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S. B. No. 32 -- As IntroducedAs Introduced
124th General Assembly | Regular Session | 2001-2002 |
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SENATOR White
A BILL
To amend sections 1707.01, 1707.03, 1707.041,
1707.06, 1707.08, 1707.09, 1707.092, 1707.14,
1707.141, 1707.161, 1707.17, 1707.19, 1707.23,
1707.391, 1707.44, and 1707.45 and to repeal
sections 1707.05 and 1707.07 of the Revised Code
to make revisions in the Securities Law, and to
maintain the provisions of this act on and after
October 5, 2001, by amending the versions of
sections 1707.01, 1707.17, 1707.23, and 1707.44 of
the Revised Code that are scheduled to take effect
on that date.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1707.01, 1707.03, 1707.041, 1707.06,
1707.08, 1707.09, 1707.092, 1707.14, 1707.141, 1707.161, 1707.17,
1707.19, 1707.23, 1707.391, 1707.44, and 1707.45 of the Revised
Code be amended to read as follows:
Sec. 1707.01. As used in this chapter: (A) Whenever the context requires it,
"division" or
"division of securities" may be read as
"director of commerce" or
as
"commissioner of securities." (B)
"Security" means any certificate or instrument that
represents title to or interest in, or is secured by any lien or
charge upon, the capital, assets, profits, property, or credit of
any person or of any public or governmental body, subdivision, or
agency. It includes shares of stock, certificates for shares of
stock, membership interests in limited liability companies,
voting-trust certificates, warrants and options to purchase
securities, subscription rights, interim receipts, interim
certificates, promissory notes, all forms of commercial paper,
evidences of indebtedness, bonds, debentures, land trust
certificates, fee certificates, leasehold certificates, syndicate
certificates, endowment certificates, certificates or written
instruments in or under profit-sharing or participation
agreements
or in or under oil, gas, or mining leases, or
certificates or
written instruments of any interest in or under
the same, receipts
evidencing preorganization or reorganization
subscriptions,
preorganization certificates, reorganization
certificates,
certificates evidencing an interest in any trust or
pretended
trust, any investment contract, any instrument
evidencing a
promise or an agreement to pay money, warehouse
receipts for
intoxicating liquor, and the currency of any
government other than
those of the United States and Canada, but
sections 1707.01 to
1707.45 of the Revised Code do not apply to
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.
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
registered or
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)(d) 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
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 or a general announcement is made
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. 1707.041. (A)(1) No control bid for any securities
of
a subject company shall be made pursuant to a tender offer or
request or invitation for tenders until the offeror files with
the
division of securities the information prescribed in division
(A)(2) of this section. The offeror shall deliver a copy of the
information specified in division (A)(2) of this section, by
personal service, to the subject company at its principal office
not later than the time of the filing with the division
of
securities. The offeror shall send or deliver to all offerees in
this state, as soon as practicable after the filing, the material
terms of the proposed offer and the information specified in
division (A)(2) of this section. (2) The information to be filed with the division
of
securities, with the subject company, and with any other offeror,
pursuant to
division (A)(1) of this section, shall
include: (a) Copies of all prospectuses, brochures, advertisements,
circulars, letters, or other matter by means of which the offeror
proposes to disclose to offerees all information material to a
decision to accept or reject the offer; (b) The identity and background of all persons on whose
behalf the acquisition of any equity security of the
subject
company has been or is to be effected; (c) The source and amount of funds or other consideration
used or to be used in acquiring any equity security, including a
statement describing any securities, other than the existing
capital stock or long term debt of the offeror, which are being
offered in exchange for the equity securities of the subject
company; (d) A statement of any plans or proposals that the
offeror,
upon gaining control, may have to liquidate the subject
company,
sell its assets, effect a merger or consolidation of it,
establish, terminate, convert, or amend employee benefit plans,
close any plant or facility of the subject company or of any of
its subsidiaries or affiliates, change or reduce the work force
of
the subject company or any of its subsidiaries or affiliates,
or
make any other major change in its business, corporate
structure,
management personnel, or policies of employment; (e) The number of shares of any equity security of the
subject company of which each offeror is beneficial or record
owner or has a right to acquire, directly or indirectly, together
with the name and address of each person defined in this section
as an offeror; (f) Particulars as to any contracts, arrangements, or
understandings to which an offeror is party with respect to any
equity security of the subject company, including transfers of
any
equity security, joint ventures, loan or option arrangements,
puts
and calls, guarantees of loan, guarantees against loss,
guarantees
of profits, division of losses or profits, or the
giving or
withholding of proxies, naming the persons with whom
such
contracts, arrangements, or understandings have been entered
into; (g) Complete information on the organization and
operations
of
the offeror, including the year of organization,; the
form of
organization,; the jurisdiction in which it is organized,;
a
description of each class of the offeror's capital stock and of
its long term debt,; financial statements for the current period
and for the three most recent annual accounting periods,
unless
the division by rule determines that the financial statements are
not material or permits the filing of financial statements for
less than the three most recent annual accounting periods; a brief
description of the location and general character of the
principal
physical properties of the offeror and its
subsidiaries,; a
description of pending legal proceedings other
than routine
litigation to which the offeror or any of its
subsidiaries is a
party or of which any of their property is the
subject,; a brief
description of the business done and projected
by the offeror and
its subsidiaries and the general development
of such business over
the past three years,; the names of all
directors and executive
officers together with biographical
summaries of each for the
preceding three years to date,; and the
approximate amount of any
material interest, direct or indirect,
of any of the directors or
officers in any material transaction
during the past three years,
or in any proposed material
transactions, to which the offeror or
any of its subsidiaries was
or is to be a party; (h) Such other and further documents, exhibits, data, and
information as may be required by regulations of the division
of
securities, or as may be necessary to make fair, full, and
effective disclosure to offerees of all information material to a
decision to accept or reject the offer. (3) Within five calendar days of the date of filing by an
offeror of information specified in division (A)(2) of this
section, the division
of securities may by order summarily
suspend
the continuation of the control bid if the division
determines
that all of the information specified has not been
provided by the
offeror or that the control bid materials
provided to offerees do
not provide full disclosure to offerees
of all material
information concerning the control bid. Such a
suspension shall
remain in effect only until the determination
following a hearing
held pursuant to division (A)(4) of this
section. (4) A hearing shall be scheduled and held by the division
of
securities with respect to each suspension imposed under
division
(A)(3) of this section. The hearing shall be held
within ten
calendar days of the date on which the suspension is
imposed.
Chapter 119. of the Revised Code does not apply to a
hearing held
under this division. The division
of securities may
allow any
interested party to appear at and participate in the
hearing in a
manner considered appropriate by the division. The
determination
of the division
of securities made following the
hearing shall be
made within three calendar days after the
hearing has been
completed, and no later than fourteen
calendar
days after the date
on which the suspension is imposed. The
division
of securities,
by rule or order, may prescribe time
limits for conducting the
hearing and for the making of the
determination that are shorter
than those specified in this
division. If, based upon the
hearing, the division
of securities
determines that all of the
information required to be provided by
division (A)(2) of this
section has not been provided by the
offeror, that the control bid
materials provided to offerees do
not provide full disclosure to
offerees of all material
information concerning the control bid,
or that the control bid
is in material violation of any provision
of this chapter, the
division shall maintain the suspension of the
continuation of the
control bid, subject to the right of the
offeror to correct
disclosure and other deficiencies identified by
the division and
to reinstitute the control bid by filing new or
amended
information pursuant to this section. (B)(1) No control bid shall be made pursuant to a tender
offer or request or invitation for tenders unless division (A) of
section 1707.14 of the Revised Code has been complied with, and
no
offeror shall make a control bid that is not made to all
holders
residing in this state of the equity security that is the
subject
of the control bid, or that is not made to such holders
on the
same terms as the control bid is made to holders of such
equity
security not residing in this state. (2) No offeror may make a control bid pursuant to a tender
offer or request or invitation for tenders or acquire any equity
security in this state pursuant to a control bid at any time
during which any proceeding by the division alleging a violation
of any provision of this chapter is pending against the offeror. (3) No offeror may acquire from any resident of this state
in any manner any equity security of any class of a subject
company at any time within two years following the last
acquisition of any security of the same class pursuant to a
control bid pursuant to a tender offer or request or invitation
for tenders by that offeror, whether the acquisition was made by
purchase, exchange, merger, consolidation, partial or complete
liquidation, redemption, reverse stock split, recapitalization,
reorganization, or any other similar transaction, unless the
resident is afforded, at the time of the later acquisition, a
reasonable opportunity to dispose of the security to the offeror
upon substantially the same terms as those provided in the
earlier
control bid. (4) If an offeror makes a tender offer or request or
invitation for tenders not subject to Rule 14D-1 or Rule 14D-4 of
the securities and exchange commission under the
"Securities
Exchange Act of 1934," for less than all the outstanding equity
securities of a class, and if a greater number of securities is
deposited pursuant thereto within ten days after copies of the
offer or request or invitation for tenders are first published or
sent or given to security holders than the offeror is bound or
willing to take up and pay for, the securities shall be taken up
as nearly as may be pro rata, disregarding fractions, according
to
the number of securities deposited by each offeree. The
preceding
sentence applies to securities deposited within ten
days after
notice of an increase in the consideration offered to
security
holders, as described in the next sentence, is first
published or
sent or given to security holders. If the terms of
a control bid
are changed before its expiration by increasing the
consideration
offered to offerees, the offeror shall pay the
increased
consideration for all equity securities taken up,
whether the same
are deposited or taken up before or after the
change in the terms
of the control bid. (C) If the offeror or the subject company is a banking
corporation
subject to regulation by the division of banks, a
or
savings and loan association subject to regulation by the
division
of
savings and loan associations
financial institutions, or a
public utility
corporation subject to regulation by the public
utilities
commission, the division of securities shall
forthwith
immediately, upon
receipt of the filing required under division
(A) of this
section, furnish a copy of the filing to the
regulatory body
having jurisdiction over the offeror or subject
company. (D) An offeror is subject to the liabilities and penalties
applicable to a seller, and an offeree is entitled to the
remedies
applicable to a purchaser, as set forth in sections
1707.041 to
1707.44 of the Revised Code. (E) The division of securities may, pursuant to
Chapter 119.
of the Revised Code, prescribe reasonable rules: (1) Defining fraudulent, evasive, deceptive, or grossly
unfair practices in connection with control bids, and the terms
used in this section; (2) Exempting from this section control bids not made for
the purpose of, and not having the effect of, changing or
influencing the control of a subject company; (3) Covering such other matters as are necessary to give
effect to this section. (F) If the offeror or a subject company is an insurance
company subject to regulation under Title XXXIX of the Revised
Code, the superintendent of insurance shall for all purposes of
this section be substituted for the division of securities. This
section shall not be construed to limit or modify in any way any
responsibility, authority, power, or jurisdiction of the division
of securities or the superintendent of insurance pursuant to any
other section of the Revised Code. (G) This section does not apply when: (1) The offeror or the subject company is a public utility
or a public utility holding company as defined in section 2 of
the
"Public Utility Holding Company Act of 1935," 49 Stat. 803,
15
U.S.C. 79, as amended, and the control bid is subject to
approval
by the appropriate federal agency as provided in such
act; (2) The offeror or the subject company is a bank or a bank
holding company as subject to the
"Bank Holding Company Act of
1956," 70 Stat. 133, 12 U.S.C. 1841, and subsequent amendments
thereto, and the control bid is subject to approval by the
appropriate federal agency as provided in such act; (3) The offeror or the subject company is a savings and
loan
holding company as defined in section 2 of the
"Savings and
Loan
Holding Company Amendments of 1967," 82 Stat. 5, 12 U.S.C.
1730a,
as amended, and the control bid is subject to approval by
the
appropriate federal agency as provided in such act; (4) The offeror and the subject company are banks and the
offer is part of a merger transaction subject to approval by
appropriate federal supervisory authorities. (H) If any application of any provision of this section is
for any reason held to be illegal or invalid, the illegality or
invalidity shall not affect any legal and valid provision or
application of this section, and the parts and application of
this
section are severable.
Sec. 1707.06. (A) The following transactions in
securities
may be carried out upon compliance with
section
1707.07
sections
1707.08 and 1707.11 of the Revised Code: (1) The sale of its securities by a corporation may be so
carried out when no part of the securities to be sold is issued
directly or indirectly in payment or exchange for intangible
property or for property not located in this state, and when the
total commission, remuneration, expense, or discount, excluding
legal, accounting, and printing fees of the corporation, in
connection with the sale of those securities does not exceed
three
per cent of the initial offering price of those securities. (2) The sale of its securities by any corporation may be
so
carried out when the securities are sold to not more than a
maximum of thirty-five purchasers, the aggregate commission,
discount, or other remuneration, excluding legal, accounting, and
printing fees, paid or given directly or indirectly in connection
with the sale of those securities does not exceed ten per cent of
the initial offering price, and those securities are issued and
disposed of for the sole account of the issuer in good faith and
not for the purpose of avoiding this chapter. For the purposes
of
this division, neither of the following shall be included
among
the thirty-five purchaser maximum: (a) Any purchaser of at least one hundred thousand dollars
of the offered securities; (b) Any director or executive officer of the issuing
corporation. (3) The sale of securities representing an interest in a
partnership, limited liability company, limited partnership,
partnership association, syndicate, pool, trust, trust fund, or
other unincorporated association may be so carried out if the
securities are sold to not more than a maximum of thirty-five
purchasers, the aggregate commission, discount, or other
remuneration, excluding legal, accounting, and printing fees,
paid
or given directly or indirectly in connection with the sale
of
those securities does not exceed ten per cent of the initial
offering price, and the sale is made in good faith and not for
the
purpose of avoiding this chapter. For the purposes of this
division, neither of the following shall be included among the
thirty-five purchaser maximum: (a) Any purchaser of at least one hundred thousand dollars
of the offered
securites
securities; (b) Any trustee, general partner, director, or executive
officer of the issuer, or any member of a limited liability
company, if the issuer is a limited liability company in which
the
management is reserved to its members, or manager of a
limited
liability company, if the issuer is a limited liability
company in
which the management is not reserved to its members. (4) The offering and sale of additional securities of a
corporation, made by it to its own security holders exclusively,
may be so carried out where no commission or other remuneration
is
paid or given directly or indirectly in connection with the
offering and sale, other than a commission in respect of the
securities purchased by such security holders or a discount in
respect of the securities not purchased by the security holders,
or both, paid by the corporation to a dealer who has agreed to
purchase all of those securities not taken by the security
holders. (B) An issuer engaging in any transaction specified in
this
section shall not be deemed a dealer. Any commission,
discount,
or other remuneration for sales in this state of
securities
specified in this section shall be paid only to
dealers or
salesmen
salespersons licensed pursuant to this
chapter. (C) For the purpose of this section, each of the following
is deemed to be a single purchaser of a security: (2) A child and its parent or guardian when the parent or
guardian holds the security for the benefit of the child; (3) 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. (D) A sale of securities registered under section 1707.09
or
1707.091 of the Revised Code or sold pursuant to an exemption
under this chapter shall not be integrated with a sale pursuant
to
this section in computing the number of purchasers under this
section.
Sec. 1707.08. The
securities specified in section 1707.05
of
the Revised Code may be sold, and the transactions enumerated
in
section 1707.06 of the Revised Code may be consummated on
compliance with this section
and section 1707.11 of the Revised
Code. A description, verified either by the oath of the person
filing it or of any person having knowledge of the facts, shall
be
filed with the division of securities by the issuer, or by a
majority of the incorporators of
such
the issuer prior to election
of
officers if it is an incorporated issuer, or by a licensed
dealer, which description shall be on forms prescribed by the
division and shall set forth: (A) The name of the issuer; (B) A brief description of the securities; (C) The amount of
such
the securities to be offered after
the
filing of
such
the description for sale in this state and, if
all the
securities are not to be offered by the person filing the
description, then the respective amounts to be offered by others,
so far as
such
those amounts are known, and the names and
addresses of
such
the other offerors; (D) A brief statement of the facts which show that the
securities
fall within one of the classes specified in section
1707.05 of the Revised Code or that they are the subject matter
of
a transaction enumerated in section 1707.06 of the Revised
Code; (E) The price at which the securities are to be offered
for
sale. When qualification is sought under division (B)(1) of
section
1707.05 of the Revised Code, there shall be filed with
the
description an appraisal signed by three disinterested
persons
having knowledge of the values described in such
division.
Registration by description is completed when the
description, together with
the
a filing fee
of fifty dollars, in
the form of cash, check,
or United States postal money order,
prescribed by this section,
is delivered, or mailed by certified
mail with postage prepaid,
to the division.
At the time the
description is filed, the
person filing it shall pay to the
division a fee of one-tenth of
one per cent of the aggregate price
at which the securities
therein described are to be offered for
sale to the public in
this state, if they fall within one of the
classes specified in
section 1707.05 of the Revised Code; but in
no case shall the fee
be less than one hundred or more than one
thousand dollars. If
such securities are the subject matter of a
transaction
enumerated in section 1707.06 of the Revised Code,
such fee shall
be a flat fee of fifty dollars. In order to correct errors or omissions, a registration by
description may be amended by the person who originally filed it,
by the filing, in the same manner as in the case of an original
registration by description, of an amended registration by
description or of an amendment of the original registration by
description; if a larger fee would have been payable upon the
filing of the original registration by description had the
amendment been incorporated therein, an additional fee in the
amount of any such deficiency shall be paid at the time of filing
such amendment. When any securities enumerated under section 1707.05 of the
Revised Code have been registered and the fees prescribed by this
section have been paid, any licensed dealer may thereafter sell
such securities under such registration so long as such
registration remains in full force, and any such dealer who
desires may file with the division a written notice of intention
to sell such securities or any designated portion thereof. For
such filing no fee need be paid.
When transactions in any securities enumerated in section
1707.06 of the Revised Code have been registered and the fees
prescribed by this section have been paid,
such
the transactions
may
be consummated so long as
such
the registration remains in
full
force.
Sec. 1707.09. All securities, except those enumerated in
section 1707.02
or 1707.05 of the Revised Code and those that
are
the subject matter of a transaction permitted by section
1707.03,
1707.04, or 1707.06 of the Revised Code, shall
be qualified in the
manner provided by
this section before being sold in this state. Applications for that qualification, on forms prescribed by
the division of securities, shall be made in writing either by
the
issuer of the securities or by any licensed dealer desiring
to
sell them within this state and shall be signed by the
applicant,
sworn to by any person having knowledge of the facts
stated in the
application, and filed in the office of the
division. The division shall require the applicant to submit to it
the
following information: (A) The names and addresses of the directors or trustees
and
of the officers of the issuer, if the issuer is a corporation
or
an unincorporated association; of all the members of the issuer,
if the
issuer is a limited liability company in which management
is reserved to its
members; of all the managers of the issuer, if
the issuer is a limited
liability company in which management is
not reserved to its members;
of all partners, if the issuer
is a
general or limited partnership or a partnership association;
and
the name and address of the issuer, if the issuer is an
individual; (B) The address of the issuer's principal place of
business
and principal office in this state, if any; (C) The purposes and general character of the business
actually being transacted, or to be transacted, by the issuer,
and
the purpose of issuing the securities named in the
application; (D) A statement of the capitalization of the issuer; a
balance sheet made up as of the most recent practicable date,
showing the amount and general character of its assets and
liabilities; a description of the security for the qualification
of which application is being made; and copies of all circulars,
prospectuses, advertisements, or other descriptions of the
securities, that are then prepared by or for the issuer, or by
or
for the applicant if the applicant is not the issuer, or by
or for
both, to be used for distribution or publication in this
state; (E) A statement of the amount of the issuer's income,
expenses, and fixed charges during the last fiscal year or, if
the
issuer has been in actual business less than one year,
for the
time that the issuer has been in actual business; (F) A statement showing the price at which the security
is
to be offered for sale; (G) A statement showing the considerations received or to
be
received by the issuer of the securities purchased or to be
purchased from the issuer and an itemized statement of all
expenses of financing to be paid from those considerations so as
to show the aggregate net amount actually received or to be
received by the issuer; (H) All other information, including an opinion of
counsel
as to the validity of the securities that are the
subject matter
of the application, that the division considers
necessary to
enable it to ascertain whether the securities are
entitled to
qualification; (I) If the issuer is a corporation, there shall be filed
with the application a certified copy of its articles of
incorporation with all amendments to the articles, if the articles
or
amendments are not already on file in the office of the
secretary
of state; if the issuer is a limited liability company,
there shall
be filed with the application a certified copy of its
articles of
organization with all amendments to the articles, if
the articles or
amendments are not already on file in the office
of the secretary of state;
if the issuer is a trust or trustee,
there shall be
filed with the application a copy of all
instruments by which the
trust was created; and if the issuer is a
partnership or an
unincorporated association, or any other form of
organization,
there shall be filed with the application a copy of
its articles
of partnership or association and of all other papers
pertaining
to its organization, if the articles or other papers
are not
already on file in the office of the secretary of state; (J) If the application is made with respect to securities
to
be sold or distributed by or on behalf of the issuer, or by or
on
behalf of an underwriter, as defined in
division (N) of section
1707.03 of the Revised Code, a statement
showing that the issuer
has received, or will receive at or prior
to the delivery of those
securities, not less than eighty-five per
cent of the aggregate
price at which all those securities are sold
by or on behalf of
the issuer, without deduction for any
additional commission,
directly or indirectly, and without
liability to pay any
additional sum as commission; (K) If the division so permits with respect to a security,
an applicant may file with the division, in lieu of the
division's
prescribed forms, a copy of the registration statement
relating to
the security, with all amendments to that statement,
previously
filed with the securities and exchange commission of
the United
States under the
"Securities Act of 1933," as amended, together
with all
additional data, information, and documents that the
division
requires. If the division finds that it is not necessary in the
public
interest and for the protection of investors to require
all the
information specified in divisions (A) to (J) of this
section, it
may permit the filing of applications for
qualification that
contain the information that it considers
necessary and
appropriate in the public interest and for the
protection of
investors; but this provision applies only in the
case of
applications for qualification of securities previously
issued and
outstanding that may not be made the subject matter
of
transactions exempt under division (M) of section 1707.03 of
the
Revised Code by reason of the fact that those securities
within
one year were purchased outside this state or within one
year were
transported into this state. All the statements, exhibits, and documents required by the
division under this section, except properly certified public
documents, shall be verified by the oath of the applicant, of the
issuer, or of any person having knowledge of the facts, and in
the
manner and form that may be required by the division. Failure
or
refusal to comply with the requests of the division shall be
sufficient reason for a refusal by the division to register
securities. If it appears to the division that substantially the only
consideration to be paid for any of the securities to be
qualified
is to be intangible property of doubtful value, the
division may
require that the securities be delivered in escrow
to a bank in
this state under the terms that the division may
reasonably
prescribe or require to prevent a deceitful
misrepresentation or
sale of the securities, that the securities be
subordinated in
favor of those sold for sound value until they
have a value
bearing a reasonable relation to the value of those
sold for sound
value, or that a legend of warning specifying the
considerations
paid or to be paid for the securities be stamped
or printed on all
advertisements, circulars, pamphlets, or
subscription blanks used
in connection with the sale of any
securities of the same issuer,
or it may impose a combination of
any two or more of these
requirements. At the time of filing the information prescribed in this
section, the applicant shall pay to the division a filing fee of
one hundred dollars. The division, at any time, as a prerequisite to
qualification, may make an examination of the issuer of securities
sought to be qualified. The applicant for qualification of any
securities may be required by the division to advance sufficient
funds to pay all or any part of the actual expenses of that
examination, an itemized statement of which shall be furnished
the
applicant. If the division finds that the business of the
issuer
is not fraudulently conducted, that the proposed offer or
disposal
of securities is not on grossly unfair terms, that the
plan of
issuance and sale of the securities referred to in the
proposed
offer or disposal would not defraud or deceive, or tend
to defraud
or deceive, purchasers, and that division (J) of this
section
applies and has been complied with, the division
shall notify the
applicant of its findings; and, upon payment of a
registration fee
of one-tenth of one per cent of the aggregate
price at which the
securities are to be sold to the public in
this state, which fee,
however, shall in no case be less than one
hundred or more than
one thousand dollars, the division shall
register the
qualification of the securities. An application may be amended by the person filing it at
any
time prior to the division's action on it either in
registering
the securities for qualification or in refusing to do
so.
Subsequent to any such action by the division, the person
who
filed the application may file with the consent of the division
one or more amendments to it that shall become effective
upon the
making by the division of the findings enumerated in the
next
preceding paragraph of this section, the giving of notice of
those
findings to the applicant by the division, and the payment
by the
applicant of the additional fee that would have been
payable had
the application as it previously became effective
contained the
amendment. When any securities have been qualified and the fees for
the
qualification have been paid as provided in this section, any
licensed
dealer subsequently may sell the securities under the
qualification, so long as the qualification remains in full
force,
and any dealer of that nature who desires may file with the
division
a written notice of intention to sell the securities or
any
designated portion of them. For that filing, no fee need be
paid.
Sec. 1707.092. (A) For the
purposes of selling securities
in this state,
except securities that are the subject matter of
transactions enumerated in section 1707.03 of the
Revised Code, an
investment company, as defined by the
Investment Company Act of
1940, that is registered
or has filed a registration statement
with the securities and
exchange commission under the
Investment
Company Act of 1940, shall file the
following with the division of
securities: (1) For the purposes of the sale of securities by a
managed
investment company, as defined in the
Investment Company Act of
1940: (a) A notice filing consisting of either of the following: (i) A copy of the investment
company's federal registration
statement as filed with the
securities and exchange commission;
(ii) A form
U-1 or form
NF of the
North American securities
administrators association and a copy of the investment
company's
prospectus and statement of additional
information. (b) Appropriate filing fees consisting of both of the
following: (i) A flat fee of one hundred dollars; (ii) A fee calculated at one-tenth of
one per cent of the
aggregate price at which the securities are
to be sold to the
public in this state, which calculated fee,
however, shall in no
case be less than one hundred or more than
one thousand dollars. (c) Upon the registration of the
securities with the
securities and exchange commission, a
managed investment company
with an initial notice filing on file
with the division shall
submit to the division a copy of its
final prospectus. (2) For the purposes of the sale of securities by a
non-managed investment company, as defined in the
Investment
Company Act of 1940: (a) A notice filing consisting of
either a copy of the
investment company's federal registration
statement as filed with
the securities and exchange commission
or a form U-1 or form NF of
the
North American securities administrators association; (b) Appropriate filing fees, as provided in division
(A)(1)(b) of this section; (c) Upon the effectiveness of the
registration of the
securities with the securities and exchange
commission, a
non-managed investment company shall submit to the
division a copy
of its final prospectus.
(B)(1) Upon payment of
the maximum filing fees as provided
in division
(A)(1)(b)
or (2)(b) of this section, a managed
or
non-managed investment company may sell an indefinite amount
of
securities in this state. (2) A managed or non-managed investment company making a
notice filing as provided in this section shall comply with
section 1707.11 of the Revised Code. An investment company
that
previously filed with the division a valid consent to
service of
process pursuant to section 1707.11 of the
Revised Code may
incorporate that
consent by reference. (C)(1) For offerings involving covered securities, as
defined in section 18
of the
"Securities act of 1933," 15 U.S.C.
77r, that are not subject to section
1707.02, 1707.03, 1707.04,
1707.05, 1707.06,
1707.07, 1707.08,
1707.09, or 1707.091 of the
Revised Code, or division
(A) of this section, a notice filing
shall be
submitted to the division together with a consent to
service of
process pursuant to section 1707.11 of the
Revised Code
and a filing fee as provided in division (A)(1)(b) of this
section. (2) The notice filing described in division (C)(1) of this
section shall
consist of any document filed with the securities
and exchange
commission pursuant to the Securities Act of 1933,
together with
annual or periodic reports of the value of the
securities sold
or offered to be sold to persons located in this
state. (D) A notice filing submitted under this section shall be
effective for
thirteen months.
Sec. 1707.14. (A)(1) No person shall act as a dealer,
unless the person is licensed as a dealer by the division of
securities, except in the following cases: (a) When the person is transacting business through or
with
a licensed dealer; (b) When the securities are the subject matter of one or
more transactions enumerated in divisions (B) to (L), (O) to (R),
and (U) to (Y) of section 1707.03, or in section 1707.06 of
the
Revised Code, except when a commission, discount, or other
remuneration is paid or given in consideration with transactions
enumerated in divisions (O), (Q), (W), (X),
and (Y) of section
1707.03, or
in section 1707.06 of the Revised Code; (c) When the person is an issuer selling securities issued
by it or by its subsidiary, if such securities are specified
under
division (G) or (I) of section 1707.02, or under section
1707.04
of the Revised Code; (d) When the person is participating in transactions
exempt,
under section 1707.34 of the Revised Code, from this
chapter. (2) Notwithstanding the exceptions to licensure set forth
in
divisions (A)(1)(a) to (d) of this section, no person other
than
an issuer selling its own securities shall engage in the
business
of selling securities to an institutional investor
unless the
person is licensed as a dealer or the division,
by rule, finds
that such licensure is not necessary for the
protection of
investors or in the public interest. (B) Each dealer that in any twelve-month or shorter
period,
alone or with any other dealer with which it is
affiliated, has
total revenues of one hundred fifty thousand
dollars or more
derived from the business of buying, selling, or
otherwise dealing
in securities, and that at any time during such
period has one
hundred or more retail securities customers, shall
be registered
as a broker or dealer with the securities and
exchange commission
under the Securities Exchange Act of 1934,
except the following
entities: (1) A bank, savings and loan association, savings bank, or
credit union chartered under the laws of the United States or any
state thereof; (2) A dealer that enters into and is in compliance with an
undertaking accepted by the division, in which the dealer agrees
that it will not engage in any transaction involving the buying,
selling, or otherwise dealing in securities with any natural
person in this state, except for transactions involving either of
the following: (a) Securities of corporations or associations that have
qualified for treatment as nonprofit organizations pursuant to
section 501(c)(3) of the
"Internal Revenue Code of 1986," 100
Stat. 2085, 26 U.S.C.A. 501, as amended; (b) Securities or transactions that are described in
divisions (A)(1)(a) to (d) of this section. (C) Every dealer that must be registered as a broker or
dealer with the securities and exchange commission pursuant to
division (B) of this section shall become so registered no later
than ninety days after the date on which the dealer meets the
requirements for such registration. (D) The division by rule may exempt any dealer from
complying with the licensing or registration requirements of this
section, if the division finds that such licensing or
registration
is not necessary for the protection of investors or
in the public
interest. (E) As used in division (B) of this section,
"retail
securities customer" means a person that purchases from or
through
or sells securities to or through a dealer, and that is
not an
officer, a director, a principal, a general partner, or an
employee of, the dealer. Each of the following is deemed to be a
single retail securities customer: (2) A minor child and the minor child's parent or legal
guardian; (3) A corporation, a partnership, an association or other
unincorporated entity, a joint stock company, or a trust.
Sec. 1707.141. (A)
Subject to division (C)(1) of this
section, no
No person shall act as an investment adviser,
unless
one of the following applies: (1) The person is licensed as an investment adviser by the
division of
securities; however, nothing in this section shall be
construed to
prohibit a person from being licensed by the division
as both an
investment adviser and a dealer or salesperson. (2) The person is registered under section 203 of the
"Investment
Advisers Act of 1940," 15
U.S.C. 80b-3, as an
investment
adviser and is in compliance with the notice filing
requirements of division
(B) of this section. (3) The person has no place of business in this state, and
the person's
only clients in this state are any of the following: (a) Investment companies as defined in the Investment
Company
Acts
Act of 1940; (b) Other investment advisers; (e) Insurance companies subject to regulation under
Title
XXXIX of the Revised Code and health insuring corporations
regulated
under Chapter 1751. of the Revised Code; (f) Employee benefit plans with assets of not less than one
million dollars; (g) Government agencies or instrumentalities, whether acting
for
themselves or trustees with investment control; (h) Other institutional investors as the division may
designate
by rule. (4) The person has no place of business in this state, and
during the
preceding twelve-month period, the person has had not
more
than five clients, other than those described in division
(A)(3) of
this section, that are residents of this state. (B)(1)
Subject to division (C)(2) of this section, no
No
person who is registered under section 203 of the
"Investment
Advisers Act of 1940," 15
U.S.C. 80b-3, as an investment
adviser
shall act as an investment adviser, unless the person
has done
both of the following: (a) Filed with the division a
consent to service of process
pursuant to section 1707.11 of the Revised Code, together with
either a
notice filing form as specified in rules adopted by the
division
or a copy of those documents that have been filed by the
investment adviser with the securities and exchange commission
as
specified in rules adopted by the
division; (b) Paid the notice filing fee specified in division (B)
of
section 1707.17 of the Revised Code. (2) Upon compliance with division (B)(1) of this section,
the
division shall issue to the person an acknowledgment of notice
filing. (3) The notice filing and fee requirements of division
(B)(1) of
this section do not apply to a person described in
division (A)(3) or
(4) of this section. (C)(1) On the effective date of this section, if a person is
registered as an
investment adviser with the securities and
exchange commission
pursuant to section 203 of the
"Investment
Advisers Act of 1940," 15 U.S.C.
80b-3, and is required to be
licensed as an investment adviser by the division of
securities,
that person has until no later than
December 31, 1999, to be
licensed as an investment adviser by the division of securities.
However, a
person required to be licensed by the division as an
investment adviser by no later than
December 31, 1999, may be
licensed as an investment adviser by the division on the effective
date of
this section and prior to
December 31, 1999.
(2) On the effective date of this section, if a person
is
registered as an investment adviser with the securities and
exchange commission pursuant to section 203 of the
"Investment
Advisers Act of 1940," 15 U.S.C.
80b-3, and is subject to the
notice filing
requirements of division (B) of
this section, that
person has until no later than
December 31, 1999, to comply
with
the notice filing requirements of division
(B) of this section.
However, a
person required to comply with the notice filing
requirements of
division (B) of this section by
no later than
December 31,
1999, may comply with those notice filing
requirements on the effective
date of this section and prior to
December 31, 1999.
Sec. 1707.161. (A)
Subject to division (F) of this
section,
no
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 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 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 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 March 18, 1999, and prior to December 31, 1999.
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
fifty 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
fifty 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) 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. 1707.19. (A) An original license, or a renewal
thereof,
applied for by a dealer or salesperson of securities,
or
by an investment adviser or an investment adviser
representative,
may be
refused, and any such license granted may be suspended and,
after
notice and hearing in accordance with Chapter 119. of
the
Revised Code, may
be revoked, by the division
of securities, if
the division determines that the
applicant or
the licensed dealer,
salesperson, investment adviser, or investment adviser
representative: (1) Is not of good business repute; (2) Is conducting an illegitimate or fraudulent business; (3) Is, in the case of a dealer or investment
adviser,
insolvent; (4) Has
intentionally
knowingly violated any provision of
sections
1707.01 to 1707.45 of the Revised Code, or any
regulation
or order made thereunder; (5) Has knowingly
and intentionally made a false statement
of a material fact
or an omission of a material fact in an
application for a license, in a
description or application that
has been filed, or in any
statement made to the division under
such sections; (6) Has refused to comply with any lawful order or
requirement of the division under section 1707.23 of the Revised
Code; (7) Has been guilty of any fraudulent act in connection
with
the sale of any securities or in connection with acting as an
investment adviser or investment adviser representative; (8) Conducts business in purchasing or selling securities
at
such variations from the existing market as in the light of
all
the circumstances are unconscionable; (9) Conducts business in violation of such rules and
regulations as the division prescribes for the protection of
investors, clients, or prospective clients; (10)(a) Has failed to furnish to the division any
information
with respect to the
purchases or sales of securities
within this
state that may
be reasonably requested by the division
as pertinent to the
protection of investors in this state. (b) Has failed to furnish to the division any
information
with respect to acting as an investment adviser or
an investment
adviser representative within this state
that may be reasonably
requested by the division. (B) For the protection of investors the division may
prescribe
reasonable rules defining fraudulent, evasive,
deceptive, or
grossly unfair practices or devices in the purchase
or sale of
securities. (C) For the protection of investors, clients, or
prospective
clients, the division may prescribe reasonable rules
regarding the
acts and practices of an investment adviser or an
investment
adviser representative. (D) Pending any investigation or hearing provided for in
sections 1707.01 to 1707.45 of the Revised Code, the
division may
order the suspension of any dealer's,
salesperson's, investment
adviser's, or investment adviser
representative's
license by
notifying the party concerned of such suspension and
the cause for
it. If it is a salesperson whose license
is
suspended, the
division shall also notify the dealer employing
the salesperson.
If it is an investment adviser representative
whose license is
suspended, the division also shall notify the investment
adviser
with whom the investment adviser representative is employed or
associated. (E)(1) The suspension or revocation of the dealer's license
suspends the licenses of all the
dealer's salespersons. (2) The suspension or revocation of the investment
adviser's
license suspends the licenses of all the investment adviser's
investment adviser representatives. The suspension or
revocation
of an investment adviser's registration under
section 203 of the
"Investment Advisers Act
of 1940," 15 U.S.C.
80b-3, suspends the
licenses of all the investment
adviser's investment adviser
representatives. (F) It is sufficient cause for refusal, revocation, or
suspension of the license in case of a partnership, partnership
association, corporation, or unincorporated association if any
general partner of the partnership, manager of
the partnership
association, or executive officer of the corporation or
unincorporated association is not of good business repute or has
been guilty of any act or omission which would be cause for
refusing or revoking the license of an individual dealer,
salesperson, investment adviser, or investment
adviser
representative.
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
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 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
refuse a license applied for by a dealer, salesperson, investment
adviser, or investment adviser representative or 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
that section; (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
immediately 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. 1707.391. When any securities have been sold in
reliance upon division
(O), (Q), (W),
(X), or (Y) of section
1707.03 of the
Revised Code, section 1707.08 of the Revised Code,
or any other
section of
Chapter 1707. of the Revised Code
this
chapter that the division of
securities may specify by rule, but
such reliance was improper
because the required filings were not
timely or properly made due
to excusable neglect, upon the
effective date of an application,
made to the division and payment
of the required fee, if not
already paid, plus a penalty fee equal
to the required fee,
the
sale of the securities shall be deemed
exempt, qualified, or
registered, as though timely and properly
filed.
Such
The application shall become effective upon the
expiration of
fourteen days after the date of the filing in
question if prior
thereto the division did not give notice to the
applicant that
the application was denied based on a finding of
lack of
excusable neglect. The division shall promptly adopt and
promulgate rules establishing provisions defining excusable
neglect and otherwise establishing reasonable standards for
determining excusable neglect. The effectiveness of an application under this section does
not relieve anyone who has, other than for excusable neglect,
violated sections 1707.01 to 1707.45 of the Revised Code, or any
previous law in force at the time of sale, from prosecution
thereunder.
Sec. 1707.44. (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
Registering securities or transactions, or
exempting securities or transactions from registration, under 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;
(6) Submitting a notice filing to the division under section
1707.092 or 1707.141 of the Revised Code. (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 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. 1707.45. In any indictment, complaint, or information
under section
1707.44 of the Revised Code, it shall not be
necessary to negative the
existence of facts which would bring a
security within section 1707.02
or
1707.05 of the Revised Code, or
would bring a transaction within section
1707.03, 1707.04, or
1707.06 of the Revised Code, or to negative
the existence of
facts
which would bring a transaction within the exceptions of section
1707.34
of the Revised Code. The burden of proof shall be upon
the party claiming the
benefits of any of such sections.
Section 2. That existing sections 1707.01, 1707.03, 1707.041,
1707.06, 1707.08, 1707.09, 1707.092, 1707.14, 1707.141, 1707.161,
1707.17, 1707.19, 1707.23, 1707.391, 1707.44, and 1707.45 and
sections 1707.05 and 1707.07 of the Revised Code are hereby
repealed.
Section 3. That the versions of sections 1707.01, 1707.17,
1707.23, and 1707.44 of the Revised Code that are scheduled to
take effect October 5, 2001, be amended 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. 1707.17. (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 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
fifty 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
fifty 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
(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. 1707.23. 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 this chapter or
rules adopted under
this chapter by the
division, or defined as
fraudulent in this chapter or rules
adopted under 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
refuse a license applied for by a dealer, salesperson, investment
adviser, or investment adviser representative or 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
that section; (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
immediately 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 this chapter or rules adopted under
this chapter by the
division. The order shall state specifically
the
section or sections of this
chapter or the rule or
rules
adopted under 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 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
Registering securities or transactions, or
exempting securities or transactions from registration, under 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;
(6) Submitting a notice filing to the division under section
1707.092 or 1707.141 of the Revised Code. (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
section 1707.03, 1707.04, 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.
Section 4. That the existing versions of sections 1707.01,
1707.17, 1707.23, and 1707.44 of the Revised Code that are
scheduled to take effect October 5, 2001, are hereby repealed.
Section 5. Sections 3 and 4 of this act shall take effect
October 5, 2001.
Section 6. Section 1707.06 of the Revised Code is presented
in
this act as a composite of the section as amended by both Am.
Sub. H.B. 488 and Sub. S.B. 74 of
the 120th General Assembly. The
General Assembly, applying the
principle stated in division (B) of
section 1.52 of the Revised
Code that amendments are to be
harmonized if reasonably capable of
simultaneous operation, finds
that the composite is the resulting
version of the section in
effect prior to the effective date of
the section as presented in
this act.
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