HB-5746, As Passed House, November 30, 2004                                 

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                              SUBSTITUTE FOR                                    

                                                                                

                           HOUSE BILL NO. 5746                                  

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                 A bill to enact the uniform securities act (2002) relating                        

                                                                                

    to the issuance, offer, sale, or purchase of securities; to                 

                                                                                

    prohibit fraudulent practices in relation to securities; to                 

                                                                                

    establish civil and criminal sanctions for violations of the act            

                                                                                

    and civil sanctions for violation of the rules promulgated                  

                                                                                

    pursuant to the act; to require the registration of                         

                                                                                

    broker-dealers, agents, investment advisers, and securities; to             

                                                                                

    make uniform the law with reference to securities; and to repeal            

                                                                                

    acts and parts of acts.                                                     

                                                                                

                THE PEOPLE OF THE STATE OF MICHIGAN ENACT:                      

                                                                                

1                               ARTICLE 1                                       

                                                                                

2                           GENERAL PROVISIONS                                  

                                                                                

3                                                                                    

                                                                                

4        Sec. 101.  This act shall be known and may be cited as the             

                                                                                

5   "uniform securities act (2002)".                                            

                                                                                


                                                                                

1       Sec. 102.  As used in this act, unless the context otherwise                

                                                                                

2   requires:                                                                   

                                                                                

3       (a) "Administrator" means the office of financial and                       

                                                                                

4   insurance services of the department of labor and economic                  

                                                                                

5   growth.                                                                     

                                                                                

6       (b) "Agent" means an individual other than a broker-dealer                  

                                                                                

7   who represents a broker-dealer in effecting or attempting to                

                                                                                

8   effect purchases or sales of securities or represents an issuer             

                                                                                

9   in effecting or attempting to effect purchases or sales of the              

                                                                                

10  issuer's securities.  The term does not include a partner,                  

                                                                                

11  officer, or director of a broker-dealer or issuer, or an                    

                                                                                

12  individual having a similar status or performing similar                    

                                                                                

13  functions, unless the individual otherwise comes within the                 

                                                                                

14  term.  The term does not include an individual excluded by rule             

                                                                                

15  or order under this act.  The term does not include a person                

                                                                                

16  acting solely as a finder and registered as a broker-dealer under           

                                                                                

17  this act or acting as a finder in a transaction exempt under                

                                                                                

18  section 202(1)(r).                                                          

                                                                                

19      (c) "Bank" means any of the following:                                      

                                                                                

20                                                                               (i) A banking institution organized under the laws of the                           

                                                                                

21  United States.                                                              

                                                                                

22      (ii) A member bank of the federal reserve system.                            

                                                                                

23      (iii) Any other banking institution that meets all of the                    

                                                                                

24  following:                                                                  

                                                                                

25      (A) It is doing business under the laws of a state or of the                

                                                                                

26  United States.                                                              

                                                                                

27      (B) A substantial portion of its business consists of                       


    House Bill No. 5746 (H-3) as amended November 30, 2004                      

1   receiving deposits or exercising fiduciary powers similar to                

                                                                                

2   those permitted to be exercised by national banks under the                 

                                                                                

3   authority of the comptroller of the currency pursuant to section            

                                                                                

4   1 of Public Law 87-722, 12 USC 92a.                                         

                                                                                

5       (C) It is supervised and examined by a state or federal                     

                                                                                

6   agency having supervision over banks.                                       

                                                                                

7       (D) It is not operated for the purpose of evading this act.                 

                                                                                

8       (iv) A receiver, conservator, or other liquidating agent of                  

                                                                                

9   any institution or firm included in subparagraph (i), (ii), or               

                                                                                

10  (iii).                                                                       

                                                                                

11      (d) "Broker-dealer" means a person engaged in the business of               

                                                                                

12  effecting transactions in securities for the account of others or           

                                                                                

13  for the person's own account.  The term does not include any of             

                                                                                

14  the following:                                                              

                                                                                

15                                                                               (i) An agent.                                                                       

                                                                                

16      (ii) An issuer.                                                              

                                                                                

17      (iii) [Beginning on the effective date of this act and until December 31, 2006, a] depository institution.                                                      

        [(iv)  Beginning January 1, 2007, a bank, trust company organized or chartered under the laws of this state, or savings institution if its activities as a broker-dealer are limited to those specified in section 3(a)(4)(B)(i) through (vi), (viii) through (x), and (xi) if limited to unsolicited transactions; 3(a)(5)(B); and 3(a)(5)(C) of the securities exchange act of 1934, 15 USC 78c, or a bank that satisfies the conditions described in section 3(a)(4)(E) of the securities exchange act of 1934, 15 USC 78c.                                                        

18      (v)] An international banking institution.                                  

                                                                                

19      [(vi)] A person excluded by rule or order under this act.                    

                                                                                

20      (e) "Depository institution" means a bank; or a savings                     

                                                                                

21  institution, trust company, credit union, or similar institution            

                                                                                

22  that is organized or chartered under the laws of a state or of              

                                                                                

23  the United States, authorized to receive deposits, and supervised           

                                                                                

24  and examined by an official or agency of a state or the United              

                                                                                

25  States if its deposits or share accounts are insured by the                 

26  federal deposit insurance corporation, the national credit union            

27  share insurance fund, or a successor authorized by federal law.             


                                                                                

1   The term does not include any of the following:                             

                                                                                

2                                                                                (i) An insurance company or other organization primarily                            

                                                                                

3   engaged in the business of insurance.                                       

                                                                                

4       (ii) A Morris Plan bank.                                                     

                                                                                

5       (iii) An industrial loan company.                                            

                                                                                

6       (f) "Federal covered investment adviser" means a person                     

                                                                                

7   registered under the investment advisers act of 1940.                       

                                                                                

8       (g) "Federal covered security" means a security that is, or                 

                                                                                

9   upon completion of a transaction will be, a covered security                

                                                                                

10  under section 18(b) of the securities act of 1933, 15 USC 77r, or           

                                                                                

11  rules or regulations adopted under that provision.                          

                                                                                

12      (h) "Filing" means the receipt under this act of a record by                

                                                                                

13  the administrator or a designee of the administrator.                       

                                                                                

14      (i) "Finder" means a person who, for consideration,                         

                                                                                

15  participates in the offer to sell, sale, or purchase of                     

                                                                                

16  securities by locating, introducing, or referring potential                 

                                                                                

17  purchasers or sellers.  Finder does not include a person whose              

                                                                                

18  actions are solely incidental to a transaction exempt pursuant to           

                                                                                

19  section 202(1)(r).  The administrator may by rule or order                  

                                                                                

20  exclude other persons from this definition.                                 

                                                                                

21      (j) "Fraud," "deceit," and "defraud" include, but are not                   

                                                                                

22  limited to, common law deceit.                                              

                                                                                

23      (k) "Guaranteed" means guaranteed as to payment of all                      

                                                                                

24  principal and all interest.                                                 

                                                                                

25      Sec. 102a.  As used in this act, unless the context otherwise               

                                                                                

26  requires:                                                                   

                                                                                

27      (a) "Institutional investor" means any of the following,                    


                                                                                

1   whether acting for itself or for others in a fiduciary capacity:            

                                                                                

2                                                                                (i) A depository institution or international banking                               

                                                                                

3   institution.                                                                

                                                                                

4       (ii) An insurance company.                                                   

                                                                                

5       (iii) A separate account of an insurance company.                            

                                                                                

6       (iv) An investment company as defined in the investment                      

                                                                                

7   company act of 1940.                                                        

                                                                                

8       (v) A broker-dealer registered under the securities exchange                

                                                                                

9   act of 1934.                                                                

                                                                                

10      (vi) An employee pension, profit-sharing, or benefit plan if                 

                                                                                

11  the plan has total assets in excess of $10,000,000.00 or its                

                                                                                

12  investment decisions are made by a named fiduciary, as defined in           

                                                                                

13  the employee retirement income security act of 1974, that is a              

                                                                                

14  broker-dealer registered under the securities exchange act of               

                                                                                

15  1934, an investment adviser registered or exempt from                       

                                                                                

16  registration under the investment advisers act of 1940, an                  

                                                                                

17  investment adviser registered under this act, a depository                  

                                                                                

18  institution, or an insurance company.                                       

                                                                                

19      (vii) A plan established and maintained by a state, a                        

                                                                                

20  political subdivision of a state, or an agency or instrumentality           

                                                                                

21  of a state or a political subdivision of a state for the benefit            

                                                                                

22  of its employees, if the plan has total assets in excess of                 

                                                                                

23  $10,000,000.00 or its investment decisions are made by a duly               

                                                                                

24  designated public official or by a named fiduciary, as defined in           

                                                                                

25  the employee retirement income security act of 1974, that is a              

                                                                                

26  broker-dealer registered under the securities exchange act of               

                                                                                

27  1934, an investment adviser registered or exempt from                       


                                                                                

1   registration under the investment advisers act of 1940, an                  

                                                                                

2   investment adviser registered under this act, a depository                  

                                                                                

3   institution, or an insurance company.                                       

                                                                                

4       (viii) A trust, if it has total assets in excess of                           

                                                                                

5   $10,000,000.00, its trustee is a depository institution, and its            

                                                                                

6   participants are exclusively plans of the types identified in               

                                                                                

7   subparagraph (vi) or (vii), regardless of size of their assets,               

                                                                                

8   except a trust that includes as participants self-directed                  

                                                                                

9   individual retirement accounts or similar self-directed plans.              

                                                                                

10      (ix) An organization described in section 501(c)(3) of the                   

                                                                                

11  internal revenue code, 26 USC 501, a corporation, Massachusetts             

                                                                                

12  or similar business trust, limited liability company, or                    

                                                                                

13  partnership, not formed for the specific purpose of acquiring the           

                                                                                

14  securities offered, with total assets in excess of                          

                                                                                

15  $10,000,000.00.                                                             

                                                                                

16      (x) A small business investment company licensed by the small               

                                                                                

17  business administration under section 301(c) of part A of title             

                                                                                

18  III of the small business investment act of 1958, 15 USC 681,               

                                                                                

19  with total assets in excess of $10,000,000.00.                              

                                                                                

20      (xi) A private business development company as defined in                    

                                                                                

21  section 202(a)(22) of the investment advisers act of 1940, 15 USC           

                                                                                

22  80b-2, with total assets in excess of $10,000,000.00.                       

                                                                                

23      (xii) A federal covered investment adviser acting for its own                

                                                                                

24  account.                                                                    

                                                                                

25      (xiii) A "qualified institutional buyer" as defined in rule                   

                                                                                

26  144A(a)(1), other than rule 144A(a)(1)(i)(H), adopted under the             

                                                                                

27  securities act of 1933, 17 CFR 230.144A.                                    


                                                                                

1       (xiv) A "major U.S. institutional investor" as defined in                    

                                                                                

2   rule 15a-6(b)(4)(i) adopted under the securities exchange act of            

                                                                                

3   1934, 17 CFR 240.15a-6(b)(4)(i).                                            

                                                                                

4       (xv) Any other person, other than an individual, of                         

                                                                                

5   institutional character with total assets in excess of                      

                                                                                

6   $10,000,000.00 not organized for the specific purpose of evading            

                                                                                

7   this act.                                                                   

                                                                                

8       (xvi) Any other person specified by rule or order under this                 

                                                                                

9   act.                                                                        

                                                                                

10      (b) "Insurance company" means a company organized as an                     

                                                                                

11  insurance company whose primary business is writing insurance or            

                                                                                

12  reinsuring risks underwritten by insurance companies and which is           

                                                                                

13  subject to supervision by the insurance commissioner or a similar           

                                                                                

14  official or agency of a state.                                              

                                                                                

15      (c) "Insured" means insured as to payment of all principal                  

                                                                                

16  and all interest.                                                           

                                                                                

17      (d) "International banking institution" means an                            

                                                                                

18  international financial institution of which the United States is           

                                                                                

19  a member and whose securities are exempt from registration under            

                                                                                

20  the securities act of 1933.                                                 

                                                                                

21      (e) "Investment adviser" means a person that, for                           

                                                                                

22  compensation, engages in the business of advising others, either            

                                                                                

23  directly or through publications or writings, as to the value of            

                                                                                

24  securities or the advisability of investing in, purchasing, or              

                                                                                

25  selling securities or that, for compensation and as a part of a             

                                                                                

26  regular business, issues or promulgates analyses or reports                 

                                                                                

27  concerning securities.  The term includes a financial planner or            


                                                                                

1   other person that, as an integral component of other financially            

                                                                                

2   related services, provides investment advice to others for                  

                                                                                

3   compensation as part of a business or that holds itself out as              

                                                                                

4   providing investment advice to others for compensation.  The term           

                                                                                

5   does not include any of the following:                                      

                                                                                

6                                                                                (i) An investment adviser representative.                                           

                                                                                

7       (ii) A lawyer, accountant, engineer, or teacher whose                        

                                                                                

8   performance of investment advice is solely incidental to the                

                                                                                

9   practice of the person's profession.                                        

                                                                                

10      (iii) A broker-dealer or its agents whose performance of                     

                                                                                

11  investment advice is solely incidental to the conduct of business           

                                                                                

12  as a broker-dealer and that does not receive special compensation           

                                                                                

13  for the investment advice.                                                  

                                                                                

14      (iv) A publisher of a bona fide newspaper, news magazine, or                 

                                                                                

15  business or financial publication of general and regular                    

                                                                                

16  circulation.                                                                

                                                                                

17      (v) A federal covered investment adviser.                                   

                                                                                

18      (vi) A depository institution.                                               

                                                                                

19      (vii) Any other person that is excluded by the investment                    

                                                                                

20  advisers act of 1940 from the definition of investment adviser.             

                                                                                

21      (viii) Any other person excluded by rule or order under this                  

                                                                                

22  act.                                                                        

                                                                                

23      (ix) A finder registered as a broker-dealer under this act.                  

                                                                                

24      (f) "Investment adviser representative" means an individual                 

                                                                                

25  employed by or associated with an investment adviser or federal             

                                                                                

26  covered investment adviser and who makes any recommendations or             

                                                                                

27  otherwise gives investment advice regarding securities, manages             


                                                                                

1   accounts or portfolios of clients, determines which                         

                                                                                

2   recommendation or advice regarding securities should be given,              

                                                                                

3   provides investment advice or holds himself or herself out as               

                                                                                

4   providing investment advice, receives compensation to solicit,              

                                                                                

5   offer, or negotiate for the sale of or for selling investment               

                                                                                

6   advice, or supervises employees who perform any of the                      

                                                                                

7   foregoing.  The term does not include an individual who meets any           

                                                                                

8   of the following:                                                           

                                                                                

9                                                                                (i) Performs only clerical or ministerial acts.                                     

                                                                                

10      (ii) Is an agent whose performance of investment advice is                   

                                                                                

11  solely incidental to the individual acting as an agent and does             

                                                                                

12  not receive special compensation for investment advisory                    

                                                                                

13  services.                                                                   

                                                                                

14      (iii) Is employed by or associated with a federal covered                    

                                                                                

15  investment adviser, unless the individual meets any of the                  

                                                                                

16  following:                                                                  

                                                                                

17      (A) Has a "place of business" in this state as that term is                 

                                                                                

18  defined by rule adopted under section 203A of the investment                

                                                                                

19  advisers act of 1940, 15 USC 80b-3a, and is an "investment                  

                                                                                

20  adviser representative" as that term is defined by rule adopted             

                                                                                

21  under section 203A of the investment advisers act of 1940, 15 USC           

                                                                                

22  80b-3a.                                                                     

                                                                                

23      (B) Has a "place of business" in this state as that term is                 

                                                                                

24  defined by rule adopted under section 203A of the investment                

                                                                                

25  advisers act of 1940, 15 USC 80b-3a, and is not a "supervised               

                                                                                

26  person" as that term is defined in section 202(a)(25) of the                

                                                                                

27  investment advisers act of 1940, 15 USC 80b-2.                              


                                                                                

1       (iv) Is excluded by rule or order under this act.                            

                                                                                

2       (g) "Issuer" means a person that issues or proposes to issue                

                                                                                

3   a security, subject to the following:                                       

                                                                                

4                                                                                (i) The issuer of a voting trust certificate, collateral                            

                                                                                

5   trust certificate, certificate of deposit for a security, or                

                                                                                

6   share in an investment company without a board of directors or              

                                                                                

7   individuals performing similar functions, is the person                     

                                                                                

8   performing the acts and assuming the duties of depositor or                 

                                                                                

9   manager pursuant to the trust or other agreement or instrument              

                                                                                

10  under which the security is issued.                                         

                                                                                

11      (ii) The issuer of an equipment trust certificate or similar                 

                                                                                

12  security serving the same purpose is the person by which the                

                                                                                

13  property is or will be used, or to which the property or                    

                                                                                

14  equipment is or will be leased or conditionally sold, or that is            

                                                                                

15  otherwise contractually responsible for assuring payment of the             

                                                                                

16  certificate.                                                                

                                                                                

17      (iii) The issuer of a fractional undivided interest in an                    

                                                                                

18  oil, gas, or other mineral lease or in payments out of production           

                                                                                

19  under a lease, right, or royalty is the owner of an interest in             

                                                                                

20  the lease or in payments out of production under a lease, right,            

                                                                                

21  or royalty, whether whole or fractional, that creates fractional            

                                                                                

22  interests for the purpose of sale.                                          

                                                                                

23      Sec. 102b.  As used in this act, unless the context otherwise               

                                                                                

24  requires:                                                                   

                                                                                

25      (a) "Nonissuer transaction" or "nonissuer distribution" means               

                                                                                

26  a transaction or distribution not directly or indirectly for the            

                                                                                

27  benefit of the issuer.                                                      


                                                                                

1       (b) "Offer to purchase" includes an attempt or offer to                     

                                                                                

2   obtain, or solicitation of an offer to sell, a security or                  

                                                                                

3   interest in a security for value.  The term does not include a              

                                                                                

4   tender offer that is subject to section 14(d) of title I of the             

                                                                                

5   securities exchange act of 1934, 15 USC 78n.                                

                                                                                

6       (c) "Person" means an individual, corporation, business                     

                                                                                

7   trust, estate, trust, partnership, limited liability company,               

                                                                                

8   limited liability partnership, association, joint venture, or               

                                                                                

9   government; a governmental subdivision, agency, or                          

                                                                                

10  instrumentality; a public corporation; or any other legal or                

                                                                                

11  commercial entity.                                                          

                                                                                

12      (d) "Place of business" of a broker-dealer, an investment                   

                                                                                

13  adviser, or a federal covered investment adviser means any of the           

                                                                                

14  following:                                                                  

                                                                                

15                                                                               (i) An office at which the broker-dealer, investment adviser,                       

                                                                                

16  or federal covered investment adviser regularly provides                    

                                                                                

17  brokerage or investment advice, or solicits, meets with, or                 

                                                                                

18  otherwise communicates with customers or clients.                           

                                                                                

19      (ii) Any other location that is held out to the general                      

                                                                                

20  public as a location at which the broker-dealer, investment                 

                                                                                

21  adviser, or federal covered investment adviser provides brokerage           

                                                                                

22  or investment advice, or solicits, meets with, or otherwise                 

                                                                                

23  communicates with customers or clients.                                     

                                                                                

24      (e) "Predecessor act" means former 1964 PA 265.                             

                                                                                

25      (f) "Price amendment" means the amendment to a registration                 

                                                                                

26  statement filed under the securities act of 1933 or, if an                  

                                                                                

27  amendment is not filed, the prospectus or prospectus supplement             


                                                                                

1   filed under the securities act of 1933 that includes a statement            

                                                                                

2   of the offering price, underwriting and selling discounts or                

                                                                                

3   commissions, amount of proceeds, conversion rates, call prices,             

                                                                                

4   and other matters dependent upon the offering price.                        

                                                                                

5       (g) "Principal place of business" of a broker-dealer or an                  

                                                                                

6   investment adviser means the executive office of the                        

                                                                                

7   broker-dealer or investment adviser from which the officers,                

                                                                                

8   partners, or managers of the broker-dealer or investment adviser            

                                                                                

9   direct, control, and coordinate the activities of the                       

                                                                                

10  broker-dealer or investment adviser.                                        

                                                                                

11      (h) "Record," except in the phrases "of record," "official                  

                                                                                

12  record," and "public record," means information that is inscribed           

                                                                                

13  on a tangible medium or that is stored in an electronic or other            

                                                                                

14  medium and is retrievable in perceivable form.                              

                                                                                

15      Sec. 102c.  As used in this act, unless the context otherwise               

                                                                                

16  requires:                                                                   

                                                                                

17      (a) "Sale" includes every contract of sale, contract to sell,               

                                                                                

18  or disposition of, a security or interest in a security for                 

                                                                                

19  value, and "offer to sell" includes every attempt or offer to               

                                                                                

20  dispose of, or solicitation of an offer to purchase, a security             

                                                                                

21  or interest in a security for value.  Both terms include any of             

                                                                                

22  the following:                                                              

                                                                                

23                                                                               (i) A security given or delivered with, or as a bonus on                            

                                                                                

24  account of, any purchase of securities or any other thing                   

                                                                                

25  constituting part of the subject of the purchase and having been            

                                                                                

26  offered and sold for value.                                                 

                                                                                

27      (ii) A gift of assessable stock involving an offer and sale.                 


                                                                                

1       (iii) A sale or offer of a warrant or right to purchase or                   

                                                                                

2   subscribe to another security of the same or another issuer, and            

                                                                                

3   a sale or offer of a security that gives the holder a present or            

                                                                                

4   future right or privilege to convert the security into another              

                                                                                

5   security of the same or another issuer, including an offer of the           

                                                                                

6   other security.                                                             

                                                                                

7       (b) "Securities and exchange commission" means the United                   

                                                                                

8   States securities and exchange commission.                                  

                                                                                

9       (c) "Security" means a note; stock; treasury stock; security                

                                                                                

10  future; bond; debenture; evidence of indebtedness; certificate of           

                                                                                

11  interest or participation in a profit-sharing agreement;                    

                                                                                

12  collateral trust certificate; preorganization certificate or                

                                                                                

13  subscription; transferable share; investment contract; voting               

                                                                                

14  trust certificate; certificate of deposit for a security;                   

                                                                                

15  fractional undivided interest in oil, gas, or other mineral                 

                                                                                

16  rights; put, call, straddle, option, or privilege on a security,            

                                                                                

17  certificate of deposit, or group or index of securities,                    

                                                                                

18  including an interest in or based on the value of that put, call,           

                                                                                

19  straddle, option, or privilege on that security, certificate of             

                                                                                

20  deposit, or group or index of securities; put, call, straddle,              

                                                                                

21  option, or privilege entered into on a national securities                  

                                                                                

22  exchange relating to foreign currency; an investment in a                   

                                                                                

23  viatical or life settlement agreement; or, in general, an                   

                                                                                

24  interest or instrument commonly known as a "security"; or a                 

                                                                                

25  certificate of interest or participation in, temporary or interim           

                                                                                

26  certificate for, receipt for, guarantee of, or warrant or right             

                                                                                

27  to subscribe to or purchase, any of the foregoing.  All of the              


                                                                                

1   following apply to the term security:                                       

                                                                                

2                                                                                (i) The term includes a contractual or quasi-contractual                            

                                                                                

3   arrangement that meets all of the following:                                

                                                                                

4       (A) A person furnishes capital, other than services, to an                  

                                                                                

5   issuer under the arrangement.                                               

                                                                                

6       (B) A portion of the capital furnished under sub-subparagraph               

                                                                                

7   (A) is subjected to the risks of the issuer's enterprise.                   

                                                                                

8       (C) The furnishing of capital under sub-subparagraph (A) is                 

                                                                                

9   induced by representations made by an issuer, promoter, or the              

                                                                                

10  issuer's or promoter's affiliates which give rise to a reasonable           

                                                                                

11  understanding that a valuable tangible benefit will accrue to the           

                                                                                

12  person furnishing the capital as a result of the operation of the           

                                                                                

13  enterprise.                                                                 

                                                                                

14      (D) The person furnishing the capital under sub-subparagraph                

                                                                                

15  (A) does not intend to be actively involved in the management of            

                                                                                

16  the enterprise in a meaningful way.                                         

                                                                                

17      (E) At the time the capital is furnished, a promoter or its                 

                                                                                

18  affiliates anticipate that financial gain may be realized as a              

                                                                                

19  result of the furnishing.                                                   

                                                                                

20      (ii) The term includes both a certificated and an                            

                                                                                

21  uncertificated security.                                                    

                                                                                

22      (iii) The term does not include an insurance or endowment                    

                                                                                

23  policy or annuity contract under which an insurance company                 

                                                                                

24  promises to pay a fixed or variable sum of money either in a lump           

                                                                                

25  sum or periodically for life or other specified period.                     

                                                                                

26      (iv) The term does not include an interest in a contributory                 

                                                                                

27  or noncontributory pension or welfare plan subject to the                   


                                                                                

1   employee retirement income security act of 1974.                            

                                                                                

2       (v) The term includes an investment in a common enterprise                  

                                                                                

3   with the expectation of profits to be derived primarily from the            

                                                                                

4   efforts of a person other than the investor.  As used in this               

                                                                                

5   subparagraph, a "common enterprise" means an enterprise in which            

                                                                                

6   the fortunes of the investor are interwoven with those of either            

                                                                                

7   the person offering the investment, a third party, or other                 

                                                                                

8   investors.                                                                  

                                                                                

9       (vi) The term may include, as an investment contract, an                     

                                                                                

10  interest in a limited partnership, a limited liability company,             

                                                                                

11  or a limited liability partnership.                                         

                                                                                

12      (d) "Self-regulatory organization" means a national                         

                                                                                

13  securities exchange registered under the securities exchange act            

                                                                                

14  of 1934, a national securities association of broker-dealers                

                                                                                

15  registered under the securities exchange act of 1934, a clearing            

                                                                                

16  agency registered under the securities exchange act of 1934, or             

                                                                                

17  the municipal securities rule-making board established under the            

                                                                                

18  securities exchange act of 1934.                                            

                                                                                

19      (e) "Sign" means, with present intent to authenticate or                    

                                                                                

20  adopt a record, either of the following:                                    

                                                                                

21                                                                               (i) To execute or adopt a tangible symbol.                                          

                                                                                

22      (ii) To attach or logically associate with the record an                     

                                                                                

23  electronic symbol, sound, or process.                                       

                                                                                

24      (f) "State" means a state of the United States, the District                

                                                                                

25  of Columbia, the Commonwealth of Puerto Rico, the United States             

                                                                                

26  Virgin Islands, or any territory or insular possession subject to           

                                                                                

27  the jurisdiction of the United States.                                      


                                                                                

1       Sec. 103.  (1) Subject to subsection (2), as used in this                   

                                                                                

2   act:                                                                        

                                                                                

3       (a) "Commodity exchange act" means the commodity exchange                   

                                                                                

4   act, 7 USC 1 to 25.                                                         

                                                                                

5       (b) "Electronic signatures in global and national commerce                  

                                                                                

6   act" means the electronic signatures in global and national                 

                                                                                

7   commerce act, Public Law 106-229, 114 Stat. 464.                            

                                                                                

8       (c) "Employee retirement income security act of 1974" means                 

                                                                                

9   the employee retirement income security act of 1974, Public Law             

                                                                                

10  93-406, 88 Stat. 829.                                                       

                                                                                

11      (d) "Internal revenue code" means the United States internal                

                                                                                

12  revenue code of 1986.                                                       

                                                                                

13      (e) "Investment advisers act of 1940" means the investment                  

                                                                                

14  advisers act of 1940, 15 USC 80b-1 to 80b-21.                               

                                                                                

15      (f) "Investment company act of 1940" means the investment                   

                                                                                

16  company act of 1940, 15 USC 80a-1 to 80a-64.                                

                                                                                

17      (g) "National housing act" means the national housing act,                  

                                                                                

18  chapter 847, 48 Stat. 1246.                                                 

                                                                                

19      (h) "Public utility holding company act of 1935" means the                  

                                                                                

20  public utility holding company act of 1935, 15 USC 79 to 79z-6.             

                                                                                

21      (i) "Securities act of 1933" means the securities act of                    

                                                                                

22  1933, 15 USC 77a to 77aa.                                                   

                                                                                

23      (j) "Securities exchange act of 1934" means the securities                  

                                                                                

24  exchange act of 1934, 15 USC 78a to 78mm.                                   

                                                                                

25      (k) "Securities investor protection act of 1970" means the                  

                                                                                

26  securities investor protection act of 1970, Public Law 91-598, 84           

                                                                                

27  Stat. 1636.                                                                 


                                                                                

1                                                                                (l) "Securities litigation uniform standards act of 1998"                           

                                                                                

2   means the securities litigation uniform standards act of 1998,              

                                                                                

3   Public Law 105-353, 112 Stat. 3227.                                         

                                                                                

4       (m) "Small business investment act of 1958" means the small                 

                                                                                

5   business investment act of 1958, Public Law 85-699, 72                      

                                                                                

6   Stat. 689.                                                                  

                                                                                

7       (2) A reference in this act to a federal statute defined in                 

                                                                                

8   subsection (1) includes that statute and the rules and                      

                                                                                

9   regulations adopted under that statute.  The administrator may,             

                                                                                

10  by rule or order, adopt an amendment or successor to a federal              

                                                                                

11  statute defined in subsection (1) or rules and regulations                  

                                                                                

12  adopted under a federal statute defined in subsection (1), a                

                                                                                

13  federal statute that is similar to a federal statute defined in             

                                                                                

14  subsection (1), or a rule or regulation that is similar to a rule           

                                                                                

15  or regulation adopted under a federal statute defined in                    

                                                                                

16  subsection (1).                                                             

                                                                                

17      Sec. 104.  Any reference in this act to an agency or                        

                                                                                

18  department of the United States is also a reference to any                  

                                                                                

19  successor agency, department, or entity of that agency or                   

                                                                                

20  department.                                                                 

                                                                                

21      Sec. 105.  This act modifies, limits, and supersedes the                    

                                                                                

22  electronic signatures in global and national commerce act, but              

                                                                                

23  does not modify, limit, or supersede section 101(c) of that act,            

                                                                                

24  15 USC 7001, or authorize electronic delivery of any of the                 

                                                                                

25  notices described in section 103(b) of that act, 15 USC 7003.               

                                                                                

26  This act authorizes the filing of records and signatures, when              

                                                                                

27  specified by provisions of this act or by a rule or order under             


                                                                                

1   this act, in a manner consistent with section 104(a) of that act,           

                                                                                

2   15 USC 7004.                                                                

                                                                                

3                               ARTICLE 2                                       

                                                                                

4               EXEMPTIONS FROM REGISTRATION OF SECURITIES                      

                                                                                

5       Sec. 201.  The following securities are exempt from the                     

                                                                                

6   requirements of sections 301 to 306 and 504:                                

                                                                                

7       (a) A security, including a revenue obligation or a separate                

                                                                                

8   security as defined in rule 131 adopted under the securities act            

                                                                                

9   of 1933, 17 CFR 230.131, issued, insured, or guaranteed by the              

                                                                                

10  United States; by a state; by a political subdivision of a state;           

                                                                                

11  by a public authority, agency, or instrumentality of 1 or more              

                                                                                

12  states; by a political subdivision of 1 or more states; or by a             

                                                                                

13  person controlled or supervised by and acting as an                         

                                                                                

14  instrumentality of the United States under authority granted by             

                                                                                

15  the Congress; or a certificate of deposit for any of the                    

                                                                                

16  foregoing.                                                                  

                                                                                

17      (b) A security issued, insured, or guaranteed by a foreign                  

                                                                                

18  government with which the United States maintains diplomatic                

                                                                                

19  relations, or any of its political subdivisions, if the security            

                                                                                

20  is recognized as a valid obligation by the issuer, insurer, or              

                                                                                

21  guarantor.                                                                  

                                                                                

22      (c) A security issued by and representing, or that will                     

                                                                                

23  represent an interest in or a direct obligation of, or be                   

                                                                                

24  guaranteed by, any of the following:                                        

                                                                                

25                                                                               (i) An international banking institution.                                           

                                                                                

26      (ii) A banking institution organized under the laws of the                   

                                                                                

27  United States; a member bank of the federal reserve system; or a            


                                                                                

1   depository institution a substantial portion of the business of             

                                                                                

2   which consists or will consist of either receiving deposits or              

                                                                                

3   share accounts that are insured to the maximum amount authorized            

                                                                                

4   by statute by the federal deposit insurance corporation, the                

                                                                                

5   national credit union share insurance fund, or a successor                  

                                                                                

6   authorized by federal law or exercising fiduciary powers that are           

                                                                                

7   similar to those permitted for national banks under the authority           

                                                                                

8   of the comptroller of currency pursuant to section 1 of Public              

                                                                                

9   Law 87-722, 12 USC 92a.                                                     

                                                                                

10      (iii) Any other depository institution, unless by rule or                    

                                                                                

11  order the administrator proceeds under section 204.                         

                                                                                

12      (d) A security issued by and representing an interest in, or                

                                                                                

13  a debt of, or insured or guaranteed by, an insurance company                

                                                                                

14  authorized to do business in this state.                                    

                                                                                

15      (e) A security issued or guaranteed by a railroad, other                    

                                                                                

16  common carrier, public utility, or public utility holding company           

                                                                                

17  that is any of the following:                                               

                                                                                

18                                                                               (i) Regulated in respect to its rates and charges by the                            

                                                                                

19  United States or a state.                                                   

                                                                                

20      (ii) Regulated in respect to the issuance or guarantee of the                

                                                                                

21  security by the United States, a state, Canada, or a Canadian               

                                                                                

22  province or territory.                                                      

                                                                                

23      (iii) A public utility holding company registered under the                  

                                                                                

24  public utility holding company act of 1935 or a subsidiary of a             

                                                                                

25  registered holding company within the meaning of that act.                  

                                                                                

26      (f) A federal covered security specified in section 18(b)(1)                

                                                                                

27  of the securities act of 1933, 15 USC 77r, or a security listed             


                                                                                

1   or approved for listing on another securities market specified by           

                                                                                

2   rule under this act; a put or a call option contract; warrant; a            

                                                                                

3   subscription right on or with respect to those securities; or an            

                                                                                

4   option or similar derivative security on a security or an index             

                                                                                

5   of securities or foreign currencies issued by a clearing agency             

                                                                                

6   registered under the securities exchange act of 1934 and listed             

                                                                                

7   or designated for trading on a national securities exchange, a              

                                                                                

8   facility of a national securities exchange, or a facility of a              

                                                                                

9   national securities association registered under the securities             

                                                                                

10  exchange act of 1934 or an offer or sale, of the underlying                 

                                                                                

11  security in connection with the offer, sale, or exercise of an              

                                                                                

12  option or other security that was exempt when the option or other           

                                                                                

13  security was written or issued; or an option or a derivative                

                                                                                

14  security designated by the securities and exchange commission               

                                                                                

15  under section 9(b) of the securities exchange act of 1934, 15 USC           

                                                                                

16  78i.                                                                        

                                                                                

17      (g) A security issued by a person organized and operated                    

                                                                                

18  exclusively for religious, educational, benevolent, fraternal,              

                                                                                

19  charitable, social, athletic, or reformatory purposes, or as a              

                                                                                

20  chamber of commerce, and not for pecuniary profit, no part of the           

                                                                                

21  net earnings of which inures to the benefit of a private                    

                                                                                

22  stockholder or other person, or a security of a company that is             

                                                                                

23  excluded from the definition of an investment company under                 

                                                                                

24  section 3(c)(10)(B) of the investment company act of 1940, 15 USC           

                                                                                

25  80a-3.  With respect to the offer or sale of a note, bond,                  

                                                                                

26  debenture, or other evidence of indebtedness by a person                    

                                                                                

27  described in this subdivision, the administrator by rule may                


                                                                                

1   limit the availability of this exemption by classifying                     

                                                                                

2   securities, persons, and transactions, imposing different                   

                                                                                

3   requirements for different classes, specifying with respect to              

                                                                                

4   subparagraph (ii) the scope of the exemption and the grounds for             

                                                                                

5   denial or suspension, and requiring an issuer to meet 1 or more             

                                                                                

6   of the following:                                                           

                                                                                

7                                                                                (i) To file a notice specifying the material terms of the                           

                                                                                

8   proposed offer or sale and copies of any proposed sales and                 

                                                                                

9   advertising literature to be used and provide that the exemption            

                                                                                

10  becomes effective if the administrator does not disallow the                

                                                                                

11  exemption within the period established by the rule.                        

                                                                                

12      (ii) To file a request for exemption authorization for which                 

                                                                                

13  a rule under this act may specify the scope of the exemption; the           

                                                                                

14  requirement of an offering statement; the filing of sales and               

                                                                                

15  advertising literature; the filing of consent to service of                 

                                                                                

16  process complying with section 611; and grounds for denial or               

                                                                                

17  suspension of the exemption.                                                

                                                                                

18      (iii) To register under section 304.                                         

                                                                                

19      (h) A member's or owner's interest in, or a retention                       

                                                                                

20  certificate or like security given in lieu of a cash patronage              

                                                                                

21  dividend issued by, a cooperative organized and operated as a               

                                                                                

22  nonprofit membership cooperative under the cooperative laws of a            

                                                                                

23  state, but not a member's or owner's interest, retention                    

                                                                                

24  certificate, or like security sold to persons other than bona               

                                                                                

25  fide members of the cooperative.                                            

                                                                                

26      (i) An equipment trust certificate in respect to equipment                  

                                                                                

27  leased or conditionally sold to a person, if any security issued            


                                                                                

1   by the person would be exempt under this section or would be a              

                                                                                

2   federal covered security under section 18(b)(1) of the securities           

                                                                                

3   act of 1933, 15 USC 77r.                                                    

                                                                                

4       Sec. 202.  (1) The following transactions are exempt from                   

                                                                                

5   the requirements of sections 301 to 306 and 504:                            

                                                                                

6       (a) An isolated nonissuer transaction, whether effected by or               

                                                                                

7   through a broker-dealer or not.                                             

                                                                                

8       (b) A nonissuer transaction by or through a broker-dealer                   

                                                                                

9   registered or exempt from registration under this act, and a                

                                                                                

10  resale transaction by a sponsor of a unit investment trust                  

                                                                                

11  registered under the investment company act of 1940, in a                   

                                                                                

12  security of a class that has been outstanding in the hands of the           

                                                                                

13  public for at least 90 days, if all of the following are met at             

                                                                                

14  the date of the transaction:                                                

                                                                                

15                                                                               (i) The issuer of the security is engaged in business, the                          

                                                                                

16  issuer is not in the organizational stage or in bankruptcy or               

                                                                                

17  receivership, and the issuer is not a blank check, blind pool, or           

                                                                                

18  shell company that has no specific business plan or purpose or              

                                                                                

19  has indicated that its primary business plan is to engage in a              

                                                                                

20  merger or combination of the business with, or an acquisition of,           

                                                                                

21  an unidentified person.                                                     

                                                                                

22      (ii) The security is sold at a price reasonably related to                   

                                                                                

23  its current market price.                                                   

                                                                                

24      (iii) The security does not constitute the whole or part of                  

                                                                                

25  an unsold allotment to, or a subscription or participation by,              

                                                                                

26  the broker-dealer as an underwriter of the security or a                    

                                                                                

27  redistribution.                                                             


                                                                                

1       (iv) A nationally recognized securities manual or its                        

                                                                                

2   electronic equivalent designated by rule or order under this act            

                                                                                

3   or a record filed with the securities and exchange commission               

                                                                                

4   that is publicly available contains all of the following:                   

                                                                                

5       (A) A description of the business and operations of the                     

                                                                                

6   issuer.                                                                     

                                                                                

7       (B) The names of the issuer's executive officers and the                    

                                                                                

8   names of the issuer's directors, if any.                                    

                                                                                

9       (C) An audited balance sheet of the issuer as of a date                     

                                                                                

10  within 18 months before the date of the transaction or, in the              

                                                                                

11  case of a reorganization or merger, and when the parties to the             

                                                                                

12  reorganization or merger each had an audited balance sheet, a pro           

                                                                                

13  forma balance sheet for the combined entity.                                

                                                                                

14      (D) An audited income statement for each of the issuer's 2                  

                                                                                

15  immediately previous fiscal years or for the period of existence            

                                                                                

16  of the issuer, whichever is shorter, or, in the case of a                   

                                                                                

17  reorganization or merger when each party to the reorganization or           

                                                                                

18  merger had audited income statements, a pro forma income                    

                                                                                

19  statement.                                                                  

                                                                                

20      (v) Any of the following requirements are met:                              

                                                                                

21      (A) The issuer of the security has a class of equity                        

                                                                                

22  securities listed on a national securities exchange registered              

                                                                                

23  under section 6 of the securities exchange act of 1934, 15 USC              

                                                                                

24  78f, or designated for trading on the national association of               

                                                                                

25  securities dealers automated quotation system.                              

                                                                                

26      (B) The issuer of the security is a unit investment trust                   

                                                                                

27  registered under the investment company act of 1940.                        


                                                                                

1       (C) The issuer of the security, including its predecessors,                 

                                                                                

2   has been engaged in continuous business for at least 3 years.               

                                                                                

3       (D) The issuer of the security has total assets of at least                 

                                                                                

4   $2,000,000.00 based on an audited balance sheet as of a date                

                                                                                

5   within 18 months before the date of the transaction or, in the              

                                                                                

6   case of a reorganization or merger when the parties to the                  

                                                                                

7   reorganization or merger each had an audited balance sheet as of            

                                                                                

8   a date within 18 months before the date of the transaction, a pro           

                                                                                

9   forma balance sheet for the combined entity.                                

                                                                                

10      (c) A nonissuer transaction by or through a broker-dealer                   

                                                                                

11  registered or exempt from registration under this act in a                  

                                                                                

12  security of a foreign issuer that is a margin security defined in           

                                                                                

13  regulations or rules adopted by the board of governors of the               

                                                                                

14  federal reserve system.                                                     

                                                                                

15      (d) A nonissuer transaction by or through a broker-dealer                   

                                                                                

16  registered or exempt from registration under this act in an                 

                                                                                

17  outstanding security if the guarantor of the security files                 

                                                                                

18  reports with the securities and exchange commission under the               

                                                                                

19  reporting requirements of section 13 or 15(d) of the securities             

                                                                                

20  exchange act of 1934, 15 USC 78m or 78o.                                    

                                                                                

21      (e) A nonissuer transaction by or through a broker-dealer                   

                                                                                

22  registered or exempt from registration under this act in a                  

                                                                                

23  security that meets 1 or more of the following:                             

                                                                                

24                                                                               (i) Is rated at the time of the transaction by a nationally                         

                                                                                

25  recognized statistical rating organization in 1 of its 4 highest            

                                                                                

26  rating categories.                                                          

                                                                                

27      (ii) Has a fixed maturity or a fixed interest or dividend, if                


                                                                                

1   both of the following are met:                                              

                                                                                

2       (A) A default has not occurred during the current fiscal year               

                                                                                

3   or within the 3 previous fiscal years or during the existence of            

                                                                                

4   the issuer and any predecessor if less than 3 fiscal years, in              

                                                                                

5   the payment of principal, interest, or dividends on the                     

                                                                                

6   security.                                                                   

                                                                                

7       (B) The issuer is engaged in business, is not in the                        

                                                                                

8   organizational stage or in bankruptcy or receivership, and is not           

                                                                                

9   and has not been within the previous 12 months a blank check,               

                                                                                

10  blind pool, or shell company that has no specific business plan             

                                                                                

11  or purpose or has indicated that its primary business plan is to            

                                                                                

12  engage in a merger or combination of the business with, or an               

                                                                                

13  acquisition of, an unidentified person.                                     

                                                                                

14      (f) A nonissuer transaction by or through a broker-dealer                   

                                                                                

15  registered or exempt from registration under this act effecting             

                                                                                

16  an unsolicited order or offer to purchase.                                  

                                                                                

17      (g) A nonissuer transaction executed by a bona fide pledgee                 

                                                                                

18  without any purpose of evading this act.                                    

                                                                                

19      (h) A nonissuer transaction by a federal covered investment                 

                                                                                

20  adviser with investments under management in excess of                      

                                                                                

21  $100,000,000.00 acting in the exercise of discretionary authority           

                                                                                

22  in a signed record for the account of others.                               

                                                                                

23      (i) A transaction in a security, whether or not the security                

                                                                                

24  or transaction is otherwise exempt, in exchange for 1 or more               

                                                                                

25  bona fide outstanding securities, claims, or property interests,            

                                                                                

26  or partly in exchange and partly for cash, if the terms and                 

                                                                                

27  conditions of the issuance and exchange or the delivery and                 


                                                                                

1   exchange and the fairness of the terms and conditions have been             

                                                                                

2   approved by the administrator at a hearing.                                 

                                                                                

3       (j) A transaction between the issuer or other person on whose               

                                                                                

4   behalf the offering is made and an underwriter, or among                    

                                                                                

5   underwriters.                                                               

                                                                                

6       (k) A transaction in a note, bond, debenture, or other                      

                                                                                

7   evidence of indebtedness secured by a mortgage or other security            

                                                                                

8   agreement if all of the following are met:                                  

                                                                                

9                                                                                (i) The note, bond, debenture, or other evidence of                                 

                                                                                

10  indebtedness is offered and sold with the mortgage or other                 

                                                                                

11  security agreement as a unit.                                               

                                                                                

12      (ii) A general solicitation or general advertisement of the                  

                                                                                

13  transaction is not made.                                                    

                                                                                

14      (iii) A commission or other remuneration is not paid or                      

                                                                                

15  given, directly or indirectly, to a person not registered under             

                                                                                

16  this act as a broker-dealer or as an agent.                                 

                                                                                

17                                                                               (l) A transaction by an executor, administrator of an estate,                       

                                                                                

18  sheriff, marshal, receiver, trustee in bankruptcy, guardian, or             

                                                                                

19  conservator.                                                                

                                                                                

20      (m) A sale or offer to sell to any of the following:                        

                                                                                

21                                                                               (i) An institutional investor.                                                      

                                                                                

22      (ii) A federal covered investment adviser.                                   

                                                                                

23      (iii) Any other person exempted by rule or order under this                  

                                                                                

24  act.                                                                        

                                                                                

25      (n) A sale or an offer to sell securities by or on behalf of                

                                                                                

26  an issuer, if the transaction is part of a single issue in which            

                                                                                

27  all of the following are met:                                               


                                                                                

1                                                                                (i) There are not more than 25 purchasers in this state                             

                                                                                

2   during any 12 consecutive months, other than those designated in            

                                                                                

3   subdivision (m).                                                            

                                                                                

4       (ii) There is no general solicitation or general advertising                 

                                                                                

5   used in connection with the offer to sell or sale of the                    

                                                                                

6   securities.                                                                 

                                                                                

7       (iii) A commission or other remuneration is not paid or                      

                                                                                

8   given, directly or indirectly, to a person other than a                     

                                                                                

9   broker-dealer registered under this act or an agent registered              

                                                                                

10  under this act for soliciting a prospective purchaser in this               

                                                                                

11  state.                                                                      

                                                                                

12      (iv) The issuer reasonably believes that all the purchasers                  

                                                                                

13  in this state other than those designated in subdivision (m) are            

                                                                                

14  purchasing for investment.                                                  

                                                                                

15      (o) A transaction under an offer to existing security holders               

                                                                                

16  of the issuer, including persons that at the date of the                    

                                                                                

17  transaction are holders of convertible securities, options, or              

                                                                                

18  warrants, if a commission or other remuneration, other than a               

                                                                                

19  standby commission, is not paid or given, directly or indirectly,           

                                                                                

20  for soliciting a security holder in this state.                             

                                                                                

21      (p) An offer to sell, but not a sale, of a security not                     

                                                                                

22  exempt from registration under the securities act of 1933 if both           

                                                                                

23  of the following are met:                                                   

                                                                                

24                                                                               (i) A registration or offering statement or similar record as                       

                                                                                

25  required under the securities act of 1933 has been filed, but is            

                                                                                

26  not effective, or the offer is made in compliance with rule 165             

                                                                                

27  adopted under the securities act of 1933, 17 CFR 230.165.                   


                                                                                

1       (ii) A stop order of which the offeror is aware has not been                 

                                                                                

2   issued against the offeror by the administrator or the securities           

                                                                                

3   and exchange commission, and an audit, inspection, or proceeding            

                                                                                

4   that is public and may culminate in a stop order is not known by            

                                                                                

5   the offeror to be pending.                                                  

                                                                                

6       (q) An offer to sell, but not a sale, of a security exempt                  

                                                                                

7   from registration under the securities act of 1933 if all of the            

                                                                                

8   following are met:                                                          

                                                                                

9                                                                                (i) A registration statement has been filed under this act,                         

                                                                                

10  but is not effective.                                                       

                                                                                

11      (ii) A solicitation of interest is provided in a record to                   

                                                                                

12  offerees in compliance with a rule adopted by the administrator             

                                                                                

13  under this act.                                                             

                                                                                

14      (iii) A stop order of which the offeror is aware has not been                

                                                                                

15  issued by the administrator under this act, and an audit,                   

                                                                                

16  inspection, or proceeding that may culminate in a stop order is             

                                                                                

17  not known by the offeror to be pending.                                     

                                                                                

18      (r) A transaction involving the distribution of the                         

                                                                                

19  securities of an issuer to the security holders of another person           

                                                                                

20  in connection with a merger, consolidation, exchange of                     

                                                                                

21  securities, sale of assets, or other reorganization to which the            

                                                                                

22  issuer, or its parent or subsidiary, and the other person, or its           

                                                                                

23  parent or subsidiary, are parties.                                          

                                                                                

24      (s) A rescission offer, sale, or purchase under section 510.                

                                                                                

25      (t) An offer or sale of a security to a person not resident                 

                                                                                

26  in this state and not present in this state if the offer or sale            

                                                                                

27  does not constitute a violation of the laws of the state or                 


                                                                                

1   foreign jurisdiction in which the offeree or purchaser is present           

                                                                                

2   and is not part of an unlawful plan or scheme to evade this act.            

                                                                                

3       (u) An offer or sale of a security pursuant to an employee's                

                                                                                

4   stock purchase, savings, option, profit-sharing, pension, or                

                                                                                

5   similar employees' benefit plan, including any securities, plan             

                                                                                

6   interests, and guarantees issued under a compensatory benefit               

                                                                                

7   plan or compensation contract, contained in a record, established           

                                                                                

8   by the issuer, its parents, its majority-owned subsidiaries, or             

                                                                                

9   the majority-owned subsidiaries of the issuer's parent for the              

                                                                                

10  participation of their employees including any of the following:            

                                                                                

11                                                                               (i) Offers or sales of those securities to directors; general                       

                                                                                

12  partners; trustees, if the issuer is a business trust; officers;            

                                                                                

13  or consultants and advisors.                                                

                                                                                

14      (ii) Family members who acquire those securities from those                  

                                                                                

15  persons through gifts or domestic relations orders.                         

                                                                                

16      (iii) Former employees, directors, general partners,                         

                                                                                

17  trustees, officers, consultants, and advisors if those                      

                                                                                

18  individuals were employed by or providing services to the issuer            

                                                                                

19  when the securities were offered.                                           

                                                                                

20      (iv) Insurance agents who are exclusive insurance agents of                  

                                                                                

21  the issuer, its subsidiaries or parents, or who derive more than            

                                                                                

22  50% of their annual income from those organizations.                        

                                                                                

23      (v) A transaction involving any of the following:                           

                                                                                

24                                                                               (i) A stock dividend or equivalent equity distribution,                             

                                                                                

25  whether the corporation or other business organization                      

                                                                                

26  distributing the dividend or equivalent equity distribution is              

                                                                                

27  the issuer or not, if nothing of value is given by stockholders             


                                                                                

1   or other equity holders for the dividend or equivalent equity               

                                                                                

2   distribution other than the surrender of a right to a cash or               

                                                                                

3   property dividend if each stockholder or other equity holder may            

                                                                                

4   elect to take the dividend or equivalent equity distribution in             

                                                                                

5   cash, property, or stock.                                                   

                                                                                

6       (ii) An act incident to a judicially approved reorganization                 

                                                                                

7   in which a security is issued in exchange for 1 or more                     

                                                                                

8   outstanding securities, claims, or property interests, or partly            

                                                                                

9   in exchange and partly for cash.                                            

                                                                                

10      (iii) The solicitation of tenders of securities by an offeror                

                                                                                

11  in a tender offer in compliance with rule 162 adopted under the             

                                                                                

12  securities act of 1933, 17 CFR 230.162.                                     

                                                                                

13      (w) Subject to subsection (2), a nonissuer transaction in an                

                                                                                

14  outstanding security by or through a broker-dealer registered or            

                                                                                

15  exempt from registration under this act, if both of the following           

                                                                                

16  are met:                                                                    

                                                                                

17                                                                               (i) The issuer is a reporting issuer in a foreign                                   

                                                                                

18  jurisdiction designated in subsection (2)(a), or by rule or order           

                                                                                

19  of the administrator, and has been subject to continuous                    

                                                                                

20  reporting requirements in the foreign jurisdiction for not less             

                                                                                

21  than 180 days before the transaction.                                       

                                                                                

22      (ii) The security is listed on the foreign jurisdiction's                    

                                                                                

23  securities exchange that has been designated in subsection                  

                                                                                

24  (2)(a), or by rule or order under this act, or is a security of             

                                                                                

25  the same issuer that is of senior or substantially equal rank to            

                                                                                

26  the listed security or is a warrant or right to purchase or                 

                                                                                

27  subscribe to any of the foregoing.                                          


                                                                                

1       (2) For purposes of subsection (1)(w), both of the following                

                                                                                

2   apply:                                                                      

                                                                                

3       (a) Canada, together with its provinces and territories, is a               

                                                                                

4   designated foreign jurisdiction and the Toronto stock exchange,             

                                                                                

5   inc., is a designated securities exchange.                                  

                                                                                

6       (b) After an administrative hearing in compliance with                      

                                                                                

7   applicable state law, the administrator, by rule or order under             

                                                                                

8   this act, may revoke the designation of a securities exchange               

                                                                                

9   under subsection (1)(w) or this subsection if the administrator             

                                                                                

10  finds that revocation is necessary or appropriate in the public             

                                                                                

11  interest and for the protection of investors.                               

                                                                                

12      Sec. 203.  A rule or order under this act may exempt a                      

                                                                                

13  security, transaction, or offer, or a rule or order under this              

                                                                                

14  act may exempt a class of securities, transactions, or offers,              

                                                                                

15  from any or all of the requirements of sections 301 to 306 and              

                                                                                

16  504, and a rule or order under this act may waive any or all of             

                                                                                

17  the conditions for an exemption or offers under sections 201 and            

                                                                                

18  202.                                                                        

                                                                                

19      Sec. 204.  (1) Except with respect to a federal covered                     

                                                                                

20  security or a transaction involving a federal covered security,             

                                                                                

21  an order of the administrator under this act may deny or suspend            

                                                                                

22  application of, condition, limit, or revoke an exemption created            

                                                                                

23  under section 201(c)(iii), (g), or (h) or 202 or an exemption or             

                                                                                

24  waiver created under section 203 with respect to a specific                 

                                                                                

25  security, transaction, or offer.  An order under this section may           

                                                                                

26  only be issued pursuant to the procedures in section 306(4) or              

                                                                                

27  604.                                                                        


                                                                                

1       (2) A person does not violate section 301, 303 to 306, 504,                 

                                                                                

2   or 510 by an offer to sell, an offer to purchase, a sale, or a              

                                                                                

3   purchase effected after the entry of an order issued under this             

                                                                                

4   section if the person did not know, and in the exercise of                  

                                                                                

5   reasonable care could not have known, of the order.                         

                                                                                

6                               ARTICLE 3                                       

                                                                                

7   REGISTRATION OF SECURITIES AND NOTICE FILINGS OF FEDERAL COVERED           

                                                                                

8                               SECURITIES                                      

                                                                                

9       Sec. 301.  A person shall not offer or sell a security in                   

                                                                                

10  this state unless 1 or more of the following are met:                       

                                                                                

11      (a) The security is a federal covered security.                             

                                                                                

12      (b) The security, transaction, or offer is exempted from                    

                                                                                

13  registration under sections 201 to 203.                                     

                                                                                

14      (c) The security is registered under this act.                              

                                                                                

15      Sec. 302.  (1) A rule or order under this act may require                   

                                                                                

16  the filing of 1 or more of the following records with respect to            

                                                                                

17  a security issued by an investment company that is a federal                

                                                                                

18  covered security as defined in section 18(b)(2) of the securities           

                                                                                

19  act of 1933, 15 USC 77r, that is not otherwise exempt under                 

                                                                                

20  sections 201 to 203:                                                        

                                                                                

21      (a) Before the initial offer of a federal covered security in               

                                                                                

22  this state, all records that are part of a federal registration             

                                                                                

23  statement filed with the securities and exchange commission under           

                                                                                

24  the securities act of 1933, a consent to service of process                 

                                                                                

25  signed by the issuer, and a fee of $500.00.                                 

                                                                                

26      (b) After the initial offer of the federal covered security                 

                                                                                

27  in this state, all records that are part of an amendment to a               


                                                                                

1   federal registration statement filed with the securities and                

                                                                                

2   exchange commission under the securities act of 1933.                       

                                                                                

3       (2) Any security issued by a unit investment trust that is                  

                                                                                

4   registered or that has filed a registration statement under the             

                                                                                

5   investment company act of 1940 as an investment company may be              

                                                                                

6   offered for sale and sold into, from, or within this state for an           

                                                                                

7   indefinite period commencing upon the later of the trust's                  

                                                                                

8   effectiveness with the securities and exchange commission or the            

                                                                                

9   administrator's receipt of a notice as prescribed by the                    

                                                                                

10  administrator and a 1-time notice filing fee of $500.00.                    

                                                                                

11      (3) Each of the following applies to a notice filing under                  

                                                                                

12  subsection (1):                                                             

                                                                                

13      (a) A notice filing is effective for a period of 1 year,                    

                                                                                

14  commencing upon the later of the effectiveness of the offering              

                                                                                

15  with the securities and exchange commission or the                          

                                                                                

16  administrator's receipt of the notice filing.                               

                                                                                

17      (b) A notice filing may be renewed for an additional 1-year                 

                                                                                

18  period by filing a current form NF and the fee required by                  

                                                                                

19  subsection (8) before the expiration of the 1-year effective                

                                                                                

20  period.  The renewal is effective upon the expiration of the                

                                                                                

21  prior notice period.                                                        

                                                                                

22      (c) A notice filing may be terminated by filing with the                    

                                                                                

23  administrator a notice of termination as prescribed by the                  

                                                                                

24  administrator.  The termination is effective upon the                       

                                                                                

25  administrator's receipt of the notice of termination.                       

                                                                                

26      (4) With respect to any security that is a federal covered                  

                                                                                

27  security under section 18(b)(4)(D) of the securities act of 1933,           


                                                                                

1   15 USC 77r, the issuer shall file all of the following:                     

                                                                                

2       (a) A notice on securities and exchange commission form D or                

                                                                                

3   a form approved by the administrator.                                       

                                                                                

4       (b) A consent to service of process signed by the issuer, no                

                                                                                

5   later than 15 days after the first sale of a federal covered                

                                                                                

6   security in this state.                                                     

                                                                                

7       (c) A nonrefundable filing fee of $100.00.                                  

                                                                                

8       (5) The administrator, by rule or order, may require the                    

                                                                                

9   filing of any document filed with the securities and exchange               

                                                                                

10  commission under the securities act of 1933 and a nonrefundable             

                                                                                

11  filing fee of $100.00 with respect to any federal covered                   

                                                                                

12  security.                                                                   

                                                                                

13      (6) The administrator may issue a stop order suspending the                 

                                                                                

14  offer and sale of a federal covered security, except a federal              

                                                                                

15  covered security under section 18(b)(1) of the securities act of            

                                                                                

16  1933, 15 USC 77r, if it finds that the order is in the public               

                                                                                

17  interest and there is a failure to comply with this section.                

                                                                                

18      (7) The administrator may waive any or all of the provisions                

                                                                                

19  of this section by rule or order.                                           

                                                                                

20      (8) All of the following apply to the renewals of a notice                  

                                                                                

21  filing under subsection (3):                                                

                                                                                

22      (a) Subject to adjustment under subdivision (c), the fee for                

                                                                                

23  the renewal is 1 of the following:                                          

                                                                                

24                                                                               (i) If the issuer projects nonexempt sales of the security in                       

                                                                                

25  this state during the 1-year renewal period of $250,000.00 or               

                                                                                

26  less, $100.00.                                                              

                                                                                

27      (ii) If the issuer projects nonexempt sales of the security                  


                                                                                

1   in this state during the 1-year renewal period of more than                 

                                                                                

2   $250,000.00 but not more than $700,000.00, $400.00.                         

                                                                                

3       (iii) If the issuer projects nonexempt sales of the security                 

                                                                                

4   in this state during the 1-year renewal period of more than                 

                                                                                

5   $700,000.00 but not more than $1,000,000.00, $800.00.                       

                                                                                

6       (iv) If the issuer projects nonexempt sales of the security                  

                                                                                

7   in this state during the 1-year renewal period of more than                 

                                                                                

8   $1,000,000.00, $1,400.00.                                                   

                                                                                

9       (b) For purposes of subdivision (a), an issuer's projection                 

                                                                                

10  of nonexempt sales of a security must be reasonable and based on            

                                                                                

11  any facts known to the issuer at the time of renewal that may               

                                                                                

12  affect sales of the security, including, but not limited to,                

                                                                                

13  nonexempt sales of the security in this state during the current            

                                                                                

14  1-year notice filing period.                                                

                                                                                

15      (c) If an issuer's nonexempt sales of a security in this                    

                                                                                

16  state during a 1-year notice filing period exceed the projections           

                                                                                

17  for that period that the issuer had submitted to the                        

                                                                                

18  administrator for determination of the issuer's renewal fee for             

                                                                                

19  that 1-year notice filing period, the issuer is not required to             

                                                                                

20  amend its projections or pay an additional fee for that notice              

                                                                                

21  filing period.  However, the fee for renewal of the notice filing           

                                                                                

22  shall be the greater of the following:                                      

                                                                                

23                                                                               (i) The renewal fee determined under subdivision (a).                               

                                                                                

24      (ii) A renewal fee determined under subdivision (a), using                   

                                                                                

25  actual sales during the current notice filing period as the                 

                                                                                

26  projected sales for the renewal notice filing period.                       

                                                                                

27      (d) If an issuer's nonexempt sales of a security in this                    


                                                                                

1   state during a 1-year notice filing period are less than the                

                                                                                

2   projections for that period that the issuer had submitted to the            

                                                                                

3   administrator for determination of the issuer's renewal fee for             

                                                                                

4   the 1-year notice filing period, the issuer is not entitled to a            

                                                                                

5   refund of any part of the renewal fee for that period or                    

                                                                                

6   adjustment of the renewal fee for any renewal period.                       

                                                                                

7       (e) Upon written request of the administrator, an issuer                    

                                                                                

8   shall provide sales reports showing the issuer's nonexempt sales            

                                                                                

9   of a security in this state for the current and 2 previous 1-year           

                                                                                

10  notice filing periods, but the issuer is not otherwise required             

                                                                                

11  to provide a sales report to the administrator in connection with           

                                                                                

12  a renewal of a notice filing.                                               

                                                                                

13      (f) If the administrator determines that for 2 consecutive                  

                                                                                

14  1-year notice filing periods an issuer's nonexempt sales of a               

                                                                                

15  security in this state exceeded the issuer's sales projections              

                                                                                

16  for that period, the administrator may assess the issuer a                  

                                                                                

17  penalty in the amount of the renewal fees the issuer would have             

                                                                                

18  paid under subdivision (a) if its projections had been accurate.            

                                                                                

19  This penalty is in addition to an increased fee for renewal under           

                                                                                

20  subdivision (c), if any.                                                    

                                                                                

21      (9) If the administrator finds that there is a failure to                   

                                                                                

22  comply with a notice or fee requirement of this section, the                

                                                                                

23  administrator may issue a stop order suspending the offer and               

                                                                                

24  sale of a federal covered security in this state, except a                  

                                                                                

25  federal covered security under section 18(b)(1) of the securities           

                                                                                

26  act of 1933, 15 USC 77r.  If the deficiency is corrected, the               

                                                                                

27  stop order is void as of the time of its issuance and no other              


                                                                                

1   penalty may be imposed by the administrator.                                

                                                                                

2       Sec. 303.  (1) A security for which a registration statement                

                                                                                

3   has been filed under the securities act of 1933 in connection               

                                                                                

4   with the same offering may be registered by coordination under              

                                                                                

5   this section.                                                               

                                                                                

6       (2) A registration statement and accompanying records under                 

                                                                                

7   this section must contain or be accompanied by all of the                   

                                                                                

8   following records in addition to the information specified in               

                                                                                

9   section 305 and a consent to service of process complying with              

                                                                                

10  section 611:                                                                

                                                                                

11      (a) A copy of the latest form of prospectus filed under the                 

                                                                                

12  securities act of 1933.                                                     

                                                                                

13      (b) A copy of the articles of incorporation and bylaws or                   

                                                                                

14  their substantial equivalents currently in effect, a copy of any            

                                                                                

15  agreement with or among underwriters, a copy of any indenture or            

                                                                                

16  other instrument governing the issuance of the security to be               

                                                                                

17  registered, and a specimen, copy, or description of the security            

                                                                                

18  that is required by rule or order under this act.                           

                                                                                

19      (c) Copies of any other information, or any other records,                  

                                                                                

20  filed by the issuer under the securities act of 1933 requested by           

                                                                                

21  the administrator.                                                          

                                                                                

22      (d) An undertaking to forward each amendment to the federal                 

                                                                                

23  prospectus, other than an amendment that delays the effective               

                                                                                

24  date of the registration statement, promptly after it is filed              

                                                                                

25  with the securities and exchange commission.                                

                                                                                

26      (3) A registration statement under this section becomes                     

                                                                                

27  effective simultaneously with or subsequent to the federal                  


                                                                                

1   registration statement when all the following conditions are                

                                                                                

2   satisfied:                                                                  

                                                                                

3       (a) A stop order under subsection (4) or section 306 or                     

                                                                                

4   issued by the securities and exchange commission is not in effect           

                                                                                

5   and a proceeding is not pending against the issuer under section            

                                                                                

6   306.                                                                        

                                                                                

7       (b) The registration statement has been on file for at least                

                                                                                

8   20 days or a shorter period provided by rule or order under this            

                                                                                

9   act.                                                                        

                                                                                

10      (4) The registrant shall promptly notify the administrator in               

                                                                                

11  a record of the date when the federal registration statement                

                                                                                

12  becomes effective and the content of a price amendment, if any,             

                                                                                

13  and shall promptly file a record containing the price amendment.            

                                                                                

14  If the notice is not timely received, the administrator may issue           

                                                                                

15  a stop order, without prior notice or hearing, retroactively                

                                                                                

16  denying effectiveness to the registration statement or suspending           

                                                                                

17  its effectiveness until compliance with this section.  The                  

                                                                                

18  administrator shall promptly notify the registrant of an order by           

                                                                                

19  telegram, telephone, or electronic means and promptly confirm               

                                                                                

20  this notice by a record.  If the registrant subsequently complies           

                                                                                

21  with the notice requirements of this section, the stop order is             

                                                                                

22  void as of the date of its issuance.                                        

                                                                                

23      (5) If the federal registration statement becomes effective                 

                                                                                

24  before each of the conditions in this section is satisfied or is            

                                                                                

25  waived by the administrator, the registration statement is                  

                                                                                

26  automatically effective under this act when all the conditions              

                                                                                

27  are satisfied or waived.  If the registrant notifies the                    


                                                                                

1   administrator of the date when the federal registration statement           

                                                                                

2   is expected to become effective, the administrator shall promptly           

                                                                                

3   notify the registrant by telegram, telephone, or electronic means           

                                                                                

4   and promptly confirm this notice by a record, indicating whether            

                                                                                

5   all the conditions are satisfied or waived and whether the                  

                                                                                

6   administrator intends the institution of a proceeding under                 

                                                                                

7   section 306.  The notice by the administrator does not preclude             

                                                                                

8   the institution of a proceeding under section 306.                          

                                                                                

9       Sec. 304.  (1) A security may be registered by qualification                

                                                                                

10  under this section.                                                         

                                                                                

11      (2) A registration statement under this section must contain                

                                                                                

12  the information or records specified in section 305, a consent to           

                                                                                

13  service of process complying with section 611, and, if provided             

                                                                                

14  by rule under this act, all of the following information or                 

                                                                                

15  records:                                                                    

                                                                                

16      (a) With respect to the issuer and any significant                          

                                                                                

17  subsidiary, its name, address, and form of organization, the                

                                                                                

18  state or foreign jurisdiction and date of its organization, the             

                                                                                

19  general character and location of its business, a description of            

                                                                                

20  its physical properties and equipment, and a statement of the               

                                                                                

21  general competitive conditions in the industry or business in               

                                                                                

22  which it is or will be engaged.                                             

                                                                                

23      (b) With respect to each director and officer of the issuer,                

                                                                                

24  and other person having a similar status or performing similar              

                                                                                

25  functions, the person's name, address, and principal occupation             

                                                                                

26  for the previous 5 years, the amount of securities of the issuer            

                                                                                

27  held by the person as of the thirtieth day before the filing of             


                                                                                

1   the registration statement, the amount of the securities covered            

                                                                                

2   by the registration statement to which the person has indicated             

                                                                                

3   an intention to subscribe, and a description of any material                

                                                                                

4   interest of the person in any material transaction with the                 

                                                                                

5   issuer or a significant subsidiary effected within the previous 3           

                                                                                

6   years or proposed to be effected.                                           

                                                                                

7       (c) With respect to persons covered by subdivision (b), the                 

                                                                                

8   aggregate sum of the remuneration paid to those persons during              

                                                                                

9   the previous 12 months and estimated to be paid during the next             

                                                                                

10  12 months, directly or indirectly, by the issuer, and all                   

                                                                                

11  predecessors, parents, subsidiaries, and affiliates of the                  

                                                                                

12  issuer.                                                                     

                                                                                

13      (d) With respect to a person owning of record or owning                     

                                                                                

14  beneficially, if known, 10% or more of the outstanding shares of            

                                                                                

15  any class of equity security of the issuer, the information                 

                                                                                

16  specified in subdivision (b) other than the person's occupation.            

                                                                                

17      (e) With respect to a promoter if the issuer was organized                  

                                                                                

18  within the previous 3 years, the information or records specified           

                                                                                

19  in subdivision (b), any amount paid to the promoter within that             

                                                                                

20  period or intended to be paid to the promoter, and the                      

                                                                                

21  consideration for the payment.                                              

                                                                                

22      (f) With respect to a person on whose behalf any part of the                

                                                                                

23  offering is to be made in a nonissuer distribution, the person's            

                                                                                

24  name and address, the amount of securities of the issuer held by            

                                                                                

25  the person as of the date of the filing of the registration                 

                                                                                

26  statement, a description of any material interest of the person             

                                                                                

27  in any material transaction with the issuer or any significant              


                                                                                

1   subsidiary effected within the previous 3 years or proposed to be           

                                                                                

2   effected, and a statement of the reasons for making the                     

                                                                                

3   offering.                                                                   

                                                                                

4       (g) The capitalization and long-term debt, on both a current                

                                                                                

5   and pro forma basis, of the issuer and any significant                      

                                                                                

6   subsidiary, including a description of each security outstanding            

                                                                                

7   or being registered or otherwise offered, and a statement of the            

                                                                                

8   amount and kind of consideration, whether in the form of cash,              

                                                                                

9   physical assets, services, patents, goodwill, or anything else of           

                                                                                

10  value, for which the issuer or any subsidiary has issued its                

                                                                                

11  securities within the previous 2 years or is obligated to issue             

                                                                                

12  its securities.                                                             

                                                                                

13      (h) The kind and amount of securities to be offered, the                    

                                                                                

14  proposed offering price or the method by which it is to be                  

                                                                                

15  computed, any variation at which a proportion of the offering is            

                                                                                

16  to be made to a person or class of persons other than the                   

                                                                                

17  underwriters, with a specification of the person or class, the              

                                                                                

18  basis upon which the offering is to be made if otherwise than for           

                                                                                

19  cash, the estimated aggregate underwriting and selling discounts            

                                                                                

20  or commissions and finders' fees, including separately cash,                

                                                                                

21  securities, contracts, or anything else of value to accrue to the           

                                                                                

22  underwriters or finders in connection with the offering, or, if             

                                                                                

23  the selling discounts or commissions are variable, the basis of             

                                                                                

24  determining them and their maximum and minimum amounts, the                 

                                                                                

25  estimated amounts of other selling expenses, including legal,               

                                                                                

26  engineering, and accounting charges, the name and address of each           

                                                                                

27  underwriter and each recipient of a finder's fee, a copy of any             


                                                                                

1   underwriting or selling group agreement under which the                     

                                                                                

2   distribution is to be made, or the proposed form of any such                

                                                                                

3   agreement whose terms have not yet been determined, and a                   

                                                                                

4   description of the plan of distribution of any securities that              

                                                                                

5   are to be offered otherwise than through an underwriter.                    

                                                                                

6       (i) The estimated monetary proceeds to be received by the                   

                                                                                

7   issuer from the offering, the purposes for which the proceeds are           

                                                                                

8   to be used by the issuer, the estimated amount to be used for               

                                                                                

9   each purpose, the order or priority in which the proceeds will be           

                                                                                

10  used for the purposes stated, the amounts of any funds to be                

                                                                                

11  raised from other sources to achieve the purposes stated, the               

                                                                                

12  sources of the funds, and, if a part of the proceeds is to be               

                                                                                

13  used to acquire property, including goodwill, otherwise than in             

                                                                                

14  the ordinary course of business, the names and addresses of the             

                                                                                

15  vendors, the purchase price, the names of any persons that have             

                                                                                

16  received commissions in connection with the acquisition, and the            

                                                                                

17  amounts of the commissions and other expenses in connection with            

                                                                                

18  the acquisition, including the cost of borrowing money to finance           

                                                                                

19  the acquisition.                                                            

                                                                                

20      (j) A description of any stock options or other security                    

                                                                                

21  options outstanding, or to be created in connection with the                

                                                                                

22  offering, and the amount of those options held or to be held by             

                                                                                

23  each person required to be named in subdivision (b), (d), (e),              

                                                                                

24  (f), or (h) and by any person that holds or will hold 10% or more           

                                                                                

25  in the aggregate of those options.                                          

                                                                                

26      (k) The dates of, parties to, and general effect concisely                  

                                                                                

27  stated of each managerial or other material contract made or to             


                                                                                

1   be made otherwise than in the ordinary course of business to be             

                                                                                

2   performed in whole or in part at or after the filing of the                 

                                                                                

3   registration statement or that was made within the previous 2               

                                                                                

4   years, and a copy of the contract.                                          

                                                                                

5                                                                                (l) A description of any pending litigation, action, or                             

                                                                                

6   proceeding to which the issuer is a party and that materially               

                                                                                

7   affects its business or assets, including any litigation, action,           

                                                                                

8   or proceeding known to be contemplated by governmental                      

                                                                                

9   authorities.                                                                

                                                                                

10      (m) A copy of any prospectus, pamphlet, circular, form                      

                                                                                

11  letter, advertisement, or other sales literature intended as of             

                                                                                

12  the effective date to be used in connection with the offering and           

                                                                                

13  any solicitation of interest used in compliance with section                

                                                                                

14  202(q)(ii).                                                                  

                                                                                

15      (n) A specimen or copy of the security being registered,                    

                                                                                

16  unless the security is uncertificated, a copy of the issuer's               

                                                                                

17  articles of incorporation and bylaws, or their substantial                  

                                                                                

18  equivalents, in effect, and a copy of any indenture or other                

                                                                                

19  instrument covering the security to be registered.                          

                                                                                

20      (o) A signed or conformed copy of an opinion of counsel                     

                                                                                

21  concerning the legality of the security being registered, with an           

                                                                                

22  English translation if it is in a language other than English,              

                                                                                

23  which states whether the security when sold will be validly                 

                                                                                

24  issued, fully paid, and nonassessable and, if a debt security, a            

                                                                                

25  binding obligation of the issuer.                                           

                                                                                

26      (p) A signed or conformed copy of a consent of any                          

                                                                                

27  accountant, engineer, appraiser, or other person whose profession           


                                                                                

1   gives authority for a statement made by the person, if the person           

                                                                                

2   is named as having prepared or certified a report or valuation,             

                                                                                

3   other than an official record, that is public, which is used in             

                                                                                

4   connection with the registration statement.                                 

                                                                                

5       (q) A balance sheet of the issuer as of a date within 4                     

                                                                                

6   months before the filing of the registration statement, a                   

                                                                                

7   statement of income and a statement of cash flows for each of the           

                                                                                

8   3 fiscal years preceding the date of the balance sheet and for              

                                                                                

9   any period between the close of the immediately previous fiscal             

                                                                                

10  year and the date of the balance sheet, or for the period of the            

                                                                                

11  issuer's and any predecessor's existence if less than 3 years,              

                                                                                

12  and, if any part of the proceeds of the offering is to be applied           

                                                                                

13  to the purchase of a business, the financial statements that                

                                                                                

14  would be required if that business were the registrant.                     

                                                                                

15      (r) Any additional information or records required by rule or               

                                                                                

16  order under this act.                                                       

                                                                                

17      (3) A registration statement under this section becomes                     

                                                                                

18  effective 30 days, or any shorter period provided by rule or                

                                                                                

19  order under this act, after the date the registration statement             

                                                                                

20  or the last amendment other than a price amendment is filed, if             

                                                                                

21  any of the following apply:                                                 

                                                                                

22      (a) A stop order is not in effect and a proceeding is not                   

                                                                                

23  pending under section 306.                                                  

                                                                                

24      (b) The administrator has not issued an order under section                 

                                                                                

25  306 delaying effectiveness.                                                 

                                                                                

26      (c) The applicant or registrant has not requested that                      

                                                                                

27  effectiveness be delayed.                                                   


                                                                                

1       (4) The administrator may delay effectiveness once for not                  

                                                                                

2   more than 90 days if the administrator determines the                       

                                                                                

3   registration statement is not complete in all material respects             

                                                                                

4   and promptly notifies the applicant or registrant of that                   

                                                                                

5   determination.  The administrator may also delay effectiveness              

                                                                                

6   for a further period of not more than 30 days if the                        

                                                                                

7   administrator determines that the delay is necessary or                     

                                                                                

8   appropriate.                                                                

                                                                                

9       (5) A rule or order under this act may require as a condition               

                                                                                

10  of registration under this section that a prospectus containing a           

                                                                                

11  specified part of the information or record specified in                    

                                                                                

12  subsection (2) be sent or given to each person to which an offer            

                                                                                

13  is made, before or concurrently with the earliest of any of the             

                                                                                

14  following:                                                                  

                                                                                

15      (a) The first offer made in a record to the person otherwise                

                                                                                

16  than by means of a public advertisement, by or for the account of           

                                                                                

17  the issuer or another person on whose behalf the offering is                

                                                                                

18  being made, or by an underwriter or broker-dealer that is                   

                                                                                

19  offering part of an unsold allotment or subscription taken by the           

                                                                                

20  person as a participant in the distribution.                                

                                                                                

21      (b) The confirmation of a sale made by or for the account of                

                                                                                

22  the person.                                                                 

                                                                                

23      (c) Payment pursuant to the sale.                                           

                                                                                

24      (d) Delivery of the security pursuant to the sale.                          

                                                                                

25      Sec. 305.  (1) A registration statement may be filed by the                 

                                                                                

26  issuer, a person on whose behalf the offering is to be made, or a           

                                                                                

27  broker-dealer registered under this act.                                    


                                                                                

1       (2) A person filing a registration statement shall pay a                    

                                                                                

2   filing fee of 1/10 of 1% of the maximum aggregate offering price            

                                                                                

3   at which the registered securities are to be offered in this                

                                                                                

4   state, but the fee shall in no case be less than $100.00 or more            

                                                                                

5   than $1,250.00.  If an application for registration is withdrawn            

                                                                                

6   before the effective date or a preeffective stop order is issued            

                                                                                

7   under section 306, the administrator shall retain a fee of                  

                                                                                

8   $100.00 if the initial review has not been commenced, and the               

                                                                                

9   full filing fee after review has been commenced.                            

                                                                                

10      (3) A registration statement filed under section 303 or 304                 

                                                                                

11  must specify all of the following:                                          

                                                                                

12      (a) The amount of securities to be offered in this state.                   

                                                                                

13      (b) The states in which a registration statement or similar                 

                                                                                

14  record in connection with the offering has been or is to be                 

                                                                                

15  filed.                                                                      

                                                                                

16      (c) Any adverse order, judgment, or decree issued in                        

                                                                                

17  connection with the offering by a state securities regulator, the           

                                                                                

18  securities and exchange commission, or a court.                             

                                                                                

19      (4) A record filed under this act or the predecessor act,                   

                                                                                

20  within 5 years preceding the filing of a registration statement,            

                                                                                

21  may be incorporated by reference in the registration statement to           

                                                                                

22  the extent that the record is currently accurate.                           

                                                                                

23      (5) In the case of a nonissuer distribution, information or a               

                                                                                

24  record shall not be required under subsection (9) or section 304,           

                                                                                

25  unless it is known to the person filing the registration                    

                                                                                

26  statement or to the person on whose behalf the distribution is to           

                                                                                

27  be made, or unless it can be furnished by those persons without             


                                                                                

1   unreasonable effort or expense.                                             

                                                                                

2       (6) A rule or order under this act may require as a condition               

                                                                                

3   of registration that a security issued within the previous 5                

                                                                                

4   years, or to be issued to a promoter for a consideration                    

                                                                                

5   substantially less than the public offering price or to a person            

                                                                                

6   for a consideration other than cash, be deposited in escrow and             

                                                                                

7   that the proceeds from the sale of the registered security in               

                                                                                

8   this state be impounded until the issuer receives a specified               

                                                                                

9   amount from the sale of the security either in this state or                

                                                                                

10  elsewhere.  The conditions of any escrow or impoundment required            

                                                                                

11  under this subsection may be established by rule or order under             

                                                                                

12  this act, but the administrator shall not reject a depository               

                                                                                

13  institution solely because of its location in another state.                

                                                                                

14      (7) A rule or order under this act may require as a condition               

                                                                                

15  of registration that a security registered under this act be sold           

                                                                                

16  only on a specified form of subscription or sale contract and               

                                                                                

17  that a signed or conformed copy of each contract be filed under             

                                                                                

18  this act or preserved for a period specified by the rule or                 

                                                                                

19  order, which may not be longer than 5 years.                                

                                                                                

20      (8) Except while a stop order is in effect under section 306,               

                                                                                

21  a registration statement is effective for 1 year after its                  

                                                                                

22  effective date, or for a longer period designated in an order               

                                                                                

23  under this act during which the security is being offered or                

                                                                                

24  distributed in a nonexempted transaction by or for the account of           

                                                                                

25  the issuer or other person on whose behalf the offering is being            

                                                                                

26  made or by an underwriter or broker-dealer that is still offering           

                                                                                

27  part of an unsold allotment or subscription taken as a                      


                                                                                

1   participant in the distribution.  For the purposes of a nonissuer           

                                                                                

2   transaction, all outstanding securities of the same class                   

                                                                                

3   identified in the registration statement as a security registered           

                                                                                

4   under this act are considered to be registered while the                    

                                                                                

5   registration statement is effective.  If any securities of the              

                                                                                

6   same class are outstanding, a registration statement may not be             

                                                                                

7   withdrawn until 1 year after its effective date.  A registration            

                                                                                

8   statement may be withdrawn only with the approval of the                    

                                                                                

9   administrator.                                                              

                                                                                

10      (9) While a registration statement is effective, a rule or                  

                                                                                

11  order under this act may require the person that filed the                  

                                                                                

12  registration statement to file reports, not more often than                 

                                                                                

13  quarterly, to keep the information or other record in the                   

                                                                                

14  registration statement reasonably current and to disclose the               

                                                                                

15  progress of the offering.                                                   

                                                                                

16      (10) A registration statement may be amended after its                      

                                                                                

17  effective date.  The posteffective amendment becomes effective              

                                                                                

18  when the administrator so orders.  If a posteffective amendment             

                                                                                

19  is made to increase the number of securities specified to be                

                                                                                

20  offered or sold, the person filing the amendment shall pay a                

                                                                                

21  registration fee calculated in the manner specified in subsection           

                                                                                

22  (2).  A posteffective amendment relates back to the date of the             

                                                                                

23  offering of the additional securities being registered if the               

                                                                                

24  amendment is filed and the additional registration fee is paid              

                                                                                

25  within 1 year after the date of the sale.                                   

                                                                                

26      Sec. 306.  (1) The administrator may issue a stop order                     

                                                                                

27  denying effectiveness to, or suspending or revoking the                     


                                                                                

1   effectiveness of, a registration statement if the administrator             

                                                                                

2   finds that the order is in the public interest and that 1 or more           

                                                                                

3   of the following apply:                                                     

                                                                                

4       (a) The registration statement as of its effective date or                  

                                                                                

5   before the effective date in the case of an order denying                   

                                                                                

6   effectiveness, an amendment under section 305(10) as of its                 

                                                                                

7   effective date, or a report under section 305(9) is incomplete in           

                                                                                

8   a material respect or contains a statement that, in the light of            

                                                                                

9   the circumstances under which it was made, was false or                     

                                                                                

10  misleading with respect to a material fact.                                 

                                                                                

11      (b) This act or a rule adopted or order issued under this act               

                                                                                

12  or a condition imposed under this act has been willfully                    

                                                                                

13  violated, in connection with the offering, by the person filing             

                                                                                

14  the registration statement; by the issuer, a partner, officer, or           

                                                                                

15  director of the issuer or a person having a similar status or               

                                                                                

16  performing a similar function; a promoter of the issuer or a                

                                                                                

17  person directly or indirectly controlling or controlled by the              

                                                                                

18  issuer; but only if the person filing the registration statement            

                                                                                

19  is directly or indirectly controlled by or acting for the issuer;           

                                                                                

20  or by an underwriter.                                                       

                                                                                

21      (c) The security registered or sought to be registered is the               

                                                                                

22  subject of a permanent or temporary injunction of a court of                

                                                                                

23  competent jurisdiction or an administrative stop order or similar           

                                                                                

24  order issued under any federal, foreign, or state law other than            

                                                                                

25  this act applicable to the offering, but the administrator shall            

                                                                                

26  not institute a proceeding against an effective registration                

                                                                                

27  statement under this paragraph more than 1 year after the date of           


                                                                                

1   the order or injunction on which it is based, and the                       

                                                                                

2   administrator shall not issue an order under this subdivision on            

                                                                                

3   the basis of an order or injunction issued under the securities             

                                                                                

4   act of another state unless the order or injunction was based on            

                                                                                

5   conduct that would constitute, as of the date of the order, a               

                                                                                

6   ground for a stop order under this section.                                 

                                                                                

7       (d) The issuer's enterprise or method of business includes or               

                                                                                

8   would include activities that are unlawful where performed.                 

                                                                                

9       (e) With respect to a security sought to be registered under                

                                                                                

10  section 303, there has been a failure to comply with the                    

                                                                                

11  undertaking required by section 303(2)(d).                                  

                                                                                

12      (f) The applicant or registrant has not paid the proper                     

                                                                                

13  filing fee, but the administrator shall void the order if the               

                                                                                

14  deficiency is corrected.                                                    

                                                                                

15      (g) One or more of the following apply to the offering:                     

                                                                                

16                                                                               (i) The offering will work or tend to work a fraud upon                             

                                                                                

17  purchasers or would so operate.                                             

                                                                                

18      (ii) The offering has been or would be made with unreasonable                

                                                                                

19  amounts of underwriters' and sellers' discounts, commissions, or            

                                                                                

20  other compensation, promoters' profits or participations, or                

                                                                                

21  unreasonable amounts or kinds of options.                                   

                                                                                

22      (iii) The offering is being made on terms that are unfair,                   

                                                                                

23  unjust, or inequitable.                                                     

                                                                                

24      (2) To the extent practicable, the administrator by rule or                 

                                                                                

25  order under this act shall publish guidelines, rules, or orders             

                                                                                

26  that provide notice of conduct that violates subsection (1)(g).             

                                                                                

27      (3) The administrator shall not institute a stop order                      


                                                                                

1   proceeding against an effective registration statement on the               

                                                                                

2   basis of conduct or a transaction known to the administrator when           

                                                                                

3   the registration statement became effective unless the proceeding           

                                                                                

4   is instituted within 30 days after the registration statement               

                                                                                

5   became effective.                                                           

                                                                                

6       (4) The administrator may summarily revoke, deny, postpone,                 

                                                                                

7   or suspend the effectiveness of a registration statement pending            

                                                                                

8   final determination of an administrative proceeding.  Upon the              

                                                                                

9   issuance of the order, the administrator shall promptly notify              

                                                                                

10  each person specified in subsection (5) that the order has been             

                                                                                

11  issued, the reasons for the revocation, denial, postponement, or            

                                                                                

12  suspension, and that within 15 days after the receipt of a                  

                                                                                

13  request in a record from the person the matter will be scheduled            

                                                                                

14  for a hearing.  If a hearing is not requested and none is ordered           

                                                                                

15  by the administrator, within 30 days after the date of service of           

                                                                                

16  the order, the order becomes final.  If a hearing is requested or           

                                                                                

17  ordered, the administrator, after notice of and opportunity for             

                                                                                

18  hearing for each person subject to the order, may modify or                 

                                                                                

19  vacate the order or extend the order until final determination.             

                                                                                

20      (5) The administrator shall not issue a stop order under this               

                                                                                

21  section until all of the following have occurred:                           

                                                                                

22      (a) Appropriate notice has been given to the applicant or                   

                                                                                

23  registrant, the issuer, and the person on whose behalf the                  

                                                                                

24  securities are to be or have been offered.                                  

                                                                                

25      (b) An opportunity for hearing has been given to the                        

                                                                                

26  applicant or registrant, the issuer, and the person on whose                

                                                                                

27  behalf the securities are to be or have been offered.                       


                                                                                

1       (c) Findings of fact and conclusions of law in a record in                  

                                                                                

2   accordance with the administrative procedures act of 1969, 1969             

                                                                                

3   PA 306, MCL 24.201 to 24.328.                                               

                                                                                

4       (6) The administrator may modify or vacate a stop order                     

                                                                                

5   issued under this section if the administrator finds that the               

                                                                                

6   conditions that caused its issuance have changed or that it is              

                                                                                

7   necessary or appropriate in the public interest or for the                  

                                                                                

8   protection of investors.                                                    

                                                                                

9       Sec. 307.  The administrator may waive or modify, in whole                  

                                                                                

10  or in part, any or all of the requirements of sections 302, 303,            

                                                                                

11  and 304(2) or the requirement of any information or record in a             

                                                                                

12  registration statement or in a periodic report filed pursuant to            

                                                                                

13  section 305(9).                                                             

                                                                                

14                              ARTICLE 4                                       

                                                                                

15  BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS, INVESTMENT ADVISER            

                                                                                

16       REPRESENTATIVES, AND FEDERAL COVERED INVESTMENT ADVISERS               

                                                                                

17      Sec. 401.  (1) A person shall not transact business in this                 

                                                                                

18  state as a broker-dealer unless the person is registered under              

                                                                                

19  this act as a broker-dealer or is exempt from registration as a             

                                                                                

20  broker-dealer under subsection (2) or (4).                                  

                                                                                

21      (2) The following persons are exempt from the registration                  

                                                                                

22  requirement of subsection (1):                                              

                                                                                

23      (a) A broker-dealer if the broker-dealer does not have a                    

                                                                                

24  place of business in this state and if the broker-dealer's only             

                                                                                

25  transactions effected in this state are with any of the                     

                                                                                

26  following:                                                                  

                                                                                

27                                                                               (i) The issuer of the securities involved in the                                    


                                                                                

1   transactions.                                                               

                                                                                

2       (ii) A broker-dealer registered as a broker-dealer under                     

                                                                                

3   this act or not required to be registered as a broker-dealer                

                                                                                

4   under this act.                                                             

                                                                                

5       (iii) An institutional investor.                                             

                                                                                

6       (iv) A nonaffiliated federal covered investment adviser with                 

                                                                                

7   investments under management in excess of $100,000,000.00 acting            

                                                                                

8   for the account of others pursuant to discretionary authority in            

                                                                                

9   a signed record.                                                            

                                                                                

10      (v) A bona fide preexisting customer whose principal place                  

                                                                                

11  of residence is not in this state and the broker-dealer is                  

                                                                                

12  registered as a broker-dealer under the securities exchange act             

                                                                                

13  of 1934 or not required to be registered under the securities               

                                                                                

14  exchange act of 1934 and is registered under the securities act             

                                                                                

15  of the state in which the customer maintains a principal place of           

                                                                                

16  residence.                                                                  

                                                                                

17      (vi) A bona fide preexisting customer whose principal place                  

                                                                                

18  of residence is in this state but who was not present in this               

                                                                                

19  state when the customer relationship was established, if both of            

                                                                                

20  the following are met:                                                      

                                                                                

21      (A) The broker-dealer is registered under the securities                    

                                                                                

22  exchange act of 1934 or not required to be registered under the             

                                                                                

23  securities exchange act of 1934 and is registered under the                 

                                                                                

24  securities laws of the state in which the customer relationship             

                                                                                

25  was established and where the customer had maintained a principal           

                                                                                

26  place of residence.                                                         

                                                                                

27      (B) Within 45 days after the customer's first transaction in                


                                                                                

1   this state, the person files an application for registration as a           

                                                                                

2   broker-dealer in this state and a further transaction is not                

                                                                                

3   effected more than 75 days after the date on which the                      

                                                                                

4   application is filed, or, if earlier, the date on which the                 

                                                                                

5   administrator notifies the person that the administrator has                

                                                                                

6   denied the application for registration or has stayed the                   

                                                                                

7   pendency of the application for good cause.                                 

                                                                                

8       (vii) Not more than 3 customers in this state during the                     

                                                                                

9   previous 12 months, in addition to those specified in                       

                                                                                

10  subparagraphs (i) to (vi) and under subparagraph (viii), if the                

                                                                                

11  broker-dealer is registered under the securities exchange act of            

                                                                                

12  1934 or not required to be registered under the securities                  

                                                                                

13  exchange act of 1934 and is registered under the securities act             

                                                                                

14  of the state in which the broker-dealer has its principal place             

                                                                                

15  of business.                                                                

                                                                                

16      (viii) Any other person exempted by rule or order under this                  

                                                                                

17  act.                                                                        

                                                                                

18      (b) A person that deals solely in United States government                  

                                                                                

19  securities and is supervised as a dealer in government securities           

                                                                                

20  by the board of governors of the federal reserve system, the                

                                                                                

21  comptroller of the currency, the federal deposit insurance                  

                                                                                

22  corporation, or the office of thrift supervision.                           

                                                                                

23      (c) A person licensed or registered as a mortgage broker,                   

                                                                                

24  mortgage lender, or mortgage servicer under the mortgage brokers,           

                                                                                

25  lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651             

                                                                                

26  to 445.1684, in the offer or sale of mortgage loans as defined in           

                                                                                

27  section 1a of the mortgage brokers, lenders, and servicers                  


                                                                                

1   licensing act, 1987 PA 173, MCL 445.1651a.                                  

                                                                                

2       (3) A broker-dealer, or an issuer engaged in offering,                      

                                                                                

3   offering to purchase, purchasing, or selling securities in this             

                                                                                

4   state, shall not directly or indirectly employ or associate with            

                                                                                

5   an individual to engage in an activity related to securities                

                                                                                

6   transactions in this state if the registration of the individual            

                                                                                

7   is suspended or revoked or the individual is barred from                    

                                                                                

8   employment or association with a broker-dealer, an issuer, an               

                                                                                

9   investment adviser, or a federal covered investment adviser by an           

                                                                                

10  order of the administrator under this act, the securities and               

                                                                                

11  exchange commission, or a self-regulatory organization.  A                  

                                                                                

12  broker-dealer or issuer does not violate this subsection if the             

                                                                                

13  broker-dealer or issuer did not know and in the exercise of                 

                                                                                

14  reasonable care could not have known of the suspension,                     

                                                                                

15  revocation, or bar.  If requested by a broker-dealer or issuer              

                                                                                

16  and if good cause is shown, an order under this act may modify or           

                                                                                

17  waive, in whole or in part, the application of the prohibitions             

                                                                                

18  of this subsection.                                                         

                                                                                

19      (4) A rule or order under this act may permit any of the                    

                                                                                

20  following:                                                                  

                                                                                

21      (a) A broker-dealer that is registered in Canada or other                   

                                                                                

22  foreign jurisdiction and that does not have a place of business             

                                                                                

23  in this state to effect transactions in securities with or for,             

                                                                                

24  or attempt to effect the purchase or sale of any securities by,             

                                                                                

25  any of the following:                                                       

                                                                                

26                                                                               (i) An individual from Canada or other foreign jurisdiction                         

                                                                                

27  who is temporarily present in this state and with whom the                  


                                                                                

1   broker-dealer had a bona fide customer relationship before the              

                                                                                

2   individual entered the United States.                                       

                                                                                

3       (ii) An individual from Canada or other foreign jurisdiction                 

                                                                                

4   who is present in this state and whose transactions are in a                

                                                                                

5   self-directed tax advantaged retirement plan of which the                   

                                                                                

6   individual is the holder or contributor in that foreign                     

                                                                                

7   jurisdiction.                                                               

                                                                                

8       (iii) An individual who is present in this state, with whom                  

                                                                                

9   the broker-dealer customer relationship arose while the                     

                                                                                

10  individual was temporarily or permanently resident in Canada or             

                                                                                

11  the other foreign jurisdiction.                                             

                                                                                

12      (b) An agent who represents a broker-dealer that is exempt                  

                                                                                

13  under this subsection to effect transactions in securities or               

                                                                                

14  attempt to effect the purchase or sale of any securities in this            

                                                                                

15  state as permitted for a broker-dealer described in subsection              

                                                                                

16  (4)(a).                                                                     

                                                                                

17      Sec. 402.  (1) An individual shall not transact business in                 

                                                                                

18  this state as an agent unless the individual is registered under            

                                                                                

19  this act as an agent or is exempt from registration as an agent             

                                                                                

20  under subsection (2).                                                       

                                                                                

21      (2) Each of the following individuals is exempt from the                    

                                                                                

22  registration requirement of subsection (1):                                 

                                                                                

23      (a) An individual who represents a broker-dealer in effecting               

                                                                                

24  transactions in this state limited to those described in section            

                                                                                

25  15(h)(2) of the securities exchange act of 1934, 15 USC 78o.                

                                                                                

26      (b) An individual who represents a broker-dealer that is                    

                                                                                

27  exempt under section 401(2) or (4).                                         


                                                                                

1       (c) An individual who represents an issuer with respect to an               

                                                                                

2   offer or sale of the issuer's own securities or those of the                

                                                                                

3   issuer's parent or any of the issuer's subsidiaries, and who is             

                                                                                

4   not compensated in connection with the individual's participation           

                                                                                

5   by the payment of commissions or other remuneration based,                  

                                                                                

6   directly or indirectly, on transactions in those securities.                

                                                                                

7       (d) An individual who represents an issuer and who effects                  

                                                                                

8   transactions in the issuer's securities exempted by section 202,            

                                                                                

9   other than section 202(1)(k) or (n).                                        

                                                                                

10      (e) An individual who represents an issuer who effects                      

                                                                                

11  transactions solely in federal covered securities of the issuer,            

                                                                                

12  but an individual who effects transactions in a federal covered             

                                                                                

13  security under section 18(b)(3) or 18(b)(4)(D) of the securities            

                                                                                

14  act of 1933, 15 USC 77r, is not exempt if the individual is                 

                                                                                

15  compensated in connection with the agent's participation by the             

                                                                                

16  payment of commissions or other remuneration based, directly or             

                                                                                

17  indirectly, on transactions in those securities.                            

                                                                                

18      (f) An individual who represents a broker-dealer registered                 

                                                                                

19  in this state under section 401(1) or exempt from registration              

                                                                                

20  under section 401(2) in the offer and sale of securities for an             

                                                                                

21  account of a nonaffiliated federal covered investment adviser               

                                                                                

22  with investments under management in excess of $100,000,000.00              

                                                                                

23  acting for the account of others pursuant to discretionary                  

                                                                                

24  authority in a signed record.                                               

                                                                                

25      (g) An individual who represents an issuer in connection with               

                                                                                

26  the purchase of the issuer's own securities.                                

                                                                                

27      (h) An individual who represents an issuer and who restricts                


                                                                                

1   participation to performing clerical or ministerial acts.                   

                                                                                

2       (i) An employee of a person licensed or registered under the                

                                                                                

3   mortgage brokers, lenders, and servicers licensing act, 1987 PA             

                                                                                

4   173, MCL 445.1651 to 445.1684, in the offer or sale of mortgage             

                                                                                

5   loans as defined in section 1a of the mortgage brokers, lenders,            

                                                                                

6   and servicers licensing act, 1987 PA 173, MCL 445.1651a, when               

                                                                                

7   acting as an employee of the licensed or registered person.                 

                                                                                

8       (j) Any other individual exempted by rule or order under this               

                                                                                

9   act.                                                                        

                                                                                

10      (3) The registration of an agent is effective only while the                

                                                                                

11  agent is employed by or associated with a broker-dealer                     

                                                                                

12  registered under this act or an issuer that is offering, selling,           

                                                                                

13  or purchasing its securities in this state.                                 

                                                                                

14      (4) A broker-dealer, or an issuer engaged in offering,                      

                                                                                

15  selling, or purchasing securities in this state, shall not employ           

                                                                                

16  or associate with an agent who transacts business in this state             

                                                                                

17  on behalf of broker-dealers or issuers unless the agent is                  

                                                                                

18  registered under subsection (1) or exempt from registration under           

                                                                                

19  subsection (2).                                                             

                                                                                

20      (5) An individual shall not act as an agent for more than 1                 

                                                                                

21  broker-dealer or more than 1 issuer at a time, unless the                   

                                                                                

22  broker-dealers or the issuers for which the agent acts are                  

                                                                                

23  affiliated by direct or indirect common control or are authorized           

                                                                                

24  by rule or order under this act.                                            

                                                                                

25      Sec. 403.  (1) A person shall not transact business in this                 

                                                                                

26  state as an investment adviser unless the person is registered              

                                                                                

27  under this act as an investment adviser or is exempt from                   


                                                                                

1   registration as an investment adviser under subsection (2).                 

                                                                                

2       (2) The following persons are exempt from the registration                  

                                                                                

3   requirement of subsection (1):                                              

                                                                                

4       (a) A person that does not have a place of business in this                 

                                                                                

5   state and that is registered under the securities act of the                

                                                                                

6   state in which the person has its principal place of business, if           

                                                                                

7   its only clients in this state are any of the following:                    

                                                                                

8                                                                                (i) Federal covered investment advisers, investment advisers                        

                                                                                

9   registered under this act, or broker-dealers registered under               

                                                                                

10  this act.                                                                   

                                                                                

11      (ii) Institutional investors.                                                

                                                                                

12      (iii) Bona fide preexisting clients whose principal places of                

                                                                                

13  residence are not in this state, if the investment adviser is               

                                                                                

14  registered under the securities act of the state in which the               

                                                                                

15  clients maintain principal places of residence.                             

                                                                                

16      (iv) Any other client exempted by rule or order under this                   

                                                                                

17  act.                                                                        

                                                                                

18      (b) A person that does not have a place of business in this                 

                                                                                

19  state if the person has had, during the preceding 12 months, not            

                                                                                

20  more than 5 clients that are residents of this state in addition            

                                                                                

21  to those specified under subdivision (a).                                   

                                                                                

22      (c) The person is an investment adviser who is not required                 

                                                                                

23  to be registered as an investment adviser under the investment              

                                                                                

24  advisers act of 1940 if the investment adviser's only clients in            

                                                                                

25  this state are other investment advisers, federal covered                   

                                                                                

26  advisers, broker-dealers, or institutional investors.                       

                                                                                

27      (d) Any other person exempted by rule or order under this                   


                                                                                

1   act.                                                                        

                                                                                

2       (3) An investment adviser shall not, directly or indirectly,                

                                                                                

3   employ or associate with an individual to engage in an activity             

                                                                                

4   related to investment advice in this state if the registration of           

                                                                                

5   the individual is suspended or revoked, or the individual is                

                                                                                

6   barred from employment or association with an investment adviser,           

                                                                                

7   federal covered investment adviser, or broker-dealer by an order            

                                                                                

8   under this act, the securities and exchange commission, or a                

                                                                                

9   self-regulatory organization, unless the investment adviser did             

                                                                                

10  not know, and in the exercise of reasonable care could not have             

                                                                                

11  known, of the suspension, revocation, or bar.  If the investment            

                                                                                

12  adviser request and good cause is shown, the administrator, by              

                                                                                

13  order, may waive, in whole or in part, the application of the               

                                                                                

14  prohibitions of this subsection.                                            

                                                                                

15      (4) An investment adviser shall not employ or associate with                

                                                                                

16  an individual required to be registered under this act as an                

                                                                                

17  investment adviser representative who transacts business in this            

                                                                                

18  state on behalf of the investment adviser unless the individual             

                                                                                

19  is registered under section 404(1) or is exempt from registration           

                                                                                

20  under section 404(2).                                                       

                                                                                

21      Sec. 404.  (1) An individual shall not transact business in                 

                                                                                

22  this state as an investment adviser representative unless the               

                                                                                

23  individual is registered under this act as an investment adviser            

                                                                                

24  representative or is exempt from registration as an investment              

                                                                                

25  adviser representative under subsection (2).                                

                                                                                

26      (2) Each of the following individuals is exempt from the                    

                                                                                

27  registration requirement of subsection (1):                                 


                                                                                

1       (a) An individual who is employed by or associated with an                  

                                                                                

2   investment adviser that is exempt from registration under section           

                                                                                

3   403(2) or a federal covered investment adviser that is excluded             

                                                                                

4   from the notice filing requirements of section 405.                         

                                                                                

5       (b) Any other individual exempted by rule or order under this               

                                                                                

6   act.                                                                        

                                                                                

7       (3) The registration of an investment adviser representative                

                                                                                

8   is not effective while the investment adviser representative is             

                                                                                

9   not employed by or associated with an investment adviser                    

                                                                                

10  registered under this act or a federal covered investment adviser           

                                                                                

11  that has made or is required to make a notice filing under                  

                                                                                

12  section 405.                                                                

                                                                                

13      (4) An individual may transact business as an investment                    

                                                                                

14  adviser representative for more than 1 investment adviser or                

                                                                                

15  federal covered investment adviser unless a rule or order under             

                                                                                

16  this act prohibits or limits an individual from acting as an                

                                                                                

17  investment adviser representative for more than 1 investment                

                                                                                

18  adviser or federal covered investment adviser.                              

                                                                                

19      (5) An individual acting as an investment adviser                           

                                                                                

20  representative shall not, directly or indirectly, conduct                   

                                                                                

21  business in this state on behalf of an investment adviser or a              

                                                                                

22  federal covered investment adviser if the registration of the               

                                                                                

23  individual as an investment adviser representative is suspended             

                                                                                

24  or revoked or the individual is barred from employment or                   

                                                                                

25  association with an investment adviser or a federal covered                 

                                                                                

26  investment adviser by an order under this act, the securities and           

                                                                                

27  exchange commission, or a self-regulatory organization.  If a               


                                                                                

1   federal covered investment adviser requests and good cause is               

                                                                                

2   shown, the administrator, by order, may waive, in whole or in               

                                                                                

3   part, the application of the requirements of this subsection.               

                                                                                

4       (6) An investment adviser registered under this act, a                      

                                                                                

5   federal covered investment adviser that has filed a notice under            

                                                                                

6   section 405, or a broker-dealer registered under this act is not            

                                                                                

7   required to employ or associate with an individual as an                    

                                                                                

8   investment adviser representative if the only compensation paid             

                                                                                

9   to the individual for a referral of investment advisory clients             

                                                                                

10  is paid to an investment adviser registered under this act, a               

                                                                                

11  federal covered investment adviser who has filed a notice under             

                                                                                

12  section 405, or a broker-dealer registered under this act with              

                                                                                

13  which the individual is employed or associated as an investment             

                                                                                

14  adviser representative.                                                     

                                                                                

15      Sec. 405.  (1) Except with respect to a federal covered                     

                                                                                

16  investment adviser described in subsection (2), a federal covered           

                                                                                

17  investment adviser shall not transact business in this state as a           

                                                                                

18  federal covered investment adviser unless the federal covered               

                                                                                

19  investment adviser complies with subsection (3).                            

                                                                                

20      (2) The following federal covered investment advisers are not               

                                                                                

21  required to comply with subsection (3):                                     

                                                                                

22      (a) A federal covered investment adviser without a place of                 

                                                                                

23  business in this state if its only clients in this state are any            

                                                                                

24  of the following:                                                           

                                                                                

25                                                                               (i) Federal covered investment advisers, investment advisers                        

                                                                                

26  registered under this act, and broker-dealers registered under              

                                                                                

27  this act.                                                                   


                                                                                

1       (ii) Institutional investors.                                                

                                                                                

2       (iii) Bona fide preexisting clients whose principal places of                

                                                                                

3   residence are not in this state.                                            

                                                                                

4       (iv) Other clients specified by rule or order under this                     

                                                                                

5   act.                                                                        

                                                                                

6       (b) A federal covered investment adviser that does not have a               

                                                                                

7   place of business in this state if the federal covered investment           

                                                                                

8   adviser has had, during the preceding 12 months, not more than 5            

                                                                                

9   clients that are residents of this state in addition to those               

                                                                                

10  specified under subdivision (a).                                            

                                                                                

11      (c) Any other person excluded by rule or order under this                   

                                                                                

12  act.                                                                        

                                                                                

13      (3) A person acting as a federal covered investment adviser,                

                                                                                

14  not excluded under subsection (2), shall file a notice, a consent           

                                                                                

15  to service of process complying with section 611, and those                 

                                                                                

16  records that have been filed with the securities and exchange               

                                                                                

17  commission under the investment advisers act of 1940 that are               

                                                                                

18  required by rule or order under this act and pay the fees                   

                                                                                

19  specified in section 410(5).                                                

                                                                                

20      (4) A notice under subsection (3) is effective on filing.                   

                                                                                

21      Sec. 406.  (1) A person shall register as a broker-dealer,                  

                                                                                

22  agent, investment adviser, or investment adviser representative             

                                                                                

23  by filing an application and a consent to service of process                

                                                                                

24  complying with section 611 and paying the fee specified in                  

                                                                                

25  section 410 and any reasonable fees charged by the designee of              

                                                                                

26  the administrator for processing the filing.  Each application              

                                                                                

27  must contain both of the following:                                         


                                                                                

1       (a) The information or record required for the filing of a                  

                                                                                

2   uniform application.                                                        

                                                                                

3       (b) If requested by the administrator, any other financial or               

                                                                                

4   other information or record that the administrator determines is            

                                                                                

5   appropriate.                                                                

                                                                                

6       (2) If the information or record contained in an application                

                                                                                

7   that is filed under subsection (1) is or becomes inaccurate or              

                                                                                

8   incomplete in any material respect, the registrant shall promptly           

                                                                                

9   file a correcting amendment.                                                

                                                                                

10      (3) If an order is not in effect and no proceeding is pending               

                                                                                

11  under section 412, registration becomes effective at 12 noon on             

                                                                                

12  the forty-fifth day after a completed application is filed unless           

                                                                                

13  the registration is denied.  A rule or order under this act may             

                                                                                

14  set an earlier effective date or may defer the effective date               

                                                                                

15  until 12 noon on the forty-fifth day after the filing of any                

                                                                                

16  amendment completing the application.                                       

                                                                                

17      (4) A registration is effective until 12 midnight on December               

                                                                                

18  31 of the year for which the application for registration is                

                                                                                

19  filed.  Unless an order is in effect under section 412, a                   

                                                                                

20  registration may be automatically renewed each year by filing the           

                                                                                

21  records required by rule or order under this act and paying the             

                                                                                

22  fee specified in section 410 and the costs charged by the                   

                                                                                

23  designee of the administrator for processing the filings.                   

                                                                                

24      (5) A rule or order under this act may impose other                         

                                                                                

25  conditions not inconsistent with the national securities markets            

                                                                                

26  improvement act of 1996, Public Law 104-290, 110 Stat. 3416, or             

                                                                                

27  an order under this act may waive, in whole or in part, specific            


                                                                                

1   requirements in connection with registration if the imposition or           

                                                                                

2   waiver is appropriate in the public interest and for the                    

                                                                                

3   protection of investors.                                                    

                                                                                

4       Sec. 407.  (1) A broker-dealer or investment adviser may                    

                                                                                

5   succeed to the current registration of another broker-dealer or             

                                                                                

6   investment adviser or a notice filing of a federal covered                  

                                                                                

7   investment adviser, and a federal covered investment adviser may            

                                                                                

8   succeed to the current registration of an investment adviser or             

                                                                                

9   notice filing of another federal covered investment adviser, by             

                                                                                

10  filing as a successor an application for registration under                 

                                                                                

11  section 401 or 403, or a notice under section 405, for the                  

                                                                                

12  unexpired portion of the current registration or notice filing.             

                                                                                

13      (2) A broker-dealer or investment adviser that changes its                  

                                                                                

14  form of organization or state of incorporation or organization              

                                                                                

15  may continue its registration by filing an amendment to its                 

                                                                                

16  registration if the change does not involve a material change in            

                                                                                

17  its financial condition or management.  The amendment is                    

                                                                                

18  effective when filed or on a date designated by the registrant in           

                                                                                

19  the filing.  The new organization is a successor to the original            

                                                                                

20  registrant for the purposes of this act.  If there is a material            

                                                                                

21  change in financial condition or management, the broker-dealer or           

                                                                                

22  investment adviser shall file a new application for                         

                                                                                

23  registration.  Any predecessor registered under this act shall              

                                                                                

24  stop conducting its securities business other than winding down             

                                                                                

25  transactions and shall file for withdrawal of broker-dealer or              

                                                                                

26  investment adviser registration within 45 days after filing its             

                                                                                

27  amendment to effect succession.                                             


                                                                                

1       (3) A broker-dealer or investment adviser that changes its                  

                                                                                

2   name may continue its registration by filing an amendment to its            

                                                                                

3   registration.  The amendment is effective when filed or on a date           

                                                                                

4   designated by the registrant.                                               

                                                                                

5       (4) A change of control of a broker-dealer or investment                    

                                                                                

6   adviser may be made in accordance with a rule or order under this           

                                                                                

7   act.                                                                        

                                                                                

8       Sec. 408.  (1) If an agent registered under this act                        

                                                                                

9   terminates employment by or association with a broker-dealer or             

                                                                                

10  issuer, or if an investment adviser representative registered               

                                                                                

11  under this act terminates employment by or association with an              

                                                                                

12  investment adviser or federal covered investment adviser, or if             

                                                                                

13  either registrant terminates activities that require registration           

                                                                                

14  as an agent or investment adviser representative, the                       

                                                                                

15  broker-dealer, investment adviser, or federal covered investment            

                                                                                

16  adviser shall promptly file a notice of termination.  If the                

                                                                                

17  registrant learns that the broker-dealer, issuer, investment                

                                                                                

18  adviser, or federal covered investment adviser has not filed the            

                                                                                

19  notice, the registrant may file the notice.                                 

                                                                                

20      (2) If an agent registered under this act terminates                        

                                                                                

21  employment by or association with a broker-dealer registered                

                                                                                

22  under this act and begins employment by or association with                 

                                                                                

23  another broker-dealer registered under this act; or if an                   

                                                                                

24  investment adviser representative registered under this act                 

                                                                                

25  terminates employment by or association with an investment                  

                                                                                

26  adviser registered under this act or a federal covered investment           

                                                                                

27  adviser that has filed a notice under section 405 and begins                


                                                                                

1   employment by or association with another investment adviser                

                                                                                

2   registered under this act or a federal covered investment adviser           

                                                                                

3   that has filed a notice under section 405, then upon the filing             

                                                                                

4   by or on behalf of the registrant, within 30 days after the                 

                                                                                

5   termination, of an application for registration that complies               

                                                                                

6   with the requirement of section 406(1) and payment of the filing            

                                                                                

7   fee required under section 410, 1 of the following applies to the           

                                                                                

8   registration of the agent or investment adviser representative:             

                                                                                

9       (a) If the agent's central registration depository record or                

                                                                                

10  successor record or the investment adviser representative's                 

                                                                                

11  investment adviser registration depository record or successor              

                                                                                

12  record does not contain a new or amended disciplinary disclosure            

                                                                                

13  within the previous 12 months, the registration is immediately              

                                                                                

14  effective as of the date of the completed filing.                           

                                                                                

15      (b) If the agent's central registration depository record or                

                                                                                

16  the investment adviser representative's investment adviser                  

                                                                                

17  registration depository record contains a new or amended                    

                                                                                

18  disciplinary disclosure within the preceding 12 months, the                 

                                                                                

19  registration is temporarily effective as of the date of the                 

                                                                                

20  completed filing.                                                           

                                                                                

21      (3) If there are or were grounds for discipline under section               

                                                                                

22  412, the administrator may withdraw a temporary registration                

                                                                                

23  within 30 days after the application is filed.  If the                      

                                                                                

24  administrator does not withdraw the temporary registration within           

                                                                                

25  the 30-day period, registration becomes automatically effective             

                                                                                

26  on the thirty-first day after filing.                                       

                                                                                

27      (4) The administrator may prevent the effectiveness of a                    


                                                                                

1   transfer of an agent or investment adviser representative under             

                                                                                

2   subsection (2)(a) or (b) based on the public interest and the               

                                                                                

3   protection of investors.                                                    

                                                                                

4       (5) If the administrator determines that a registrant or                    

                                                                                

5   applicant for registration is no longer in existence, has ceased            

                                                                                

6   to act as a broker-dealer, agent, investment adviser, or                    

                                                                                

7   investment adviser representative, is the subject of an                     

                                                                                

8   adjudication of incapacity, is subject to the control of a                  

                                                                                

9   committee, conservator, or guardian, or cannot reasonably be                

                                                                                

10  located, a rule or order under this act may require the                     

                                                                                

11  registration be canceled or terminated or the application                   

                                                                                

12  denied.  The administrator may reinstate a canceled or terminated           

                                                                                

13  registration, with or without hearing, and may make the                     

                                                                                

14  registration retroactive.                                                   

                                                                                

15      Sec. 409.  Withdrawal of registration by a broker-dealer,                   

                                                                                

16  agent, investment adviser, or investment adviser representative             

                                                                                

17  is effective 60 days after an application to withdraw is filed or           

                                                                                

18  within a shorter period as provided by rule or order under this             

                                                                                

19  act, unless a revocation or suspension proceeding is pending when           

                                                                                

20  the application is filed.  If a proceeding is pending, withdrawal           

                                                                                

21  is effective when and on conditions required by rule or order               

                                                                                

22  under this act.  The administrator may institute a revocation or            

                                                                                

23  suspension proceeding under section 412 within 1 year after the             

                                                                                

24  withdrawal became effective automatically and issue a revocation            

                                                                                

25  or suspension order as of the last date on which registration was           

                                                                                

26  effective if a proceeding is not pending.                                   

                                                                                

27      Sec. 410.  (1) Before October 1, 2007, a person shall pay a                 


                                                                                

1   fee of $300.00 when initially filing an application for                     

                                                                                

2   registration as a broker-dealer and a fee of $300.00 when filing            

                                                                                

3   a renewal of registration as a broker-dealer.  After                        

                                                                                

4   September 30, 2007, a person shall pay a fee of $250.00 when                

                                                                                

5   initially filing an application for registration as a                       

                                                                                

6   broker-dealer and a fee of $250.00 when filing a renewal of                 

                                                                                

7   registration as a broker-dealer.  If the filing results in a                

                                                                                

8   denial or withdrawal, the administrator shall retain all of the             

                                                                                

9   filing fee.                                                                 

                                                                                

10      (2) Before October 1, 2007, an individual shall pay a fee of                

                                                                                

11  $65.00 when filing an application for registration as an agent, a           

                                                                                

12  fee of $65.00 when filing a renewal of registration as an agent,            

                                                                                

13  and a fee of $65.00 when filing for a change of registration as             

                                                                                

14  an agent.  After September 30, 2007, an individual shall pay a              

                                                                                

15  fee of $30.00 when filing an application for registration as an             

                                                                                

16  agent, a fee of $30.00 when filing a renewal of registration as             

                                                                                

17  an agent, and a fee of $30.00 when filing for a change of                   

                                                                                

18  registration as an agent.  If the filing results in a denial or             

                                                                                

19  withdrawal, the administrator shall retain all of the filing                

                                                                                

20  fee.                                                                        

                                                                                

21      (3) Before October 1, 2007, a person shall pay a fee of                     

                                                                                

22  $200.00 when filing an application for registration as an                   

                                                                                

23  investment adviser and a fee of $200.00 when filing a renewal of            

                                                                                

24  registration as an investment adviser.  After September 30, 2007,           

                                                                                

25  a person shall pay a fee of $150.00 when filing an application              

                                                                                

26  for registration as an investment adviser and a fee of $150.00              

                                                                                

27  when filing a renewal of registration as an investment adviser.             


                                                                                

1   If the filing results in a denial or withdrawal, the                        

                                                                                

2   administrator shall retain all of the filing fee.                           

                                                                                

3       (4) Before October 1, 2007, an individual shall pay a fee of                

                                                                                

4   $65.00 when filing an application for registration as an                    

                                                                                

5   investment adviser representative, a fee of $65.00 when filing a            

                                                                                

6   renewal of registration as an investment adviser representative,            

                                                                                

7   and a fee of $65.00 when filing a change of registration as an              

                                                                                

8   investment adviser representative.  After September 30, 2007, an            

                                                                                

9   individual shall pay a fee of $30.00 when filing an application             

                                                                                

10  for registration as an investment adviser representative, a fee             

                                                                                

11  of $30.00 when filing a renewal of registration as an investment            

                                                                                

12  adviser representative, and a fee of $30.00 when filing a change            

                                                                                

13  of registration as an investment adviser representative.  If the            

                                                                                

14  filing results in a denial or withdrawal, the administrator shall           

                                                                                

15  retain all of the filing fee.                                               

                                                                                

16      (5) Before October 1, 2007, a federal covered investment                    

                                                                                

17  adviser required to file a notice under section 405 shall pay an            

                                                                                

18  initial and annual notice fee of $200.00.  After September 30,              

                                                                                

19  2007, a federal covered investment adviser required to file a               

                                                                                

20  notice under section 405 shall pay an initial and annual notice             

                                                                                

21  fee of $150.00.                                                             

                                                                                

22      (6) A person required to pay a filing or notice fee under                   

                                                                                

23  this section may transmit the fee through or to a designee as a             

                                                                                

24  rule or order requires under this act.                                      

                                                                                

25      (7) An investment adviser representative who is registered as               

                                                                                

26  an agent under section 402 and who represents a person that is              

                                                                                

27  both registered as a broker-dealer under section 401 and                    


                                                                                

1   registered as an investment adviser under section 403 or required           

                                                                                

2   as a federal covered investment adviser to make a notice filing             

                                                                                

3   under section 405 is not required to pay an initial or annual               

                                                                                

4   registration fee for registration as an investment adviser                  

                                                                                

5   representative.                                                             

                                                                                

6       Sec. 411.  (1) Subject to section 15(h) of the securities                   

                                                                                

7   act of 1934, 15 USC 78o, or section 222 of the investment                   

                                                                                

8   advisers act of 1940, 15 USC 80b-18a, a rule or order under this            

                                                                                

9   act may establish minimum financial requirements for                        

                                                                                

10  broker-dealers registered or required to be registered under this           

                                                                                

11  act and investment advisers registered or required to be                    

                                                                                

12  registered under this act.                                                  

                                                                                

13      (2) Subject to section 15(h) of the securities exchange act                 

                                                                                

14  of 1934, 15 USC 78o, or section 222(b) of the investment advisers           

                                                                                

15  act of 1940, 15 USC 80b-18a, a broker-dealer registered or                  

                                                                                

16  required to be registered under this act and an investment                  

                                                                                

17  adviser registered or required to be registered under this act              

                                                                                

18  shall file financial reports required by rule or order under this           

                                                                                

19  act.  If the information contained in a record filed under this             

                                                                                

20  subsection is or becomes inaccurate or incomplete in any material           

                                                                                

21  respect, the registrant shall promptly file a correcting                    

                                                                                

22  amendment.                                                                  

                                                                                

23      (3) Subject to section 15(h) of the securities exchange act                 

                                                                                

24  of 1934, 15 USC 78o, or section 222 of the investment advisers              

                                                                                

25  act of 1940, 15 USC 80b-18a, a broker-dealer registered or                  

                                                                                

26  required to be registered under this act and an investment                  

                                                                                

27  adviser registered or required to be registered under this act              


                                                                                

1   shall make and maintain the accounts, correspondence, memoranda,            

                                                                                

2   papers, books, and other records required by rule or order of the           

                                                                                

3   administrator.  The records required to be maintained under this            

                                                                                

4   subsection shall be maintained as follows:                                  

                                                                                

5       (a) Broker-dealer records may be maintained in any form of                  

                                                                                

6   data storage acceptable under section 17(a) of the securities               

                                                                                

7   exchange act of 1934, 15 USC 78q, if they are readily accessible            

                                                                                

8   to the administrator.                                                       

                                                                                

9       (b) Investment adviser records may be maintained in any form                

                                                                                

10  of data storage required by rule or order under this act.                   

                                                                                

11      (4) The records of a broker-dealer registered or required to                

                                                                                

12  be registered under this act and of an investment adviser                   

                                                                                

13  registered or required to be registered under this act are                  

                                                                                

14  subject to reasonable periodic, special, or other audits or                 

                                                                                

15  inspections by a representative of the administrator, in or                 

                                                                                

16  outside of this state, as the administrator considers necessary             

                                                                                

17  or appropriate in the public interest and for the protection of             

                                                                                

18  investors.  An audit or inspection may be made at any time and              

                                                                                

19  without prior notice.  The administrator may copy and remove for            

                                                                                

20  audit or inspection copies of all records the administrator                 

                                                                                

21  reasonably considers necessary or appropriate to conduct the                

                                                                                

22  audit or inspection.  The administrator may assess a reasonable             

                                                                                

23  charge for conducting an audit or inspection under this                     

                                                                                

24  subsection.                                                                 

                                                                                

25      (5) Subject to section 15(h) of the securities exchange act                 

                                                                                

26  of 1934, 15 USC 78o, or section 222 of the investment advisers              

                                                                                

27  act of 1940, 15 USC 80b-18a, a rule or order under this act may             


                                                                                

1   require a broker-dealer and investment adviser that has custody             

                                                                                

2   of or discretionary authority over funds or securities of a                 

                                                                                

3   client to obtain insurance or post a bond or other satisfactory             

                                                                                

4   form of security in an amount established by the administrator by           

                                                                                

5   rule or order.  The administrator may determine the requirements            

                                                                                

6   of the insurance, bond, or other satisfactory form of security.             

                                                                                

7   Insurance or a bond or other satisfactory form of security shall            

                                                                                

8   not be required of a broker-dealer registered under this act                

                                                                                

9   whose net capital exceeds, or of an investment adviser registered           

                                                                                

10  under this act whose minimum financial requirements exceed, the             

                                                                                

11  amounts required by rule or order under this act.  The insurance,           

                                                                                

12  bond, or other satisfactory form of security must permit an                 

                                                                                

13  action by a person to enforce any liability on the insurance,               

                                                                                

14  bond, or other satisfactory form of security if commenced within            

                                                                                

15  the time limitations in section 509(10)(b).                                 

                                                                                

16      (6) Subject to section 15(h) of the securities exchange act                 

                                                                                

17  of 1934, 15 USC 78o, or section 222 of the investment advisers              

                                                                                

18  act of 1940, 15 USC 80b-18a, an agent shall not have custody of             

                                                                                

19  funds or securities of a customer except under the supervision of           

                                                                                

20  a broker-dealer and an investment adviser representative shall              

                                                                                

21  not have custody of funds or securities of a client except under            

                                                                                

22  the supervision of an investment adviser or federal covered                 

                                                                                

23  investment adviser.  A rule or order under this act may prohibit,           

                                                                                

24  limit, or impose conditions on the custody of funds or securities           

                                                                                

25  of a customer by a broker-dealer and on the custody of securities           

                                                                                

26  or funds of a client by an investment adviser.                              

                                                                                

27      (7) With respect to an investment adviser registered or                     


                                                                                

1   required to be registered under this act, a rule or order under             

                                                                                

2   this act may require that information or other record be                    

                                                                                

3   furnished or disseminated to clients or prospective clients in              

                                                                                

4   this state as necessary or appropriate in the public interest and           

                                                                                

5   for the protection of investors and advisory clients.                       

                                                                                

6       (8) A rule or order under this act may require an individual                

                                                                                

7   registered under section 402 or 404 to participate in a                     

                                                                                

8   continuing education program approved by the securities and                 

                                                                                

9   exchange commission and administered by a self-regulatory                   

                                                                                

10  organization or, in the absence of such a program, a rule or                

                                                                                

11  order under this act may require continuing education for an                

                                                                                

12  individual registered under section 404.                                    

                                                                                

13      Sec. 412.  (1) If the administrator finds that the order is                 

                                                                                

14  in the public interest and subsection (4) authorizes the action,            

                                                                                

15  an order under this act may deny an application or condition or             

                                                                                

16  limit registration of an applicant to be a broker-dealer, agent,            

                                                                                

17  investment adviser, or investment adviser representative and, if            

                                                                                

18  the applicant is a broker-dealer or investment adviser, of a                

                                                                                

19  partner, officer, or director, or a person having a similar                 

                                                                                

20  status or performing similar functions, or any person directly or           

                                                                                

21  indirectly in control of the broker-dealer or investment                    

                                                                                

22  adviser.                                                                    

                                                                                

23      (2) If the administrator finds that the order is in the                     

                                                                                

24  public interest and subsection (4) authorizes the action, an                

                                                                                

25  order under this act may revoke, suspend, condition, or limit the           

                                                                                

26  registration of a registrant and if the registrant is a                     

                                                                                

27  broker-dealer or investment adviser, of a partner, officer, or              


                                                                                

1   director, or a person having a similar status or performing                 

                                                                                

2   similar functions, or a person directly or indirectly in control            

                                                                                

3   of the broker-dealer or investment adviser.  However, the                   

                                                                                

4   administrator may not do any of the following:                              

                                                                                

5       (a) Institute a revocation or suspension proceeding under                   

                                                                                

6   this subsection based on an order issued under a law of another             

                                                                                

7   state that is reported to the administrator or a designee of the            

                                                                                

8   administrator more than 1 year after the date of the order on               

                                                                                

9   which it is based.                                                          

                                                                                

10      (b) Under subsection (4)(e)(i) or (ii), issue an order on the                

                                                                                

11  basis of an order issued under the securities act of another                

                                                                                

12  state unless the other order was based on conduct for which                 

                                                                                

13  subsection (4) would authorize the action had the conduct                   

                                                                                

14  occurred in this state.                                                     

                                                                                

15      (3) If the administrator finds that the order is in the                     

                                                                                

16  public interest and subsection (4)(a) to (f), (i) to (j), or (l)            

                                                                                

17  to (n) authorizes the action, an order under this act may                   

                                                                                

18  censure, impose a bar, or impose a civil penalty in an amount not           

                                                                                

19  to exceed a maximum of $10,000.00 for a single violation or                 

                                                                                

20  $500,000.00 for more than 1 violation on a registrant and, if the           

                                                                                

21  registrant is a broker-dealer or investment adviser, on a                   

                                                                                

22  partner, officer, or director, a person having a similar status             

                                                                                

23  or performing similar functions, or a person directly or                    

                                                                                

24  indirectly in control of the broker-dealer or investment                    

                                                                                

25  adviser.                                                                    

                                                                                

26      (4) A person may be disciplined under subsections (1) to (3)                

                                                                                

27  if any of the following apply to the person:                                


                                                                                

1       (a) The person filed an application for registration in this                

                                                                                

2   state under this act or the predecessor act within the previous             

                                                                                

3   10 years, which, as of the effective date of registration or as             

                                                                                

4   of any date after filing in the case of an order denying                    

                                                                                

5   effectiveness, was incomplete in any material respect or                    

                                                                                

6   contained a statement that, in light of the circumstances under             

                                                                                

7   which it was made, was false or misleading with respect to a                

                                                                                

8   material fact.                                                              

                                                                                

9       (b) The person willfully violated or willfully failed to                    

                                                                                

10  comply with this act or the predecessor act or a rule adopted or            

                                                                                

11  order issued under this act or the predecessor act within the               

                                                                                

12  previous 10 years.                                                          

                                                                                

13      (c) The person was convicted of any felony or within the                    

                                                                                

14  previous 10 years was convicted of a misdemeanor involving a                

                                                                                

15  security, a commodity futures or option contract, or an aspect of           

                                                                                

16  a business involving securities, commodities, investments,                  

                                                                                

17  franchises, insurance, banking, or finance.                                 

                                                                                

18      (d) The person is enjoined or restrained by a court of                      

                                                                                

19  competent jurisdiction in an action instituted by the                       

                                                                                

20  administrator under this act or the predecessor act, a state, the           

                                                                                

21  securities and exchange commission, or the United States from               

                                                                                

22  engaging in or continuing an act, practice, or course of business           

                                                                                

23  involving an aspect of a business involving securities,                     

                                                                                

24  commodities, investments, franchises, insurance, banking, or                

                                                                                

25  finance.                                                                    

                                                                                

26      (e) The person is the subject of an order, issued after                     

                                                                                

27  notice and opportunity for hearing by any of the following:                 


                                                                                

1                                                                                (i) The securities or other financial services regulator of a                       

                                                                                

2   state, or the securities and exchange commission or other federal           

                                                                                

3   agency denying, revoking, barring, or suspending registration as            

                                                                                

4   a broker-dealer, agent, investment adviser, federal covered                 

                                                                                

5   investment adviser, or investment adviser representative.                   

                                                                                

6       (ii) The securities regulator of a state or the securities                   

                                                                                

7   and exchange commission against a broker-dealer, agent,                     

                                                                                

8   investment adviser, investment adviser representative, or federal           

                                                                                

9   covered investment adviser.                                                 

                                                                                

10      (iii) The securities and exchange commission or a                            

                                                                                

11  self-regulatory organization suspending or expelling the                    

                                                                                

12  registrant from membership in a self-regulatory organization.               

                                                                                

13      (iv) A court adjudicating a United States postal service                     

                                                                                

14  fraud.                                                                      

                                                                                

15      (v) The insurance regulator of a state denying, suspending,                 

                                                                                

16  or revoking the license or registration of an insurance agent.              

                                                                                

17      (vi) A depository institution or financial services regulator                

                                                                                

18  suspending or barring the person from the depository institution            

                                                                                

19  or other financial services business.                                       

                                                                                

20      (f) The person is the subject of an adjudication or                         

                                                                                

21  determination, after notice and opportunity for hearing, by the             

                                                                                

22  securities and exchange commission, the commodity futures trading           

                                                                                

23  commission, the federal trade commission, a federal depository              

                                                                                

24  institution regulator, or a depository institution, insurance, or           

                                                                                

25  other financial services regulator of a state that the person               

                                                                                

26  willfully violated the securities act of 1933, the securities               

                                                                                

27  exchange act of 1934, the investment advisers act of 1940, the              


                                                                                

1   investment company act of 1940, or the commodity exchange act,              

                                                                                

2   the securities or commodities law of a state, or a federal or               

                                                                                

3   state law under which a business involving investments,                     

                                                                                

4   franchises, insurance, banking, or finance is regulated.                    

                                                                                

5       (g) The person is insolvent, either because the person's                    

                                                                                

6   liabilities exceed the person's assets or because the person                

                                                                                

7   cannot meet the person's obligations as they mature.  The                   

                                                                                

8   administrator shall not enter an order against an applicant or              

                                                                                

9   registrant under this subdivision without a finding of insolvency           

                                                                                

10  as to the applicant or registrant.                                          

                                                                                

11      (h) The person refuses to allow or otherwise impedes the                    

                                                                                

12  administrator from conducting an audit or inspection under                  

                                                                                

13  section 411(4) or refuses access to a registrant's office to                

                                                                                

14  conduct an audit or inspection under section 411(4).                        

                                                                                

15      (i) The person has failed to reasonably supervise an agent,                 

                                                                                

16  investment adviser representative, or other individual, if the              

                                                                                

17  agent, investment adviser representative, or other individual was           

                                                                                

18  subject to the person's supervision and committed a violation of            

                                                                                

19  this act or the predecessor act or a rule adopted or order issued           

                                                                                

20  under this act or the predecessor act within the previous 10                

                                                                                

21  years.                                                                      

                                                                                

22      (j) The person has not paid the proper filing fee within 30                 

                                                                                

23  days after having been notified by the administrator of a                   

                                                                                

24  deficiency.  The administrator shall vacate an order under this             

                                                                                

25  paragraph when the deficiency is corrected.                                 

                                                                                

26      (k) After notice and opportunity for a hearing, 1 or more of                

                                                                                

27  the following have occurred within the previous 10 years:                   


                                                                                

1                                                                                (i) A court of competent jurisdiction has found the person to                       

                                                                                

2   have willfully violated the laws of a foreign jurisdiction under            

                                                                                

3   which the business of securities, commodities, investment,                  

                                                                                

4   franchises, insurance, banking, or finance is regulated.                    

                                                                                

5       (ii) The person was found to have been the subject of an                     

                                                                                

6   order of a securities regulator of a foreign jurisdiction                   

                                                                                

7   denying, revoking, or suspending the right to engage in the                 

                                                                                

8   business of securities as a broker-dealer, agent, investment                

                                                                                

9   adviser, investment adviser representative, or similar person.              

                                                                                

10      (iii) The person was found to have been suspended or expelled                

                                                                                

11  from membership by or participation in a securities exchange or             

                                                                                

12  securities association operating under the securities laws of a             

                                                                                

13  foreign jurisdiction.                                                       

                                                                                

14                                                                               (l) The person is the subject of a cease and desist order                           

                                                                                

15  issued by the securities and exchange commission or issued under            

                                                                                

16  the securities, commodities, investment, franchise, banking,                

                                                                                

17  finance, or insurance laws of a state.                                      

                                                                                

18      (m) The person has engaged in dishonest or unethical                        

                                                                                

19  practices in the securities, commodities, investment, franchise,            

                                                                                

20  banking, finance, or insurance business within the previous 10              

                                                                                

21  years.                                                                      

                                                                                

22      (n) The person is not qualified on the basis of factors such                

                                                                                

23  as training, experience, and knowledge of the securities                    

                                                                                

24  business.  If an application is made by an agent for a                      

                                                                                

25  broker-dealer that is a member of a self-regulatory organization            

                                                                                

26  or by an individual for registration as an investment adviser               

                                                                                

27  representative, a denial order shall not be based on this                   


                                                                                

1   subdivision if the individual has successfully completed all                

                                                                                

2   examinations required by subsection (5).  The administrator may             

                                                                                

3   require an applicant for registration under section 402 or 404              

                                                                                

4   who has not been registered in a state within the 2 years                   

                                                                                

5   preceding the filing of an application in this state to                     

                                                                                

6   successfully complete an examination.                                       

                                                                                

7       (5) A rule or order under this act may require that an                      

                                                                                

8   examination, including an examination developed or approved by an           

                                                                                

9   organization of securities regulators, be successfully completed            

                                                                                

10  by a class of individuals or all individuals.  An order under               

                                                                                

11  this act may waive an examination as to an individual and a rule            

                                                                                

12  under this act may waive an examination as to a class of                    

                                                                                

13  individuals if the administrator determines that the examination            

                                                                                

14  is not necessary or appropriate in the public interest and for              

                                                                                

15  the protection of investors.                                                

                                                                                

16      (6) The administrator may suspend or deny an application                    

                                                                                

17  summarily, restrict, condition, limit, or suspend a registration,           

                                                                                

18  or censure, bar, or impose a civil penalty on a registrant                  

                                                                                

19  pending final determination of an administrative proceeding.  On            

                                                                                

20  the issuance of the order, the administrator shall promptly                 

                                                                                

21  notify each person subject to the order that the order has been             

                                                                                

22  issued, the reasons for the action, and that, within 15 days                

                                                                                

23  after the receipt of a request in a record from the person, the             

                                                                                

24  matter will be scheduled for a hearing.  If a hearing is not                

                                                                                

25  requested by a person subject to the order or is not ordered by             

                                                                                

26  the administrator within 30 days after the date of service of the           

                                                                                

27  order, the order is final.  If a hearing is requested or ordered,           


                                                                                

1   the administrator, after notice of and opportunity for hearing to           

                                                                                

2   each person subject to the order, may modify or vacate the order            

                                                                                

3   or extend the order until final determination.                              

                                                                                

4       (7) Except under subsection (6), an order shall not be issued               

                                                                                

5   under this section unless all of the following have occurred:               

                                                                                

6       (a) Appropriate notice has been given to the applicant or                   

                                                                                

7   registrant.                                                                 

                                                                                

8       (b) Opportunity for hearing has been given to the applicant                 

                                                                                

9   or registrant.                                                              

                                                                                

10      (c) Findings of fact and conclusions of law have been made on               

                                                                                

11  the record pursuant to the administrative procedures act of 1969,           

                                                                                

12  1969 PA 306, MCL 24.201 to 24.328.                                          

                                                                                

13      (8) A person who controls, directly or indirectly, a person                 

                                                                                

14  not in compliance with this section may be disciplined by order             

                                                                                

15  of the administrator under subsections (1) to (3) to the same               

                                                                                

16  extent as the noncomplying person, unless the controlling person            

                                                                                

17  did not know, and in the exercise of reasonable care could not              

                                                                                

18  have known, of the existence of conduct that is a basis for                 

                                                                                

19  discipline under this section.                                              

                                                                                

20      (9) The administrator shall not institute a proceeding under                

                                                                                

21  subsection (1), (2), or (3) solely based on material facts                  

                                                                                

22  actually known by the administrator unless an investigation or              

                                                                                

23  the proceeding is instituted within 1 year after the                        

                                                                                

24  administrator actually knew the material facts.                             

                                                                                

25      Sec. 413.  A broker-dealer acting as a finder shall not do                  

                                                                                

26  any of the following:                                                       

                                                                                

27      (a) Take possession of funds or securities in connection                    


                                                                                

1   with the transaction for which payment is made for services as a            

                                                                                

2   finder.                                                                     

                                                                                

3       (b) Fail to disclose clearly and conspicuously in writing to                

                                                                                

4   all persons involved in the transaction as a result of the                  

                                                                                

5   broker-dealer's finding activities before the sale or purchase              

                                                                                

6   that the person is acting as a finder, any payment for services             

                                                                                

7   as a finder, the method and amount of payment, and any beneficial           

                                                                                

8   interest, direct or indirect, of the broker-dealer, or a member             

                                                                                

9   of the broker-dealer's immediate family if the broker-dealer is             

                                                                                

10  an individual, in the issue of the securities that are the                  

                                                                                

11  subject of services as a finder.                                            

                                                                                

12      (c) Participate in the offer, purchase, or sale of a                        

                                                                                

13  security in violation of section 301.  However, if the                      

                                                                                

14  broker-dealer makes a reasonable effort to ascertain if a                   

                                                                                

15  registration has been effected or an exemption order granted in             

                                                                                

16  this state or to ascertain the basis for an exemption claim and             

                                                                                

17  does not have knowledge that the proposed transaction would                 

                                                                                

18  violate section 301, the broker-dealer's activities as a finder             

                                                                                

19  do not violate section 301.                                                 

                                                                                

20      (d) Participate in the offer, purchase, or sale of a                        

                                                                                

21  security without obtaining information relative to the risks of             

                                                                                

22  the transaction, the direct or indirect compensation to be                  

                                                                                

23  received by promoters, partners, officers, directors, or their              

                                                                                

24  affiliates, the financial condition of the issuer, and the use of           

                                                                                

25  proceeds to be received from investors, or fail to read any                 

                                                                                

26  offering materials obtained.  This section does not require                 

                                                                                

27  independent investigation or alteration of offering materials               


                                                                                

1   furnished to the broker-dealer.                                             

                                                                                

2       (e) Fail to inform or otherwise ensure disclosure to all                    

                                                                                

3   persons involved in the transaction as a result of the                      

                                                                                

4   broker-dealer's finding activities of any material information              

                                                                                

5   which the broker-dealer knows, or in the exercise of reasonable             

                                                                                

6   care should know based on the information furnished to the                  

                                                                                

7   broker-dealer, is material in making an investment decision,                

                                                                                

8   until conclusion of the transaction.                                        

                                                                                

9       (f) Locate, introduce, or refer persons that the                            

                                                                                

10  broker-dealer knows, or after a reasonable inquiry should know,             

                                                                                

11  are not suitable investors by reason of their financial                     

                                                                                

12  condition, age, experience, or need to diversify investments.