HOUSE BILL No. 5746

 

April 1, 2004, Introduced by Rep. Koetje and referred to the Committee on Commerce.

        

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                 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                       


                                                                                

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) A bank engaged solely in 1 or more of the activities                   

                                                                                

18  described in, under the conditions described in, section                    

                                                                                

19  3(a)(4)(B) of the securities exchange act of 1934, 15 USC 78c.              

                                                                                

20      (iv) An international banking institution.                                   

                                                                                

21      (v) A person excluded by rule or order under this act.                      

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

1   federal deposit insurance corporation, the national credit union            

                                                                                

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

                                                                                

3   The term does not include any of the following:                             

                                                                                

4                                                                                (i) An insurance company or other organization primarily                            

                                                                                

5   engaged in the business of insurance.                                       

                                                                                

6       (ii) A Morris Plan bank.                                                     

                                                                                

7       (iii) An industrial loan company.                                            

                                                                                

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

                                                                                

9   registered under the investment advisers act of 1940.                       

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

13  rules or regulations adopted under that provision.                          

                                                                                

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

                                                                                

15  the administrator or a designee of the administrator.                       

                                                                                

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

                                                                                

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

                                                                                

18  securities by locating, introducing, or referring potential                 

                                                                                

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

                                                                                

20  actions are solely incidental to a transaction exempt pursuant to           

                                                                                

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

                                                                                

22  exclude other persons from this definition.                                 

                                                                                

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

                                                                                

24  limited to, common law deceit.                                              

                                                                                

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

                                                                                

26  principal and all interest.                                                 

                                                                                

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


                                                                                

1   requires:                                                                   

                                                                                

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

                                                                                

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

                                                                                

4                                                                                (i) A depository institution or international banking                               

                                                                                

5   institution.                                                                

                                                                                

6       (ii) An insurance company.                                                   

                                                                                

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

                                                                                

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

                                                                                

9   company act of 1940.                                                        

                                                                                

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

                                                                                

11  act of 1934.                                                                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

16  broker-dealer registered under the securities exchange act of               

                                                                                

17  1934, an investment adviser registered or exempt from                       

                                                                                

18  registration under the investment advisers act of 1940, an                  

                                                                                

19  investment adviser registered under this act, a depository                  

                                                                                

20  institution, or an insurance company.                                       

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

25  $10,000,000.00 or its investment decisions are made by a duly               

                                                                                

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

                                                                                

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


                                                                                

1   broker-dealer registered under the securities exchange act of               

                                                                                

2   1934, an investment adviser registered or exempt from                       

                                                                                

3   registration under the investment advisers act of 1940, an                  

                                                                                

4   investment adviser registered under this act, a depository                  

                                                                                

5   institution, or an insurance company.                                       

                                                                                

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

                                                                                

7   $10,000,000.00, its trustee is a depository institution, and its            

                                                                                

8   participants are exclusively plans of the types identified in               

                                                                                

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

                                                                                

10  except a trust that includes as participants self-directed                  

                                                                                

11  individual retirement accounts or similar self-directed plans.              

                                                                                

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

                                                                                

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

                                                                                

14  or similar business trust, limited liability company, or                    

                                                                                

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

                                                                                

16  securities offered, with total assets in excess of                          

                                                                                

17  $10,000,000.00.                                                             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  80b-2, with total assets in excess of $10,000,000.00.                       

                                                                                

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

                                                                                

26  account.                                                                    

                                                                                

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


                                                                                

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

                                                                                

2   securities act of 1933, 17 CFR 230.144A(a)(1).                              

                                                                                

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

                                                                                

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

                                                                                

5   1934, 17 CFR 240.15a-6(b)(4)(i).                                            

                                                                                

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

                                                                                

7   institutional character with total assets in excess of                      

                                                                                

8   $10,000,000.00 not organized for the specific purpose of evading            

                                                                                

9   this act.                                                                   

                                                                                

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

                                                                                

11  act.                                                                        

                                                                                

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

                                                                                

13  insurance company whose primary business is writing insurance or            

                                                                                

14  reinsuring risks underwritten by insurance companies and which is           

                                                                                

15  subject to supervision by the insurance commissioner or a similar           

                                                                                

16  official or agency of a state.                                              

                                                                                

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

                                                                                

18  and all interest.                                                           

                                                                                

19      (d) "International banking institution" means an                            

                                                                                

20  international financial institution of which the United States is           

                                                                                

21  a member and whose securities are exempt from registration under            

                                                                                

22  the securities act of 1933.                                                 

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

1   regular business, issues or promulgates analyses or reports                 

                                                                                

2   concerning securities.  The term includes a financial planner or            

                                                                                

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

                                                                                

4   related services, provides investment advice to others for                  

                                                                                

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

                                                                                

6   providing investment advice to others for compensation.  The term           

                                                                                

7   does not include any of the following:                                      

                                                                                

8                                                                                (i) An investment adviser representative.                                           

                                                                                

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

                                                                                

10  performance of investment advice is solely incidental to the                

                                                                                

11  practice of the person's profession.                                        

                                                                                

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

                                                                                

13  investment advice is solely incidental to the conduct of business           

                                                                                

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

                                                                                

15  for the investment advice.                                                  

                                                                                

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

                                                                                

17  business or financial publication of general and regular                    

                                                                                

18  circulation.                                                                

                                                                                

19      (v) A federal covered investment adviser.                                   

                                                                                

20      (vi) A bank or savings institution.                                          

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  act.                                                                        

                                                                                

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

                                                                                

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

                                                                                

27  employed by or associated with an investment adviser or federal             


                                                                                

1   covered investment adviser and who makes any recommendations or             

                                                                                

2   otherwise gives investment advice regarding securities, manages             

                                                                                

3   accounts or portfolios of clients, determines which                         

                                                                                

4   recommendation or advice regarding securities should be given,              

                                                                                

5   provides investment advice or holds himself or herself out as               

                                                                                

6   providing investment advice, receives compensation to solicit,              

                                                                                

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

                                                                                

8   advice, or supervises employees who perform any of the                      

                                                                                

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

                                                                                

10  of the following:                                                           

                                                                                

11                                                                               (i) Performs only clerical or ministerial acts.                                     

                                                                                

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

                                                                                

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

                                                                                

14  not receive special compensation for investment advisory                    

                                                                                

15  services.                                                                   

                                                                                

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

                                                                                

17  investment adviser, unless the individual meets any of the                  

                                                                                

18  following:                                                                  

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  80b-3a.                                                                     

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

5   a security, subject to the following:                                       

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

9   individuals performing similar functions, is the person                     

                                                                                

10  performing the acts and assuming the duties of depositor or                 

                                                                                

11  manager pursuant to the trust or other agreement or instrument              

                                                                                

12  under which the security is issued.                                         

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

17  otherwise contractually responsible for assuring payment of the             

                                                                                

18  certificate.                                                                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  interests for the purpose of sale.                                          

                                                                                

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

                                                                                

26  requires:                                                                   

                                                                                

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


                                                                                

1   a transaction or distribution not directly or indirectly for the            

                                                                                

2   benefit of the issuer.                                                      

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

9   trust, estate, trust, partnership, limited liability company,               

                                                                                

10  limited liability partnership, association, joint venture, or               

                                                                                

11  government; a governmental subdivision, agency, or                          

                                                                                

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

                                                                                

13  commercial entity.                                                          

                                                                                

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

                                                                                

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

                                                                                

16  following:                                                                  

                                                                                

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

                                                                                

18  or federal covered investment adviser regularly provides                    

                                                                                

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

                                                                                

20  otherwise communicates with customers or clients.                           

                                                                                

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

                                                                                

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

                                                                                

23  adviser, or federal covered investment adviser provides brokerage           

                                                                                

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

                                                                                

25  communicates with customers or clients.                                     

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

2   amendment is not filed, the prospectus or prospectus supplement             

                                                                                

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

                                                                                

4   of the offering price, underwriting and selling discounts or                

                                                                                

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

                                                                                

6   and other matters dependent upon the offering price.                        

                                                                                

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

                                                                                

8   investment adviser means the executive office of the                        

                                                                                

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

                                                                                

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

                                                                                

11  direct, control, and coordinate the activities of the                       

                                                                                

12  broker-dealer or investment adviser.                                        

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

16  medium and is retrievable in perceivable form.                              

                                                                                

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

                                                                                

18  requires:                                                                   

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  the following:                                                              

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

1   offered and sold for value.                                                 

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

6   future right or privilege to convert the security into another              

                                                                                

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

                                                                                

8   other security.                                                             

                                                                                

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

                                                                                

10  States securities and exchange commission.                                  

                                                                                

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

                                                                                

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

                                                                                

13  interest or participation in a profit-sharing agreement;                    

                                                                                

14  collateral trust certificate; preorganization certificate or                

                                                                                

15  subscription; transferable share; investment contract; voting               

                                                                                

16  trust certificate; certificate of deposit for a security;                   

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

23  option, or privilege entered into on a national securities                  

                                                                                

24  exchange relating to foreign currency; an investment in a                   

                                                                                

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

                                                                                

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

                                                                                

27  certificate of interest or participation in, temporary or interim           


                                                                                

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

                                                                                

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

                                                                                

3   following apply to the term security:                                       

                                                                                

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

                                                                                

5   arrangement that meets all of the following:                                

                                                                                

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

                                                                                

7   issuer under the arrangement.                                               

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

13  understanding that a valuable tangible benefit will accrue to the           

                                                                                

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

                                                                                

15  enterprise.                                                                 

                                                                                

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

                                                                                

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

                                                                                

18  the enterprise in a meaningful way.                                         

                                                                                

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

                                                                                

20  affiliates anticipate that financial gain may be realized as a              

                                                                                

21  result of the furnishing.                                                   

                                                                                

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

                                                                                

23  uncertificated security.                                                    

                                                                                

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

                                                                                

25  policy or annuity contract under which an insurance company                 

                                                                                

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

                                                                                

27  sum or periodically for life or other specified period.                     


                                                                                

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

                                                                                

2   or noncontributory pension or welfare plan subject to the                   

                                                                                

3   employee retirement income security act of 1974.                            

                                                                                

4       (v) The term includes, as an investment contract, an                        

                                                                                

5   investment in a common enterprise with the expectation of profits           

                                                                                

6   to be derived primarily from the efforts of a person other than             

                                                                                

7   the investor.  As used in this subparagraph, a "common                      

                                                                                

8   enterprise" means an enterprise in which the fortunes of the                

                                                                                

9   investor are interwoven with those of either the person offering            

                                                                                

10  the investment, a third party, or other investors.                          

                                                                                

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

                                                                                

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

                                                                                

13  or a limited liability partnership.                                         

                                                                                

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

                                                                                

15  securities exchange registered under the securities exchange act            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  the municipal securities rule-making board established under the            

                                                                                

20  securities exchange act of 1934.                                            

                                                                                

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

                                                                                

22  adopt a record, either of the following:                                    

                                                                                

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

                                                                                

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

                                                                                

25  electronic symbol, sound, or process.                                       

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

2   the jurisdiction of the United States.                                      

                                                                                

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

                                                                                

4   act:                                                                        

                                                                                

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

                                                                                

6   act, 7 USC 1 to 25.                                                         

                                                                                

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

                                                                                

8   act" means the electronic signatures in global and national                 

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

12  93-406, 88 Stat. 829.                                                       

                                                                                

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

                                                                                

14  revenue code of 1986.                                                       

                                                                                

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

                                                                                

16  advisers act of 1940, title II of chapter 686, 15 USC 80b-1 to              

                                                                                

17  80b-21.                                                                     

                                                                                

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

                                                                                

19  company act of 1940, title I of chapter 686, 15 USC 80a-1 to                

                                                                                

20  80a-64.                                                                     

                                                                                

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

                                                                                

22  chapter 847, 48 Stat. 1246.                                                 

                                                                                

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

                                                                                

24  public utility holding company act of 1935, title I of chapter              

                                                                                

25  687, 15 USC 79 to 79z-6.                                                    

                                                                                

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

                                                                                

27  1933, title I of chapter 38, 15 USC 77a to 77aa.                            


                                                                                

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

                                                                                

2   exchange act of 1934, chapter 404, 48 Stat. 881.                            

                                                                                

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

                                                                                

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

                                                                                

5   Stat. 1636.                                                                 

                                                                                

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

                                                                                

7   means the securities litigation uniform standards act of 1998,              

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

11  Stat. 689.                                                                  

                                                                                

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

                                                                                

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

                                                                                

14  regulations adopted under that statute.  The administrator may,             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

20  or regulation adopted under a federal statute defined in                    

                                                                                

21  subsection (1).                                                             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

25  department.                                                                 

                                                                                

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

                                                                                

27  electronic signatures in global and national commerce act, but              


                                                                                

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

                                                                                

2   15 USC 7001, or authorize electronic delivery of any of the                 

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

7   15 USC 7004.                                                                

                                                                                

8                               ARTICLE 2                                       

                                                                                

9               EXEMPTIONS FROM REGISTRATION OF SECURITIES                      

                                                                                

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

                                                                                

11  requirements of sections 301 to 306 and 504:                                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

18  person controlled or supervised by and acting as an                         

                                                                                

19  instrumentality of the United States under authority granted by             

                                                                                

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

                                                                                

21  foregoing.                                                                  

                                                                                

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

                                                                                

23  government with which the United States maintains diplomatic                

                                                                                

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

                                                                                

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

                                                                                

26  guarantor.                                                                  

                                                                                

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


                                                                                

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

                                                                                

2   guaranteed by, any of the following:                                        

                                                                                

3                                                                                (i) An international banking institution.                                           

                                                                                

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

                                                                                

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

                                                                                

6   depository institution a substantial portion of the business of             

                                                                                

7   which consists or will consist of either receiving deposits or              

                                                                                

8   share accounts that are insured to the maximum amount authorized            

                                                                                

9   by statute by the federal deposit insurance corporation, the                

                                                                                

10  national credit union share insurance fund, or a successor                  

                                                                                

11  authorized by federal law or exercising fiduciary powers that are           

                                                                                

12  similar to those permitted for national banks under the authority           

                                                                                

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

                                                                                

14  Law 87-722, 12 USC 92a.                                                     

                                                                                

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

                                                                                

16  order the administrator proceeds under section 204.                         

                                                                                

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

                                                                                

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

                                                                                

19  authorized to do business in this state.                                    

                                                                                

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

                                                                                

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

                                                                                

22  that is any of the following:                                               

                                                                                

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

                                                                                

24  United States or a state.                                                   

                                                                                

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

                                                                                

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

                                                                                

27  province or territory.                                                      


                                                                                

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

                                                                                

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

                                                                                

3   registered holding company within the meaning of that act.                  

                                                                                

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

                                                                                

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

                                                                                

6   or approved for listing on another securities market specified by           

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

10  of securities or foreign currencies issued by a clearing agency             

                                                                                

11  registered under the securities exchange act of 1934 and listed             

                                                                                

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

                                                                                

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

                                                                                

14  national securities association registered under the securities             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  security designated by the securities and exchange commission               

                                                                                

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

                                                                                

21  78i.                                                                        

                                                                                

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

                                                                                

23  exclusively for religious, educational, benevolent, fraternal,              

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

1   excluded from the definition of an investment company under                 

                                                                                

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

                                                                                

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

                                                                                

4   debenture, or other evidence of indebtedness by a person                    

                                                                                

5   described in this subdivision, the administrator by rule may                

                                                                                

6   limit the availability of this exemption by classifying                     

                                                                                

7   securities, persons, and transactions, imposing different                   

                                                                                

8   requirements for different classes, specifying with respect to              

                                                                                

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

                                                                                

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

                                                                                

11  of the following:                                                           

                                                                                

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

                                                                                

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

                                                                                

14  advertising literature to be used and provide that the exemption            

                                                                                

15  becomes effective if the administrator does not disallow the                

                                                                                

16  exemption within the period established by the rule.                        

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

20  advertising literature; the filing of consent to service of                 

                                                                                

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

                                                                                

22  suspension of the exemption.                                                

                                                                                

23      (iii) To register under section 304.                                         

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

27  nonprofit membership cooperative under the cooperative laws of a            


                                                                                

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

                                                                                

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

                                                                                

3   fide members of the cooperative.                                            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

8   act of 1933, 15 USC 77r.                                                    

                                                                                

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

                                                                                

10  the requirements of sections 301 to 306 and 504:                            

                                                                                

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

                                                                                

12  through a broker-dealer or not.                                             

                                                                                

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

                                                                                

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

                                                                                

15  resale transaction by a sponsor of a unit investment trust                  

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  the date of the transaction:                                                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

26  an unidentified person.                                                     

                                                                                

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


                                                                                

1   its current market price.                                                   

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

5   redistribution.                                                             

                                                                                

6       (iv) One of the following:                                                   

                                                                                

7       (A) A nationally recognized securities manual or its                        

                                                                                

8   electronic equivalent designated by rule or order under this act            

                                                                                

9   or a record filed with the securities and exchange commission               

                                                                                

10  that is publicly available and that contains all of the                     

                                                                                

11  following:                                                                  

                                                                                

12      (I) A description of the business and operations of the                     

                                                                                

13  issuer.                                                                     

                                                                                

14      (II) The names of the issuer's executive officers and the                   

                                                                                

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

                                                                                

16      (III) An audited balance sheet of the issuer as of a date                   

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

20  forma balance sheet for the combined entity.                                

                                                                                

21      (IV) An audited income statement for each of the issuer's 2                 

                                                                                

22  immediately previous fiscal years or for the period of existence            

                                                                                

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

                                                                                

24  reorganization or merger when each party to the reorganization or           

                                                                                

25  merger had audited income statements, a pro forma income                    

                                                                                

26  statement.                                                                  

                                                                                

27      (B) The issuer of the security has a class of equity                        


                                                                                

1   securities listed on a national securities exchange registered              

                                                                                

2   under the securities exchange act of 1934 or designated for                 

                                                                                

3   trading on the national association of securities dealers                   

                                                                                

4   automated quotation system, unless the issuer of the security is            

                                                                                

5   a unit investment trust registered under the investment company             

                                                                                

6   act of 1940; or the issuer of the security, including its                   

                                                                                

7   predecessors, has been engaged in continuous business for at                

                                                                                

8   least 3 years; or the issuer of the security has total assets of            

                                                                                

9   at least $2,000,000.00 based on an audited balance sheet as of a            

                                                                                

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

                                                                                

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

                                                                                

12  reorganization or merger each had the audited balance sheet, a              

                                                                                

13  pro forma balance sheet for the combined entity.                            

                                                                                

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

                                                                                

15  registered or exempt from registration under this act in a                  

                                                                                

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

                                                                                

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

                                                                                

18  federal reserve system.                                                     

                                                                                

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

                                                                                

20  registered or exempt from registration under this act in an                 

                                                                                

21  outstanding security if the guarantor of the security files                 

                                                                                

22  reports with the securities and exchange commission under the               

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

26  registered or exempt from registration under this act in a                  

                                                                                

27  security that meets 1 or more of the following:                             


                                                                                

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

                                                                                

2   recognized statistical rating organization in 1 of its 4 highest            

                                                                                

3   rating categories.                                                          

                                                                                

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

                                                                                

5   both of the following are met:                                              

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

10  security.                                                                   

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

17  acquisition of, an unidentified person.                                     

                                                                                

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

                                                                                

19  registered or exempt from registration under this act effecting             

                                                                                

20  an unsolicited order or offer to purchase.                                  

                                                                                

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

                                                                                

22  without any purpose of evading this act.                                    

                                                                                

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

                                                                                

24  adviser with investments under management in excess of                      

                                                                                

25  $100,000,000.00 acting in the exercise of discretionary authority           

                                                                                

26  in a signed record for the account of others.                               

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

4   conditions of the issuance and exchange or the delivery and                 

                                                                                

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

                                                                                

6   approved by the administrator at a hearing.                                 

                                                                                

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

                                                                                

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

                                                                                

9   underwriters.                                                               

                                                                                

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

                                                                                

11  evidence of indebtedness secured by a mortgage or other security            

                                                                                

12  agreement if all of the following are met:                                  

                                                                                

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

                                                                                

14  indebtedness is offered and sold with the mortgage or other                 

                                                                                

15  security agreement as a unit.                                               

                                                                                

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

                                                                                

17  transaction is not made.                                                    

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

23  conservator.                                                                

                                                                                

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

                                                                                

25                                                                               (i) An institutional investor.                                                      

                                                                                

26      (ii) A federal covered investment adviser.                                   

                                                                                

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


                                                                                

1   act.                                                                        

                                                                                

2       (n) A sale or an offer to sell securities of an issuer, if                  

                                                                                

3   part of a single issue in which all of the following are met:               

                                                                                

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

                                                                                

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

                                                                                

6   subdivision (m).                                                            

                                                                                

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

                                                                                

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

                                                                                

9   securities.                                                                 

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

13  under this act for soliciting a prospective purchaser in this               

                                                                                

14  state.                                                                      

                                                                                

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

                                                                                

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

                                                                                

17  purchasing for investment.                                                  

                                                                                

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

                                                                                

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

                                                                                

20  transaction are holders of convertible securities, options, or              

                                                                                

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

                                                                                

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

                                                                                

23  for soliciting a security holder in this state.                             

                                                                                

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

                                                                                

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

                                                                                

26  of the following are met:                                                   

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

5   issued against the offeror by the administrator or the securities           

                                                                                

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

                                                                                

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

                                                                                

8   the offeror to be pending.                                                  

                                                                                

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

                                                                                

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

                                                                                

11  following are met:                                                          

                                                                                

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

                                                                                

13  but is not effective.                                                       

                                                                                

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

                                                                                

15  offerees in compliance with a rule adopted by the administrator             

                                                                                

16  under this act.                                                             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

20  not known by the offeror to be pending.                                     

                                                                                

21      (r) A transaction involving the distribution of the                         

                                                                                

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

                                                                                

23  in connection with a merger, consolidation, exchange of                     

                                                                                

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

                                                                                

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

                                                                                

26  parent or subsidiary, are parties.                                          

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

4   foreign jurisdiction in which the offeree or purchaser is present           

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

9   interests, and guarantees issued under a compensatory benefit               

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

13  participation of their employees including any of the following:            

                                                                                

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

                                                                                

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

                                                                                

16  or consultants and advisors.                                                

                                                                                

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

                                                                                

18  persons through gifts or domestic relations orders.                         

                                                                                

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

                                                                                

20  trustees, officers, consultants, and advisors if those                      

                                                                                

21  individuals were employed by or providing services to the issuer            

                                                                                

22  when the securities were offered.                                           

                                                                                

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

                                                                                

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

                                                                                

25  50% of their annual income from those organizations.                        

                                                                                

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

                                                                                

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


                                                                                

1   whether the corporation or other business organization                      

                                                                                

2   distributing the dividend or equivalent equity distribution is              

                                                                                

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

                                                                                

4   or other equity holders for the dividend or equivalent equity               

                                                                                

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

                                                                                

6   property dividend if each stockholder or other equity holder may            

                                                                                

7   elect to take the dividend or equivalent equity distribution in             

                                                                                

8   cash, property, or stock.                                                   

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

12  in exchange and partly for cash.                                            

                                                                                

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

                                                                                

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

                                                                                

15  securities act of 1933, 17 CFR 230.162.                                     

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  are met:                                                                    

                                                                                

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

                                                                                

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

                                                                                

22  of the administrator, and has been subject to continuous                    

                                                                                

23  reporting requirements in the foreign jurisdiction for not less             

                                                                                

24  than 180 days before the transaction.                                       

                                                                                

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

                                                                                

26  securities exchange that has been designated in subsection                  

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

3   subscribe to any of the foregoing.                                          

                                                                                

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

                                                                                

5   apply:                                                                      

                                                                                

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

                                                                                

7   designated foreign jurisdiction and the Toronto stock exchange,             

                                                                                

8   inc., is a designated securities exchange.                                  

                                                                                

9       (b) After an administrative hearing in compliance with                      

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

13  finds that revocation is necessary or appropriate in the public             

                                                                                

14  interest and for the protection of investors.                               

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  504, and a rule or order under this act may waive any or all of             

                                                                                

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

                                                                                

21  202.                                                                        

                                                                                

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

                                                                                

23  security or a transaction involving a federal covered security,             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

27  waiver created under section 203 with respect to a specific                 


                                                                                

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

                                                                                

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

                                                                                

3   604.                                                                        

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

9                               ARTICLE 3                                       

                                                                                

10  REGISTRATION OF SECURITIES AND NOTICE FILINGS OF FEDERAL COVERED           

                                                                                

11                              SECURITIES                                      

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

16  registration under sections 201 to 203.                                     

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

23  sections 201 to 203:                                                        

                                                                                

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

                                                                                

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

                                                                                

26  statement filed with the securities and exchange commission under           

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

4   federal registration statement filed with the securities and                

                                                                                

5   exchange commission under the securities act of 1933.                       

                                                                                

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

                                                                                

7   registered or that has filed a registration statement under the             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

11  effectiveness with the securities and exchange commission or the            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

15  subsection (1):                                                             

                                                                                

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

                                                                                

17  commencing upon the later of the effectiveness of the offering              

                                                                                

18  with the securities and exchange commission or the                          

                                                                                

19  administrator's receipt of the notice filing.                               

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  prior notice period.                                                        

                                                                                

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

                                                                                

26  administrator a notice of termination as prescribed by the                  

                                                                                

27  administrator.  The termination is effective upon the                       


                                                                                

1   administrator's receipt of the notice of termination.                       

                                                                                

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

                                                                                

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

                                                                                

4   15 USC 77r, the issuer shall file all of the following:                     

                                                                                

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

                                                                                

6   a form approved by the administrator.                                       

                                                                                

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

                                                                                

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

                                                                                

9   security in this state.                                                     

                                                                                

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

                                                                                

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

                                                                                

12  filing of any document filed with the securities and exchange               

                                                                                

13  commission under the securities act of 1933 and a nonrefundable             

                                                                                

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

                                                                                

15  security.                                                                   

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  1933, 15 USC 77r, if it finds that the order is in the public               

                                                                                

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

                                                                                

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

                                                                                

22  of this section by rule or order.                                           

                                                                                

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

                                                                                

24  filing under subsection (3):                                                

                                                                                

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

                                                                                

26  the renewal is 1 of the following:                                          

                                                                                

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


                                                                                

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

                                                                                

2   less, $100.00.                                                              

                                                                                

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

                                                                                

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

                                                                                

5   $250,000.00 but not more than $700,000.00, $400.00.                         

                                                                                

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

                                                                                

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

                                                                                

8   $700,000.00 but not more than $1,000,000.00, $800.00.                       

                                                                                

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

                                                                                

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

                                                                                

11  $1,000,000.00, $1,400.00.                                                   

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

17  1-year notice filing period.                                                

                                                                                

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

                                                                                

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

                                                                                

20  for that period that the issuer had submitted to the                        

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

25  shall be the greater of the following:                                      

                                                                                

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

                                                                                

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


                                                                                

1   actual sales during the current notice filing period as the                 

                                                                                

2   projected sales for the renewal notice filing period.                       

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

9   adjustment of the renewal fee for any renewal period.                       

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

15  a renewal of a notice filing.                                               

                                                                                

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

                                                                                

17  1-year notice filing periods an issuer's nonexempt sales of a               

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

23  subdivision (c), if any.                                                    

                                                                                

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

                                                                                

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

                                                                                

26  administrator may issue a stop order suspending the offer and               

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

4   penalty may be imposed by the administrator.                                

                                                                                

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

                                                                                

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

                                                                                

7   with the same offering may be registered by coordination under              

                                                                                

8   this section.                                                               

                                                                                

9       (2) A registration statement and accompanying records under                 

                                                                                

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

                                                                                

11  following records in addition to the information specified in               

                                                                                

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

                                                                                

13  section 611:                                                                

                                                                                

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

                                                                                

15  securities act of 1933.                                                     

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  other instrument governing the issuance of the security to be               

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  the administrator.                                                          

                                                                                

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

                                                                                

26  prospectus, other than an amendment that delays the effective               

                                                                                

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


                                                                                

1   with the securities and exchange commission.                                

                                                                                

2       (3) A registration statement under this section becomes                     

                                                                                

3   effective simultaneously with or subsequent to the federal                  

                                                                                

4   registration statement when all the following conditions are                

                                                                                

5   satisfied:                                                                  

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

9   412.                                                                        

                                                                                

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

                                                                                

11  20 days or a shorter period provided by rule or order under this            

                                                                                

12  act.                                                                        

                                                                                

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

                                                                                

14  a record of the date when the federal registration statement                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  denying effectiveness to the registration statement or suspending           

                                                                                

20  its effectiveness until compliance with this section.  The                  

                                                                                

21  administrator shall promptly notify the registrant of an order by           

                                                                                

22  telegram, telephone, or electronic means and promptly confirm               

                                                                                

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

                                                                                

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

                                                                                

25  void as of the date of its issuance.                                        

                                                                                

26      (5) If the federal registration statement becomes effective                 

                                                                                

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


                                                                                

1   waived by the administrator, the registration statement is                  

                                                                                

2   automatically effective under this act when all the conditions              

                                                                                

3   are satisfied or waived.  If the registrant notifies the                    

                                                                                

4   administrator of the date when the federal registration statement           

                                                                                

5   is expected to become effective, the administrator shall promptly           

                                                                                

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

                                                                                

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

                                                                                

8   all the conditions are satisfied or waived and whether the                  

                                                                                

9   administrator intends the institution of a proceeding under                 

                                                                                

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

                                                                                

11  the institution of a proceeding under section 306.                          

                                                                                

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

                                                                                

13  under this section.                                                         

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

18  records:                                                                    

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  general competitive conditions in the industry or business in               

                                                                                

25  which it is or will be engaged.                                             

                                                                                

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

                                                                                

27  and other person having a similar status or performing similar              


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

4   the registration statement, the amount of the securities covered            

                                                                                

5   by the registration statement to which the person has indicated             

                                                                                

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

                                                                                

7   interest of the person in any material transaction with the                 

                                                                                

8   issuer or a significant subsidiary effected within the previous 3           

                                                                                

9   years or proposed to be effected.                                           

                                                                                

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

                                                                                

11  aggregate sum of the remuneration paid to those persons during              

                                                                                

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

                                                                                

13  12 months, directly or indirectly, by the issuer, and all                   

                                                                                

14  predecessors, parents, subsidiaries, and affiliates of the                  

                                                                                

15  issuer.                                                                     

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  consideration for the payment.                                              

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

1   the person as of the date of the filing of the registration                 

                                                                                

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

                                                                                

3   in any material transaction with the issuer or any significant              

                                                                                

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

                                                                                

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

                                                                                

6   offering.                                                                   

                                                                                

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

                                                                                

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

                                                                                

9   subsidiary, including a description of each security outstanding            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

15  its securities.                                                             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

22  cash, the estimated aggregate underwriting and selling discounts            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

27  determining them and their maximum and minimum amounts, the                 


                                                                                

1   estimated amounts of other selling expenses, including legal,               

                                                                                

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

                                                                                

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

                                                                                

4   underwriting or selling group agreement under which the                     

                                                                                

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

                                                                                

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

                                                                                

7   description of the plan of distribution of any securities that              

                                                                                

8   are to be offered otherwise than through an underwriter.                    

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  received commissions in connection with the acquisition, and the            

                                                                                

20  amounts of the commissions and other expenses in connection with            

                                                                                

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

                                                                                

22  the acquisition.                                                            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

1   in the aggregate of those options.                                          

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

6   registration statement or that was made within the previous 2               

                                                                                

7   years, and a copy of the contract.                                          

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

11  or proceeding known to be contemplated by governmental                      

                                                                                

12  authorities.                                                                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

16  any solicitation of interest used in compliance with section                

                                                                                

17  202(q)(ii).                                                                  

                                                                                

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

                                                                                

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

                                                                                

20  articles of incorporation and bylaws, or their substantial                  

                                                                                

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

                                                                                

22  instrument covering the security to be registered.                          

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

26  which states whether the security when sold will be validly                 

                                                                                

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


                                                                                

1   binding obligation of the issuer.                                           

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

7   connection with the registration statement.                                 

                                                                                

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

                                                                                

9   months before the filing of the registration statement, a                   

                                                                                

10  statement of income and changes in financial position for each of           

                                                                                

11  the 3 fiscal years preceding the date of the balance sheet and              

                                                                                

12  for any period between the close of the immediately previous                

                                                                                

13  fiscal year and the date of the balance sheet, or for the period            

                                                                                

14  of the issuer's and any predecessor's existence if less than 3              

                                                                                

15  years, and, if any part of the proceeds of the offering is to be            

                                                                                

16  applied to the purchase of a business, the financial statements             

                                                                                

17  that would be required if that business were the registrant.                

                                                                                

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

                                                                                

19  order under this act.                                                       

                                                                                

20      (3) A registration statement under this section becomes                     

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  all of the following apply:                                                 

                                                                                

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

                                                                                

26  pending under section 306.                                                  

                                                                                

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


                                                                                

1   306 delaying effectiveness.                                                 

                                                                                

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

                                                                                

3   effectiveness be delayed.                                                   

                                                                                

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

                                                                                

5   more than 90 days if the administrator determines the                       

                                                                                

6   registration statement is not complete in all material respects             

                                                                                

7   and promptly notifies the applicant or registrant of that                   

                                                                                

8   determination.  The administrator may also delay effectiveness              

                                                                                

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

                                                                                

10  administrator determines that the delay is necessary or                     

                                                                                

11  appropriate.                                                                

                                                                                

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

                                                                                

13  of registration under this section that a prospectus containing a           

                                                                                

14  specified part of the information or record specified in                    

                                                                                

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

                                                                                

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

                                                                                

17  following:                                                                  

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

23  person as a participant in the distribution.                                

                                                                                

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

                                                                                

25  the person.                                                                 

                                                                                

26      (c) Payment pursuant to the sale.                                           

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

3   broker-dealer registered under this act.                                    

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

11  $100.00 if the initial review has not been commenced, and the               

                                                                                

12  full filing fee after review has been commenced.                            

                                                                                

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

                                                                                

14  must specify all of the following:                                          

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

18  filed.                                                                      

                                                                                

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

                                                                                

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

                                                                                

21  securities and exchange commission, or a court.                             

                                                                                

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

                                                                                

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

                                                                                

24  may be incorporated by reference in the registration statement to           

                                                                                

25  the extent that the record is currently accurate.                           

                                                                                

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

                                                                                

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


                                                                                

1   unless it is known to the person filing the registration                    

                                                                                

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

                                                                                

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

                                                                                

4   unreasonable effort or expense.                                             

                                                                                

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

                                                                                

6   of registration that a security issued within the previous 5                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

11  this state be impounded until the issuer receives a specified               

                                                                                

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

                                                                                

13  elsewhere.  The conditions of any escrow or impoundment required            

                                                                                

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

                                                                                

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

                                                                                

16  institution solely because of its location in another state.                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  a registration statement is effective for 1 year after its                  

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

3   part of an unsold allotment or subscription taken as a                      

                                                                                

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

                                                                                

5   transaction, all outstanding securities of the same class                   

                                                                                

6   identified in the registration statement as a security registered           

                                                                                

7   under this act are considered to be registered while the                    

                                                                                

8   registration statement is effective.  If any securities of the              

                                                                                

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

                                                                                

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

                                                                                

11  statement may be withdrawn only with the approval of the                    

                                                                                

12  administrator.                                                              

                                                                                

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

                                                                                

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

                                                                                

15  registration statement to file reports, not more often than                 

                                                                                

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

                                                                                

17  registration statement reasonably current and to disclose the               

                                                                                

18  progress of the offering.                                                   

                                                                                

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

                                                                                

20  effective date.  The posteffective amendment becomes effective              

                                                                                

21  when the administrator so orders.  If a posteffective amendment             

                                                                                

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

                                                                                

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

                                                                                

24  registration fee calculated in the manner specified in subsection           

                                                                                

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

                                                                                

26  offering of the additional securities being registered if the               

                                                                                

27  amendment is filed and the additional registration fee is paid              


                                                                                

1   within 1 year after the date of the sale.                                   

                                                                                

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

                                                                                

3   denying effectiveness to, or suspending or revoking the                     

                                                                                

4   effectiveness of, a registration statement if the administrator             

                                                                                

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

                                                                                

6   of the following apply:                                                     

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

13  misleading with respect to a material fact.                                 

                                                                                

14      (b) This act or a rule adopted or order issued under this act               

                                                                                

15  or a condition imposed under this act has been willfully                    

                                                                                

16  violated, in connection with the offering, by the person filing             

                                                                                

17  the registration statement; by the issuer, a partner, officer, or           

                                                                                

18  director of the issuer or a person having a similar status or               

                                                                                

19  performing a similar function; a promoter of the issuer or a                

                                                                                

20  person directly or indirectly controlling or controlled by the              

                                                                                

21  issuer; but only if the person filing the registration statement            

                                                                                

22  is directly or indirectly controlled by or acting for the issuer;           

                                                                                

23  or by an underwriter.                                                       

                                                                                

24      (c) The security registered or sought to be registered is the               

                                                                                

25  subject of a permanent or temporary injunction of a court of                

                                                                                

26  competent jurisdiction or an administrative stop order or similar           

                                                                                

27  order issued under any federal, foreign, or state law other than            


                                                                                

1   this act applicable to the offering, but the administrator shall            

                                                                                

2   not institute a proceeding against an effective registration                

                                                                                

3   statement under this paragraph more than 1 year after the date of           

                                                                                

4   the order or injunction on which it is based, and the                       

                                                                                

5   administrator shall not issue an order under this subdivision on            

                                                                                

6   the basis of an order or injunction issued under the securities             

                                                                                

7   act of another state unless the order or injunction was based on            

                                                                                

8   conduct that would constitute, as of the date of the order, a               

                                                                                

9   ground for a stop order under this section.                                 

                                                                                

10      (d) The issuer's enterprise or method of business includes or               

                                                                                

11  would include activities that are unlawful where performed.                 

                                                                                

12      (e) With respect to a security sought to be registered under                

                                                                                

13  section 303, there has been a failure to comply with the                    

                                                                                

14  undertaking required by section 303(2)(d).                                  

                                                                                

15      (f) The applicant or registrant has not paid the proper                     

                                                                                

16  filing fee, but the administrator shall void the order if the               

                                                                                

17  deficiency is corrected.                                                    

                                                                                

18      (g) One or more of the following apply to the offering:                     

                                                                                

19                                                                               (i) The offering will work or tend to work a fraud upon                             

                                                                                

20  purchasers or would so operate.                                             

                                                                                

21      (ii) The offering has been or would be made with unreasonable                

                                                                                

22  amounts of underwriters' and sellers' discounts, commissions, or            

                                                                                

23  other compensation, promoters' profits or participations, or                

                                                                                

24  unreasonable amounts or kinds of options.                                   

                                                                                

25      (iii) The offering is being made on terms that are unfair,                   

                                                                                

26  unjust, or inequitable.                                                     

                                                                                

27      (2) To the extent practicable, the administrator by rule or                 


                                                                                

1   order under this act shall publish guidelines, rules, or orders             

                                                                                

2   that provide notice of conduct that violates subsection (1)(g).             

                                                                                

3       (3) The administrator shall not institute a stop order                      

                                                                                

4   proceeding against an effective registration statement on the               

                                                                                

5   basis of conduct or a transaction known to the administrator when           

                                                                                

6   the registration statement became effective unless the proceeding           

                                                                                

7   is instituted within 30 days after the registration statement               

                                                                                

8   became effective.                                                           

                                                                                

9       (4) The administrator may summarily revoke, deny, postpone,                 

                                                                                

10  or suspend the effectiveness of a registration statement pending            

                                                                                

11  final determination of an administrative proceeding.  Upon the              

                                                                                

12  issuance of the order, the administrator shall promptly notify              

                                                                                

13  each person specified in subsection (5) that the order has been             

                                                                                

14  issued, the reasons for the revocation, denial, postponement, or            

                                                                                

15  suspension, and that within 15 days after the receipt of a                  

                                                                                

16  request in a record from the person the matter will be scheduled            

                                                                                

17  for a hearing.  If a hearing is not requested and none is ordered           

                                                                                

18  by the administrator, within 30 days after the date of service of           

                                                                                

19  the order, the order becomes final.  If a hearing is requested or           

                                                                                

20  ordered, the administrator, after notice of and opportunity for             

                                                                                

21  hearing for each person subject to the order, may modify or                 

                                                                                

22  vacate the order or extend the order until final determination.             

                                                                                

23      (5) The administrator shall not issue a stop order under this               

                                                                                

24  section until all of the following have occurred:                           

                                                                                

25      (a) Appropriate notice has been given to the applicant or                   

                                                                                

26  registrant, the issuer, and the person on whose behalf the                  

                                                                                

27  securities are to be or have been offered.                                  


                                                                                

1       (b) An opportunity for hearing has been given to the                        

                                                                                

2   applicant or registrant, the issuer, and the person on whose                

                                                                                

3   behalf the securities are to be or have been offered.                       

                                                                                

4       (c) Findings of fact and conclusions of law in a record in                  

                                                                                

5   accordance with the administrative procedures act of 1969, 1969             

                                                                                

6   PA 306, MCL 24.201 to 24.328.                                               

                                                                                

7       (6) The administrator may modify or vacate a stop order                     

                                                                                

8   issued under this section if the administrator finds that the               

                                                                                

9   conditions that caused its issuance have changed or that it is              

                                                                                

10  necessary or appropriate in the public interest or for the                  

                                                                                

11  protection of investors.                                                    

                                                                                

12      Sec. 307.  The administrator may waive or modify, in whole                  

                                                                                

13  or in part, any or all of the requirements of sections 302, 303,            

                                                                                

14  and 304(2) or the requirement of any information or record in a             

                                                                                

15  registration statement or in a periodic report filed pursuant to            

                                                                                

16  section 305(9).                                                             

                                                                                

17                              ARTICLE 4                                       

                                                                                

18  BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS, INVESTMENT ADVISER            

                                                                                

19       REPRESENTATIVES, AND FEDERAL COVERED INVESTMENT ADVISERS               

                                                                                

20      Sec. 401.  (1) A person shall not transact business in this                 

                                                                                

21  state as a broker-dealer unless the person is registered under              

                                                                                

22  this act as a broker-dealer or is exempt from registration as a             

                                                                                

23  broker-dealer under subsection (2) or (4).                                  

                                                                                

24      (2) The following persons are exempt from the registration                  

                                                                                

25  requirement of subsection (1):                                              

                                                                                

26      (a) A broker-dealer if the broker-dealer does not have a                    

                                                                                

27  place of business in this state and if the broker-dealer's only             


                                                                                

1   transactions effected in this state are with any of the                     

                                                                                

2   following:                                                                  

                                                                                

3                                                                                (i) The issuer of the securities involved in the                                    

                                                                                

4   transactions.                                                               

                                                                                

5       (ii) A person registered as a broker-dealer under this act                   

                                                                                

6   or not required to be registered as a broker-dealer under this              

                                                                                

7   act.                                                                        

                                                                                

8       (iii) An institutional investor.                                             

                                                                                

9       (iv) A nonaffiliated federal covered investment adviser with                 

                                                                                

10  investments under management in excess of $100,000,000.00 acting            

                                                                                

11  for the account of others pursuant to discretionary authority in            

                                                                                

12  a signed record.                                                            

                                                                                

13      (v) A bona fide preexisting customer whose principal place                  

                                                                                

14  of residence is not in this state and the broker-dealer is                  

                                                                                

15  registered as a broker-dealer under the securities exchange act             

                                                                                

16  of 1934 or not required to be registered under the securities               

                                                                                

17  exchange act of 1934 and is registered under the securities act             

                                                                                

18  of the state in which the customer maintains a principal place of           

                                                                                

19  residence.                                                                  

                                                                                

20      (vi) A bona fide preexisting customer whose principal place                  

                                                                                

21  of residence is in this state but who was not present in this               

                                                                                

22  state when the customer relationship was established, if both of            

                                                                                

23  the following are met:                                                      

                                                                                

24      (A) The broker-dealer is registered under the securities                    

                                                                                

25  exchange act of 1934 or not required to be registered under the             

                                                                                

26  securities exchange act of 1934 and is registered under the                 

                                                                                

27  securities laws of the state in which the customer relationship             


                                                                                

1   was established and where the customer had maintained a principal           

                                                                                

2   place of residence.                                                         

                                                                                

3       (B) Within 45 days after the customer's first transaction in                

                                                                                

4   this state, the person files an application for registration as a           

                                                                                

5   broker-dealer in this state and a further transaction is not                

                                                                                

6   effected more than 75 days after the date on which the                      

                                                                                

7   application is filed, or, if earlier, the date on which the                 

                                                                                

8   administrator notifies the person that the administrator has                

                                                                                

9   denied the application for registration or has stayed the                   

                                                                                

10  pendency of the application for good cause.                                 

                                                                                

11      (vii) Not more than 3 customers in this state during the                     

                                                                                

12  previous 12 months, in addition to those specified in                       

                                                                                

13  subparagraphs (i) to (vi) and under subparagraph (viii), if the                

                                                                                

14  broker-dealer is registered under the securities exchange act of            

                                                                                

15  1934 or not required to be registered under the securities                  

                                                                                

16  exchange act of 1934 and is registered under the securities act             

                                                                                

17  of the state in which the broker-dealer has its principal place             

                                                                                

18  of business.                                                                

                                                                                

19      (viii) Any other person exempted by rule or order under this                  

                                                                                

20  act.                                                                        

                                                                                

21      (b) A person that deals solely in United States government                  

                                                                                

22  securities and is supervised as a dealer in government securities           

                                                                                

23  by the board of governors of the federal reserve system, the                

                                                                                

24  comptroller of the currency, the federal deposit insurance                  

                                                                                

25  corporation, or the office of thrift supervision.                           

                                                                                

26      (3) A broker-dealer, or an issuer engaged in offering,                      

                                                                                

27  offering to purchase, purchasing, or selling securities in this             


                                                                                

1   state, shall not directly or indirectly employ or associate with            

                                                                                

2   an individual to engage in an activity related to securities                

                                                                                

3   transactions in this state if the registration of the individual            

                                                                                

4   is suspended or revoked or the individual is barred from                    

                                                                                

5   employment or association with a broker-dealer, an issuer, an               

                                                                                

6   investment adviser, or a federal covered investment adviser by an           

                                                                                

7   order of the administrator under this act, the securities and               

                                                                                

8   exchange commission, or a self-regulatory organization.  A                  

                                                                                

9   broker-dealer or issuer does not violate this subsection if the             

                                                                                

10  broker-dealer or issuer did not know and in the exercise of                 

                                                                                

11  reasonable care could not have known of the suspension,                     

                                                                                

12  revocation, or bar.  If requested by a broker-dealer or issuer              

                                                                                

13  and if good cause is shown, an order under this act may modify or           

                                                                                

14  waive, in whole or in part, the application of the prohibitions             

                                                                                

15  of this subsection.                                                         

                                                                                

16      (4) A rule or order under this act may permit any of the                    

                                                                                

17  following:                                                                  

                                                                                

18      (a) A broker-dealer that is registered in Canada or other                   

                                                                                

19  foreign jurisdiction and that does not have a place of business             

                                                                                

20  in this state to effect transactions in securities with or for,             

                                                                                

21  or attempt to effect the purchase or sale of any securities by,             

                                                                                

22  any of the following:                                                       

                                                                                

23                                                                               (i) An individual from Canada or other foreign jurisdiction                         

                                                                                

24  who is temporarily present in this state and with whom the                  

                                                                                

25  broker-dealer had a bona fide customer relationship before the              

                                                                                

26  individual entered the United States.                                       

                                                                                

27      (ii) An individual from Canada or other foreign jurisdiction                 


                                                                                

1   who is present in this state and whose transactions are in a                

                                                                                

2   self-directed tax advantaged retirement plan of which the                   

                                                                                

3   individual is the holder or contributor in that foreign                     

                                                                                

4   jurisdiction.                                                               

                                                                                

5       (iii) An individual who is present in this state, with whom                  

                                                                                

6   the broker-dealer customer relationship arose while the                     

                                                                                

7   individual was temporarily or permanently resident in Canada or             

                                                                                

8   the other foreign jurisdiction.                                             

                                                                                

9       (b) An agent who represents a broker-dealer that is exempt                  

                                                                                

10  under this subsection to effect transactions in securities or               

                                                                                

11  attempt to effect the purchase or sale of any securities in this            

                                                                                

12  state as permitted for a broker-dealer described in subsection              

                                                                                

13  (4)(a).                                                                     

                                                                                

14      Sec. 402.  (1) An individual shall not transact business in                 

                                                                                

15  this state as an agent unless the individual is registered under            

                                                                                

16  this act as an agent or is exempt from registration as an agent             

                                                                                

17  under subsection (2).                                                       

                                                                                

18      (2) Each of the following individuals is exempt from the                    

                                                                                

19  registration requirement of subsection (1):                                 

                                                                                

20      (a) An individual who represents a broker-dealer in effecting               

                                                                                

21  transactions in this state limited to those described in section            

                                                                                

22  15(h)(2) of the securities exchange act of 1934, 15 USC 78o.                

                                                                                

23      (b) An individual who represents a broker-dealer that is                    

                                                                                

24  exempt under section 401(2) or (4).                                         

                                                                                

25      (c) An individual who represents an issuer with respect to an               

                                                                                

26  offer or sale of the issuer's own securities or those of the                

                                                                                

27  issuer's parent or any of the issuer's subsidiaries, and who is             


                                                                                

1   not compensated in connection with the individual's participation           

                                                                                

2   by the payment of commissions or other remuneration based,                  

                                                                                

3   directly or indirectly, on transactions in those securities.                

                                                                                

4       (d) An individual who represents an issuer and who effects                  

                                                                                

5   transactions in the issuer's securities exempted by section 202,            

                                                                                

6   other than section 202(1)(k) or (n).                                        

                                                                                

7       (e) An individual who represents an issuer who effects                      

                                                                                

8   transactions solely in federal covered securities of the issuer,            

                                                                                

9   but an individual who effects transactions in a federal covered             

                                                                                

10  security under section 18(b)(3) or 18(b)(4)(D) of the securities            

                                                                                

11  act of 1933, 15 USC 77r, is not exempt if the individual is                 

                                                                                

12  compensated in connection with the agent's participation by the             

                                                                                

13  payment of commissions or other remuneration based, directly or             

                                                                                

14  indirectly, on transactions in those securities.                            

                                                                                

15      (f) An individual who represents a broker-dealer registered                 

                                                                                

16  in this state under section 401(1) or exempt from registration              

                                                                                

17  under section 401(2) in the offer and sale of securities for an             

                                                                                

18  account of a nonaffiliated federal covered investment adviser               

                                                                                

19  with investments under management in excess of $100,000,000.00              

                                                                                

20  acting for the account of others pursuant to discretionary                  

                                                                                

21  authority in a signed record.                                               

                                                                                

22      (g) An individual who represents an issuer in connection with               

                                                                                

23  the purchase of the issuer's own securities.                                

                                                                                

24      (h) An individual who represents an issuer and who restricts                

                                                                                

25  participation to performing clerical or ministerial acts.                   

                                                                                

26      (i) Any other individual exempted by rule or order under this               

                                                                                

27  act.                                                                        


                                                                                

1       (3) The registration of an agent is effective only while the                

                                                                                

2   agent is employed by or associated with a broker-dealer                     

                                                                                

3   registered under this act or an issuer that is offering, selling,           

                                                                                

4   or purchasing its securities in this state.                                 

                                                                                

5       (4) A broker-dealer, or an issuer engaged in offering,                      

                                                                                

6   selling, or purchasing securities in this state, shall not employ           

                                                                                

7   or associate with an agent who transacts business in this state             

                                                                                

8   on behalf of broker-dealers or issuers unless the agent is                  

                                                                                

9   registered under subsection (1) or exempt from registration under           

                                                                                

10  subsection (2).                                                             

                                                                                

11      (5) An individual shall not act as an agent for more than 1                 

                                                                                

12  broker-dealer or more than 1 issuer at a time, unless the                   

                                                                                

13  broker-dealers or the issuers for which the agent acts are                  

                                                                                

14  affiliated by direct or indirect common control or are authorized           

                                                                                

15  by rule or order under this act.                                            

                                                                                

16      Sec. 403.  (1) A person shall not transact business in this                 

                                                                                

17  state as an investment adviser unless the person is registered              

                                                                                

18  under this act as an investment adviser or is exempt from                   

                                                                                

19  registration as an investment adviser under subsection (2).                 

                                                                                

20      (2) The following persons are exempt from the registration                  

                                                                                

21  requirement of subsection (1):                                              

                                                                                

22      (a) A person that does not have a place of business in this                 

                                                                                

23  state and that is registered under the securities act of the                

                                                                                

24  state in which the person has its principal place of business, if           

                                                                                

25  its only clients in this state are any of the following:                    

                                                                                

26                                                                               (i) Federal covered investment advisers, investment advisers                        

                                                                                

27  registered under this act, or broker-dealers registered under               


                                                                                

1   this act.                                                                   

                                                                                

2       (ii) Institutional investors.                                                

                                                                                

3       (iii) Bona fide preexisting clients whose principal places of                

                                                                                

4   residence are not in this state, if the investment adviser is               

                                                                                

5   registered under the securities act of the state in which the               

                                                                                

6   clients maintain principal places of residence.                             

                                                                                

7       (iv) Any other client exempted by rule or order under this                   

                                                                                

8   act.                                                                        

                                                                                

9       (b) A person that does not have a place of business in this                 

                                                                                

10  state if the person has had, during the preceding 12 months, not            

                                                                                

11  more than 5 clients that are residents of this state in addition            

                                                                                

12  to those specified under subdivision (a).                                   

                                                                                

13      (c) The person is an investment adviser who is not required                 

                                                                                

14  to be registered as an investment adviser under the investment              

                                                                                

15  advisers act of 1940 if the investment adviser's only clients in            

                                                                                

16  this state are other investment advisers, federal covered                   

                                                                                

17  advisers, broker-dealers, or institutional investors.                       

                                                                                

18      (d) Any other person exempted by rule or order under this                   

                                                                                

19  act.                                                                        

                                                                                

20      (3) An investment adviser shall not, directly or indirectly,                

                                                                                

21  employ or associate with an individual to engage in an activity             

                                                                                

22  related to investment advice in this state if the registration of           

                                                                                

23  the individual is suspended or revoked, or the individual is                

                                                                                

24  barred from employment or association with an investment adviser,           

                                                                                

25  federal covered investment adviser, or broker-dealer by an order            

                                                                                

26  under this act, the securities and exchange commission, or a                

                                                                                

27  self-regulatory organization, unless the investment adviser did             


                                                                                

1   not know, and in the exercise of reasonable care could not have             

                                                                                

2   known, of the suspension, revocation, or bar.  If the investment            

                                                                                

3   adviser request and good cause is shown, the administrator, by              

                                                                                

4   order, may waive, in whole or in part, the application of the               

                                                                                

5   prohibitions of this subsection.                                            

                                                                                

6       (4) An investment adviser shall not employ or associate with                

                                                                                

7   an individual required to be registered under this act as an                

                                                                                

8   investment adviser representative who transacts business in this            

                                                                                

9   state on behalf of the investment adviser unless the individual             

                                                                                

10  is registered under section 404(1) or is exempt from registration           

                                                                                

11  under section 404(2).                                                       

                                                                                

12      Sec. 404.  (1) An individual shall not transact business in                 

                                                                                

13  this state as an investment adviser representative unless the               

                                                                                

14  individual is registered under this act as an investment adviser            

                                                                                

15  representative or is exempt from registration as an investment              

                                                                                

16  adviser under subsection (2).                                               

                                                                                

17      (2) Each of the following individuals is exempt from the                    

                                                                                

18  registration requirement of subsection (1):                                 

                                                                                

19      (a) An individual who is employed by or associated with an                  

                                                                                

20  investment adviser that is exempt from registration under section           

                                                                                

21  403(2) or a federal covered investment adviser that is excluded             

                                                                                

22  from the notice filing requirements of section 405.                         

                                                                                

23      (b) Any other individual exempted by rule or order under this               

                                                                                

24  act.                                                                        

                                                                                

25      (3) The registration of an investment adviser representative                

                                                                                

26  is not effective while the investment adviser representative is             

                                                                                

27  not employed by or associated with an investment adviser                    


                                                                                

1   registered under this act or a federal covered investment adviser           

                                                                                

2   that has made or is required to make a notice filing under                  

                                                                                

3   section 405.                                                                

                                                                                

4       (4) An individual may transact business as an investment                    

                                                                                

5   adviser representative for more than 1 investment adviser or                

                                                                                

6   federal covered investment adviser unless a rule or order under             

                                                                                

7   this act prohibits or limits an individual from acting as an                

                                                                                

8   investment adviser representative for more than 1 investment                

                                                                                

9   adviser or federal covered investment adviser.                              

                                                                                

10      (5) An individual acting as an investment adviser                           

                                                                                

11  representative shall not, directly or indirectly, conduct                   

                                                                                

12  business in this state on behalf of an investment adviser or a              

                                                                                

13  federal covered investment adviser if the registration of the               

                                                                                

14  individual as an investment adviser representative is suspended             

                                                                                

15  or revoked or the individual is barred from employment or                   

                                                                                

16  association with an investment adviser or a federal covered                 

                                                                                

17  investment adviser by an order under this act, the securities and           

                                                                                

18  exchange commission, or a self-regulatory organization.  If a               

                                                                                

19  federal covered investment adviser requests and good cause is               

                                                                                

20  shown, the administrator, by order, may waive, in whole or in               

                                                                                

21  part, the application of the requirements of this subsection.               

                                                                                

22      (6) An investment adviser registered under this act, a                      

                                                                                

23  federal covered investment adviser that has filed a notice under            

                                                                                

24  section 405, or a broker-dealer registered under this act is not            

                                                                                

25  required to employ or associate with an individual as an                    

                                                                                

26  investment adviser representative if the only compensation paid             

                                                                                

27  to the individual for a referral of investment advisory clients             


                                                                                

1   is paid to an investment adviser registered under this act, a               

                                                                                

2   federal covered investment adviser who has filed a notice under             

                                                                                

3   section 405, or a broker-dealer registered under this act with              

                                                                                

4   which the individual is employed or associated as an investment             

                                                                                

5   adviser representative.                                                     

                                                                                

6       Sec. 405.  (1) Except with respect to a federal covered                     

                                                                                

7   investment adviser described in subsection (2), a federal covered           

                                                                                

8   investment adviser shall not transact business in this state as a           

                                                                                

9   federal covered investment adviser unless the federal covered               

                                                                                

10  investment adviser complies with subsection (3).                            

                                                                                

11      (2) The following federal covered investment advisers are not               

                                                                                

12  required to comply with subsection (3):                                     

                                                                                

13      (a) A federal covered investment adviser without a place of                 

                                                                                

14  business in this state if its only clients in this state are any            

                                                                                

15  of the following:                                                           

                                                                                

16                                                                               (i) Federal covered investment advisers, investment advisers                        

                                                                                

17  registered under this act, and broker-dealers registered under              

                                                                                

18  this act.                                                                   

                                                                                

19      (ii) Institutional investors.                                                

                                                                                

20      (iii) Bona fide preexisting clients whose principal places of                

                                                                                

21  residence are not in this state.                                            

                                                                                

22      (iv) Other clients specified by rule or order under this                     

                                                                                

23  act.                                                                        

                                                                                

24      (b) A federal covered investment adviser that does not have a               

                                                                                

25  place of business in this state if the federal covered investment           

                                                                                

26  adviser has had, during the preceding 12 months, not more than 5            

                                                                                

27  clients that are residents of this state in addition to those               


                                                                                

1   specified under subdivision (a).                                            

                                                                                

2       (c) Any other person excluded by rule or order under this                   

                                                                                

3   act.                                                                        

                                                                                

4       (3) A person acting as a federal covered investment adviser,                

                                                                                

5   not excluded under subsection (2), shall file a notice, a consent           

                                                                                

6   to service of process complying with section 611, and those                 

                                                                                

7   records that have been filed with the securities and exchange               

                                                                                

8   commission under the investment advisers act of 1940 that are               

                                                                                

9   required by rule or order under this act and pay the fees                   

                                                                                

10  specified in section 410(5).                                                

                                                                                

11      (4) A notice under subsection (3) is effective on filing.                   

                                                                                

12      Sec. 406.  (1) A person shall register as a broker-dealer,                  

                                                                                

13  agent, investment adviser, or investment adviser representative             

                                                                                

14  by filing an application and a consent to service of process                

                                                                                

15  complying with section 611 and paying the fee specified in                  

                                                                                

16  section 410 and any reasonable fees charged by the designee of              

                                                                                

17  the administrator for processing the filing.  Each application              

                                                                                

18  must contain both of the following:                                         

                                                                                

19      (a) The information or record required for the filing of a                  

                                                                                

20  uniform application.                                                        

                                                                                

21      (b) If requested by the administrator, any other financial or               

                                                                                

22  other information or record that the administrator determines is            

                                                                                

23  appropriate.                                                                

                                                                                

24      (2) If the information or record contained in an application                

                                                                                

25  that is filed under subsection (1) is or becomes inaccurate or              

                                                                                

26  incomplete in any material respect, the registrant shall promptly           

                                                                                

27  file a correcting amendment.                                                


                                                                                

1       (3) If an order is not in effect and no proceeding is pending               

                                                                                

2   under section 412, registration becomes effective at 12 noon on             

                                                                                

3   the forty-fifth day after a completed application is filed unless           

                                                                                

4   the registration is denied.  A rule or order under this act may             

                                                                                

5   set an earlier effective date or may defer the effective date               

                                                                                

6   until 12 noon on the forty-fifth day after the filing of any                

                                                                                

7   amendment completing the application.                                       

                                                                                

8       (4) A registration is effective until 12 midnight on December               

                                                                                

9   31 of the year for which the application for registration is                

                                                                                

10  filed.  Unless an order is in effect under section 412, a                   

                                                                                

11  registration may be automatically renewed each year by filing the           

                                                                                

12  records required by rule or order under this act and paying the             

                                                                                

13  fee specified in section 410 and the costs charged by the                   

                                                                                

14  designee of the administrator for processing the filings.                   

                                                                                

15      (5) A rule or order under this act may impose other                         

                                                                                

16  conditions not inconsistent with the national securities markets            

                                                                                

17  improvement act of 1996, Public Law 104-290, 110 Stat. 3416, or             

                                                                                

18  an order under this act may waive, in whole or in part, specific            

                                                                                

19  requirements in connection with registration if the imposition or           

                                                                                

20  waiver is appropriate in the public interest and for the                    

                                                                                

21  protection of investors.                                                    

                                                                                

22      Sec. 407.  (1) A broker-dealer or investment adviser may                    

                                                                                

23  succeed to the current registration of another broker-dealer or             

                                                                                

24  investment adviser or a notice filing of a federal covered                  

                                                                                

25  investment adviser, and a federal covered investment adviser may            

                                                                                

26  succeed to the current registration of an investment adviser or             

                                                                                

27  notice filing of another federal covered investment adviser, by             


                                                                                

1   filing as a successor an application for registration under                 

                                                                                

2   section 401 or 403, or a notice under section 405, for the                  

                                                                                

3   unexpired portion of the current registration or notice filing.             

                                                                                

4       (2) A broker-dealer or investment adviser that changes its                  

                                                                                

5   form of organization or state of incorporation or organization              

                                                                                

6   may continue its registration by filing an amendment to its                 

                                                                                

7   registration if the change does not involve a material change in            

                                                                                

8   its financial condition or management.  The amendment is                    

                                                                                

9   effective when filed or on a date designated by the registrant in           

                                                                                

10  the filing.  The new organization is a successor to the original            

                                                                                

11  registrant for the purposes of this act.  If there is a material            

                                                                                

12  change in financial condition or management, the broker-dealer or           

                                                                                

13  investment adviser shall file a new application for                         

                                                                                

14  registration.  Any predecessor registered under this act shall              

                                                                                

15  stop conducting its securities business other than winding down             

                                                                                

16  transactions and shall file for withdrawal of broker-dealer or              

                                                                                

17  investment adviser registration within 45 days after filing its             

                                                                                

18  amendment to effect succession.                                             

                                                                                

19      (3) A broker-dealer or investment adviser that changes its                  

                                                                                

20  name may continue its registration by filing an amendment to its            

                                                                                

21  registration.  The amendment is effective when filed or on a date           

                                                                                

22  designated by the registrant.                                               

                                                                                

23      (4) A change of control of a broker-dealer or investment                    

                                                                                

24  adviser may be made in accordance with a rule or order under this           

                                                                                

25  act.                                                                        

                                                                                

26      Sec. 408.  (1) If an agent registered under this act                        

                                                                                

27  terminates employment by or association with a broker-dealer or             


                                                                                

1   issuer, or if an investment adviser representative registered               

                                                                                

2   under this act terminates employment by or association with an              

                                                                                

3   investment adviser or federal covered investment adviser, or if             

                                                                                

4   either registrant terminates activities that require registration           

                                                                                

5   as an agent or investment adviser representative, the                       

                                                                                

6   broker-dealer, investment adviser, or federal covered investment            

                                                                                

7   adviser shall promptly file a notice of termination.  If the                

                                                                                

8   registrant learns that the broker-dealer, issuer, investment                

                                                                                

9   adviser, or federal covered investment adviser has not filed the            

                                                                                

10  notice, the registrant may file the notice.                                 

                                                                                

11      (2) If an agent registered under this act terminates                        

                                                                                

12  employment by or association with a broker-dealer registered                

                                                                                

13  under this act and begins employment by or association with                 

                                                                                

14  another broker-dealer registered under this act; or if an                   

                                                                                

15  investment adviser representative registered under this act                 

                                                                                

16  terminates employment by or association with an investment                  

                                                                                

17  adviser registered under this act; or if a federal covered                  

                                                                                

18  investment adviser that has filed a notice under section 405                

                                                                                

19  begins employment by or association with another investment                 

                                                                                

20  adviser registered under this act; or if a federal covered                  

                                                                                

21  investment adviser, who has filed a notice under section 405,               

                                                                                

22  files an application for registration that complies with the                

                                                                                

23  requirement of section 406(1) and the filing fee required under             

                                                                                

24  section 410 is paid by or on behalf of the registrant within 30             

                                                                                

25  days after the termination, 1 of the following applies to the               

                                                                                

26  registration of the agent or investment adviser representative:             

                                                                                

27      (a) If the agent's central registration depository record or                


                                                                                

1   successor record or the investment adviser representative's                 

                                                                                

2   investment adviser registration depository record or successor              

                                                                                

3   record does not contain a new or amended disciplinary disclosure            

                                                                                

4   within the previous 12 months, the registration is immediately              

                                                                                

5   effective as of the date of the completed filing.                           

                                                                                

6       (b) If the agent's central registration depository record or                

                                                                                

7   the investment adviser representative's investment adviser                  

                                                                                

8   registration depository record contains a new or amended                    

                                                                                

9   disciplinary disclosure within the preceding 12 months, the                 

                                                                                

10  registration is temporarily effective as of the date of the                 

                                                                                

11  completed filing.                                                           

                                                                                

12      (3) If there are or were grounds for discipline under section               

                                                                                

13  412, the administrator may withdraw a temporary registration                

                                                                                

14  within 30 days after the application is filed.  If the                      

                                                                                

15  administrator does not withdraw the temporary registration within           

                                                                                

16  the 30-day period, registration becomes automatically effective             

                                                                                

17  on the thirty-first day after filing.                                       

                                                                                

18      (4) The administrator may prevent the effectiveness of a                    

                                                                                

19  transfer of an agent or investment adviser representative under             

                                                                                

20  subsection (2)(a) or (b) based on the public interest and the               

                                                                                

21  protection of investors.                                                    

                                                                                

22      (5) If the administrator determines that a registrant or                    

                                                                                

23  applicant for registration is no longer in existence, has ceased            

                                                                                

24  to act as a broker-dealer, agent, investment adviser, or                    

                                                                                

25  investment adviser representative, is the subject of an                     

                                                                                

26  adjudication of incapacity, is subject to the control of a                  

                                                                                

27  committee, conservator, or guardian, or cannot reasonably be                


                                                                                

1   located, a rule or order under this act may require the                     

                                                                                

2   registration be canceled or terminated or the application                   

                                                                                

3   denied.  The administrator may reinstate a canceled or terminated           

                                                                                

4   registration, with or without hearing, and may make the                     

                                                                                

5   registration retroactive.                                                   

                                                                                

6       Sec. 409.  Withdrawal of registration by a broker-dealer,                   

                                                                                

7   agent, investment adviser, or investment adviser representative             

                                                                                

8   is effective 60 days after an application to withdraw is filed or           

                                                                                

9   within a shorter period as provided by rule or order under this             

                                                                                

10  act, unless a revocation or suspension proceeding is pending when           

                                                                                

11  the application is filed.  If a proceeding is pending, withdrawal           

                                                                                

12  is effective when and on conditions required by rule or order               

                                                                                

13  under this act.  The administrator may institute a revocation or            

                                                                                

14  suspension proceeding under section 412 within 1 year after the             

                                                                                

15  withdrawal became effective automatically and issue a revocation            

                                                                                

16  or suspension order as of the last date on which registration was           

                                                                                

17  effective if a proceeding is not pending.                                   

                                                                                

18      Sec. 410.  (1) A person shall pay a fee of $250.00 when                     

                                                                                

19  initially filing an application for registration as a                       

                                                                                

20  broker-dealer and a fee of $250.00 when filing a renewal of                 

                                                                                

21  registration as a broker-dealer.  If the filing results in a                

                                                                                

22  denial or withdrawal, the administrator shall retain all of the             

                                                                                

23  filing fee.                                                                 

                                                                                

24      (2) An individual shall pay a fee of $30.00 when filing an                  

                                                                                

25  application for registration as an agent, a fee of $30.00 when              

                                                                                

26  filing a renewal of registration as an agent, and a fee of $30.00           

                                                                                

27  when filing for a change of registration as an agent.  If the               


                                                                                

1   filing results in a denial or withdrawal, the administrator shall           

                                                                                

2   retain all of the filing fee.                                               

                                                                                

3       (3) A person shall pay a fee of $150.00 when filing an                      

                                                                                

4   application for registration as an investment adviser and a fee             

                                                                                

5   of $150.00 when filing a renewal of registration as an investment           

                                                                                

6   adviser.  If the filing results in a denial or withdrawal, the              

                                                                                

7   administrator shall retain all of the filing fee.                           

                                                                                

8       (4) An individual shall pay a fee of $30.00 when filing an                  

                                                                                

9   application for registration as an investment adviser                       

                                                                                

10  representative, a fee of $30.00 when filing a renewal of                    

                                                                                

11  registration as an investment adviser representative, and a fee             

                                                                                

12  of $30.00 when filing a change of registration as an investment             

                                                                                

13  adviser representative.  If the filing results in a denial or               

                                                                                

14  withdrawal, the administrator shall retain all of the filing                

                                                                                

15  fee.                                                                        

                                                                                

16      (5) A federal covered investment adviser required to file a                 

                                                                                

17  notice under section 405 shall pay an initial and annual notice             

                                                                                

18  fee of $150.00.                                                             

                                                                                

19      (6) A person required to pay a filing or notice fee under                   

                                                                                

20  this section may transmit the fee through or to a designee as a             

                                                                                

21  rule or order requires under this act.                                      

                                                                                

22      (7) An investment adviser representative who is registered as               

                                                                                

23  an agent under section 402 and who represents a person that is              

                                                                                

24  both registered as a broker-dealer under section 401 and                    

                                                                                

25  registered as an investment adviser under section 403 or required           

                                                                                

26  as a federal covered investment adviser to make a notice filing             

                                                                                

27  under section 405 is not required to pay an initial or annual               


                                                                                

1   registration fee for registration as an investment adviser                  

                                                                                

2   representative.                                                             

                                                                                

3       Sec. 411.  (1) Subject to section 15(h) of the securities                   

                                                                                

4   act of 1934, 15 USC 78o, or section 222 of the investment                   

                                                                                

5   advisers act of 1940, 15 USC 80b-18a, a rule or order under this            

                                                                                

6   act may establish minimum financial requirements for                        

                                                                                

7   broker-dealers registered or required to be registered under this           

                                                                                

8   act and investment advisers registered or required to be                    

                                                                                

9   registered under this act.                                                  

                                                                                

10      (2) Subject to section 15(h) of the securities exchange act                 

                                                                                

11  of 1934, 15 USC 78o, or section 222(b) of the investment advisers           

                                                                                

12  act of 1940, 15 USC 80b-18a, a broker-dealer registered or                  

                                                                                

13  required to be registered under this act and an investment                  

                                                                                

14  adviser registered or required to be registered under this act              

                                                                                

15  shall file financial reports required by rule or order under this           

                                                                                

16  act.  If the information contained in a record filed under this             

                                                                                

17  subsection is or becomes inaccurate or incomplete in any material           

                                                                                

18  respect, the registrant shall promptly file a correcting                    

                                                                                

19  amendment.                                                                  

                                                                                

20      (3) Subject to section 15(h) of the securities exchange act                 

                                                                                

21  of 1934, 15 USC 78o, or section 222 of the investment advisers              

                                                                                

22  act of 1940, 15 USC 80b-18a, a broker-dealer registered or                  

                                                                                

23  required to be registered under this act and an investment                  

                                                                                

24  adviser registered or required to be registered under this act              

                                                                                

25  shall make and maintain the accounts, correspondence, memoranda,            

                                                                                

26  papers, books, and other records required by rule or order of the           

                                                                                

27  administrator.  The records required to be maintained under this            


                                                                                

1   subsection shall be maintained as follows:                                  

                                                                                

2       (a) Broker-dealer records may be maintained in any form of                  

                                                                                

3   data storage acceptable under section 17(a) of the securities               

                                                                                

4   exchange act of 1934, 15 USC 78q, if they are readily accessible            

                                                                                

5   to the administrator.                                                       

                                                                                

6       (b) Investment adviser records may be maintained in any form                

                                                                                

7   of data storage required by rule or order under this act.                   

                                                                                

8       (4) The records of a broker-dealer registered or required to                

                                                                                

9   be registered under this act and of an investment adviser                   

                                                                                

10  registered or required to be registered under this act are                  

                                                                                

11  subject to reasonable periodic, special, or other audits or                 

                                                                                

12  inspections by a representative of the administrator, in or                 

                                                                                

13  outside of this state, as the administrator considers necessary             

                                                                                

14  or appropriate in the public interest and for the protection of             

                                                                                

15  investors.  An audit or inspection may be made at any time and              

                                                                                

16  without prior notice.  The administrator may copy and remove for            

                                                                                

17  audit or inspection copies of all records the administrator                 

                                                                                

18  reasonably considers necessary or appropriate to conduct the                

                                                                                

19  audit or inspection.  The administrator may assess a reasonable             

                                                                                

20  charge for conducting an audit or inspection under this                     

                                                                                

21  subsection.                                                                 

                                                                                

22      (5) Subject to section 15(h) of the securities exchange act                 

                                                                                

23  of 1934, 15 USC 78o, or section 222 of the investment advisers              

                                                                                

24  act of 1940, 15 USC 80b-18a, a rule or order under this act may             

                                                                                

25  require a broker-dealer and investment adviser that has custody             

                                                                                

26  of or discretionary authority over funds or securities of a                 

                                                                                

27  client to obtain insurance or post a bond or other satisfactory             


                                                                                

1   form of security in an amount established by the administrator by           

                                                                                

2   rule or order.  The administrator may determine the requirements            

                                                                                

3   of the insurance, bond, or other satisfactory form of security.             

                                                                                

4   Insurance or a bond or other satisfactory form of security shall            

                                                                                

5   not be required of a broker-dealer registered under this act                

                                                                                

6   whose net capital exceeds, or of an investment adviser registered           

                                                                                

7   under this act whose minimum financial requirements exceed, the             

                                                                                

8   amounts required by rule or order under this act.  The insurance,           

                                                                                

9   bond, or other satisfactory form of security must permit an                 

                                                                                

10  action by a person to enforce any liability on the insurance,               

                                                                                

11  bond, or other satisfactory form of security if commenced within            

                                                                                

12  the time limitations in section 509(10)(b).                                 

                                                                                

13      (6) Subject to section 15(h) of the securities exchange act                 

                                                                                

14  of 1934, 15 USC 78o, or section 222 of the investment advisers              

                                                                                

15  act of 1940, 15 USC 80b-18a, an agent shall not have custody of             

                                                                                

16  funds or securities of a customer except under the supervision of           

                                                                                

17  a broker-dealer and an investment adviser representative shall              

                                                                                

18  not have custody of funds or securities of a client except under            

                                                                                

19  the supervision of an investment adviser or federal covered                 

                                                                                

20  investment adviser.  A rule or order under this act may prohibit,           

                                                                                

21  limit, or impose conditions on the custody of funds or securities           

                                                                                

22  of a customer by a broker-dealer and on the custody of securities           

                                                                                

23  or funds of a client by an investment adviser.                              

                                                                                

24      (7) With respect to an investment adviser registered or                     

                                                                                

25  required to be registered under this act, a rule or order under             

                                                                                

26  this act may require that information or other record be                    

                                                                                

27  furnished or disseminated to clients or prospective clients in              


                                                                                

1   this state as necessary or appropriate in the public interest and           

                                                                                

2   for the protection of investors and advisory clients.                       

                                                                                

3       (8) A rule or order under this act may require an individual                

                                                                                

4   registered under section 402 or 404 to participate in a                     

                                                                                

5   continuing education program approved by the securities and                 

                                                                                

6   exchange commission and administered by a self-regulatory                   

                                                                                

7   organization or, in the absence of such a program, a rule or                

                                                                                

8   order under this act may require continuing education for an                

                                                                                

9   individual registered under section 404.                                    

                                                                                

10      Sec. 412.  (1) If the administrator finds that the order is                 

                                                                                

11  in the public interest and subsection (4) authorizes the action,            

                                                                                

12  an order under this act may deny an application or condition or             

                                                                                

13  limit registration of an applicant to be a broker-dealer, agent,            

                                                                                

14  investment adviser, or investment adviser representative and, if            

                                                                                

15  the applicant is a broker-dealer or investment adviser, of any              

                                                                                

16  partner, officer, or director, any person having a similar status           

                                                                                

17  or performing similar functions, or any person directly or                  

                                                                                

18  indirectly controlling the broker-dealer or investment adviser.             

                                                                                

19      (2) If the administrator finds that the order is in the                     

                                                                                

20  public interest and subsection (4) authorizes the action, an                

                                                                                

21  order under this act may revoke, suspend, condition, or limit the           

                                                                                

22  registration of a registrant and if the registrant is a                     

                                                                                

23  broker-dealer or investment adviser, of any partner, officer, or            

                                                                                

24  director, any person having a similar status or performing                  

                                                                                

25  similar functions, or any person directly or indirectly                     

                                                                                

26  controlling the broker-dealer or investment adviser.  Both of the           

                                                                                

27  following conditions apply, however, to actions by the                      


                                                                                

1   administrator under this subsection:                                        

                                                                                

2       (a) The administrator shall not institute a revocation or                   

                                                                                

3   suspension proceeding under this subsection based on an order               

                                                                                

4   issued by another state that is reported to the administrator or            

                                                                                

5   designee later than 1 year after the date of the order on which             

                                                                                

6   it is based.                                                                

                                                                                

7       (b) Under subsection (4)(e)(i) and (ii), the administrator                   

                                                                                

8   shall not issue an order on the basis of an order under the state           

                                                                                

9   securities act of another state unless the other order was based            

                                                                                

10  on conduct for which subsection (4) would authorize the action              

                                                                                

11  had the conduct occurred in this state.                                     

                                                                                

12      (3) If the administrator finds that the order is in the                     

                                                                                

13  public interest and subsection (4)(a) to (f), (i) to (j), or (l)            

                                                                                

14  to (n) authorizes the action, an order under this act may                   

                                                                                

15  censure, impose a bar, or impose a civil penalty in an amount not           

                                                                                

16  to exceed a maximum of $10,000.00 for a single violation or                 

                                                                                

17  $500,000.00 for multiple violations on a registrant and, if the             

                                                                                

18  registrant is a broker-dealer or investment adviser, on any                 

                                                                                

19  partner, officer, or director, any person having a similar                  

                                                                                

20  function, or any person directly or indirectly controlling the              

                                                                                

21  broker-dealer or investment adviser.                                        

                                                                                

22      (4) A person may be disciplined under subsections (1) to (3)                

                                                                                

23  if any of the following apply to the person:                                

                                                                                

24      (a) The person filed an application for registration in this                

                                                                                

25  state under this act or the predecessor act within the previous             

                                                                                

26  10 years, which, as of the effective date of registration or as             

                                                                                

27  of any date after filing in the case of an order denying                    


                                                                                

1   effectiveness, was incomplete in any material respect or                    

                                                                                

2   contained a statement that, in light of the circumstances under             

                                                                                

3   which it was made, was false or misleading with respect to a                

                                                                                

4   material fact.                                                              

                                                                                

5       (b) The person willfully violated or willfully failed to                    

                                                                                

6   comply with this act or the predecessor act or a rule adopted or            

                                                                                

7   order issued under this act or the predecessor act within the               

                                                                                

8   previous 10 years.                                                          

                                                                                

9       (c) The person was convicted of any felony or within the                    

                                                                                

10  previous 10 years was convicted of a misdemeanor involving a                

                                                                                

11  security, a commodity futures or option contract, or an aspect of           

                                                                                

12  a business involving securities, commodities, investments,                  

                                                                                

13  franchises, insurance, banking, or finance.                                 

                                                                                

14      (d) The person is enjoined or restrained by a court of                      

                                                                                

15  competent jurisdiction in an action instituted by the                       

                                                                                

16  administrator under this act or the predecessor act, a state, the           

                                                                                

17  securities and exchange commission, or the United States from               

                                                                                

18  engaging in or continuing an act, practice, or course of business           

                                                                                

19  involving an aspect of a business involving securities,                     

                                                                                

20  commodities, investments, franchises, insurance, banking, or                

                                                                                

21  finance.                                                                    

                                                                                

22      (e) The person is the subject of an order, issued after                     

                                                                                

23  notice and opportunity for hearing by any of the following:                 

                                                                                

24                                                                               (i) The securities, depository institution, insurance, or                           

                                                                                

25  other financial services regulator of a state, or by the                    

                                                                                

26  securities and exchange commission or other federal agency                  

                                                                                

27  denying, revoking, barring, or suspending registration as a                 


                                                                                

1   broker-dealer, agent, investment adviser, federal covered                   

                                                                                

2   investment adviser, or investment adviser representative.                   

                                                                                

3       (ii) The securities regulator of a state or by the securities                

                                                                                

4   and exchange commission against a broker-dealer, agent,                     

                                                                                

5   investment adviser, investment adviser representative, or federal           

                                                                                

6   covered investment adviser.                                                 

                                                                                

7       (iii) The securities and exchange commission or by a                         

                                                                                

8   self-regulatory organization suspending or expelling the                    

                                                                                

9   registrant from membership in a self-regulatory organization.               

                                                                                

10      (iv) A court adjudicating a United States postal service                     

                                                                                

11  fraud.                                                                      

                                                                                

12      (v) The insurance regulator of a state denying, suspending,                 

                                                                                

13  or revoking the license or registration of an insurance agent.              

                                                                                

14      (vi) A depository institution regulator suspending or barring                

                                                                                

15  a person from the banking or depository institution business.               

                                                                                

16      (f) The person is the subject of an adjudication or                         

                                                                                

17  determination, after notice and opportunity for hearing, by the             

                                                                                

18  securities and exchange commission, the commodity futures trading           

                                                                                

19  commission, the federal trade commission, a federal depository              

                                                                                

20  institution regulator, or a depository institution, insurance, or           

                                                                                

21  other financial services regulator of a state that the person               

                                                                                

22  willfully violated the securities act of 1933, the securities               

                                                                                

23  exchange act of 1934, the investment advisers act of 1940, the              

                                                                                

24  investment company act of 1940, or the commodity exchange act,              

                                                                                

25  the securities or commodities law of a state, or a federal or               

                                                                                

26  state law under which a business involving investments,                     

                                                                                

27  franchises, insurance, banking, or finance is regulated.                    


                                                                                

1       (g) The person is insolvent, either because the person's                    

                                                                                

2   liabilities exceed the person's assets or because the person                

                                                                                

3   cannot meet the person's obligations as they mature.  The                   

                                                                                

4   administrator shall not enter an order against an applicant or              

                                                                                

5   registrant under this subdivision without a finding of insolvency           

                                                                                

6   as to the applicant or registrant.                                          

                                                                                

7       (h) The person refuses to allow or otherwise impedes the                    

                                                                                

8   administrator from conducting an audit or inspection under                  

                                                                                

9   section 411(4) or refuses access to a registrant's office to                

                                                                                

10  conduct an audit or inspection under section 411(4).                        

                                                                                

11      (i) The person has failed to reasonably supervise an agent,                 

                                                                                

12  investment adviser representative, or other individual, if the              

                                                                                

13  agent, investment adviser representative, or other individual was           

                                                                                

14  subject to the person's supervision and committed a violation of            

                                                                                

15  this act or the predecessor act or a rule adopted or order issued           

                                                                                

16  under this act or the predecessor act within the previous 10                

                                                                                

17  years.                                                                      

                                                                                

18      (j) The person has not paid the proper filing fee within 30                 

                                                                                

19  days after having been notified by the administrator of a                   

                                                                                

20  deficiency.  The administrator shall vacate an order under this             

                                                                                

21  paragraph when the deficiency is corrected.                                 

                                                                                

22      (k) After notice and opportunity for a hearing, 1 or more of                

                                                                                

23  the following have occurred within the previous 10 years:                   

                                                                                

24                                                                               (i) A court of competent jurisdiction has found the person to                       

                                                                                

25  have willfully violated the laws of a foreign jurisdiction under            

                                                                                

26  which the business of securities, commodities, investment,                  

                                                                                

27  franchises, insurance, banking, or finance is regulated.                    


                                                                                

1       (ii) The person was found to have been the subject of an                     

                                                                                

2   order of a securities regulator of a foreign jurisdiction                   

                                                                                

3   denying, revoking, or suspending the right to engage in the                 

                                                                                

4   business of securities as a broker-dealer, agent, investment                

                                                                                

5   adviser, investment adviser representative, or similar person.              

                                                                                

6       (iii) The person was found to have been suspended or expelled                

                                                                                

7   from membership by or participation in a securities exchange or             

                                                                                

8   securities association operating under the securities laws of a             

                                                                                

9   foreign jurisdiction.                                                       

                                                                                

10                                                                               (l) The person is the subject of a cease and desist order                           

                                                                                

11  issued by the securities and exchange commission or issued under            

                                                                                

12  the securities, commodities, investment, franchise, banking,                

                                                                                

13  finance, or insurance laws of a state.                                      

                                                                                

14      (m) The person has engaged in dishonest or unethical                        

                                                                                

15  practices in the securities, commodities, investment, franchise,            

                                                                                

16  banking, finance, or insurance business within the previous 10              

                                                                                

17  years.                                                                      

                                                                                

18      (n) The person is not qualified on the basis of factors such                

                                                                                

19  as training, experience, and knowledge of the securities                    

                                                                                

20  business.  If an application is made by an agent for a                      

                                                                                

21  broker-dealer that is a member of a self-regulatory organization            

                                                                                

22  or by an individual for registration as an investment adviser               

                                                                                

23  representative, a denial order shall not be based on this                   

                                                                                

24  subdivision if the individual has successfully completed all                

                                                                                

25  examinations required by subsection (5).  The administrator may             

                                                                                

26  require an applicant for registration under section 402 or 404              

                                                                                

27  who has not been registered in a state within the 2 years                   


                                                                                

1   preceding the filing of an application in this state to                     

                                                                                

2   successfully complete an examination.                                       

                                                                                

3       (5) A rule or order under this act may require that an                      

                                                                                

4   examination, including an examination developed or approved by an           

                                                                                

5   organization of securities regulators, be successfully completed            

                                                                                

6   by a class of individuals or all individuals.  An order under               

                                                                                

7   this act may waive an examination as to an individual and a rule            

                                                                                

8   under this act may waive an examination as to a class of                    

                                                                                

9   individuals if the administrator determines that the examination            

                                                                                

10  is not necessary or appropriate in the public interest and for              

                                                                                

11  the protection of investors.                                                

                                                                                

12      (6) The administrator may suspend or deny an application                    

                                                                                

13  summarily, restrict, condition, limit, or suspend a registration,           

                                                                                

14  or censure, bar, or impose a civil penalty on a registrant                  

                                                                                

15  pending final determination of an administrative proceeding.  On            

                                                                                

16  the issuance of the order, the administrator shall promptly                 

                                                                                

17  notify each person subject to the order that the order has been             

                                                                                

18  issued, the reasons for the action, and that, within 15 days                

                                                                                

19  after the receipt of a request in a record from the person, the             

                                                                                

20  matter will be scheduled for a hearing.  If a hearing is not                

                                                                                

21  requested by a person subject to the order or is not ordered by             

                                                                                

22  the administrator within 30 days after the date of service of the           

                                                                                

23  order, the order is final.  If a hearing is requested or ordered,           

                                                                                

24  the administrator, after notice of and opportunity for hearing to           

                                                                                

25  each person subject to the order, may modify or vacate the order            

                                                                                

26  or extend the order until final determination.                              

                                                                                

27      (7) Except under subsection (6), an order shall not be issued               


                                                                                

1   under this section unless all of the following have occurred:               

                                                                                

2       (a) Appropriate notice has been given to the applicant or                   

                                                                                

3   registrant.                                                                 

                                                                                

4       (b) Opportunity for hearing has been given to the applicant                 

                                                                                

5   or registrant.                                                              

                                                                                

6       (c) Findings of fact and conclusions of law have been made on               

                                                                                

7   the record pursuant to the administrative procedures act of 1969,           

                                                                                

8   1969 PA 306, MCL 24.201 to 24.328.                                          

                                                                                

9       (8) A person who controls, directly or indirectly, a person                 

                                                                                

10  not in compliance with this section may be disciplined by order             

                                                                                

11  of the administrator under subsections (1) to (3) to the same               

                                                                                

12  extent as the noncomplying person, unless the controlling person            

                                                                                

13  did not know, and in the exercise of reasonable care could not              

                                                                                

14  have known, of the existence of conduct that is a basis for                 

                                                                                

15  discipline under this section.                                              

                                                                                

16      (9) The administrator shall not institute a proceeding under                

                                                                                

17  subsection (1), (2), or (3) solely based on material facts                  

                                                                                

18  actually known by the administrator unless an investigation or              

                                                                                

19  the proceeding is instituted within 1 year after the                        

                                                                                

20  administrator actually knew the material facts.                             

                                                                                

21      Sec. 413.  A broker-dealer acting as a finder shall not do                  

                                                                                

22  any of the following:                                                       

                                                                                

23      (a) Take possession of funds or securities in connection                    

                                                                                

24  with the transaction for which payment is made for services as a            

                                                                                

25  finder.                                                                     

                                                                                

26      (b) Fail to disclose clearly and conspicuously in writing to                

                                                                                

27  all persons involved in the transaction as a result of the                  


                                                                                

1   broker-dealer's finding activities before the sale or purchase              

                                                                                

2   that the person is acting as a finder, any payment for services             

                                                                                

3   as a finder, the method and amount of payment, and any beneficial           

                                                                                

4   interest, direct or indirect, of the broker-dealer, or a member             

                                                                                

5   of the broker-dealer's immediate family if the broker-dealer is             

                                                                                

6   an individual, in the issue of the securities that are the                  

                                                                                

7   subject of services as a finder.                                            

                                                                                

8       (c) Participate in the offer, purchase, or sale of a                        

                                                                                

9   security in violation of section 301.  However, if the                      

                                                                                

10  broker-dealer makes a reasonable effort to ascertain if a                   

                                                                                

11  registration has been effected or an exemption order granted in             

                                                                                

12  this state or to ascertain the basis for an exemption claim and             

                                                                                

13  does not have knowledge that the proposed transaction would                 

                                                                                

14  violate section 301, the broker-dealer's activities as a finder             

                                                                                

15  do not violate section 301.                                                 

                                                                                

16      (d) Participate in the offer, purchase, or sale of a                        

                                                                                

17  security without obtaining information relative to the risks of             

                                                                                

18  the transaction, the direct or indirect compensation to be                  

                                                                                

19  received by promoters, partners, officers, directors, or their              

                                                                                

20  affiliates, the financial condition of the issuer, and the use of           

                                                                                

21  proceeds to be received from investors, or fail to read any                 

                                                                                

22  offering materials obtained.  This section does not require                 

                                                                                

23  independent investigation or alteration of offering materials               

                                                                                

24  furnished to the broker-dealer.                                             

                                                                                

25      (e) Fail to inform or otherwise ensure disclosure to all                    

                                                                                

26  persons involved in the transaction as a result of the                      

                                                                                

27  broker-dealer's finding activities of any material information              


                                                                                

1   which the broker-dealer knows, or in the exercise of reasonable             

                                                                                

2   care should know based on the information furnished to the                  

                                                                                

3   broker-dealer, is material in making an investment decision,                

                                                                                

4   until conclusion of the transaction.                                        

                                                                                

5       (f) Locate, introduce, or refer persons that the                            

                                                                                

6   broker-dealer knows, or after a reasonable inquiry should know,             

                                                                                

7   are not suitable investors by reason of their financial                     

                                                                                

8   condition, age, experience, or need to diversify investments.               

                                                                                

9                               ARTICLE 5                                       

                                                                                

10                        FRAUD AND LIABILITIES                                 

                                                                                

11      Sec. 501.  It is unlawful for a person, in connection with                  

                                                                                

12  the offer, sale, or purchase of a security, to directly or                  

                                                                                

13  indirectly do any of the following:                                         

                                                                                

14      (a) Employ a device, scheme, or artifice to defraud.                        

                                                                                

15      (b) Make an untrue statement of a material fact or omit to                  

                                                                                

16  state a material fact necessary in order to make the statement              

                                                                                

17  made, in the light of the circumstances under which it is made,             

                                                                                

18  not misleading.                                                             

                                                                                

19      (c) Engage in an act, practice, or course of business that                  

                                                                                

20  operates or would operate as a fraud or deceit on another                   

                                                                                

21  person.                                                                     

                                                                                

22      Sec. 502.  (1) It is unlawful for a person that advises                     

                                                                                

23  others for compensation, either directly or indirectly or through           

                                                                                

24  publications or writings, as to the value of securities or the              

                                                                                

25  advisability of investing in, purchasing, or selling securities,            

                                                                                

26  or that, for compensation and as part of a regular business,                

                                                                                

27  issues or promulgates analyses or reports relating to securities,           


                                                                                

1   to do any of the following:                                                 

                                                                                

2       (a) Employ a device, scheme, or artifice to defraud another                 

                                                                                

3   person.                                                                     

                                                                                

4       (b) Engage in an act, practice, or course of business that                  

                                                                                

5   operates or would operate as a fraud or deceit upon another                 

                                                                                

6   person.                                                                     

                                                                                

7       (2) An investment adviser acting as a finder shall not do any               

                                                                                

8   of the following:                                                           

                                                                                

9       (a) Take possession of funds or securities in connection with               

                                                                                

10  the transaction for which payment is made for services as a                 

                                                                                

11  finder.                                                                     

                                                                                

12      (b) Fail to disclose clearly and conspicuously in writing to