase of securities, and
to make other changes in the Ohio Securities Law.
Be it enacted by the General Assembly of the State of Ohio:
SECTION 1 . That sections 1701.48, 1707.01, 1707.03, 1707.161, 1707.36, and
1707.44 be amended and section 1707.439 of the Revised Code be
enacted to read as follows:
Sec. 1701.48. (A) A person who is entitled to attend a
shareholders' meeting, to vote thereat at a shareholders'
meeting, or to execute consents,
waivers, or releases, may be represented at such the
meeting or
vote
thereat at the meeting, and may execute consents,
waivers, and releases, and
may exercise any of his the person's other rights, by
proxy or
proxies appointed
by a writing signed by such the person or appointed by a
verifiable communication authorized by the person. (B) A Any transmission that creates a record capable of
authentication, including, but not limited to, a telegram
or, a cablegram appearing, electronic
mail, or an electronic, telephonic, or other transmission, that appears to
have been
transmitted by such a person, or a described in
division (A) of this section, and that appoints a proxy is a
sufficient verifiable communication to appoint a proxy. A photographic,
photostatic, facsimile transmission, or
equivalent reproduction of a writing, appointing that is signed by a
person described in division (A) of this section and that
appoints a proxy is a
sufficient writing to appoint a proxy. (C) No appointment of a proxy is valid after the
expiration of eleven months after it is made unless the writing or
verifiable communication
specifies the date on which it is to expire or the length of time
it is to continue in force. No proxy appointed for or in
connection with the shareholder authorization of a control share
acquisition pursuant to section 1701.831 of the Revised Code is
valid if it provides that it is irrevocable or if it is sought,
appointed, and received other than both: (1) In accordance with all applicable requirements of the
law of this state and the law of the United States; (2) Separate and apart from the sale or purchase, contract
or tender for sale or purchase, or request or invitation for
tender for sale or purchase, of shares of the issuing public
corporation. (D) Every appointment of a proxy shall be revocable unless
such that appointment is coupled with an interest, except that,
as
provided in division (C) of this section, proxies appointed for
or in connection with the shareholder authorization of a control
share acquisition pursuant to section 1701.831 of the Revised
Code shall be revocable at all times prior to the obtaining of
such that shareholder authorization, whether or not coupled with
an
interest. A revocation of a revocable appointment may be made
only as provided in this section. Without affecting any vote
previously taken, the person appointing a proxy may revoke a
revocable appointment by a later appointment received by the
corporation or by giving notice of revocation to the corporation
in writing, in a verifiable communication, or in open
meeting. The presence at a meeting of the
person appointing a proxy does not revoke the appointment. (E) A revocable appointment of a proxy is not revoked by
the death or incompetency of the maker unless, before the vote is
taken or the authority granted is otherwise exercised, written
notice of such the death or incompetency of the maker is
received by the
corporation from the executor or administrator of the estate of
such the maker or from the fiduciary having control of the
shares in
respect of which the proxy was appointed. (F) Unless the writing or verifiable communication appointing a proxy
otherwise
provides: (1) Each proxy has the power of substitution, and, when
if
three or more proxies are appointed, a majority of them or of
their substitutes may appoint one or more substitutes to act for
all;. (2) If more than one proxy is appointed, then (a) with
respect to voting or executing consents, waivers, or releases, or
objections to consents at a shareholders' meeting, a majority of
such the proxies as that attend the meeting, or if
only one attends then
that one, may exercise all the voting and consenting authority
thereat at the meeting; and if one or more attend and a majority
do not agree on
any particular issue, each proxy so attending shall be entitled
to exercise such that authority with respect to an equal number
of
shares; (b) with respect to exercising any other authority, a
majority may act for all. Sec. 1707.01. As used in this chapter: (A) Whenever the context requires it, "division" or
"division of securities" may be read as "director of commerce" or
as "commissioner of securities." (B) "Security" means any certificate or instrument that
represents title to or interest in, or is secured by any lien or
charge upon, the capital, assets, profits, property, or credit of
any person or of any public or governmental body, subdivision, or
agency. It includes shares of stock, certificates for shares of
stock, membership interests in limited liability companies,
voting-trust certificates, warrants and options to purchase
securities, subscription rights, interim receipts, interim
certificates, promissory notes, all forms of commercial paper,
evidences of indebtedness, bonds, debentures, land trust
certificates, fee certificates, leasehold certificates, syndicate
certificates, endowment certificates, certificates or written
instruments in or under profit-sharing or participation
agreements or in or under oil, gas, or mining leases, or
certificates or written instruments of any interest in or under
the same, receipts evidencing preorganization or reorganization
subscriptions, preorganization certificates, reorganization
certificates, certificates evidencing an interest in any trust or
pretended trust, any investment contract, any instrument
evidencing a promise or an agreement to pay money, warehouse
receipts for intoxicating liquor, and the currency of any
government other than those of the United States and Canada, but
sections 1707.01 to 1707.45 of the Revised Code do not apply to
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 thereof 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 the effective date of this
amendment 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 the effective date of this
amendment 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 the effective date of this amendment
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 the effective date of this
amendment 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. Sec. 1707.03. (A) As used in this section, "exempt" means
that, except in the case of securities the right to buy, sell, or
deal in which has been suspended or revoked under an existing
order of the division of securities under section 1707.13 of the
Revised Code or under a cease and desist order under division (H)
of section 1707.23 of the Revised Code, transactions in
securities may be carried on and completed without compliance
with sections 1707.08 to 1707.11 of the Revised Code. (B) A sale of securities made by or on behalf of a bona
fide owner, neither the issuer nor a dealer, is exempt if the
sale is made in good faith and not for the purpose of avoiding
this chapter and is not made in the course of repeated and
successive transactions of a similar character. Any sale of
securities over a stock exchange that is lawfully conducted in
this state and regularly open for public patronage and that has
been established and operated for a period of at least five years
prior to the sale at a commission not exceeding the commission
regularly charged in such transactions also is exempt. (C) The sale of securities by executors, administrators,
receivers, trustees, or anyone acting in a fiduciary capacity is
exempt, where such relationship was created by law, by a will, or
by judicial authority, and where such sales are subject to
approval by, or are made in pursuance to authority granted by,
any court of competent jurisdiction or are otherwise authorized
and lawfully made by such fiduciary. (D) A sale to the issuer, to a dealer, or to an
institutional investor is exempt. (E) A sale in good faith, and not for the purpose of
avoiding this chapter, by a pledgee of a security pledged for a
bona fide debt is exempt. (F) The sale at public auction by a corporation of shares
of its stock because of delinquency in payment for the shares is
exempt. (G)(1) The giving of any conversion right with, or on
account of the purchase of, any security that is exempt, is the
subject matter of an exempt transaction, has been registered by
description, by coordination, or by qualification, or is the
subject matter of a transaction that has been registered by
description is exempt. (2) The giving of any subscription right, warrant, or
option to purchase a security or right to receive a security upon
exchange, which security is exempt at the time the right,
warrant, or option to purchase or right to receive is given, is
the subject matter of an exempt transaction, is registered by
description, by coordination, or by qualification, or is the
subject matter of a transaction that has been registered by
description is exempt. (3) The giving of any subscription right or any warrant or
option to purchase a security, which right, warrant, or option
expressly provides that it shall not be exercisable except for a
security that at the time of the exercise is exempt, is the
subject matter of an exempt transaction, is registered by
description, by coordination, or by qualification, or at such
time is the subject matter of a transaction that has been
registered by description is exempt. (H) The sale of notes, bonds, or other evidences of
indebtedness that are secured by a mortgage lien upon real
estate, leasehold estate other than oil, gas, or mining
leasehold, or tangible personal property, or which evidence of
indebtedness is due under or based upon a conditional-sale
contract, if all such notes, bonds, or other evidences of
indebtedness are sold to a single purchaser at a single sale, is
exempt. (I) The delivery of securities by the issuer on the
exercise of conversion rights, the sale of securities by the
issuer on exercise of subscription rights or of warrants or
options to purchase securities, the delivery of voting-trust
certificates for securities deposited under a voting-trust
agreement, the delivery of deposited securities on surrender of
voting-trust certificates, and the delivery of final certificates
on surrender of interim certificates are exempt; but the sale of
securities on exercise of subscription rights, warrants, or
options is not an exempt transaction unless those rights,
warrants, or options when granted were the subject matter of an
exempt transaction under division (G) of this section or were
registered by description, by coordination, or by qualification. (J) The sale of securities by a bank, savings and loan
association, savings bank, or credit union organized under the
laws of the United States or of this state is exempt if at a
profit to that seller of not more than two per cent of the total
sale price of the securities. (K)(1) The distribution by a corporation of its securities
to its security holders as a share dividend or other distribution
out of earnings or surplus is exempt. (2) The exchange or distribution by the issuer of any of
its securities or of the securities of any of the issuer's wholly
owned subsidiaries exclusively with or to its existing security
holders, if no commission or other remuneration is given directly
or indirectly for soliciting the exchange, is exempt. (3) The sale of preorganization subscriptions for shares
of stock of a corporation prior to the incorporation of the corporation is
exempt, when the sale is evidenced by a written agreement, no
remuneration is given, or promised, directly or indirectly, for
or in connection with the sale of those securities, and no
consideration is received, directly or indirectly, by any person
from the purchasers of those securities until registration by
qualification, by coordination, or by description of those
securities is made under this chapter. (L) The issuance of securities in exchange for one or more
bona fide outstanding securities, claims, or property interests,
not including securities sold for a consideration payable in
whole or in part in cash, under a plan of reorganization,
recapitalization, or refinancing approved by a court pursuant to
the Bankruptcy Act of the United States or to any other federal
act giving any federal court jurisdiction over such plan of
reorganization, or under a plan of reorganization approved by a
court of competent jurisdiction of any state of the United States
is exempt. As used in this division, "reorganization,"
"recapitalization," and "refinancing" have the same meanings as
in section 1707.04 of the Revised Code. (M) A sale by a licensed dealer, acting either as
principal or as agent, of securities issued and outstanding
before the sale is exempt, unless the sale is of one or more of
the following: (1) Securities constituting the whole or a part of an
unsold allotment to or subscription by a dealer as an underwriter
or other participant in the distribution of those securities by
the issuer, whether that distribution is direct or through an
underwriter, provided that, if the issuer is such by reason of
owning one-fourth or more of those securities, the dealer
has
knowledge of this fact or reasonable cause to believe
this fact; (2) Any class of shares issued by a corporation when the
number of beneficial owners of that class is less than
twenty-five, with the record owner of securities being deemed the
beneficial owner for this purpose, in the absence of actual
knowledge to the contrary; (3) Securities that within one year were purchased outside
this state or within one year were transported into this state,
if the dealer has knowledge or reasonable cause to believe,
before the sale of those securities, that within one year they
were purchased outside this state or within one year were
transported into this state; but such a sale of those securities
is exempt if any of the following occurs: (a) A recognized securities manual contains the names of
the issuer's officers and directors, a balance sheet of the
issuer as of a date within eighteen months, and a profit and loss
statement for either the fiscal year preceding that date or the
most recent year of operations; (b) Those securities, or securities of the same class,
were registered within one year on the basis provided in section
1707.05 of the Revised Code, or within one year were qualified
under section 1707.09 or 1707.091 of the Revised Code, and that
registration or qualification is in full force and effect; (c) Those securities at the time of sale could be
registered on the basis provided in section 1707.05 of the
Revised Code; (d) The sale is made by a licensed dealer on behalf of the
bona fide owner of those securities in accordance with division
(B) of this section; (e) Those securities were transported into Ohio in a
transaction of the type described in division (L), (K), or (I) of
this section, or in a transaction registered under division (A)
of section 1707.06 of the Revised Code. (N) For the purpose of this division and division (M) of
this section, "underwriter" means any person who has purchased
from an issuer with a view to, or sells for an issuer in
connection with, the distribution of any security, or who
participates directly or indirectly in any such undertaking or in
the underwriting thereof, but "underwriter" does not include a
person whose interest is limited to a discount, commission, or
profit from the underwriter or from a dealer that is not in
excess of the customary distributors' or sellers' discount,
commission, or profit; and "issuer" includes any person or any
group of persons acting in concert in the sale of such
securities, owning beneficially one-fourth or more of the
outstanding securities of the class involved in the transactions
in question, with the record owner of securities being deemed the
beneficial owner for this purpose, in the absence of actual
knowledge to the contrary. (O)(1) The sale of any equity security is exempt if all
the following conditions are satisfied: (a) The sale is by the issuer of the security. (b) The total number of purchasers in this state of all
securities issued or sold by the issuer in reliance upon this
exemption during the period of one year ending with the date of
the sale does not exceed ten. A sale of securities registered
under this chapter or sold pursuant to an exemption under this
chapter other than this exemption shall not be integrated with a
sale pursuant to this exemption in computing the number of
purchasers under this exemption. (c) No advertisement, article, notice, or other
communication published in any newspaper, magazine, or similar
medium or broadcast over television or radio is used in
connection with the sale, but the use of an offering circular or
other communication delivered by the issuer to selected
individuals does not destroy this exemption. (d) The issuer reasonably believes after reasonable
investigation that the purchaser is purchasing for investment. (e) The aggregate commission, discount, and other
remuneration, excluding legal, accounting, and printing fees,
paid or given directly or indirectly does not exceed ten per cent
of the initial offering price. (f) Any such commission, discount, or other remuneration
for sales in this state is paid or given only to dealers or
salespersons registered pursuant to this chapter. (2) For the purposes of division (O)(1) of this section,
each of the following is deemed to be a single purchaser of a
security: husband and wife, a child and its parent or guardian
when the parent or guardian holds the security for the benefit of
the child, a corporation, a limited liability company, a
partnership, an association or other unincorporated entity, a
joint-stock company, or a trust, but only if the corporation,
limited liability company, partnership, association, entity,
joint-stock company, or trust was not formed for the purpose of
purchasing the security. (3) As used in division (O)(1) of this section, "equity
security" means any stock or similar security of a corporation or
any membership interest in a limited liability company; or any
security convertible, with or without consideration, into such a
security, or carrying any warrant or right to subscribe to or
purchase such a security; or any such warrant or right; or any
other security that the division considers necessary or
appropriate, by such rules as it may prescribe in the public
interest or for the protection of investors, to treat as an
equity security. (P) The sale of securities representing interests in or
under profit-sharing or participation agreements relating to oil
or gas wells located in this state, or representing interests in
or under oil or gas leases of real estate situated in this state,
is exempt if the securities are issued by an individual,
partnership, limited partnership, partnership association,
syndicate, pool, trust or trust fund, or other unincorporated
association and if each of the following conditions is complied
with: (1) The beneficial owners of the securities do not, and
will not after the sale, exceed five natural persons; (2) The securities constitute or represent interests in
not more than one oil or gas well; (3) A certificate or other instrument in writing is
furnished to each purchaser of the securities at or before the
consummation of the sale, disclosing the maximum commission,
compensation for services, cost of lease, and expenses with
respect to the sale of such interests and with respect to the
promotion, development, and management of the oil or gas well,
and the total of that commission, compensation, costs, and
expenses does not exceed twenty-five per cent of the aggregate
interests in the oil or gas well, exclusive of any landowner's
rental or royalty; (4) The sale is made in good faith and not for the purpose
of avoiding this chapter. (Q) The sale of any security is exempt if all of the
following conditions are satisfied: (1) The provisions of section 5 of the Securities Act of
1933 do not apply to the sale by reason of an exemption under
section 4 (2) of that act. (2) The aggregate commission, discount, and other
remuneration, excluding legal, accounting, and printing fees,
paid or given directly or indirectly does not exceed ten per cent
of the initial offering price. (3) Any such commission, discount, or other remuneration
for sales in this state is paid or given only to dealers or
salespersons registered under this chapter. (4) The issuer or dealer files with the division of
securities, not later than sixty days after the sale, a report
setting forth the name and address of the issuer, the total
amount of the securities sold under this division, the number of
persons to whom the securities were sold, the price at which the
securities were sold, and the commissions or discounts paid or
given. (5) The issuer pays a filing fee of one hundred dollars
for the first filing and fifty dollars for every subsequent
filing during each calendar year. (R) A sale of a money order, travelers' check, or other
instrument for the transmission of money by a person qualified to
engage in such business under section 1109.60 or
Chapter 1315. of
the Revised Code is exempt. (S) A sale by a licensed dealer of securities that are in
the process of registration under the Securities Act of 1933, unless exempt
under that
act, and that are in the process of registration, if registration
is required under this chapter, is exempt, provided that no sale
of that nature shall be consummated prior to the registration by
description or qualification of the securities. (T) The execution by a licensed dealer of orders for the
purchase of any security is exempt, provided that the dealer acts
only as agent for the purchaser, has made no solicitation of the
order to purchase the security, has no interest in the
distribution of the security, and delivers to the purchaser
written confirmation of the transaction that clearly itemizes his
the dealer's
commission. "Solicitation," as used in this division, means
solicitation of the order for the specific security purchased and
does not include general solicitations or advertisements of any
kind. (U) The sale insofar as the security holders of a person
are concerned, where, pursuant to statutory provisions of the
jurisdiction under which that person is organized or pursuant to
provisions contained in its articles of incorporation,
certificate of incorporation, partnership agreement, declaration
of trust, trust indenture, or similar controlling instrument,
there is submitted to the security holders, for their vote or
consent, (1) a plan or agreement for a reclassification of
securities of that person that involves the substitution of a
security of that person for another security of that person, (2)
a plan or agreement of merger or consolidation or a similar plan
or agreement of acquisition in which the securities of that
person held by the security holders will become or be exchanged
for securities of any other person, or (3) a plan or agreement
for a combination as defined in division (Q) of section 1701.01
of the Revised Code or a similar plan or agreement for the
transfer of assets of that person to another person in
consideration of the issuance of securities of any person, is
exempt if, with respect to any of the foregoing transactions,
either of the following conditions is satisfied: (a) The securities to be issued to the security holders
are effectively registered under sections 6 to 8 of the
Securities Act of 1933 and offered and sold in compliance with
section 5 of that act; (b) At least twenty days prior to the date on which a
meeting of the security holders is held or the earliest date on
which corporate action may be taken when no meeting is held,
there is submitted to the security holders, by that person, or by
the person whose securities are to be issued in the transaction,
information substantially equivalent to the information that
would be required to be included in a proxy statement or
information statement prepared by or on behalf of the management
of an issuer subject to section 14(a) or 14(c) of the
Securities Exchange Act of 1934. (V) The sale of any security is exempt if the division by
rule finds that registration is not necessary or appropriate in
the public interest or for the protection of investors. (W) Any offer or sale of securities made in reliance on
the exemptions provided by Rule 505 of Regulation D made pursuant
to the Securities Act of 1933 and the conditions and definitions
provided by Rules 501 to 503 thereunder is exempt if the offer or
sale satisfies all of the following conditions: (1) No commission or other remuneration is given, directly
or indirectly, to any person for soliciting or selling to any
person in this state in reliance on the exemption under this
division, except to dealers licensed in this state. (2)(a) Unless the cause for disqualification is waived
under division (W)(2)(b) of this section, no exemption under this
section is available for the securities of an issuer unless the
issuer did not know and in the exercise of reasonable care could
not have known that any of the following applies to any of the
persons described in Rule 262(a) to
(c) of Regulation A under the
Securities Act of 1933: (i) The person has filed an application for registration
or qualification that is the subject of an effective order
entered against the issuer, its officers, directors, general
partners, controlling persons or affiliates thereof, pursuant to
the law of any state within five years before the filing of a
notice required under division (W)(3) of this section denying
effectiveness to, or suspending or revoking the effectiveness of,
the registration statement. (ii) The person has been convicted of any offense in
connection with the offer, sale, or purchase of any security or
franchise, or any felony involving fraud or deceit, including,
but not limited to, forgery, embezzlement, fraud, theft, or
conspiracy to defraud. (iii) The person is subject to an effective administrative
order or judgment that was entered by a state securities
administrator within five years before the filing of a notice
required under division (W)(3) of this section and that
prohibits, denies, or revokes the use of any exemption from
securities registration, prohibits the transaction of business by
the person as a dealer, or is based on fraud, deceit, an untrue
statement of a material fact, or an omission to state a material
fact. (iv) The person is subject to any order, judgment, or
decree of any court entered within five years before the filing
of a notice required under division (W)(3) of this section,
temporarily, preliminarily, or permanently restraining or
enjoining the person from engaging in or continuing any conduct
or practice in connection with the offer, sale, or purchase of
any security, or the making of any false filing with any state. (b)(i) Any disqualification under this division involving
a dealer may be waived if the dealer is or continues to be
licensed in this state as a dealer after notifying the
commissioner of the act or event causing disqualification. (ii) The commissioner may waive any disqualification under
this paragraph upon a showing of good cause that it is not
necessary under the circumstances that use of the exemption be
denied. (3) Not later than five business days before the earlier
of the date on which the first use of an offering document or the
first sale is made in this state in reliance on the exemption
under this division, there is filed with the commissioner a
notice comprised of offering material in compliance with the
requirements of Rule 502 of Regulation D under the Securities Act
of 1933 and a fee of one hundred dollars. Material amendments to
the offering document shall be filed with the commissioner not
later than the date of their first use in this state. (4) The aggregate commission, discount, and other
remuneration paid or given, directly or indirectly, does not
exceed twelve per cent of the initial offering price, excluding
legal, accounting, and printing fees. (X) Any offer or sale of securities made in
reliance on the exemption provided in
Rule 506 of
Regulation
D under the
Securities
Act of 1933, and in accordance
with Rules 501 to 503 of
Regulation
D under the
Securities
Act of 1933, is exempt provided
that all of the following apply: (1) The issuer makes a notice filing with the division on
form D of the securities and
exchange commission within fifteen days of the first sale in
this state; (2) Any commission, discount, or other remuneration for
sales of securities in this state is paid or given only to
dealers or salespersons licensed under this chapter; (3) The issuer pays a filing fee of one hundred dollars to
the division; however, no filing fee shall be required to file
amendments to the form D of the
securities and exchange commission. (Y) The offer or sale of securities by an issuer is exempt
provided that all of the following apply: (1) The sale of securities is made only to persons who
are, or who the issuer reasonably believes are, accredited
investors as defined in Rule 501 of Regulation D under the Securities Act of
1933. (2) The issuer reasonably believes that all purchasers are
purchasing for investment and not with a view to or for sale in
connection with a distribution of the security. Any resale of a
security sold in reliance on this exemption within twelve months
of sale shall be presumed to be with a view to distribution and
not for investment, except a resale to which any of the
following applies: (a) The resale is pursuant to a
registration statement effective under section 1707.09 or
1707.091 of the Revised
Code. (b) The resale is to an accredited
investor, as defined in Rule
501 of Regulation
D under the
Securities
Act of 1933. (c) The resale is to an institutional
investor pursuant to the exemptions under division
(B) or
(D) of this section. (3) The exemption under this division is not available to
an issuer that is in the development stage and that either has
no specific business plan or purpose or has indicated that its
business plan is to engage in a merger or acquisition with an
unidentified company or companies, or other entities or
persons. (4) The exemption under this division is not available to
an issuer, if the issuer, any of the issuer's predecessors, any
affiliated issuer, any of the issuer's directors, officers,
general partners, or beneficial owners of ten per cent or more
of any class of its equity securities, any of the issuer's
promoters presently connected with the issuer in any capacity,
any underwriter of the securities to be offered, or any partner,
director, or officer of such underwriter: (a) Within the past five years, has
filed a registration statement that is the subject of a
currently effective registration stop order entered by any state
securities administrator or the securities and exchange
commission; (b) Within the past five years, has
been convicted of any criminal offense in connection with the
offer, purchase, or sale of any security, or involving fraud or
deceit; (c) Is currently subject to any state
or federal administrative enforcement order or judgment, entered
within the past five years, finding fraud or deceit in
connection with the purchase or sale of any security; (d) Is currently subject to any order,
judgment, or decree of any court of competent jurisdiction,
entered within the past five years, that temporarily,
preliminarily, or permanently restrains or enjoins the party
from engaging in or continuing to engage in any conduct or
practice involving fraud or deceit in connection with the
purchase or sale of any security. (5) Division (Y)(4) of
this section is inapplicable if any of the following
applies: (a) The party subject to the
disqualification is licensed or registered to conduct securities
business in the state in which the order, judgment, or decree
creating the disqualification was entered against the party
described in division (Y)(4) of
this section. (b) Before the
first offer is made
under this exemption, the state securities administrator,
or the court or regulatory authority that entered the order,
judgment, or decree, waives the disqualification. (c) The issuer did not know and, in
the exercise of reasonable care based on reasonable
investigation, could not have known that a disqualification from
the exemption existed under division
(Y)(4) of this section. (6) A general announcement of the proposed offering may be
made by any means; however, the general announcement shall
include only the following information, unless additional
information is specifically permitted by the division by
rule: (a) The name, address, and telephone
number of the issuer of the securities; (b) The name, a brief description, and
price of any security to be issued; (c) A brief description of the
business of the issuer; (d) The type, number, and aggregate
amount of securities being offered; (e) The name, address, and telephone
number of the person to contact for additional information; and (f) A statement indicating all of the
following: (i) Sales will only be made to
accredited investors as defined in
Rule 501 of
Regulation
D under the
Securities
Act of 1933; (ii) No money or other consideration
is being solicited or will be accepted by way of this general
announcement; (iii) The securities have not been
registered with or approved by any state securities
administrator or the securities and exchange commission and are
being offered and sold pursuant to an exemption from
registration. (7) The issuer, in connection with an offer, may provide
information in addition to the general announcement described in
division (Y)(6) of this
section, provided that either of the following applies: (a) The information is delivered
through an electronic database that is restricted to persons
that are accredited investors as defined in
Rule 501 of
Regulation
D under the
Securities
Act of 1933. (b) The information is delivered after
the issuer reasonably believes that the prospective purchaser is
an accredited investor as defined in
Rule 501 of
Regulation
D under the
Securities
Act of 1933. (8) No telephone solicitation shall be done, unless prior
to placing the telephone call, the issuer reasonably believes
that the prospective purchaser to be solicited is an accredited
investor as defined in Rule 501
of Regulation
D under the
Securities
Act of 1933. (9) Dissemination of the general announcement described in
division (Y)(6) of this section
to persons that are not accredited investors, as defined in
Rule 501 of
Regulation
D under the
Securities
Act of 1933, does not
disqualify the issuer from claiming an exemption under this
division. (10) The issuer shall file with the division notice of the
offering of securities within fifteen days after notice of the
offering is made to the public or a general announcement is made
to the public in this state. The filing shall be on forms
adopted by the division and shall include a copy of the general
announcement, if one is made regarding the proposed offering,
and copies of any offering materials, circulars, or
prospectuses. A filing fee of one hundred dollars also shall be
included. Sec. 1707.161. (A) Subject to division (F) of this
section, no person shall act as an investment adviser
representative, unless one of the following applies: (1) The person is licensed as an investment adviser representative by the
division of securities. (2) The person is a natural person who is licensed as an investment
adviser by the division, and does not act as an investment adviser
representative for another investment adviser; however, a natural person who
is licensed as an
investment adviser by the division may act as an investment
adviser representative for another investment adviser if the
natural person also is licensed by the division, or is properly
excepted from licensure, as an investment adviser representative of
the other investment adviser. (3) The person is employed by or associated with an investment adviser
registered under section 203 of the "Investment Advisers
Act of 1940," 15
U.S.C. 80b-3, and does not have a
place of business in this state. (4) The person is employed by or associated with an investment adviser
that is exempted excepted from licensure pursuant to division
(A)(3) or (4) of
section 1707.141 of the Revised Code or excepted from notice filing
pursuant to division (B)(3) of section 1707.141 of the Revised Code. (B)(1) No investment adviser representative required to be
licensed under this section shall act as an investment adviser
representative for more than two investment advisers. An
investment adviser representative that acts as an investment
adviser representative for two investment advisers shall do so
only after the occurrence of both of the following: (a) Being properly licensed, or
properly excepted from licensure under this section, as an
investment adviser representative for both investment
advisers; (b) Complying with the
requirements set forth in rules adopted by the division
regarding consent of both investment advisers and notice. (2) Nothing in this section shall be construed to prohibit a natural
person
from
being licensed by the division as both an investment adviser and an investment
adviser representative. (3) Nothing is in this section shall be construed to
prohibit a natural person from being licensed by the division as
both a salesperson and an investment adviser
representative. (4) Nothing in this section shall be construed to prohibit a
natural person from being licensed by the division as both a dealer and an
investment adviser representative. (C) An investment adviser representative's license issued under
this section shall not be effective during any period when the investment
adviser representative is not employed by or associated with an investment
adviser that is licensed by the division or that is in compliance with the
notice filing requirements of
division (B) of section 1707.141 of the Revised Code.
Notice of the commencement and termination of the employment or association of
an investment
adviser representative licensed under this section shall be given to the
division within thirty days after the commencement or termination by either of
the following: (1) The investment adviser, in the case of an investment adviser
representative licensed under this section and employed by or associated with,
or formerly employed
by or associated with, an investment adviser licensed under section 1707.141
of the Revised Code; (2) The investment adviser representative, in the case of an investment
adviser representative licensed under this section and employed by or
associated with, or formerly
employed by or associated with, an investment adviser that is subject to the
notice filings
requirements of division (B) of section 1707.141 of the Revised Code. (D)(1) Application for an investment adviser representative
license shall be made in accordance with this section and by filing with the
division the information, materials, and forms specified in rules adopted by
the division. (2) The division shall by rule require an applicant to pass an examination
designated by the division or achieve a specified professional designation. (3) Prior to issuing the investment adviser
representative license, the division may require the applicant to reimburse
the division
for the actual expenses incurred in investigating the applicant. An itemized
statement of any such expenses that
the applicant is required to pay shall be furnished to the applicant by the
division. (E) If the division finds that the applicant is of good business
repute, appears to be qualified to act as an investment adviser
representative, and has complied with
sections 1707.01 to 1707.45 of the Revised Code and the
rules adopted under those sections by the division, the division, upon payment
of the fees prescribed by division (B) of
section 1707.17 of the Revised Code, shall
issue to the applicant a license authorizing the applicant to act as an
investment adviser representative for the investment adviser, or investment
advisers that are under common ownership or control, named in the application. (F) On the effective date of this section March
18, 1999, a person required to be licensed as an
investment adviser representative pursuant to this section has
until no later than December
31, 1999, to be licensed as an investment adviser representative
by the division of securities. However, a person required to be
licensed by the division as an investment adviser representative
by no later than December 31,
1999, may be licensed as an investment adviser representative by
the division on the effective date of this section
March 18, 1999, and prior to
December 31, 1999. Sec. 1707.36. (A) There is hereby created in the division
of securities a position to be known as attorney-inspector, which
shall be held only by an attorney at law. The duties of this
position are to investigate and report upon all complaints and
alleged violations of this chapter or rules adopted under this chapter by
the division and to represent the division in prosecutions and other
matters arising from such complaints and alleged violations. The office of the attorney-inspector is hereby
designated a criminal justice agency in investigating reported
violations of law relating to securities and investment advice,
and as such is authorized by this state to apply for access to
the computerized databases administered by the national crime
information center or the law enforcement automated data system
in Ohio, and to other
computerized databases administered for the purpose of making
criminal justice information accessible to state criminal
justice agencies. (B) There is hereby created in the division of securities
two positions to be known as control-bid attorneys, which shall
be held only by attorneys at law. The duties of these positions
are to investigate and report upon all matters relating to
control-bids and related matters and to represent the division in
the regulatory matters arising under the Ohio control-bid law. (C) The attorney-inspector and each control-bid attorney
shall be paid at a rate not less than pay range 47 set out in
schedule E-2 of section 124.152 of the Revised Code, to be paid
as other operating expenses of the division. Sec. 1707.439. As used in sections 1707.432 through 1707.439 of the Revised Code,
"private civil action" shall not include an action for rescission pursuant to
section 1707.43 of the Revised Code. 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 1707.03, 1707.04, and 1707.34 of the Revised Code,
has not been registered by description, coordination, or
qualification, and is not the subject matter of a transaction
that has been registered by description; (2) The prescribed fees for registering by description, by
coordination, or by qualification have not been paid in respect
to such security; (3) Such person has been notified by the division, or has
knowledge of the notice, that the right to buy, sell, or
deal in
such security has been suspended or revoked, or that the
registration by description, by coordination, or by qualification
under which it may be sold has been suspended or revoked; (4) The offer or sale is accompanied by a statement that
the security offered or sold has been or is to be in any manner
indorsed by the division. (D) No person who is an officer, director, or trustee of,
or a dealer for, any issuer, and who knows such issuer to be
insolvent in that the liabilities of such 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 such 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 which 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
thereof 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
thereto to the securities, upon demand and tender of any amount
due thereon 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. SECTION 2 . That existing sections 1701.48, 1707.01, 1707.03, 1707.161,
1707.36, and 1707.44 of the Revised
Code are hereby
repealed.
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