July 10, 2007, Introduced by Rep. Huizenga 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:
ARTICLE 1
GENERAL PROVISIONS
Sec. 101. This act shall be known and may be cited as the
"uniform securities act (2002)".
Sec. 102. As used in this act, unless the context otherwise
requires:
(a) "Administrator" means the office of financial and
insurance services of the department of labor and economic growth.
(b) "Agent" means an individual other than a broker-dealer who
represents a broker-dealer in effecting or attempting to effect
purchases or sales of securities or represents an issuer in
effecting or attempting to effect purchases or sales of the
issuer's securities. The term does not include a partner, officer,
or director of a broker-dealer or issuer, or an individual having a
similar status or performing similar functions, unless the
individual otherwise comes within the term. The term does not
include an individual excluded by rule or order under this act. The
term does not include a person acting solely as a finder and
registered as a broker-dealer under this act or acting as a finder
in a transaction exempt under section 202(1)(r).
(c) "Bank" means any of the following:
(i) A banking institution organized under the laws of the
United States.
(ii) A member bank of the federal reserve system.
(iii) Any other banking institution that meets all of the
following:
(A) It is doing business under the laws of a state or of the
United States.
(B) A substantial portion of its business consists of
receiving deposits or exercising fiduciary powers similar to those
permitted to be exercised by national banks under the authority of
the comptroller of the currency pursuant to 12 USC 92a.
(C) It is supervised and examined by a state or federal agency
having supervision over banks.
(D) It is not operated for the purpose of evading this act.
(iv) A receiver, conservator, or other liquidating agent of any
institution or firm included in subparagraph (i), (ii), or (iii).
(d) "Broker-dealer" means a person engaged in the business of
effecting transactions in securities for the account of others or
for the person's own account. The term does not include any of the
following:
(i) An agent.
(ii) An issuer.
(iii) Beginning on the effective date of this act and until
December 31, 2006, a depository institution.
(iv) Beginning January 1, 2007, a bank, trust company organized
or chartered under the laws of this state, or savings institution
if its activities as a broker-dealer are limited to those specified
in section 3(a)(4)(B)(i) through (vi), (viii) through (x), and (xi) if
limited to unsolicited transactions; 3(a)(5)(B); and 3(a)(5)(C) of
the securities exchange act of 1934, 15 USC 78c, or a bank that
satisfies the conditions described in section 3(a)(4)(E) of the
securities exchange act of 1934, 15 USC 78c.
(v) An international banking institution.
(vi) A person excluded by rule or order under this act.
(e) "Depository institution" means a bank; or a savings
institution, trust company, credit union, or similar institution
that is organized or chartered under the laws of a state or of the
United States, authorized to receive deposits, and supervised and
examined by an official or agency of a state or the United States
if its deposits or share accounts are insured by the federal
deposit insurance corporation, the national credit union share
insurance fund, or a successor authorized by federal law. The term
does not include any of the following:
(i) An insurance company or other organization primarily
engaged in the business of insurance.
(ii) A Morris Plan bank.
(iii) An industrial loan company.
(f) "Federal covered investment adviser" means a person
registered under the investment advisers act of 1940.
(g) "Federal covered security" means a security that is, or
upon completion of a transaction will be, a covered security under
section 18(b) of the securities act of 1933, 15 USC 77r, or rules
or regulations adopted under that provision.
(h) "Filing" means the receipt under this act of a record by
the administrator or a designee of the administrator.
(i) "Finder" means a person who, for consideration,
participates in the offer to sell, sale, or purchase of securities
by locating, introducing, or referring potential purchasers or
sellers. Finder does not include a person whose actions are solely
incidental to a transaction exempt pursuant to section 202(1)(r).
The administrator may by rule or order exclude other persons from
this definition.
(j) "Fraud," "deceit," and "defraud" include, but are not
limited to, common law deceit.
(k) "Guaranteed" means guaranteed as to payment of all
principal and all interest.
Sec. 102a. As used in this act, unless the context otherwise
requires:
(a) "Institutional investor" means any of the following,
whether acting for itself or for others in a fiduciary capacity:
(i) A depository institution or international banking
institution.
(ii) An insurance company.
(iii) A separate account of an insurance company.
(iv) An investment company as defined in the investment company
act of 1940.
(v) A broker-dealer registered under the securities exchange
act of 1934.
(vi) An employee pension, profit-sharing, or benefit plan if
the plan has total assets in excess of $10,000,000.00 or its
investment decisions are made by a named fiduciary, as defined in
the employee retirement income security act of 1974, that is a
broker-dealer registered under the securities exchange act of 1934,
an investment adviser registered or exempt from registration under
the investment advisers act of 1940, an investment adviser
registered under this act, a depository institution, or an
insurance company.
(vii) A plan established and maintained by a state, a political
subdivision of a state, or an agency or instrumentality of a state
or a political subdivision of a state for the benefit of its
employees, if the plan has total assets in excess of $10,000,000.00
or its investment decisions are made by a duly designated public
official or by a named fiduciary, as defined in the employee
retirement income security act of 1974, that is a broker-dealer
registered under the securities exchange act of 1934, an investment
adviser registered or exempt from registration under the investment
advisers act of 1940, an investment adviser registered under this
act, a depository institution, or an insurance company.
(viii) A trust, if it has total assets in excess of
$10,000,000.00, its trustee is a depository institution, and its
participants are exclusively plans of the types identified in
subparagraph (vi) or (vii), regardless of size of their assets,
except a trust that includes as participants self-directed
individual retirement accounts or similar self-directed plans.
(ix) An organization described in section 501(c)(3) of the
internal revenue code, 26 USC 501, a corporation, Massachusetts or
similar business trust, limited liability company, or partnership,
not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $10,000,000.00.
(x) A small business investment company licensed by the small
business administration under section 301(c) of the small business
investment act of 1958, 15 USC 681, with total assets in excess of
$10,000,000.00.
(xi) A private business development company as defined in
section 202(a)(22) of the investment advisers act of 1940, 15 USC
80b-2, with total assets in excess of $10,000,000.00.
(xii) A federal covered investment adviser acting for its own
account.
(xiii) A "qualified institutional buyer" as defined in rule
144A(a)(1), other than rule 144A(a)(1)(i)(H), adopted under the
securities act of 1933, 17 CFR 230.144A.
(xiv) A "major U.S. institutional investor" as defined in rule
15a-6(b)(4)(i) adopted under the securities exchange act of 1934, 17
CFR 240.15a-6(b)(4)(i).
(xv) Any other person, other than an individual, of
institutional character with total assets in excess of
$10,000,000.00 not organized for the specific purpose of evading
this act.
(xvi) Any other person specified by rule or order under this
act.
(b) "Insurance company" means a company organized as an
insurance company whose primary business is writing insurance or
reinsuring risks underwritten by insurance companies and which is
subject to supervision by the insurance commissioner or a similar
official or agency of a state.
(c) "Insured" means insured as to payment of all principal and
all interest.
(d) "International banking institution" means an international
financial institution of which the United States is a member and
whose securities are exempt from registration under the securities
act of 1933.
(e) "Investment adviser" means a person that, for
compensation, engages in the business of advising others, either
directly or through publications or writings, as to the value of
securities or the advisability of investing in, purchasing, or
selling securities or that, for compensation and as a part of a
regular business, issues or promulgates analyses or reports
concerning securities. The term includes a financial planner or
other person that, as an integral component of other financially
related services, provides investment advice to others for
compensation as part of a business or that holds itself out as
providing investment advice to others for compensation. The term
does not include any of the following:
(i) An investment adviser representative.
(ii) A lawyer, accountant, engineer, or teacher whose
performance of investment advice is solely incidental to the
practice of the person's profession.
(iii) A broker-dealer or its agents whose performance of
investment advice is solely incidental to the conduct of business
as a broker-dealer and that does not receive special compensation
for the investment advice.
(iv) A publisher of a bona fide newspaper, news magazine, or
business or financial publication of general and regular
circulation.
(v) A federal covered investment adviser.
(vi) A depository institution.
(vii) Any other person that is excluded by the investment
advisers act of 1940 from the definition of investment adviser.
(viii) Any other person excluded by rule or order under this
act.
(ix) A finder registered as a broker-dealer under this act.
(f) "Investment adviser representative" means an individual
employed by or associated with an investment adviser or federal
covered investment adviser and who makes any recommendations or
otherwise gives investment advice regarding securities, manages
accounts or portfolios of clients, determines which recommendation
or advice regarding securities should be given, provides investment
advice or holds himself or herself out as providing investment
advice, receives compensation to solicit, offer, or negotiate for
the sale of or for selling investment advice, or supervises
employees who perform any of the foregoing. The term does not
include an individual who meets any of the following:
(i) Performs only clerical or ministerial acts.
(ii) Is an agent whose performance of investment advice is
solely incidental to the individual acting as an agent and does not
receive special compensation for investment advisory services.
(iii) Is employed by or associated with a federal covered
investment adviser, unless the individual meets any of the
following:
(A) Has a "place of business" in this state as that term is
defined by rule adopted under section 203A of the investment
advisers act of 1940, 15 USC 80b-3a, and is an "investment adviser
representative" as that term is defined by rule adopted under
section 203A of the investment advisers act of 1940, 15 USC 80b-3a.
(B) Has a "place of business" in this state as that term is
defined by rule adopted under section 203A of the investment
advisers act of 1940, 15 USC 80b-3a, and is not a "supervised
person" as that term is defined in section 202(a)(25) of the
investment advisers act of 1940, 15 USC 80b-2.
(iv) Is excluded by rule or order under this act.
(g) "Issuer" means a person that issues or proposes to issue a
security, subject to the following:
(i) The issuer of a voting trust certificate, collateral trust
certificate, certificate of deposit for a security, or share in an
investment company without a board of directors or individuals
performing similar functions, is the person performing the acts and
assuming the duties of depositor or manager pursuant to the trust
or other agreement or instrument under which the security is
issued.
(ii) The issuer of an equipment trust certificate or similar
security serving the same purpose is the person by which the
property is or will be used, or to which the property or equipment
is or will be leased or conditionally sold, or that is otherwise
contractually responsible for assuring payment of the certificate.
(iii) The issuer of a fractional undivided interest in an oil,
gas, or other mineral lease or in payments out of production under
a lease, right, or royalty is the owner of an interest in the lease
or in payments out of production under a lease, right, or royalty,
whether whole or fractional, that creates fractional interests for
the purpose of sale.
Sec. 102b. As used in this act, unless the context otherwise
requires:
(a) "Nonissuer transaction" or "nonissuer distribution" means
a transaction or distribution not directly or indirectly for the
benefit of the issuer.
(b) "Offer to purchase" includes an attempt or offer to
obtain, or solicitation of an offer to sell, a security or interest
in a security for value. The term does not include a tender offer
that is subject to section 14(d) of title I of the securities
exchange act of 1934, 15 USC 78n.
(c) "Person" means an individual, corporation, business trust,
estate, trust, partnership, limited liability company, limited
liability partnership, association, joint venture, or government; a
governmental subdivision, agency, or instrumentality; a public
corporation; or any other legal or commercial entity.
(d) "Place of business" of a broker-dealer, an investment
adviser, or a federal covered investment adviser means any of the
following:
(i) An office at which the broker-dealer, investment adviser,
or federal covered investment adviser regularly provides brokerage
or investment advice, or solicits, meets with, or otherwise
communicates with customers or clients.
(ii) Any other location that is held out to the general public
as a location at which the broker-dealer, investment adviser, or
federal covered investment adviser provides brokerage or investment
advice, or solicits, meets with, or otherwise communicates with
customers or clients.
(e) "Predecessor act" means former 1964 PA 265.
(f) "Price amendment" means the amendment to a registration
statement filed under the securities act of 1933 or, if an
amendment is not filed, the prospectus or prospectus supplement
filed under the securities act of 1933 that includes a statement of
the offering price, underwriting and selling discounts or
commissions, amount of proceeds, conversion rates, call prices, and
other matters dependent upon the offering price.
(g) "Principal place of business" of a broker-dealer or an
investment adviser means the executive office of the broker-dealer
or investment adviser from which the officers, partners, or
managers of the broker-dealer or investment adviser direct,
control, and coordinate the activities of the broker-dealer or
investment adviser.
(h) "Record," except in the phrases "of record," "official
record," and "public record," means information that is inscribed
on a tangible medium or that is stored in an electronic or other
medium and is retrievable in perceivable form.
Sec. 102c. As used in this act, unless the context otherwise
requires:
(a) "Sale" includes every contract of sale, contract to sell,
or disposition of, a security or interest in a security for value,
and "offer to sell" includes every attempt or offer to dispose of,
or solicitation of an offer to purchase, a security or interest in
a security for value. Both terms include any of the following:
(i) A security given or delivered with, or as a bonus on
account of, any purchase of securities or any other thing
constituting part of the subject of the purchase and having been
offered and sold for value.
(ii) A gift of assessable stock involving an offer and sale.
(iii) A sale or offer of a warrant or right to purchase or
subscribe to another security of the same or another issuer, and a
sale or offer of a security that gives the holder a present or
future right or privilege to convert the security into another
security of the same or another issuer, including an offer of the
other security.
(b) "Securities and exchange commission" means the United
States securities and exchange commission.
(c) "Security" means a note; stock; treasury stock; security
future; bond; debenture; evidence of indebtedness; certificate of
interest or participation in a profit-sharing agreement; collateral
trust certificate; preorganization certificate or subscription;
transferable share; investment contract; voting trust certificate;
certificate of deposit for a security; fractional undivided
interest in oil, gas, or other mineral rights; put, call, straddle,
option, or privilege on a security, certificate of deposit, or
group or index of securities, including an interest in or based on
the value of that put, call, straddle, option, or privilege on that
security, certificate of deposit, or group or index of securities;
put, call, straddle, option, or privilege entered into on a
national securities exchange relating to foreign currency; an
investment in a viatical or life settlement agreement; or, in
general, an interest or instrument commonly known as a "security";
or a certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or
right to subscribe to or purchase, any of the foregoing. All of the
following apply to the term security:
(i) The term includes a contractual or quasi-contractual
arrangement that meets all of the following:
(A) A person furnishes capital, other than services, to an
issuer under the arrangement.
(B) A portion of the capital furnished under sub-subparagraph
(A) is subjected to the risks of the issuer's enterprise.
(C) The furnishing of capital under sub-subparagraph (A) is
induced by representations made by an issuer, promoter, or the
issuer's or promoter's affiliates which give rise to a reasonable
understanding that a valuable tangible benefit will accrue to the
person furnishing the capital as a result of the operation of the
enterprise.
(D) The person furnishing the capital under sub-subparagraph
(A) does not intend to be actively involved in the management of
the enterprise in a meaningful way.
(E) At the time the capital is furnished, a promoter or its
affiliates anticipate that financial gain may be realized as a
result of the furnishing.
(ii) The term includes both a certificated and an
uncertificated security.
(iii) The term does not include an insurance or endowment policy
or annuity contract under which an insurance company promises to
pay a fixed or variable sum of money either in a lump sum or
periodically for life or other specified period.
(iv) The term does not include an interest in a contributory or
noncontributory pension or welfare plan subject to the employee
retirement income security act of 1974.
(v) The term includes an investment in a common enterprise
with the expectation of profits to be derived primarily from the
efforts of a person other than the investor. As used in this
subparagraph, a "common enterprise" means an enterprise in which
the fortunes of the investor are interwoven with those of either
the person offering the investment, a third party, or other
investors.
(vi) The term may include, as an investment contract, an
interest in a limited partnership, a limited liability company, or
a limited liability partnership.
(d) "Self-regulatory organization" means a national securities
exchange registered under the securities exchange act of 1934, a
national securities association of broker-dealers registered under
the securities exchange act of 1934, a clearing agency registered
under the securities exchange act of 1934, or the municipal
securities rule-making board established under the securities
exchange act of 1934.
(e) "Sign" means, with present intent to authenticate or adopt
a record, either of the following:
(i) To execute or adopt a tangible symbol.
(ii) To attach or logically associate with the record an
electronic symbol, sound, or process.
(f) "State" means a state of the United States, the District
of Columbia, the Commonwealth of Puerto Rico, the United States
Virgin Islands, or any territory or insular possession subject to
the jurisdiction of the United States.
Sec. 103. (1) Subject to subsection (2), as used in this act:
(a) "Commodity exchange act" means the commodity exchange act,
7 USC 1 to 27f.
(b) "Electronic signatures in global and national commerce
act" means the electronic signatures in global and national
commerce act, 15 USC 7001 to 7031.
(c) "Employee retirement income security act of 1974" means
the employee retirement income security act of 1974, 29 USC 1001 to
1461.
(d) "Internal revenue code" means the internal revenue code of
1986, 26 USC 1 to 9833.
(e) "Investment advisers act of 1940" means the investment
advisers act of 1940, 15 USC 80b-1 to 80b-21.
(f) "Investment company act of 1940" means the investment
company act of 1940, 15 USC 80a-1 to 80a-64.
(g) "National housing act" means the national housing act, 12
USC 1701 to 1750g.
(h) "Public utility holding company act of 1935" means the
public utility holding company act of 1935, 15 USC 79 to 79z-6.
(i) "Securities act of 1933" means the securities act of 1933,
15 USC 77a to 77aa.
(j) "Securities exchange act of 1934" means the securities
exchange act of 1934, 15 USC 78a to 78nn.
(k) "Securities investor protection act of 1970" means the
securities investor protection act of 1970, 15 USC 78aaa to 78lll.
(l) "Securities litigation uniform standards act of 1998" means
the securities litigation uniform standards act of 1998, Public Law
105-353, 112 Stat. 3227.
(m) "Small business investment act of 1958" means the small
business investment act of 1958, 15 USC 661 to 697g.
(2) A reference in this act to a federal statute defined in
subsection (1) includes that statute and the rules and regulations
adopted under that statute. The administrator may, by rule or
order, adopt an amendment or successor to a federal statute defined
in subsection (1) or rules and regulations adopted under a federal
statute defined in subsection (1), a federal statute that is
similar to a federal statute defined in subsection (1), or a rule
or regulation that is similar to a rule or regulation adopted under
a federal statute defined in subsection (1).
Sec. 104. Any reference in this act to an agency or department
of the United States is also a reference to any successor agency,
department, or entity of that agency or department.
Sec. 105. This act modifies, limits, and supersedes the
electronic signatures in global and national commerce act, but does
not modify, limit, or supersede section 101(c) of that act, 15 USC
7001, or authorize electronic delivery of any of the notices
described in section 103(b) of that act, 15 USC 7003. This act
authorizes the filing of records and signatures, when specified by
provisions of this act or by a rule or order under this act, in a
manner consistent with section 104(a) of that act, 15 USC 7004.
ARTICLE 2
EXEMPTIONS FROM REGISTRATION OF SECURITIES
Sec. 201. The following securities are exempt from the
requirements of sections 301 to 306 and 504:
(a) A security, including a revenue obligation or a separate
security as defined in rule 131 adopted under the securities act of
1933, 17 CFR 230.131, issued, insured, or guaranteed by the United
States; by a state; by a political subdivision of a state; by a
public authority, agency, or instrumentality of 1 or more states;
by a political subdivision of 1 or more states; or by a person
controlled or supervised by and acting as an instrumentality of the
United States under authority granted by the Congress; or a
certificate of deposit for any of the foregoing.
(b) A security issued, insured, or guaranteed by a foreign
government with which the United States maintains diplomatic
relations, or any of its political subdivisions, if the security is
recognized as a valid obligation by the issuer, insurer, or
guarantor.
(c) A security issued by and representing, or that will
represent an interest in or a direct obligation of, or be
guaranteed by, any of the following:
(i) An international banking institution.
(ii) A banking institution organized under the laws of the
United States; a member bank of the federal reserve system; or a
depository institution a substantial portion of the business of
which consists or will consist of either receiving deposits or
share accounts that are insured to the maximum amount authorized by
statute by the federal deposit insurance corporation, the national
credit union share insurance fund, or a successor authorized by
federal law or exercising fiduciary powers that are similar to
those permitted for national banks under the authority of the
comptroller of currency pursuant to 12 USC 92a.
(iii) Any other depository institution, unless by rule or order
the administrator proceeds under section 204.
(d) A security issued by and representing an interest in, or a
debt of, or insured or guaranteed by, an insurance company
authorized to do business in this state.
(e) A security issued or guaranteed by a railroad, other
common carrier, public utility, or public utility holding company
that is any of the following:
(i) Regulated in respect to its rates and charges by the United
States or a state.
(ii) Regulated in respect to the issuance or guarantee of the
security by the United States, a state, Canada, or a Canadian
province or territory.
(iii) A public utility holding company registered under the
public utility holding company act of 1935 or a subsidiary of a
registered holding company within the meaning of that act.
(f) A federal covered security specified in section 18(b)(1)
of the securities act of 1933, 15 USC 77r, or a security listed or
approved for listing on another securities market specified by rule
under this act; a put or a call option contract; warrant; a
subscription right on or with respect to those securities; or an
option or similar derivative security on a security or an index of
securities or foreign currencies issued by a clearing agency
registered under the securities exchange act of 1934 and listed or
designated for trading on a national securities exchange, a
facility of a national securities exchange, or a facility of a
national securities association registered under the securities
exchange act of 1934 or an offer or sale, of the underlying
security in connection with the offer, sale, or exercise of an
option or other security that was exempt when the option or other
security was written or issued; or an option or a derivative
security designated by the securities and exchange commission under
section 9(b) of the securities exchange act of 1934, 15 USC 78i.
(g) A security issued by a person organized and operated
exclusively for religious, educational, benevolent, fraternal,
charitable, social, athletic, or reformatory purposes, or as a
chamber of commerce, and not for pecuniary profit, no part of the
net earnings of which inures to the benefit of a private
stockholder or other person, or a security of a company that is
excluded from the definition of an investment company under section
3(c)(10)(B) of the investment company act of 1940, 15 USC 80a-3.
With respect to the offer or sale of a note, bond, debenture, or
other evidence of indebtedness by a person described in this
subdivision, the administrator by rule may limit the availability
of this exemption by classifying securities, persons, and
transactions, imposing different requirements for different
classes, specifying with respect to subparagraph (ii) the scope of
the exemption and the grounds for denial or suspension, and
requiring an issuer to meet 1 or more of the following:
(i) To file a notice specifying the material terms of the
proposed offer or sale and copies of any proposed sales and
advertising literature to be used and provide that the exemption
becomes effective if the administrator does not disallow the
exemption within the period established by the rule.
(ii) To file a request for exemption authorization for which a
rule under this act may specify the scope of the exemption; the
requirement of an offering statement; the filing of sales and
advertising literature; the filing of consent to service of process
complying with section 611; and grounds for denial or suspension of
the exemption.
(iii) To register under section 304.
(h) A member's or owner's interest in, or a retention
certificate or like security given in lieu of a cash patronage
dividend issued by, a cooperative organized and operated as a
nonprofit membership cooperative under the cooperative laws of a
state, but not a member's or owner's interest, retention
certificate, or like security sold to persons other than bona fide
members of the cooperative.
(i) An equipment trust certificate in respect to equipment
leased or conditionally sold to a person, if any security issued by
the person would be exempt under this section or would be a federal
covered security under section 18(b)(1) of the securities act of
1933, 15 USC 77r.
Sec. 202. (1) The following transactions are exempt from the
requirements of sections 301 to 306 and 504:
(a) An isolated nonissuer transaction, whether effected by or
through a broker-dealer or not.
(b) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act, and a resale
transaction by a sponsor of a unit investment trust registered
under the investment company act of 1940, in a security of a class
that has been outstanding in the hands of the public for at least
90 days, if all of the following are met at the date of the
transaction:
(i) The issuer of the security is engaged in business, the
issuer is not in the organizational stage or in bankruptcy or
receivership, and the issuer is not a blank check, blind pool, or
shell company that has no specific business plan or purpose or has
indicated that its primary business plan is to engage in a merger
or combination of the business with, or an acquisition of, an
unidentified person.
(ii) The security is sold at a price reasonably related to its
current market price.
(iii) The security does not constitute the whole or part of an
unsold allotment to, or a subscription or participation by, the
broker-dealer as an underwriter of the security or a
redistribution.
(iv) A nationally recognized securities manual or its
electronic equivalent designated by rule or order under this act or
a record filed with the securities and exchange commission that is
publicly available contains all of the following:
(A) A description of the business and operations of the
issuer.
(B) The names of the issuer's executive officers and the names
of the issuer's directors, if any.
(C) An audited balance sheet of the issuer as of a date within
18 months before the date of the transaction or, in the case of a
reorganization or merger, and when the parties to the
reorganization or merger each had an audited balance sheet, a pro
forma balance sheet for the combined entity.
(D) An audited income statement for each of the issuer's 2
immediately previous fiscal years or for the period of existence of
the issuer, whichever is shorter, or, in the case of a
reorganization or merger when each party to the reorganization or
merger had audited income statements, a pro forma income statement.
(v) Any of the following requirements are met:
(A) The issuer of the security has a class of equity
securities listed on a national securities exchange registered
under section 6 of the securities exchange act of 1934, 15 USC 78f,
or designated for trading on the national association of securities
dealers automated quotation system.
(B) The issuer of the security is a unit investment trust
registered under the investment company act of 1940.
(C) The issuer of the security, including its predecessors,
has been engaged in continuous business for at least 3 years.
(D) The issuer of the security has total assets of at least
$2,000,000.00 based on an audited balance sheet as of a date within
18 months before the date of the transaction or, in the case of a
reorganization or merger when the parties to the reorganization or
merger each had an audited balance sheet as of a date within 18
months before the date of the transaction, a pro forma balance
sheet for the combined entity.
(c) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act in a security
of a foreign issuer that is a margin security defined in
regulations or rules adopted by the board of governors of the
federal reserve system.
(d) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act in an
outstanding security if the guarantor of the security files reports
with the securities and exchange commission under the reporting
requirements of section 13 or 15(d) of the securities exchange act
of 1934, 15 USC 78m or 78o.
(e) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act in a security
that meets 1 or more of the following:
(i) Is rated at the time of the transaction by a nationally
recognized statistical rating organization in 1 of its 4 highest
rating categories.
(ii) Has a fixed maturity or a fixed interest or dividend, if
both of the following are met:
(A) A default has not occurred during the current fiscal year
or within the 3 previous fiscal years or during the existence of
the issuer and any predecessor if less than 3 fiscal years, in the
payment of principal, interest, or dividends on the security.
(B) The issuer is engaged in business, is not in the
organizational stage or in bankruptcy or receivership, and is not
and has not been within the previous 12 months a blank check, blind
pool, or shell company that has no specific business plan or
purpose or has indicated that its primary business plan is to
engage in a merger or combination of the business with, or an
acquisition of, an unidentified person.
(f) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act effecting an
unsolicited order or offer to purchase.
(g) A nonissuer transaction executed by a bona fide pledgee
without any purpose of evading this act.
(h) A nonissuer transaction by a federal covered investment
adviser with investments under management in excess of
$100,000,000.00 acting in the exercise of discretionary authority
in a signed record for the account of others.
(i) A transaction in a security, whether or not the security
or transaction is otherwise exempt, in exchange for 1 or more bona
fide outstanding securities, claims, or property interests, or
partly in exchange and partly for cash, if the terms and conditions
of the issuance and exchange or the delivery and exchange and the
fairness of the terms and conditions have been approved by the
administrator at a hearing.
(j) A transaction between the issuer or other person on whose
behalf the offering is made and an underwriter, or among
underwriters.
(k) A transaction in a note, bond, debenture, or other
evidence of indebtedness secured by a mortgage or other security
agreement if all of the following are met:
(i) The note, bond, debenture, or other evidence of
indebtedness is offered and sold with the mortgage or other
security agreement as a unit.
(ii) A general solicitation or general advertisement of the
transaction is not made.
(iii) A commission or other remuneration is not paid or given,
directly or indirectly, to a person not registered under this act
as a broker-dealer or as an agent.
(l) A transaction by an executor, administrator of an estate,
sheriff, marshal, receiver, trustee in bankruptcy, guardian, or
conservator.
(m) A sale or offer to sell to any of the following:
(i) An institutional investor.
(ii) A federal covered investment adviser.
(iii) Any other person exempted by rule or order under this act.
(n) A sale or an offer to sell securities by or on behalf of
an issuer, if the transaction is part of a single issue in which
all of the following are met:
(i) There are not more than 25 purchasers in this state during
any 12 consecutive months, other than those designated in
subdivision (m).
(ii) There is no general solicitation or general advertising
used in connection with the offer to sell or sale of the
securities.
(iii) A commission or other remuneration is not paid or given,
directly or indirectly, to a person other than a broker-dealer
registered under this act or an agent registered under this act for
soliciting a prospective purchaser in this state.
(iv) The issuer reasonably believes that all the purchasers in
this state other than those designated in subdivision (m) are
purchasing for investment.
(o) A transaction under an offer to existing security holders
of the issuer, including persons that at the date of the
transaction are holders of convertible securities, options, or
warrants, if a commission or other remuneration, other than a
standby commission, is not paid or given, directly or indirectly,
for soliciting a security holder in this state.
(p) An offer to sell, but not a sale, of a security not exempt
from registration under the securities act of 1933 if both of the
following are met:
(i) A registration or offering statement or similar record as
required under the securities act of 1933 has been filed, but is
not effective, or the offer is made in compliance with rule 165
adopted under the securities act of 1933, 17 CFR 230.165.
(ii) A stop order of which the offeror is aware has not been
issued against the offeror by the administrator or the securities
and exchange commission, and an audit, inspection, or proceeding
that is public and may culminate in a stop order is not known by
the offeror to be pending.
(q) An offer to sell, but not a sale, of a security exempt
from registration under the securities act of 1933 if all of the
following are met:
(i) A registration statement has been filed under this act, but
is not effective.
(ii) A solicitation of interest is provided in a record to
offerees in compliance with a rule adopted by the administrator
under this act.
(iii) A stop order of which the offeror is aware has not been
issued by the administrator under this act, and an audit,
inspection, or proceeding that may culminate in a stop order is not
known by the offeror to be pending.
(r) A transaction involving the distribution of the securities
of an issuer to the security holders of another person in
connection with a merger, consolidation, exchange of securities,
sale of assets, or other reorganization to which the issuer, or its
parent or subsidiary, and the other person, or its parent or
subsidiary, are parties.
(s) A rescission offer, sale, or purchase under section 510.
(t) An offer or sale of a security to a person not resident in
this state and not present in this state if the offer or sale does
not constitute a violation of the laws of the state or foreign
jurisdiction in which the offeree or purchaser is present and is
not part of an unlawful plan or scheme to evade this act.
(u) An offer or sale of a security pursuant to an employee's
stock purchase, savings, option, profit-sharing, pension, or
similar employees' benefit plan, including any securities, plan
interests, and guarantees issued under a compensatory benefit plan
or compensation contract, contained in a record, established by the
issuer, its parents, its majority-owned subsidiaries, or the
majority-owned subsidiaries of the issuer's parent for the
participation of their employees including any of the following:
(i) Offers or sales of those securities to directors; general
partners; trustees, if the issuer is a business trust; officers; or
consultants and advisors.
(ii) Family members who acquire those securities from those
persons through gifts or domestic relations orders.
(iii) Former employees, directors, general partners, trustees,
officers, consultants, and advisors if those individuals were
employed by or providing services to the issuer when the securities
were offered.
(iv) Insurance agents who are exclusive insurance agents of the
issuer, its subsidiaries or parents, or who derive more than 50% of
their annual income from those organizations.
(v) A transaction involving any of the following:
(i) A stock dividend or equivalent equity distribution, whether
the corporation or other business organization distributing the
dividend or equivalent equity distribution is the issuer or not, if
nothing of value is given by stockholders or other equity holders
for the dividend or equivalent equity distribution other than the
surrender of a right to a cash or property dividend if each
stockholder or other equity holder may elect to take the dividend
or equivalent equity distribution in cash, property, or stock.
(ii) An act incident to a judicially approved reorganization in
which a security is issued in exchange for 1 or more outstanding
securities, claims, or property interests, or partly in exchange
and partly for cash.
(iii) The solicitation of tenders of securities by an offeror in
a tender offer in compliance with rule 162 adopted under the
securities act of 1933, 17 CFR 230.162.
(w) Subject to subsection (2), a nonissuer transaction in an
outstanding security by or through a broker-dealer registered or
exempt from registration under this act, if both of the following
are met:
(i) The issuer is a reporting issuer in a foreign jurisdiction
designated in subsection (2)(a), or by rule or order of the
administrator, and has been subject to continuous reporting
requirements in the foreign jurisdiction for not less than 180 days
before the transaction.
(ii) The security is listed on the foreign jurisdiction's
securities exchange that has been designated in subsection (2)(a),
or by rule or order under this act, or is a security of the same
issuer that is of senior or substantially equal rank to the listed
security or is a warrant or right to purchase or subscribe to any
of the foregoing.
(2) For purposes of subsection (1)(w), both of the following
apply:
(a) Canada, together with its provinces and territories, is a
designated foreign jurisdiction and the Toronto stock exchange,
inc., is a designated securities exchange.
(b) After an administrative hearing in compliance with
applicable state law, the administrator, by rule or order under
this act, may revoke the designation of a securities exchange under
subsection (1)(w) or this subsection if the administrator finds
that revocation is necessary or appropriate in the public interest
and for the protection of investors.
Sec. 203. A rule or order under this act may exempt a
security, transaction, or offer, or a rule or order under this act
may exempt a class of securities, transactions, or offers, from any
or all of the requirements of sections 301 to 306 and 504, and a
rule or order under this act may waive any or all of the conditions
for an exemption or offers under sections 201 and 202.
Sec. 204. (1) Except with respect to a federal covered
security or a transaction involving a federal covered security, an
order of the administrator under this act may deny or suspend
application of, condition, limit, or revoke an exemption created
under section 201(c)(iii), (g), or (h) or 202 or an exemption or
waiver created under section 203 with respect to a specific
security, transaction, or offer. An order under this section may
only be issued pursuant to the procedures in section 306(4) or 604.
(2) A person does not violate section 301, 303 to 306, 504, or
510 by an offer to sell, an offer to purchase, a sale, or a
purchase effected after the entry of an order issued under this
section if the person did not know, and in the exercise of
reasonable care could not have known, of the order.
ARTICLE 3
REGISTRATION OF SECURITIES AND NOTICE FILINGS OF FEDERAL COVERED
SECURITIES
Sec. 301. A person shall not offer or sell a security in this
state unless 1 or more of the following are met:
(a) The security is a federal covered security.
(b) The security, transaction, or offer is exempted from
registration under sections 201 to 203.
(c) The security is registered under this act.
Sec. 302. (1) A rule or order under this act may require the
filing of 1 or more of the following records with respect to a
security issued by an investment company that is a federal covered
security as defined in section 18(b)(2) of the securities act of
1933, 15 USC 77r, that is not otherwise exempt under sections 201
to 203:
(a) Before the initial offer of a federal covered security in
this state, all records that are part of a federal registration
statement filed with the securities and exchange commission under
the securities act of 1933, a consent to service of process signed
by the issuer, and a fee of $500.00.
(b) After the initial offer of the federal covered security in
this state, all records that are part of an amendment to a federal
registration statement filed with the securities and exchange
commission under the securities act of 1933.
(2) Any security issued by a unit investment trust that is
registered or that has filed a registration statement under the
investment company act of 1940 as an investment company may be
offered for sale and sold into, from, or within this state for an
indefinite period commencing upon the later of the trust's
effectiveness with the securities and exchange commission or the
administrator's receipt of a notice as prescribed by the
administrator and a 1-time notice filing fee of $500.00.
(3) Each of the following applies to a notice filing under
subsection (1):
(a) A notice filing is effective for a period of 1 year,
commencing upon the later of the effectiveness of the offering with
the securities and exchange commission or the administrator's
receipt of the notice filing.
(b) A notice filing may be renewed for an additional 1-year
period by filing a current form NF and the fee required by
subsection (8) before the expiration of the 1-year effective
period. The renewal is effective upon the expiration of the prior
notice period.
(c) A notice filing may be terminated by filing with the
administrator a notice of termination as prescribed by the
administrator. The termination is effective upon the
administrator's receipt of the notice of termination.
(4) With respect to any security that is a federal covered
security under section 18(b)(4)(D) of the securities act of 1933,
15 USC 77r, the issuer shall file all of the following:
(a) A notice on securities and exchange commission form D or a
form approved by the administrator.
(b) A consent to service of process signed by the issuer, no
later than 15 days after the first sale of a federal covered
security in this state.
(c) A nonrefundable filing fee of $100.00.
(5) The administrator, by rule or order, may require the
filing of any document filed with the securities and exchange
commission under the securities act of 1933 and a nonrefundable
filing fee of $100.00 with respect to any federal covered security.
(6) The administrator may issue a stop order suspending the
offer and sale of a federal covered security, except a federal
covered security under section 18(b)(1) of the securities act of
1933, 15 USC 77r, if it finds that the order is in the public
interest and there is a failure to comply with this section.
(7) The administrator may waive any or all of the provisions
of this section by rule or order.
(8) All of the following apply to the renewals of a notice
filing under subsection (3):
(a) Subject to adjustment under subdivision (c), the fee for
the renewal is 1 of the following:
(i) If the issuer projects nonexempt sales of the security in
this state during the 1-year renewal period of $250,000.00 or less,
$100.00.
(ii) If the issuer projects nonexempt sales of the security in
this state during the 1-year renewal period of more than
$250,000.00 but not more than $700,000.00, $400.00.
(iii) If the issuer projects nonexempt sales of the security in
this state during the 1-year renewal period of more than
$700,000.00 but not more than $1,000,000.00, $800.00.
(iv) If the issuer projects nonexempt sales of the security in
this state during the 1-year renewal period of more than
$1,000,000.00, $1,400.00.
(b) For purposes of subdivision (a), an issuer's projection of
nonexempt sales of a security must be reasonable and based on any
facts known to the issuer at the time of renewal that may affect
sales of the security, including, but not limited to, nonexempt
sales of the security in this state during the current 1-year
notice filing period.
(c) If an issuer's nonexempt sales of a security in this state
during a 1-year notice filing period exceed the projections for
that period that the issuer had submitted to the administrator for
determination of the issuer's renewal fee for that 1-year notice
filing period, the issuer is not required to amend its projections
or pay an additional fee for that notice filing period. However,
the fee for renewal of the notice filing shall be the greater of
the following:
(i) The renewal fee determined under subdivision (a).
(ii) A renewal fee determined under subdivision (a), using
actual sales during the current notice filing period as the
projected sales for the renewal notice filing period.
(d) If an issuer's nonexempt sales of a security in this state
during a 1-year notice filing period are less than the projections
for that period that the issuer had submitted to the administrator
for determination of the issuer's renewal fee for the 1-year notice
filing period, the issuer is not entitled to a refund of any part
of the renewal fee for that period or adjustment of the renewal fee
for any renewal period.
(e) Upon written request of the administrator, an issuer shall
provide sales reports showing the issuer's nonexempt sales of a
security in this state for the current and 2 previous 1-year notice
filing periods, but the issuer is not otherwise required to provide
a sales report to the administrator in connection with a renewal of
a notice filing.
(f) If the administrator determines that for 2 consecutive 1-
year notice filing periods an issuer's nonexempt sales of a
security in this state exceeded the issuer's sales projections for
that period, the administrator may assess the issuer a penalty in
the amount of the renewal fees the issuer would have paid under
subdivision (a) if its projections had been accurate. This penalty
is in addition to an increased fee for renewal under subdivision
(c), if any.
(9) If the administrator finds that there is a failure to
comply with a notice or fee requirement of this section, the
administrator may issue a stop order suspending the offer and sale
of a federal covered security in this state, except a federal
covered security under section 18(b)(1) of the securities act of
1933, 15 USC 77r. If the deficiency is corrected, the stop order is
void as of the time of its issuance and no other penalty may be
imposed by the administrator.
Sec. 303. (1) A security for which a registration statement
has been filed under the securities act of 1933 in connection with
the same offering may be registered by coordination under this
section.
(2) A registration statement and accompanying records under
this section must contain or be accompanied by all of the following
records in addition to the information specified in section 305 and
a consent to service of process complying with section 611:
(a) A copy of the latest form of prospectus filed under the
securities act of 1933.
(b) A copy of the articles of incorporation and bylaws or
their substantial equivalents currently in effect, a copy of any
agreement with or among underwriters, a copy of any indenture or
other instrument governing the issuance of the security to be
registered, and a specimen, copy, or description of the security
that is required by rule or order under this act.
(c) Copies of any other information, or any other records,
filed by the issuer under the securities act of 1933 requested by
the administrator.
(d) An undertaking to forward each amendment to the federal
prospectus, other than an amendment that delays the effective date
of the registration statement, promptly after it is filed with the
securities and exchange commission.
(3) A registration statement under this section becomes
effective simultaneously with or subsequent to the federal
registration statement when all the following conditions are
satisfied:
(a) A stop order under subsection (4) or section 306 or issued
by the securities and exchange commission is not in effect and a
proceeding is not pending against the issuer under section 306.
(b) The registration statement has been on file for at least
20 days or a shorter period provided by rule or order under this
act.
(4) The registrant shall promptly notify the administrator in
a record of the date when the federal registration statement
becomes effective and the content of a price amendment, if any, and
shall promptly file a record containing the price amendment. If the
notice is not timely received, the administrator may issue a stop
order, without prior notice or hearing, retroactively denying
effectiveness to the registration statement or suspending its
effectiveness until compliance with this section. The administrator
shall promptly notify the registrant of an order by telegram,
telephone, or electronic means and promptly confirm this notice by
a record. If the registrant subsequently complies with the notice
requirements of this section, the stop order is void as of the date
of its issuance.
(5) If the federal registration statement becomes effective
before each of the conditions in this section is satisfied or is
waived by the administrator, the registration statement is
automatically effective under this act when all the conditions are
satisfied or waived. If the registrant notifies the administrator
of the date when the federal registration statement is expected to
become effective, the administrator shall promptly notify the
registrant by telegram, telephone, or electronic means and promptly
confirm this notice by a record, indicating whether all the
conditions are satisfied or waived and whether the administrator
intends the institution of a proceeding under section 306. The
notice by the administrator does not preclude the institution of a
proceeding under section 306.
Sec. 304. (1) A security may be registered by qualification
under this section.
(2) A registration statement under this section must contain
the information or records specified in section 305, a consent to
service of process complying with section 611, and, if provided by
rule under this act, all of the following information or records:
(a) With respect to the issuer and any significant subsidiary,
its name, address, and form of organization, the state or foreign
jurisdiction and date of its organization, the general character
and location of its business, a description of its physical
properties and equipment, and a statement of the general
competitive conditions in the industry or business in which it is
or will be engaged.
(b) With respect to each director and officer of the issuer,
and other person having a similar status or performing similar
functions, the person's name, address, and principal occupation for
the previous 5 years, the amount of securities of the issuer held
by the person as of the thirtieth day before the filing of the
registration statement, the amount of the securities covered by the
registration statement to which the person has indicated an
intention to subscribe, and a description of any material interest
of the person in any material transaction with the issuer or a
significant subsidiary effected within the previous 3 years or
proposed to be effected.
(c) With respect to persons covered by subdivision (b), the
aggregate sum of the remuneration paid to those persons during the
previous 12 months and estimated to be paid during the next 12
months, directly or indirectly, by the issuer, and all
predecessors, parents, subsidiaries, and affiliates of the issuer.
(d) With respect to a person owning of record or owning
beneficially, if known, 10% or more of the outstanding shares of
any class of equity security of the issuer, the information
specified in subdivision (b) other than the person's occupation.
(e) With respect to a promoter if the issuer was organized
within the previous 3 years, the information or records specified
in subdivision (b), any amount paid to the promoter within that
period or intended to be paid to the promoter, and the
consideration for the payment.
(f) With respect to a person on whose behalf any part of the
offering is to be made in a nonissuer distribution, the person's
name and address, the amount of securities of the issuer held by
the person as of the date of the filing of the registration
statement, a description of any material interest of the person in
any material transaction with the issuer or any significant
subsidiary effected within the previous 3 years or proposed to be
effected, and a statement of the reasons for making the offering.
(g) The capitalization and long-term debt, on both a current
and pro forma basis, of the issuer and any significant subsidiary,
including a description of each security outstanding or being
registered or otherwise offered, and a statement of the amount and
kind of consideration, whether in the form of cash, physical
assets, services, patents, goodwill, or anything else of value, for
which the issuer or any subsidiary has issued its securities within
the previous 2 years or is obligated to issue its securities.
(h) The kind and amount of securities to be offered, the
proposed offering price or the method by which it is to be
computed, any variation at which a proportion of the offering is to
be made to a person or class of persons other than the
underwriters, with a specification of the person or class, the
basis upon which the offering is to be made if otherwise than for
cash, the estimated aggregate underwriting and selling discounts or
commissions and finders' fees, including separately cash,
securities, contracts, or anything else of value to accrue to the
underwriters or finders in connection with the offering, or, if the
selling discounts or commissions are variable, the basis of
determining them and their maximum and minimum amounts, the
estimated amounts of other selling expenses, including legal,
engineering, and accounting charges, the name and address of each
underwriter and each recipient of a finder's fee, a copy of any
underwriting or selling group agreement under which the
distribution is to be made, or the proposed form of any such
agreement whose terms have not yet been determined, and a
description of the plan of distribution of any securities that are
to be offered otherwise than through an underwriter.
(i) The estimated monetary proceeds to be received by the
issuer from the offering, the purposes for which the proceeds are
to be used by the issuer, the estimated amount to be used for each
purpose, the order or priority in which the proceeds will be used
for the purposes stated, the amounts of any funds to be raised from
other sources to achieve the purposes stated, the sources of the
funds, and, if a part of the proceeds is to be used to acquire
property, including goodwill, otherwise than in the ordinary course
of business, the names and addresses of the vendors, the purchase
price, the names of any persons that have received commissions in
connection with the acquisition, and the amounts of the commissions
and other expenses in connection with the acquisition, including
the cost of borrowing money to finance the acquisition.
(j) A description of any stock options or other security
options outstanding, or to be created in connection with the
offering, and the amount of those options held or to be held by
each person required to be named in subdivision (b), (d), (e), (f),
or (h) and by any person that holds or will hold 10% or more in the
aggregate of those options.
(k) The dates of, parties to, and general effect concisely
stated of each managerial or other material contract made or to be
made otherwise than in the ordinary course of business to be
performed in whole or in part at or after the filing of the
registration statement or that was made within the previous 2
years, and a copy of the contract.
(l) A description of any pending litigation, action, or
proceeding to which the issuer is a party and that materially
affects its business or assets, including any litigation, action,
or proceeding known to be contemplated by governmental authorities.
(m) A copy of any prospectus, pamphlet, circular, form letter,
advertisement, or other sales literature intended as of the
effective date to be used in connection with the offering and any
solicitation of interest used in compliance with section 202(q)(ii).
(n) A specimen or copy of the security being registered,
unless the security is uncertificated, a copy of the issuer's
articles of incorporation and bylaws, or their substantial
equivalents, in effect, and a copy of any indenture or other
instrument covering the security to be registered.
(o) A signed or conformed copy of an opinion of counsel
concerning the legality of the security being registered, with an
English translation if it is in a language other than English,
which states whether the security when sold will be validly issued,
fully paid, and nonassessable and, if a debt security, a binding
obligation of the issuer.
(p) A signed or conformed copy of a consent of any accountant,
engineer, appraiser, or other person whose profession gives
authority for a statement made by the person, if the person is
named as having prepared or certified a report or valuation, other
than an official record, that is public, which is used in
connection with the registration statement.
(q) A balance sheet of the issuer as of a date within 4 months
before the filing of the registration statement, a statement of
income and a statement of cash flows for each of the 3 fiscal years
preceding the date of the balance sheet and for any period between
the close of the immediately previous fiscal year and the date of
the balance sheet, or for the period of the issuer's and any
predecessor's existence if less than 3 years, and, if any part of
the proceeds of the offering is to be applied to the purchase of a
business, the financial statements that would be required if that
business were the registrant.
(r) Any additional information or records required by rule or
order under this act.
(3) A registration statement under this section becomes
effective 30 days, or any shorter period provided by rule or order
under this act, after the date the registration statement or the
last amendment other than a price amendment is filed, if any of the
following apply:
(a) A stop order is not in effect and a proceeding is not
pending under section 306.
(b) The administrator has not issued an order under section
306 delaying effectiveness.
(c) The applicant or registrant has not requested that
effectiveness be delayed.
(4) The administrator may delay effectiveness once for not
more than 90 days if the administrator determines the registration
statement is not complete in all material respects and promptly
notifies the applicant or registrant of that determination. The
administrator may also delay effectiveness for a further period of
not more than 30 days if the administrator determines that the
delay is necessary or appropriate.
(5) A rule or order under this act may require as a condition
of registration under this section that a prospectus containing a
specified part of the information or record specified in subsection
(2) be sent or given to each person to which an offer is made,
before or concurrently with the earliest of any of the following:
(a) The first offer made in a record to the person otherwise
than by means of a public advertisement, by or for the account of
the issuer or another person on whose behalf the offering is being
made, or by an underwriter or broker-dealer that is offering part
of an unsold allotment or subscription taken by the person as a
participant in the distribution.
(b) The confirmation of a sale made by or for the account of
the person.
(c) Payment pursuant to the sale.
(d) Delivery of the security pursuant to the sale.
Sec. 305. (1) A registration statement may be filed by the
issuer, a person on whose behalf the offering is to be made, or a
broker-dealer registered under this act.
(2) A person filing a registration statement shall pay a
filing fee of 1/10 of 1% of the maximum aggregate offering price at
which the registered securities are to be offered in this state,
but the fee shall in no case be less than $100.00 or more than
$1,250.00. If an application for registration is withdrawn before
the effective date or a preeffective stop order is issued under
section 306, the administrator shall retain a fee of $100.00 if the
initial review has not been commenced, and the full filing fee
after review has been commenced.
(3) A registration statement filed under section 303 or 304
must specify all of the following:
(a) The amount of securities to be offered in this state.
(b) The states in which a registration statement or similar
record in connection with the offering has been or is to be filed.
(c) Any adverse order, judgment, or decree issued in
connection with the offering by a state securities regulator, the
securities and exchange commission, or a court.
(4) A record filed under this act or the predecessor act,
within 5 years preceding the filing of a registration statement,
may be incorporated by reference in the registration statement to
the extent that the record is currently accurate.
(5) In the case of a nonissuer distribution, information or a
record shall not be required under subsection (9) or section 304,
unless it is known to the person filing the registration statement
or to the person on whose behalf the distribution is to be made, or
unless it can be furnished by those persons without unreasonable
effort or expense.
(6) A rule or order under this act may require as a condition
of registration that a security issued within the previous 5 years,
or to be issued to a promoter for a consideration substantially
less than the public offering price or to a person for a
consideration other than cash, be deposited in escrow and that the
proceeds from the sale of the registered security in this state be
impounded until the issuer receives a specified amount from the
sale of the security either in this state or elsewhere. The
conditions of any escrow or impoundment required under this
subsection may be established by rule or order under this act, but
the administrator shall not reject a depository institution solely
because of its location in another state.
(7) A rule or order under this act may require as a condition
of registration that a security registered under this act be sold
only on a specified form of subscription or sale contract and that
a signed or conformed copy of each contract be filed under this act
or preserved for a period specified by the rule or order, which may
not be longer than 5 years.
(8) Except while a stop order is in effect under section 306,
a registration statement is effective for 1 year after its
effective date, or for a longer period designated in an order under
this act during which the security is being offered or distributed
in a nonexempted transaction by or for the account of the issuer or
other person on whose behalf the offering is being made or by an
underwriter or broker-dealer that is still offering part of an
unsold allotment or subscription taken as a participant in the
distribution. For the purposes of a nonissuer transaction, all
outstanding securities of the same class identified in the
registration statement as a security registered under this act are
considered to be registered while the registration statement is
effective. If any securities of the same class are outstanding, a
registration statement may not be withdrawn until 1 year after its
effective date. A registration statement may be withdrawn only with
the approval of the administrator.
(9) While a registration statement is effective, a rule or
order under this act may require the person that filed the
registration statement to file reports, not more often than
quarterly, to keep the information or other record in the
registration statement reasonably current and to disclose the
progress of the offering.
(10) A registration statement may be amended after its
effective date. The posteffective amendment becomes effective when
the administrator so orders. If a posteffective amendment is made
to increase the number of securities specified to be offered or
sold, the person filing the amendment shall pay a registration fee
calculated in the manner specified in subsection (2). A
posteffective amendment relates back to the date of the offering of
the additional securities being registered if the amendment is
filed and the additional registration fee is paid within 1 year
after the date of the sale.
Sec. 306. (1) The administrator may issue a stop order denying
effectiveness to, or suspending or revoking the effectiveness of, a
registration statement if the administrator finds that the order is
in the public interest and that 1 or more of the following apply:
(a) The registration statement as of its effective date or
before the effective date in the case of an order denying
effectiveness, an amendment under section 305(10) as of its
effective date, or a report under section 305(9) is incomplete in a
material respect or contains a statement that, in the light of the
circumstances under which it was made, was false or misleading with
respect to a material fact.
(b) This act or a rule adopted or order issued under this act
or a condition imposed under this act has been willfully violated,
in connection with the offering, by the person filing the
registration statement; by the issuer, a partner, officer, or
director of the issuer or a person having a similar status or
performing a similar function; a promoter of the issuer or a person
directly or indirectly controlling or controlled by the issuer; but
only if the person filing the registration statement is directly or
indirectly controlled by or acting for the issuer; or by an
underwriter.
(c) The security registered or sought to be registered is the
subject of a permanent or temporary injunction of a court of
competent jurisdiction or an administrative stop order or similar
order issued under any federal, foreign, or state law other than
this act applicable to the offering, but the administrator shall
not institute a proceeding against an effective registration
statement under this paragraph more than 1 year after the date of
the order or injunction on which it is based, and the administrator
shall not issue an order under this subdivision on the basis of an
order or injunction issued under the securities act of another
state unless the order or injunction was based on conduct that
would constitute, as of the date of the order, a ground for a stop
order under this section.
(d) The issuer's enterprise or method of business includes or
would include activities that are unlawful where performed.
(e) With respect to a security sought to be registered under
section 303, there has been a failure to comply with the
undertaking required by section 303(2)(d).
(f) The applicant or registrant has not paid the proper filing
fee, but the administrator shall void the order if the deficiency
is corrected.
(g) One or more of the following apply to the offering:
(i) The offering will work or tend to work a fraud upon
purchasers or would so operate.
(ii) The offering has been or would be made with unreasonable
amounts of underwriters' and sellers' discounts, commissions, or
other compensation, promoters' profits or participations, or
unreasonable amounts or kinds of options.
(iii) The offering is being made on terms that are unfair,
unjust, or inequitable.
(2) To the extent practicable, the administrator by rule or
order under this act shall publish guidelines, rules, or orders
that provide notice of conduct that violates subsection (1)(g).
(3) The administrator shall not institute a stop order
proceeding against an effective registration statement on the basis
of conduct or a transaction known to the administrator when the
registration statement became effective unless the proceeding is
instituted within 30 days after the registration statement became
effective.
(4) The administrator may summarily revoke, deny, postpone, or
suspend the effectiveness of a registration statement pending final
determination of an administrative proceeding. Upon the issuance of
the order, the administrator shall promptly notify each person
specified in subsection (5) that the order has been issued, the
reasons for the revocation, denial, postponement, or suspension,
and that within 15 days after the receipt of a request in a record
from the person the matter will be scheduled for a hearing. If a
hearing is not requested and none is ordered by the administrator,
within 30 days after the date of service of the order, the order
becomes final. If a hearing is requested or ordered, the
administrator, after notice of and opportunity for hearing for each
person subject to the order, may modify or vacate the order or
extend the order until final determination.
(5) The administrator shall not issue a stop order under this
section until all of the following have occurred:
(a) Appropriate notice has been given to the applicant or
registrant, the issuer, and the person on whose behalf the
securities are to be or have been offered.
(b) An opportunity for hearing has been given to the applicant
or registrant, the issuer, and the person on whose behalf the
securities are to be or have been offered.
(c) Findings of fact and conclusions of law in a record in
accordance with the administrative procedures act of 1969, 1969 PA
306, MCL 24.201 to 24.328.
(6) The administrator may modify or vacate a stop order issued
under this section if the administrator finds that the conditions
that caused its issuance have changed or that it is necessary or
appropriate in the public interest or for the protection of
investors.
Sec. 307. The administrator may waive or modify, in whole or
in part, any or all of the requirements of sections 302, 303, and
304(2) or the requirement of any information or record in a
registration statement or in a periodic report filed pursuant to
section 305(9).
ARTICLE 4
BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS, INVESTMENT ADVISER
REPRESENTATIVES, AND FEDERAL COVERED INVESTMENT ADVISERS
Sec. 401. (1) A person shall not transact business in this
state as a broker-dealer unless the person is registered under this
act as a broker-dealer or is exempt from registration as a broker-
dealer under subsection (2) or (4).
(2) The following persons are exempt from the registration
requirement of subsection (1):
(a) A broker-dealer if the broker-dealer does not have a place
of business in this state and if the broker-dealer's only
transactions effected in this state are with any of the following:
(i) The issuer of the securities involved in the transactions.
(ii) A broker-dealer registered as a broker-dealer under this
act or not required to be registered as a broker-dealer under this
act.
(iii) An institutional investor.
(iv) A nonaffiliated federal covered investment adviser with
investments under management in excess of $100,000,000.00 acting
for the account of others pursuant to discretionary authority in a
signed record.
(v) A bona fide preexisting customer whose principal place of
residence is not in this state and the broker-dealer is registered
as a broker-dealer under the securities exchange act of 1934 or not
required to be registered under the securities exchange act of 1934
and is registered under the securities act of the state in which
the customer maintains a principal place of residence.
(vi) A bona fide preexisting customer whose principal place of
residence is in this state but who was not present in this state
when the customer relationship was established, if both of the
following are met:
(A) The broker-dealer is registered under the securities
exchange act of 1934 or not required to be registered under the
securities exchange act of 1934 and is registered under the
securities laws of the state in which the customer relationship was
established and where the customer had maintained a principal place
of residence.
(B) Within 45 days after the customer's first transaction in
this state, the person files an application for registration as a
broker-dealer in this state and a further transaction is not
effected more than 75 days after the date on which the application
is filed, or, if earlier, the date on which the administrator
notifies the person that the administrator has denied the
application for registration or has stayed the pendency of the
application for good cause.
(vii) Not more than 3 customers in this state during the
previous 12 months, in addition to those specified in subparagraphs
(i) to (vi) and under subparagraph (viii), if the broker-dealer is
registered under the securities exchange act of 1934 or not
required to be registered under the securities exchange act of 1934
and is registered under the securities act of the state in which
the broker-dealer has its principal place of business.
(viii) Any other person exempted by rule or order under this
act.
(b) A person that deals solely in United States government
securities and is supervised as a dealer in government securities
by the board of governors of the federal reserve system, the
comptroller of the currency, the federal deposit insurance
corporation, or the office of thrift supervision.
(c) A person licensed or registered as a mortgage broker,
mortgage lender, or mortgage servicer under the mortgage brokers,
lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to
445.1684, in the offer or sale of mortgage loans as defined in
section 1a of the mortgage brokers, lenders, and servicers
licensing act, 1987 PA 173, MCL 445.1651a.
(3) A broker-dealer, or an issuer engaged in offering,
offering to purchase, purchasing, or selling securities in this
state, shall not directly or indirectly employ or associate with an
individual to engage in an activity related to securities
transactions in this state if the registration of the individual is
suspended or revoked or the individual is barred from employment or
association with a broker-dealer, an issuer, an investment adviser,
or a federal covered investment adviser by an order of the
administrator under this act, the securities and exchange
commission, or a self-regulatory organization. A broker-dealer or
issuer does not violate this subsection if the broker-dealer or
issuer did not know and in the exercise of reasonable care could
not have known of the suspension, revocation, or bar. If requested
by a broker-dealer or issuer and if good cause is shown, an order
under this act may modify or waive, in whole or in part, the
application of the prohibitions of this subsection.
(4) A rule or order under this act may permit any of the
following:
(a) A broker-dealer that is registered in Canada or other
foreign jurisdiction and that does not have a place of business in
this state to effect transactions in securities with or for, or
attempt to effect the purchase or sale of any securities by, any of
the following:
(i) An individual from Canada or other foreign jurisdiction who
is temporarily present in this state and with whom the broker-
dealer had a bona fide customer relationship before the individual
entered the United States.
(ii) An individual from Canada or other foreign jurisdiction
who is present in this state and whose transactions are in a self-
directed tax advantaged retirement plan of which the individual is
the holder or contributor in that foreign jurisdiction.
(iii) An individual who is present in this state, with whom the
broker-dealer customer relationship arose while the individual was
temporarily or permanently resident in Canada or the other foreign
jurisdiction.
(b) An agent who represents a broker-dealer that is exempt
under this subsection to effect transactions in securities or
attempt to effect the purchase or sale of any securities in this
state as permitted for a broker-dealer described in subsection
(4)(a).
Sec. 402. (1) An individual shall not transact business in
this state as an agent unless the individual is registered under
this act as an agent or is exempt from registration as an agent
under subsection (2).
(2) Each of the following individuals is exempt from the
registration requirement of subsection (1):
(a) An individual who represents a broker-dealer in effecting
transactions in this state limited to those described in section
15(h)(2) of the securities exchange act of 1934, 15 USC 78o.
(b) An individual who represents a broker-dealer that is
exempt under section 401(2) or (4).
(c) An individual who represents an issuer with respect to an
offer or sale of the issuer's own securities or those of the
issuer's parent or any of the issuer's subsidiaries, and who is not
compensated in connection with the individual's participation by
the payment of commissions or other remuneration based, directly or
indirectly, on transactions in those securities.
(d) An individual who represents an issuer and who effects
transactions in the issuer's securities exempted by section 202,
other than section 202(1)(k) or (n).
(e) An individual who represents an issuer who effects
transactions solely in federal covered securities of the issuer,
but an individual who effects transactions in a federal covered
security under section 18(b)(3) or 18(b)(4)(D) of the securities
act of 1933, 15 USC 77r, is not exempt if the individual is
compensated in connection with the agent's participation by the
payment of commissions or other remuneration based, directly or
indirectly, on transactions in those securities.
(f) An individual who represents a broker-dealer registered in
this state under section 401(1) or exempt from registration under
section 401(2) in the offer and sale of securities for an account
of a nonaffiliated federal covered investment adviser with
investments under management in excess of $100,000,000.00 acting
for the account of others pursuant to discretionary authority in a
signed record.
(g) An individual who represents an issuer in connection with
the purchase of the issuer's own securities.
(h) An individual who represents an issuer and who restricts
participation to performing clerical or ministerial acts.
(i) An employee of a person licensed or registered under the
mortgage brokers, lenders, and servicers licensing act, 1987 PA
173, MCL 445.1651 to 445.1684, in the offer or sale of mortgage
loans as defined in section 1a of the mortgage brokers, lenders,
and servicers licensing act, 1987 PA 173, MCL 445.1651a, when
acting as an employee of the licensed or registered person.
(j) Any other individual exempted by rule or order under this
act.
(3) The registration of an agent is effective only while the
agent is employed by or associated with a broker-dealer registered
under this act or an issuer that is offering, selling, or
purchasing its securities in this state.
(4) A broker-dealer, or an issuer engaged in offering,
selling, or purchasing securities in this state, shall not employ
or associate with an agent who transacts business in this state on
behalf of broker-dealers or issuers unless the agent is registered
under subsection (1) or exempt from registration under subsection
(2).
(5) An individual shall not act as an agent for more than 1
broker-dealer or more than 1 issuer at a time, unless the broker-
dealers or the issuers for which the agent acts are affiliated by
direct or indirect common control or are authorized by rule or
order under this act.
Sec. 403. (1) A person shall not transact business in this
state as an investment adviser unless the person is registered
under this act as an investment adviser or is exempt from
registration as an investment adviser under subsection (2).
(2) The following persons are exempt from the registration
requirement of subsection (1):
(a) A person that does not have a place of business in this
state and that is registered under the securities act of the state
in which the person has its principal place of business, if its
only clients in this state are any of the following:
(i) Federal covered investment advisers, investment advisers
registered under this act, or broker-dealers registered under this
act.
(ii) Institutional investors.
(iii) Bona fide preexisting clients whose principal places of
residence are not in this state, if the investment adviser is
registered under the securities act of the state in which the
clients maintain principal places of residence.
(iv) Any other client exempted by rule or order under this act.
(b) A person that does not have a place of business in this
state if the person has had, during the preceding 12 months, not
more than 5 clients that are residents of this state in addition to
those specified under subdivision (a).
(c) The person is an investment adviser who is not required to
be registered as an investment adviser under the investment
advisers act of 1940 if the investment adviser's only clients in
this state are other investment advisers, federal covered advisers,
broker-dealers, or institutional investors.
(d) Any other person exempted by rule or order under this act.
(3) An investment adviser shall not, directly or indirectly,
employ or associate with an individual to engage in an activity
related to investment advice in this state if the registration of
the individual is suspended or revoked, or the individual is barred
from employment or association with an investment adviser, federal
covered investment adviser, or broker-dealer by an order under this
act, the securities and exchange commission, or a self-regulatory
organization, unless the investment adviser did not know, and in
the exercise of reasonable care could not have known, of the
suspension, revocation, or bar. If the investment adviser request
and good cause is shown, the administrator, by order, may waive, in
whole or in part, the application of the prohibitions of this
subsection.
(4) An investment adviser shall not employ or associate with
an individual required to be registered under this act as an
investment adviser representative who transacts business in this
state on behalf of the investment adviser unless the individual is
registered under section 404(1) or is exempt from registration
under section 404(2).
Sec. 404. (1) An individual shall not transact business in
this state as an investment adviser representative unless the
individual is registered under this act as an investment adviser
representative or is exempt from registration as an investment
adviser representative under subsection (2).
(2) Each of the following individuals is exempt from the
registration requirement of subsection (1):
(a) An individual who is employed by or associated with an
investment adviser that is exempt from registration under section
403(2) or a federal covered investment adviser that is excluded
from the notice filing requirements of section 405.
(b) Any other individual exempted by rule or order under this
act.
(3) The registration of an investment adviser representative
is not effective while the investment adviser representative is not
employed by or associated with an investment adviser registered
under this act or a federal covered investment adviser that has
made or is required to make a notice filing under section 405.
(4) An individual may transact business as an investment
adviser representative for more than 1 investment adviser or
federal covered investment adviser unless a rule or order under
this act prohibits or limits an individual from acting as an
investment adviser representative for more than 1 investment
adviser or federal covered investment adviser.
(5) An individual acting as an investment adviser
representative shall not, directly or indirectly, conduct business
in this state on behalf of an investment adviser or a federal
covered investment adviser if the registration of the individual as
an investment adviser representative is suspended or revoked or the
individual is barred from employment or association with an
investment adviser or a federal covered investment adviser by an
order under this act, the securities and exchange commission, or a
self-regulatory organization. If a federal covered investment
adviser requests and good cause is shown, the administrator, by
order, may waive, in whole or in part, the application of the
requirements of this subsection.
(6) An investment adviser registered under this act, a federal
covered investment adviser that has filed a notice under section
405, or a broker-dealer registered under this act is not required
to employ or associate with an individual as an investment adviser
representative if the only compensation paid to the individual for
a referral of investment advisory clients is paid to an investment
adviser registered under this act, a federal covered investment
adviser who has filed a notice under section 405, or a broker-
dealer registered under this act with which the individual is
employed or associated as an investment adviser representative.
Sec. 405. (1) Except with respect to a federal covered
investment adviser described in subsection (2), a federal covered
investment adviser shall not transact business in this state as a
federal covered investment adviser unless the federal covered
investment adviser complies with subsection (3).
(2) The following federal covered investment advisers are not
required to comply with subsection (3):
(a) A federal covered investment adviser without a place of
business in this state if its only clients in this state are any of
the following:
(i) Federal covered investment advisers, investment advisers
registered under this act, and broker-dealers registered under this
act.
(ii) Institutional investors.
(iii) Bona fide preexisting clients whose principal places of
residence are not in this state.
(iv) Other clients specified by rule or order under this act.
(b) A federal covered investment adviser that does not have a
place of business in this state if the federal covered investment
adviser has had, during the preceding 12 months, not more than 5
clients that are residents of this state in addition to those
specified under subdivision (a).
(c) Any other person excluded by rule or order under this act.
(3) A person acting as a federal covered investment adviser,
not excluded under subsection (2), shall file a notice, a consent
to service of process complying with section 611, and those records
that have been filed with the securities and exchange commission
under the investment advisers act of 1940 that are required by rule
or order under this act and pay the fees specified in section
410(5).
(4) A notice under subsection (3) is effective on filing.
Sec. 406. (1) A person shall register as a broker-dealer,
agent, investment adviser, or investment adviser representative by
filing an application and a consent to service of process complying
with section 611 and paying the fee specified in section 410 and
any reasonable fees charged by the designee of the administrator
for processing the filing. Each application must contain both of
the following:
(a) The information or record required for the filing of a
uniform application.
(b) If requested by the administrator, any other financial or
other information or record that the administrator determines is
appropriate.
(2) If the information or record contained in an application
that is filed under subsection (1) is or becomes inaccurate or
incomplete in any material respect, the registrant shall promptly
file a correcting amendment.
(3) If an order is not in effect and no proceeding is pending
under section 412, registration becomes effective at 12 noon on the
forty-fifth day after a completed application is filed unless the
registration is denied. A rule or order under this act may set an
earlier effective date or may defer the effective date until 12
noon on the forty-fifth day after the filing of any amendment
completing the application.
(4) A registration is effective until 12 midnight on December
31 of the year for which the application for registration is filed.
Unless an order is in effect under section 412, a registration may
be automatically renewed each year by filing the records required
by rule or order under this act and paying the fee specified in
section 410 and the costs charged by the designee of the
administrator for processing the filings.
(5) A rule or order under this act may impose other conditions
not inconsistent with the national securities markets improvement
act of 1996, Public Law 104-290, 110 Stat. 3416, or an order under
this act may waive, in whole or in part, specific requirements in
connection with registration if the imposition or waiver is
appropriate in the public interest and for the protection of
investors.
Sec. 407. (1) A broker-dealer or investment adviser may
succeed to the current registration of another broker-dealer or
investment adviser or a notice filing of a federal covered
investment adviser, and a federal covered investment adviser may
succeed to the current registration of an investment adviser or
notice filing of another federal covered investment adviser, by
filing as a successor an application for registration under section
401 or 403, or a notice under section 405, for the unexpired
portion of the current registration or notice filing.
(2) A broker-dealer or investment adviser that changes its
form of organization or state of incorporation or organization may
continue its registration by filing an amendment to its
registration if the change does not involve a material change in
its financial condition or management. The amendment is effective
when filed or on a date designated by the registrant in the filing.
The new organization is a successor to the original registrant for
the purposes of this act. If there is a material change in
financial condition or management, the broker-dealer or investment
adviser shall file a new application for registration. Any
predecessor registered under this act shall stop conducting its
securities business other than winding down transactions and shall
file for withdrawal of broker-dealer or investment adviser
registration within 45 days after filing its amendment to effect
succession.
(3) A broker-dealer or investment adviser that changes its
name may continue its registration by filing an amendment to its
registration. The amendment is effective when filed or on a date
designated by the registrant.
(4) A change of control of a broker-dealer or investment
adviser may be made in accordance with a rule or order under this
act.
Sec. 408. (1) If an agent registered under this act terminates
employment by or association with a broker-dealer or issuer, or if
an investment adviser representative registered under this act
terminates employment by or association with an investment adviser
or federal covered investment adviser, or if either registrant
terminates activities that require registration as an agent or
investment adviser representative, the broker-dealer, investment
adviser, or federal covered investment adviser shall promptly file
a notice of termination. If the registrant learns that the broker-
dealer, issuer, investment adviser, or federal covered investment
adviser has not filed the notice, the registrant may file the
notice.
(2) If an agent registered under this act terminates
employment by or association with a broker-dealer registered under
this act and begins employment by or association with another
broker-dealer registered under this act; or if an investment
adviser representative registered under this act terminates
employment by or association with an investment adviser registered
under this act or a federal covered investment adviser that has
filed a notice under section 405 and begins employment by or
association with another investment adviser registered under this
act or a federal covered investment adviser that has filed a notice
under section 405, then upon the filing by or on behalf of the
registrant, within 30 days after the termination, of an application
for registration that complies with the requirement of section
406(1) and payment of the filing fee required under section 410, 1
of the following applies to the registration of the agent or
investment adviser representative:
(a) If the agent's central registration depository record or
successor record or the investment adviser representative's
investment adviser registration depository record or successor
record does not contain a new or amended disciplinary disclosure
within the previous 12 months, the registration is immediately
effective as of the date of the completed filing.
(b) If the agent's central registration depository record or
the investment adviser representative's investment adviser
registration depository record contains a new or amended
disciplinary disclosure within the preceding 12 months, the
registration is temporarily effective as of the date of the
completed filing.
(3) If there are or were grounds for discipline under section
412, the administrator may withdraw a temporary registration within
30 days after the application is filed. If the administrator does
not withdraw the temporary registration within the 30-day period,
registration becomes automatically effective on the thirty-first
day after filing.
(4) The administrator may prevent the effectiveness of a
transfer of an agent or investment adviser representative under
subsection (2)(a) or (b) based on the public interest and the
protection of investors.
(5) If the administrator determines that a registrant or
applicant for registration is no longer in existence, has ceased to
act as a broker-dealer, agent, investment adviser, or investment
adviser representative, is the subject of an adjudication of
incapacity, is subject to the control of a committee, conservator,
or guardian, or cannot reasonably be located, a rule or order under
this act may require the registration be canceled or terminated or
the application denied. The administrator may reinstate a canceled
or terminated registration, with or without hearing, and may make
the registration retroactive.
Sec. 409. Withdrawal of registration by a broker-dealer,
agent, investment adviser, or investment adviser representative is
effective 60 days after an application to withdraw is filed or
within a shorter period as provided by rule or order under this
act, unless a revocation or suspension proceeding is pending when
the application is filed. If a proceeding is pending, withdrawal is
effective when and on conditions required by rule or order under
this act. The administrator may institute a revocation or
suspension proceeding under section 412 within 1 year after the
withdrawal became effective automatically and issue a revocation or
suspension order as of the last date on which registration was
effective if a proceeding is not pending.
Sec. 410. (1) Before October 1, 2007, a person shall pay a fee
of $300.00 when initially filing an application for registration as
a broker-dealer and a fee of $300.00 when filing a renewal of
registration as a broker-dealer. After September 30, 2007, a person
shall pay a fee of $250.00 when initially filing an application for
registration as a broker-dealer and a fee of $250.00 when filing a
renewal of registration as a broker-dealer. If the filing results
in a denial or withdrawal, the administrator shall retain all of
the filing fee.
(2) Before October 1, 2007, an individual shall pay a fee of
$65.00 when filing an application for registration as an agent, a
fee of $65.00 when filing a renewal of registration as an agent,
and a fee of $65.00 when filing for a change of registration as an
agent. After September 30, 2007, an individual shall pay a fee of
$30.00 when filing an application for registration as an agent, a
fee of $30.00 when filing a renewal of registration as an agent,
and a fee of $30.00 when filing for a change of registration as an
agent. If the filing results in a denial or withdrawal, the
administrator shall retain all of the filing fee.
(3) Before October 1, 2007, a person shall pay a fee of
$200.00 when filing an application for registration as an
investment adviser and a fee of $200.00 when filing a renewal of
registration as an investment adviser. After September 30, 2007, a
person shall pay a fee of $150.00 when filing an application for
registration as an investment adviser and a fee of $150.00 when
filing a renewal of registration as an investment adviser. If the
filing results in a denial or withdrawal, the administrator shall
retain all of the filing fee.
(4) Before October 1, 2007, an individual shall pay a fee of
$65.00 when filing an application for registration as an investment
adviser representative, a fee of $65.00 when filing a renewal of
registration as an investment adviser representative, and a fee of
$65.00 when filing a change of registration as an investment
adviser representative. After September 30, 2007, an individual
shall pay a fee of $30.00 when filing an application for
registration as an investment adviser representative, a fee of
$30.00 when filing a renewal of registration as an investment
adviser representative, and a fee of $30.00 when filing a change of
registration as an investment adviser representative. If the filing
results in a denial or withdrawal, the administrator shall retain
all of the filing fee.
(5) Before October 1, 2007, a federal covered investment
adviser required to file a notice under section 405 shall pay an
initial and annual notice fee of $200.00. After September 30, 2007,
a federal covered investment adviser required to file a notice
under section 405 shall pay an initial and annual notice fee of
$150.00.
(6) A person required to pay a filing or notice fee under this
section may transmit the fee through or to a designee as a rule or
order requires under this act.
(7) An investment adviser representative who is registered as
an agent under section 402 and who represents a person that is both
registered as a broker-dealer under section 401 and registered as
an investment adviser under section 403 or required as a federal
covered investment adviser to make a notice filing under section
405 is not required to pay an initial or annual registration fee
for registration as an investment adviser representative.
Sec. 411. (1) Subject to section 15(h) of the securities act
of 1934, 15 USC 78o, or section 222 of the investment advisers act
of 1940, 15 USC 80b-18a, a rule or order under this act may
establish minimum financial requirements for broker-dealers
registered or required to be registered under this act and
investment advisers registered or required to be registered under
this act.
(2) Subject to section 15(h) of the securities exchange act of
1934, 15 USC 78o, or section 222(b) of the investment advisers act
of 1940, 15 USC 80b-18a, a broker-dealer registered or required to
be registered under this act and an investment adviser registered
or required to be registered under this act shall file financial
reports required by rule or order under this act. If the
information contained in a record filed under this subsection is or
becomes inaccurate or incomplete in any material respect, the
registrant shall promptly file a correcting amendment.
(3) Subject to section 15(h) of the securities exchange act of
1934, 15 USC 78o, or section 222 of the investment advisers act of
1940, 15 USC 80b-18a, a broker-dealer registered or required to be
registered under this act and an investment adviser registered or
required to be registered under this act shall make and maintain
the accounts, correspondence, memoranda, papers, books, and other
records required by rule or order of the administrator. The records
required to be maintained under this subsection shall be maintained
as follows:
(a) Broker-dealer records may be maintained in any form of
data storage acceptable under section 17(a) of the securities
exchange act of 1934, 15 USC 78q, if they are readily accessible to
the administrator.
(b) Investment adviser records may be maintained in any form
of data storage required by rule or order under this act.
(4) The records of a broker-dealer registered or required to
be registered under this act and of an investment adviser
registered or required to be registered under this act are subject
to reasonable periodic, special, or other audits or inspections by
a representative of the administrator, in or outside of this state,
as the administrator considers necessary or appropriate in the
public interest and for the protection of investors. An audit or
inspection may be made at any time and without prior notice. The
administrator may copy and remove for audit or inspection copies of
all records the administrator reasonably considers necessary or
appropriate to conduct the audit or inspection. The administrator
may assess a reasonable charge for conducting an audit or
inspection under this subsection.
(5) Subject to section 15(h) of the securities exchange act of
1934, 15 USC 78o, or section 222 of the investment advisers act of
1940, 15 USC 80b-18a, a rule or order under this act may require a
broker-dealer and investment adviser that has custody of or
discretionary authority over funds or securities of a client to
obtain insurance or post a bond or other satisfactory form of
security in an amount established by the administrator by rule or
order. The administrator may determine the requirements of the
insurance, bond, or other satisfactory form of security. Insurance
or a bond or other satisfactory form of security shall not be
required of a broker-dealer registered under this act whose net
capital exceeds, or of an investment adviser registered under this
act whose minimum financial requirements exceed, the amounts
required by rule or order under this act. The insurance, bond, or
other satisfactory form of security must permit an action by a
person to enforce any liability on the insurance, bond, or other
satisfactory form of security if commenced within the time
limitations in section 509(10)(b).
(6) Subject to section 15(h) of the securities exchange act of
1934, 15 USC 78o, or section 222 of the investment advisers act of
1940, 15 USC 80b-18a, an agent shall not have custody of funds or
securities of a customer except under the supervision of a broker-
dealer and an investment adviser representative shall not have
custody of funds or securities of a client except under the
supervision of an investment adviser or federal covered investment
adviser. A rule or order under this act may prohibit, limit, or
impose conditions on the custody of funds or securities of a
customer by a broker-dealer and on the custody of securities or
funds of a client by an investment adviser.
(7) With respect to an investment adviser registered or
required to be registered under this act, a rule or order under
this act may require that information or other record be furnished
or disseminated to clients or prospective clients in this state as
necessary or appropriate in the public interest and for the
protection of investors and advisory clients.
(8) A rule or order under this act may require an individual
registered under section 402 or 404 to participate in a continuing
education program approved by the securities and exchange
commission and administered by a self-regulatory organization or,
in the absence of such a program, a rule or order under this act
may require continuing education for an individual registered under
section 404.
Sec. 412. (1) If the administrator finds that the order is in
the public interest and subsection (4) authorizes the action, an
order under this act may deny an application or condition or limit
registration of an applicant to be a broker-dealer, agent,
investment adviser, or investment adviser representative and, if
the applicant is a broker-dealer or investment adviser, of a
partner, officer, or director, or a person having a similar status
or performing similar functions, or any person directly or
indirectly in control of the broker-dealer or investment adviser.
(2) If the administrator finds that the order is in the public
interest and subsection (4) authorizes the action, an order under
this act may revoke, suspend, condition, or limit the registration
of a registrant and if the registrant is a broker-dealer or
investment adviser, of a partner, officer, or director, or a person
having a similar status or performing similar functions, or a
person directly or indirectly in control of the broker-dealer or
investment adviser. However, the administrator may not do any of
the following:
(a) Institute a revocation or suspension proceeding under this
subsection based on an order issued under a law of another state
that is reported to the administrator or a designee of the
administrator more than 1 year after the date of the order on which
it is based.
(b) Under subsection (4)(e)(i) or (ii), issue an order on the
basis of an order issued under the securities act of another state
unless the other order was based on conduct for which subsection
(4) would authorize the action had the conduct occurred in this
state.
(3) If the administrator finds that the order is in the public
interest and subsection (4)(a) to (f), (i) to (j), or (l) to (n)
authorizes the action, an order under this act may censure, impose
a bar, or impose a civil penalty in an amount not to exceed a
maximum of $10,000.00 for a single violation or $500,000.00 for
more than 1 violation on a registrant and, if the registrant is a
broker-dealer or investment adviser, on a partner, officer, or
director, a person having a similar status or performing similar
functions, or a person directly or indirectly in control of the
broker-dealer or investment adviser.
(4) A person may be disciplined under subsections (1) to (3)
if any of the following apply to the person:
(a) The person filed an application for registration in this
state under this act or the predecessor act within the previous 10
years, which, as of the effective date of registration or as of any
date after filing in the case of an order denying effectiveness,
was incomplete in any material respect or contained a statement
that, in light of the circumstances under which it was made, was
false or misleading with respect to a material fact.
(b) The person willfully violated or willfully failed to
comply with this act or the predecessor act or a rule adopted or
order issued under this act or the predecessor act within the
previous 10 years.
(c) The person was convicted of any felony or within the
previous 10 years was convicted of a misdemeanor involving a
security, a commodity futures or option contract, or an aspect of a
business involving securities, commodities, investments,
franchises, insurance, banking, or finance.
(d) The person is enjoined or restrained by a court of
competent jurisdiction in an action instituted by the administrator
under this act or the predecessor act, a state, the securities and
exchange commission, or the United States from engaging in or
continuing an act, practice, or course of business involving an
aspect of a business involving securities, commodities,
investments, franchises, insurance, banking, or finance.
(e) The person is the subject of an order, issued after notice
and opportunity for hearing by any of the following:
(i) The securities or other financial services regulator of a
state, or the securities and exchange commission or other federal
agency denying, revoking, barring, or suspending registration as a
broker-dealer, agent, investment adviser, federal covered
investment adviser, or investment adviser representative.
(ii) The securities regulator of a state or the securities and
exchange commission against a broker-dealer, agent, investment
adviser, investment adviser representative, or federal covered
investment adviser.
(iii) The securities and exchange commission or a self-
regulatory organization suspending or expelling the registrant from
membership in a self-regulatory organization.
(iv) A court adjudicating a United States postal service fraud.
(v) The insurance regulator of a state denying, suspending, or
revoking the license or registration of an insurance agent.
(vi) A depository institution or financial services regulator
suspending or barring the person from the depository institution or
other financial services business.
(f) The person is the subject of an adjudication or
determination, after notice and opportunity for hearing, by the
securities and exchange commission, the commodity futures trading
commission, the federal trade commission, a federal depository
institution regulator, or a depository institution, insurance, or
other financial services regulator of a state that the person
willfully violated the securities act of 1933, the securities
exchange act of 1934, the investment advisers act of 1940, the
investment company act of 1940, or the commodity exchange act, the
securities or commodities law of a state, or a federal or state law
under which a business involving investments, franchises,
insurance, banking, or finance is regulated.
(g) The person is insolvent, either because the person's
liabilities exceed the person's assets or because the person cannot
meet the person's obligations as they mature. The administrator
shall not enter an order against an applicant or registrant under
this subdivision without a finding of insolvency as to the
applicant or registrant.
(h) The person refuses to allow or otherwise impedes the
administrator from conducting an audit or inspection under section
411(4) or refuses access to a registrant's office to conduct an
audit or inspection under section 411(4).
(i) The person has failed to reasonably supervise an agent,
investment adviser representative, or other individual, if the
agent, investment adviser representative, or other individual was
subject to the person's supervision and committed a violation of
this act or the predecessor act or a rule adopted or order issued
under this act or the predecessor act within the previous 10 years.
(j) The person has not paid the proper filing fee within 30
days after having been notified by the administrator of a
deficiency. The administrator shall vacate an order under this
paragraph when the deficiency is corrected.
(k) After notice and opportunity for a hearing, 1 or more of
the following have occurred within the previous 10 years:
(i) A court of competent jurisdiction has found the person to
have willfully violated the laws of a foreign jurisdiction under
which the business of securities, commodities, investment,
franchises, insurance, banking, or finance is regulated.
(ii) The person was found to have been the subject of an order
of a securities regulator of a foreign jurisdiction denying,
revoking, or suspending the right to engage in the business of
securities as a broker-dealer, agent, investment adviser,
investment adviser representative, or similar person.
(iii) The person was found to have been suspended or expelled
from membership by or participation in a securities exchange or
securities association operating under the securities laws of a
foreign jurisdiction.
(l) The person is the subject of a cease and desist order
issued by the securities and exchange commission or issued under
the securities, commodities, investment, franchise, banking,
finance, or insurance laws of a state.
(m) The person has engaged in dishonest or unethical practices
in the securities, commodities, investment, franchise, banking,
finance, or insurance business within the previous 10 years.
(n) The person is not qualified on the basis of factors such
as training, experience, and knowledge of the securities business.
If an application is made by an agent for a broker-dealer that is a
member of a self-regulatory organization or by an individual for
registration as an investment adviser representative, a denial
order shall not be based on this subdivision if the individual has
successfully completed all examinations required by subsection (5).
The administrator may require an applicant for registration under
section 402 or 404 who has not been registered in a state within
the 2 years preceding the filing of an application in this state to
successfully complete an examination.
(5) A rule or order under this act may require that an
examination, including an examination developed or approved by an
organization of securities regulators, be successfully completed by
a class of individuals or all individuals. An order under this act
may waive an examination as to an individual and a rule under this
act may waive an examination as to a class of individuals if the
administrator determines that the examination is not necessary or
appropriate in the public interest and for the protection of
investors.
(6) The administrator may suspend or deny an application
summarily, restrict, condition, limit, or suspend a registration,
or censure, bar, or impose a civil penalty on a registrant pending
final determination of an administrative proceeding. On the
issuance of the order, the administrator shall promptly notify each
person subject to the order that the order has been issued, the
reasons for the action, and that, within 15 days after the receipt
of a request in a record from the person, the matter will be
scheduled for a hearing. If a hearing is not requested by a person
subject to the order or is not ordered by the administrator within
30 days after the date of service of the order, the order is final.
If a hearing is requested or ordered, the administrator, after
notice of and opportunity for hearing to each person subject to the
order, may modify or vacate the order or extend the order until
final determination.
(7) Except under subsection (6), an order shall not be issued
under this section unless all of the following have occurred:
(a) Appropriate notice has been given to the applicant or
registrant.
(b) Opportunity for hearing has been given to the applicant or
registrant.
(c) Findings of fact and conclusions of law have been made on
the record pursuant to the administrative procedures act of 1969,
1969 PA 306, MCL 24.201 to 24.328.
(8) A person who controls, directly or indirectly, a person
not in compliance with this section may be disciplined by order of
the administrator under subsections (1) to (3) to the same extent
as the noncomplying person, unless the controlling person did not
know, and in the exercise of reasonable care could not have known,
of the existence of conduct that is a basis for discipline under
this section.
(9) The administrator shall not institute a proceeding under
subsection (1), (2), or (3) solely based on material facts actually
known by the administrator unless an investigation or the
proceeding is instituted within 1 year after the administrator
actually knew the material facts.
Sec. 413. A broker-dealer acting as a finder shall not do any
of the following:
(a) Take possession of funds or securities in connection with
the transaction for which payment is made for services as a finder.
(b) Fail to disclose clearly and conspicuously in writing to
all persons involved in the transaction as a result of the broker-
dealer's finding activities before the sale or purchase that the
person is acting as a finder, any payment for services as a finder,
the method and amount of payment, and any beneficial interest,
direct or indirect, of the broker-dealer, or a member of the
broker-dealer's immediate family if the broker-dealer is an
individual, in the issue of the securities that are the subject of
services as a finder.
(c) Participate in the offer, purchase, or sale of a security
in violation of section 301. However, if the broker-dealer makes a
reasonable effort to ascertain if a registration has been effected
or an exemption order granted in this state or to ascertain the
basis for an exemption claim and does not have knowledge that the
proposed transaction would violate section 301, the broker-dealer's
activities as a finder do not violate section 301.
(d) Participate in the offer, purchase, or sale of a security
without obtaining information relative to the risks of the
transaction, the direct or indirect compensation to be received by
promoters, partners, officers, directors, or their affiliates, the
financial condition of the issuer, and the use of proceeds to be
received from investors, or fail to read any offering materials
obtained. This section does not require independent investigation
or alteration of offering materials furnished to the broker-dealer.
(e) Fail to inform or otherwise ensure disclosure to all
persons involved in the transaction as a result of the broker-
dealer's finding activities of any material information which the
broker-dealer knows, or in the exercise of reasonable care should
know based on the information furnished to the broker-dealer, is
material in making an investment decision, until conclusion of the
transaction.
(f) Locate, introduce, or refer persons that the broker-dealer
knows, or after a reasonable inquiry should know, are not suitable
investors by reason of their financial condition, age, experience,
or need to diversify investments.
ARTICLE 5
FRAUD AND LIABILITIES
Sec. 501. It is unlawful for a person, in connection with the
offer, sale, or purchase of a security, to directly or indirectly
do any of the following:
(a) Employ a device, scheme, or artifice to defraud.
(b) Make an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made,
not misleading.
(c) Engage in an act, practice, or course of business that
operates or would operate as a fraud or deceit on another person.
Sec. 502. (1) It is unlawful for a person that advises others
for compensation, either directly or indirectly or through
publications or writings, as to the value of securities or the
advisability of investing in, purchasing, or selling securities, or
that, for compensation and as part of a regular business, issues or
promulgates analyses or reports relating to securities, to do any
of the following:
(a) Employ a device, scheme, or artifice to defraud another
person.
(b) Engage in an act, practice, or course of business that
operates or would operate as a fraud or deceit upon another person.
(2) An investment adviser acting as a finder shall not do any
of the following:
(a) Take possession of funds or securities in connection with
the transaction for which payment is made for services as a finder.
(b) Fail to disclose clearly and conspicuously in writing to
all persons involved in the transaction as a result of his or her
finding activities before the sale or purchase that the person is
acting as a finder, any payment for services as a finder, the
method and amount of payment, as well as any beneficial interest,
direct or indirect, of the finder or a member of the finder's
immediate family in the issue of the securities that are the
subject of services as a finder.
(c) Participate in the offer, purchase, or sale of a security
in violation of section 301. However, if the investment adviser
makes a reasonable effort to ascertain if a registration has been
effected or an exemption order granted in this state or to
ascertain the basis for an exemption claim and does not have
knowledge that the proposed transaction would violate section 301,
his or her activities as a finder do not violate section 301.
(d) Participate in the offer, purchase, or sale of a security
without obtaining information relative to the risks of the
transaction, the direct or indirect compensation to be received by
promoters, partners, officers, directors, or their affiliates, the
financial condition of the issuer, and the use of proceeds to be
received from investors, or fail to read any offering materials
obtained. This subdivision does not require independent
investigation or alteration of offering materials furnished to the
finder.
(e) Fail to inform or otherwise ensure disclosure to all
persons involved in the transaction as a result of his or her
finding activities of any material information which the finder
knows, or in the exercise of reasonable care should know based on
the information furnished to him or her, is material in making an
investment decision, until conclusion of the transaction. This
subdivision does not require the finder to independently generate
information.
(f) Locate, introduce, or refer persons that the finder knows,
or after a reasonable inquiry should know, are not suitable
investors by reason of their financial condition, age, experience,
or need to diversify investments.
(3) A rule under this act may do any of the following:
(a) Define an act, practice, or course of business of an
investment adviser or an investment adviser representative, other
than a supervised person of a federal covered investment adviser,
as fraudulent, deceptive, or manipulative, and prescribe means
reasonably designed to prevent investment advisers and investment
adviser representatives, other than supervised persons of a federal
covered investment adviser, from engaging in acts, practices, and
courses of business defined as fraudulent, deceptive, or
manipulative.
(b) Specify the contents of an investment advisory contract
entered into, extended, or renewed by an investment adviser.
Sec. 503. (1) In a civil action or administrative proceeding
under this act, a person claiming an exemption, exception,
preemption, or exclusion has the burden to prove the applicability
of the exemption, exception, preemption, or exclusion.
(2) In a criminal proceeding under this act, a person claiming
an exemption, exception, preemption, or exclusion has the burden of
going forward with evidence of the claim.
Sec. 504. (1) Subject to subsection (2), a rule or order under
this act may require the filing of a prospectus, pamphlet,
circular, form letter, advertisement, sales literature, or other
advertising record relating to a security or investment advice
addressed or intended for distribution to prospective investors,
including clients or prospective clients of a person registered or
required to be registered as an investment adviser under this act.
(2) This section does not apply to sales and advertising
literature specified in subsection (1) relating to a federal
covered security, a federal covered investment adviser, or a
security or transaction exempted by section 201, 202, or 203 except
as required under section 201(g).
Sec. 505. A person shall not make or cause to be made, in a
record that is used in an action or proceeding or filed under this
act, a statement that, at the time and in the light of the
circumstances under which it is made, is false or misleading in a
material respect, or, in connection with the statement, omit to
state a material fact necessary to make the statement made, in the
light of the circumstances under which it was made, not false or
misleading.
Sec. 506. The filing of an application for registration, a
registration statement, a notice filing under this act, or the
registration of a person, the notice filing by a person, or the
registration of a security under this act does not constitute a
finding by the administrator that a record filed under this act is
true, complete, and not misleading. The filing or registration or
the availability of an exemption, exception, preemption, or
exclusion for a security or a transaction does not mean that the
administrator has passed upon the merits or qualifications of, or
recommended or given approval to, a person, security, or
transaction. A person shall not make or cause to be made to a
purchaser, customer, client, or prospective customer or client a
representation inconsistent with this section.
Sec. 507. A broker-dealer, agent, investment adviser, federal
covered investment adviser, or investment adviser representative is
not liable to another broker-dealer, agent, investment adviser,
federal covered investment adviser, or investment adviser
representative for defamation relating to a statement that is
contained in a record required by the administrator, or designee of
the administrator, the securities and exchange commission, or a
self-regulatory organization, unless the person knew, or should
have known at the time that the statement was made, that it was
false in a material respect or the person acted in reckless
disregard of the statement's truth or falsity.
Sec. 508. (1) A person that willfully violates this act or a
rule adopted or order issued under this act, except section 504 or
the notice filing requirements of section 302 or 405, or that
willfully violates section 505 knowing the statement made to be
false or misleading in a material respect, is guilty of a felony
punishable by imprisonment for not more than 10 years or a fine of
not more than $500,000.00 for each violation, or both. An
individual convicted of violating a rule or order under this act
may be fined, but shall not be imprisoned, if the individual did
not have knowledge of the rule or order.
(2) The attorney general or the proper prosecuting attorney
may institute appropriate criminal proceedings under this act with
or without a reference from the administrator.
(3) This act does not limit the power of this state to punish
a person for conduct that constitutes a crime under other laws of
this state.
Sec. 509. (1) Enforcement of civil liability under this
section is subject to the securities litigation uniform standards
act of 1998.
(2) A person is liable to the purchaser if the person sells a
security in violation of section 301, or by means of an untrue
statement of a material fact or an omission to state a material
fact necessary in order to make the statement made, in light of the
circumstances under which it is made, not misleading, the purchaser
not knowing the untruth or omission, and the seller not sustaining
the burden of proof that the seller did not know and, in the
exercise of reasonable care, could not have known of the untruth or
omission. All of the following apply to an action under this
subsection:
(a) The purchaser may maintain an action to recover the
consideration paid for the security, less the amount of any income
received on the security, and interest at 6% per year from the date
of the purchase, costs, and reasonable attorney fees determined by
the court, upon the tender of the security, or for actual damages
as provided in subdivision (c).
(b) The tender referred to in subdivision (a) may be made any
time before entry of judgment. Tender requires only notice in a
record of ownership of the security and willingness to exchange the
security for the amount specified. A purchaser that no longer owns
the security may recover actual damages as provided in subdivision
(c).
(c) Actual damages in an action arising under this subsection
are the amount that would be recoverable upon a tender less the
value of the security when the purchaser disposed of it and
interest at 6% from the date of purchase, costs, and reasonable
attorney fees determined by the court.
(3) A person is liable to the seller if the person buys a
security by means of an untrue statement of a material fact or
omission to state a material fact necessary in order to make the
statement made, in light of the circumstances under which it is
made, not misleading, if the seller did not know of the untruth or
omission and the purchaser does not sustain the burden of proving
that the purchaser did not know, and in the exercise of reasonable
care could not have known, of the untruth or omission. All of the
following apply to an action under this subsection:
(a) The seller may maintain an action to recover the security,
any income received on the security, costs, and reasonable attorney
fees determined by the court, on the tender of the purchase price,
or for actual damages as provided in subdivision (c).
(b) The tender referred to in subdivision (a) may be made any
time before entry of judgment. Tender requires only notice in a
record of the present ability to pay the amount tendered and
willingness to take delivery of the security for the amount
specified. If the purchaser no longer owns the security, the seller
may recover actual damages as provided in subdivision (c).
(c) Actual damages in an action arising under this subsection
are the difference between the price at which the security was sold
and the value the security would have had at the time of the sale
in the absence of the purchaser's conduct causing liability,
interest at 6% from the date of sale of the security, costs, and
reasonable attorney fees determined by the court.
(4) A person acting as a broker-dealer or agent that sells or
buys a security in violation of section 401(1), 402(1), or 506 is
liable to the customer. The customer, if a purchaser, may maintain
an action for recovery of actual damages as specified in subsection
(2) or, if a seller, a remedy as specified in subsection (3).
(5) A person acting as an investment adviser or investment
adviser representative that provides investment advice for
compensation in violation of section 403(1), 404(1), or 506 is
liable to the client. The client may maintain an action at law or
in equity to recover the consideration paid for the advice,
interest at 6% from the date of payment, costs, and reasonable
attorney fees determined by the court.
(6) A person that receives, directly or indirectly, any
consideration for providing investment advice to another person and
that employs a device, scheme, or artifice to defraud the other
person or engages in an act, practice, or course of business that
operates or would operate as a fraud or deceit on the other person
is liable to the other person. The person defrauded may maintain an
action to recover the consideration paid for the advice and the
amount of any actual damages caused by the fraudulent conduct that
gives rise to liability under this subsection, interest at 6% from
the date of the fraudulent conduct, costs, and reasonable attorney
fees determined by the court, less the amount of any income
received as a result of the fraudulent conduct. This subsection
does not apply to a broker-dealer or its agents if the investment
advice provided is solely incidental to transacting business as a
broker-dealer and no special compensation is received for the
investment advice.
(7) The following persons are liable jointly and severally
with and to the same extent as persons liable under subsections (2)
to (6):
(a) A person that directly or indirectly controls a person
liable under subsections (2) to (6), unless the controlling person
sustains the burden of proving that the controlling person did not
know, and in the exercise of reasonable care could not have known,
of the existence of the conduct by reason of which the liability is
alleged to exist.
(b) An individual who is a managing partner, executive
officer, or director of a person liable under subsections (2) to
(6), including each individual having a similar status or
performing similar functions, unless the individual sustains the
burden of proving that the individual did not know and, in the
exercise of reasonable care could not have known, of the existence
of the conduct by reason of which the liability is alleged to
exist.
(c) An individual who is an employee of or associated with a
person liable under subsections (2) to (6) and who materially aids
the conduct giving rise to the liability, unless the individual
sustains the burden of proving that the individual did not know
and, in the exercise of reasonable care could not have known, of
the existence of the conduct by reason of which the liability is
alleged to exist.
(d) A person that is a broker-dealer, agent, investment
adviser, or investment adviser representative that materially aids
the conduct giving rise to the liability under subsections (2) to
(6), unless the person sustains the burden of proving that the
person did not know and, in the exercise of reasonable care could
not have known, of the existence of the conduct by reason of which
liability is alleged to exist.
(8) A person liable under this section has a right of
contribution as in cases of contract against any other person
liable under this section for the same conduct.
(9) A cause of action under this section survives the death of
an individual who might have been a plaintiff or defendant.
(10) A person may not obtain relief if an action is not
commenced within 1 of the following time limits, as applicable:
(a) Under subsection (2) for violation of section 301, or
under subsection (4) or (5), unless the action is commenced within
1 year after the violation occurred.
(b) Under subsection (2), other than for violation of section
301, or under subsection (3) or (6), unless the action is commenced
within the earlier of 2 years after discovery of the facts
constituting the violation or 5 years after the violation occurred.
(11) A person that has made or engaged in the performance of a
contract in violation of this act or a rule adopted or order issued
under this act, or that has acquired a purported right under the
contract with knowledge of the facts by reason of which its making
or performance was in violation of this act, may not base an action
on the contract.
(12) A condition, stipulation, or provision binding a person
purchasing or selling a security or receiving investment advice to
waive compliance with this act or a rule adopted or order issued
under this act is void.
(13) The rights and remedies provided by this act are in
addition to any other rights or remedies that may exist, but this
act does not create a cause of action not specified in this section
or section 411(5).
Sec. 510. A purchaser, seller, or recipient of investment
advice may not maintain an action under section 509 if all of the
following are met:
(a) The purchaser, seller, or recipient of investment advice
receives in a record, before the action is commenced, an offer that
does all of the following:
(i) States the respect in which liability under section 509 may
have arisen and fairly advises the purchaser, seller, or recipient
of investment advice of that person's rights in connection with the
offer, including financial or other information necessary to
correct all material misstatements or omissions in the information
that was required by this act to be furnished to that person at the
time of the purchase, sale, or investment advice.
(ii) If the basis for relief under this section may have been a
violation of section 509(2), offers to repurchase the security for
cash, payable on delivery of the security, equal to the
consideration paid, and interest at 6% per year from the date of
purchase, less the amount of any income received on the security,
or, if the purchaser no longer owns the security, offers to pay the
purchaser upon acceptance of the offer damages in an amount that
would be recoverable upon a tender, less the value of the security
when the purchaser disposed of it, and interest at 6% from the date
of purchase in cash equal to the damages computed in the manner
provided in this subsection.
(iii) If the basis for relief under this section may have been a
violation of section 509(3), offers to tender the security, on
payment by the seller of an amount equal to the purchase price
paid, less income received on the security by the purchaser and
interest at 6% from the date of the sale, or if the purchaser no
longer owns the security, offers to pay the seller upon acceptance
of the offer, in cash, damages in the amount of the difference
between the price at which the security was purchased and the value
the security would have had at the time of the purchase in the
absence of the purchaser's conduct that may have caused liability
and interest at 6% from the date of the sale.
(iv) If the basis for relief under this section may have been a
violation of section 509(4), and if the customer is a purchaser,
offers to pay as specified in subdivision (a)(ii) or, if the
customer is a seller, offers to tender or to pay as specified in
subdivision (a)(iii).
(v) If the basis for relief under this section may have been a
violation of section 509(5), offers to reimburse in cash the
consideration paid for the advice and interest at 6% from the date
of payment.
(vi) If the basis for relief under this section may have been a
violation of section 509(6), offers to reimburse in cash the
consideration paid for the advice and the amount of any actual
damages that may have been caused by the conduct, and interest at
6% from the date of the violation causing the loss.
(vii) States that the offer must be accepted by the purchaser,
seller, or recipient of investment advice within 30 days after the
date of its receipt by the purchaser, seller, or recipient of
investment advice or within a shorter period of not less than 3
days that the administrator, by order, specifies.
(b) The offeror has the present ability to pay the amount
offered or to tender the security under subdivision (a).
(c) The offer under subdivision (a) is delivered to the
purchaser, seller, or recipient of investment advice or sent in a
manner that ensures receipt by the purchaser, seller, or recipient
of investment advice.
(d) The purchaser, seller, or recipient of investment advice
that accepts the offer under subdivision (a) in a record within the
period specified under subdivision (a)(vii) is paid in accordance
with the terms of the offer.
ARTICLE 6
ADMINISTRATION AND JUDICIAL REVIEW
Sec. 601. (1) The administrator shall administer this act.
(2) The administrator or officer, employee, or designee of the
administrator shall not use for personal benefit or the benefit of
others records or other information obtained by or filed with the
administrator that are not public under section 607(2). This act
does not authorize the administrator or an officer, employee, or
designee of the administrator to disclose the record or
information, except in accordance with section 602, 607(3), or 608.
(3) This act does not create or diminish any privilege or
exemption that exists at common law, by statute, by rule, or
otherwise.
(4) The administrator may develop and implement investor
education initiatives to inform the public about investing in
securities, with particular emphasis on the prevention and
detection of securities fraud. In developing and implementing these
initiatives, the administrator may collaborate with public and
nonprofit organizations with an interest in investor education. The
administrator may accept grants or donations from a person that is
not affiliated with the securities industry or from a nonprofit
organization, regardless of whether or not the organization is
affiliated with the securities industry, to develop and implement
investor education initiatives. This subsection does not authorize
the administrator to require participation or monetary
contributions of a registrant in an investor education program.
(5) All fees and civil fines received under this act shall be
deposited in the state treasury to the credit of the administrator,
to be used pursuant to legislative appropriation by the
administrator in carrying out those duties required by law. After
the payment of the amounts appropriated by the legislature for the
necessary expenses incurred in the administration of this act, the
money remaining shall be credited to the general fund of this
state.
Sec. 602. (1) The administrator may do any of the following:
(a) Conduct public or private investigations in or out of this
state that the administrator considers necessary or appropriate to
determine whether any person has violated, is violating, or is
about to violate this act or a rule adopted or order issued under
this act, or to aid in the enforcement of this act or the adoption
of rules and forms under this act.
(b) Require or permit a person to testify, file a statement,
or produce a record, under oath or otherwise as the administrator
determines, as to all the facts and circumstances concerning a
matter to be investigated or about which an action or proceeding is
to be commenced.
(c) Publish a record concerning an action, proceeding, or
investigation under, or a violation of, this act or a rule adopted
or order issued under this act if the administrator determines it
is necessary or appropriate in the public interest and for the
protection of investors.
(2) For the purpose of an investigation under this act, the
administrator or a designated officer may administer oaths and
affirmations, subpoena witnesses, seek compulsion of attendance,
take evidence, require the filing of statements, and require the
production of any records that the administrator considers relevant
or material to the investigation.
(3) If a person fails to appear or refuses to testify, file a
statement, produce records, or otherwise fails to obey a subpoena
as required by the administrator under this act, the administrator
may refer the matter to the attorney general or the proper
prosecuting attorney, who may apply to the circuit court of Ingham
county or a court of another state to enforce compliance. The court
may do any of the following:
(a) Hold the person in contempt.
(b) Order the person to appear before the administrator.
(c) Order the person to testify about the matter under
investigation or in question.
(d) Order the production of records.
(e) Grant injunctive relief, including restricting or
prohibiting the offer or sale of securities or the providing of
investment advice.
(f) Order a civil fine of not less than $10,000.00 and not
more than $500,000.00 for each violation.
(g) Grant any other necessary or appropriate relief.
(4) This section does not preclude a person from applying to
the circuit court of Ingham county or a court of another state for
appropriate relief from a request to appear, testify, file a
statement, produce records, or obey a subpoena.
(5) An individual is not excused from attending, testifying,
filing a statement, producing a record or other evidence, or
obeying a subpoena of the administrator under this act or in an
action commenced or proceeding instituted by the administrator
under this act on the ground that the required testimony,
statement, record, or other evidence, directly or indirectly, may
tend to incriminate the individual or subject the individual to a
criminal fine, penalty, or forfeiture. If the individual refuses to
testify, file a statement, or produce a record or other evidence on
the basis of the individual's privilege against self-incrimination,
the administrator may apply to the circuit court to compel the
testimony, the filing of the statement, the production of the
record, or the giving of other evidence. The testimony, record, or
other information compelled under a court order obtained under this
subsection shall not be used, directly or indirectly, against the
individual in a criminal case, except in a prosecution for perjury,
contempt, or otherwise failing to comply with the order.
(6) At the request of the securities regulator of another
state or a foreign jurisdiction, the administrator may provide
assistance if the requesting regulator states that it is conducting
an investigation to determine whether a person has violated, is
violating, or is about to violate a law or rule of the other state
or foreign jurisdiction relating to securities matters which the
requesting regulator administers or enforces. The administrator may
provide the assistance by using the authority to investigate and
the powers conferred by this section as the administrator
determines is necessary or appropriate. The assistance may be
provided without regard to whether the conduct described in the
request would also constitute a violation of this act or other law
of this state if occurring in this state. In deciding whether to
provide the assistance, the administrator may consider whether the
requesting regulator is permitted and has agreed to provide
assistance reciprocally within its state or foreign jurisdiction to
the administrator on securities matters when requested, whether
compliance with the request would violate or prejudice the public
policy of this state, and the availability of resources and
employees of the administrator to carry out the request for
assistance.
Sec. 603. (1) If it appears to the administrator that a person
has engaged, is engaging, or is about to engage in an act,
practice, or course of business constituting a violation of this
act or a rule adopted or order issued under this act, or that a
person has, is, or is about to engage in an act, practice, or
course of business that materially aids a violation of this act or
a rule adopted or order issued under this act, the administrator
may maintain an action in the circuit court to enjoin the act,
practice, or course of business and to enforce compliance with this
act or a rule adopted or order issued under this act.
(2) In an action under this section and upon a proper showing,
the court may do any of the following:
(a) Issue a permanent or temporary injunction, restraining
order, or a declaratory judgment.
(b) Issue an order for other appropriate or ancillary relief,
including any of the following:
(i) An asset freeze, accounting, writ of attachment, writ of
general or specific execution, and an appointment of a receiver or
conservator, which may be the administrator, for the defendant or
the defendant's assets.
(ii) An order to the administrator to take charge and control
of a defendant's property, including investment accounts and
accounts in a depository institution, rents, and profits, to
collect debts, and to acquire and dispose of property.
(iii) The imposition of a civil fine of not more than $10,000.00
for a single violation or $500,000.00 for multiple violations.
(iv) An order of rescission, restitution, or disgorgement
directed to a person that has engaged in an act, practice, or
course of business constituting a violation of this act or the
predecessor act or a rule adopted or order issued under this act or
the predecessor act.
(v) An order for the payment of prejudgment and postjudgment
interest.
(c) Granting other relief that the court considers
appropriate.
(3) The administrator shall not be required to post a bond in
an action under this section.
Sec. 604. (1) If the administrator determines that a person
has engaged, is engaging, or is about to engage in an act,
practice, or course of business constituting a violation of this
act or a rule adopted or order issued under this act, or that a
person has materially aided, is materially aiding, or is about to
materially aid an act, practice, or course of business constituting
a violation of this act or a rule adopted or order issued under
this act, the administrator may do 1 or more of the following:
(a) Issue an order directing the person to cease and desist
from engaging in the act, practice, or course of business or to
take other action necessary or appropriate to comply with this act.
(b) Issue an order denying, suspending, revoking, or
conditioning the exemptions for a broker-dealer under section
401(2)(a)(iv) or (vi) or an investment adviser under section
403(2)(a)(iii).
(c) Issue an order under section 204.
(2) An order under subsection (1) is effective on the date of
issuance. Upon issuance of the order, the administrator shall
promptly serve each person subject to the order with a copy of the
order and a notice that the order has been entered. The order must
include a statement of any civil penalty or costs of the
investigation the administrator will seek, a statement of the
reasons for the order, and notice that the matter will be scheduled
for a hearing within 15 days after receipt of a request in a record
from the person. If a person subject to the order does not request
a hearing and none is ordered by the administrator within 30 days
after the date of service of the order, the order, including any
civil penalty imposed or requirement for payment of the costs of
investigation sought in a statement in that order, becomes final as
to that person by operation of law. If a hearing is requested or
ordered, the administrator, after notice of and opportunity for
hearing to each person subject to the order, may modify or vacate
the order or extend it until final determination.
(3) If a hearing is requested or ordered pursuant to
subsection (2), the hearing shall be held pursuant to the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328. A final order shall not be issued unless the administrator
makes findings of fact and conclusions of law on the record
pursuant to the administrative procedures act of 1969, 1969 PA 306,
MCL 24.201 to 24.328. The final order may make final, vacate, or
modify the order issued under subsection (1).
(4) In a final order, the administrator may impose a civil
fine of not more than $10,000.00 for a single violation or
$500,000.00 for multiple violations.
(5) In a final order, the administrator may charge the actual
cost of an investigation or proceeding for a violation of this act
or a rule adopted or order issued under this act.
(6) If a petition for judicial review of a final order is not
filed in accordance with section 609, the administrator may file a
certified copy of the final order with the clerk of a court of
competent jurisdiction. The filed order shall have the same effect
as a judgment of the court and may be recorded, enforced, or
satisfied in the same manner as a judgment of the court.
(7) If a person fails to comply with an order under this
section, the administrator may petition a court of competent
jurisdiction to enforce the order. The court shall not require the
administrator to post a bond. If the court finds, after service and
opportunity for hearing, that the person is not in compliance with
the order, the court may adjudge the person in civil contempt of
the order. The court may impose an additional civil penalty against
the person for contempt in an amount not less than $10,000.00 or
more than $500,000.00 for each violation and may grant any other
relief the court determines is just and proper in the
circumstances.
Sec. 605. (1) The administrator may do any of the following:
(a) Issue forms and orders and, after notice and comment, may
adopt and amend rules necessary or appropriate to carry out this
act, and may repeal rules, including rules and forms governing
registration statements, applications, notice filings, reports, and
other records.
(b) By rule, define terms, whether or not used in this act, if
the definitions are not inconsistent with this act.
(c) By rule, classify securities, persons, and transactions
and adopt different requirements for different classes.
(2) A rule or form shall not be adopted or amended or an order
issued or amended under this act unless the administrator finds
that the rule, form, order, or amendment is necessary or
appropriate in the public interest or for the protection of
investors and is consistent with the purposes intended by this act.
In adopting, amending, and repealing rules and forms, section 608
applies in order to achieve uniformity among the states and
coordination with federal laws in the form and content of
registration statements, applications, reports, and other records,
including in the adoption of uniform rules, forms, and procedures.
(3) Subject to section 15(h) of the securities exchange act of
1934, 15 USC 78o, and section 222 of the investment advisers act of
1940, 15 USC 80b-18a, the administrator may require that a
financial statement filed under this act be prepared in accordance
with generally accepted accounting principles in the United States
and comply with other requirements specified by rule or order under
this act. A rule or order under this act may establish any of the
following:
(a) Subject to section 15(h) of the securities exchange act of
1934, 15 USC 78o, and section 222 of the investment advisers act of
1940, 15 USC 80b-18a, the form and content of financial statements
required under this act.
(b) Whether unconsolidated financial statements must be filed.
(c) Whether required financial statements must be audited by
an independent certified public accountant.
(4) The administrator may provide interpretative opinions or
issue determinations that the administrator will not institute a
proceeding or an action under this act against a specified person
for engaging in a specified act, practice, or course of business if
the determination is consistent with this act. A rule or order
under this act may charge a reasonable fee for interpretative
opinions or determinations that the administrator will not
institute an action or a proceeding under this act.
(5) A penalty under this act shall not be imposed and
liability does not arise for conduct that is engaged in or omitted
in good faith conformity with a rule, form, or order of the
administrator under this act.
(6) A hearing in an administrative proceeding under this act
shall be conducted in public unless the administrator for good
cause consistent with the purposes intended by this act determines
that the hearing not be public.
Sec. 606. (1) The administrator shall maintain, or designate a
person to maintain, a register of all applications for registration
of securities; registration statements; notice filings,
applications for registration of broker-dealers, agents, investment
advisers, and investment adviser representatives; notice filings by
federal covered investment advisers that are or have been effective
under this act or the predecessor act; notices of claims of
exemption from registration or notice filing requirements contained
in a record; orders issued under this act or the predecessor act;
and interpretative opinions or no-action determinations issued
under this act.
(2) The administrator shall make all rules, forms,
interpretative opinions, and orders available to the public.
(3) Upon request, the administrator shall furnish to a person
a copy of a record that is a public record or a certification that
the public record does not exist. A rule under this act may
establish a reasonable charge for furnishing the record. A copy of
the record certified or a certificate of its nonexistence by the
administrator is prima facie evidence of a record or its
nonexistence.
Sec. 607. (1) Subject to subsection (2), records obtained by
the administrator or filed under this act, including a record
contained in or filed with any registration statement, application,
notice filing, or report, are public records and are available for
public examination.
(2) The following records are not public records and are not
available for public examination under subsection (1):
(a) A record obtained by the administrator in connection with
an audit or inspection under section 411(4) or an investigation
under section 602.
(b) A part of a report filed in connection with a registration
statement under sections 301 and 303 through 305, or a record under
section 411(4), that contains trade secrets or confidential
information when the person filing the registration statement or
report has asserted a claim of confidentiality or privilege that is
authorized by law.
(c) A record that is not required to be provided to the
administrator or filed under this act and is provided to the
administrator only on the condition that the record will not be
subject to public examination or disclosure.
(d) A nonpublic record received from a person specified in
section 608.
(e) Any social security number, residential address unless
used as a business address, or residential telephone number unless
used as a business telephone number contained in a record that is
filed.
(f) A record obtained by the administrator through a designee
of the administrator that is determined by a rule or order under
this act to have been either of the following:
(i) Appropriately expunged from the administrator's records by
that designee.
(ii) Appropriately determined to be nonpublic or nondisclosable
by that designee if the administrator finds that this is in the
public interest and for the protection of investors.
(3) The administrator may disclose a record obtained in
connection with an audit or inspection under section 411(4) or a
record obtained in connection with an investigation under section
602 if disclosure is for the purpose of a civil, administrative, or
criminal investigation, action, or proceeding or to a person
specified in section 608(1).
Sec. 608. (1) The administrator shall, in its discretion,
cooperate, coordinate, consult, and, subject to section 607, share
records and information with the securities regulators of 1 or more
states, Canada or 1 or more of its provinces or territories, 1 or
more foreign jurisdictions, the securities and exchange commission,
the United States department of justice, the commodity futures
trading commission, the federal trade commission, the securities
investor protection corporation, a self-regulatory organization, a
national or international organization of securities regulators,
federal or state banking and insurance regulators, and any
governmental law enforcement agency, in order to effectuate greater
uniformity in securities matters among the federal government,
self-regulatory organizations, and state and foreign governments.
(2) In cooperating, coordinating, consulting, and sharing
records and information under this section and in acting by rule,
order, or waiver under this act, the administrator shall, in the
discretion of the administrator, take into consideration in
carrying out the public interest the following general policies:
(a) Maximizing effectiveness of regulation for the protection
of investors.
(b) Maximizing uniformity in federal and state regulatory
standards.
(c) Minimizing burdens on the business of capital formation,
without adversely affecting essentials of investor protection.
(3) The cooperation, coordination, consultation, and sharing
of records and information authorized by this section includes:
(a) Establishing or employing 1 or more designees as a central
depository for registration and notice filings under this act and
for records required or allowed to be maintained under this act.
(b) Developing and maintaining uniform forms.
(c) Conducting a joint examination or investigation.
(d) Holding a joint administrative hearing.
(e) Instituting and prosecuting a joint civil or
administrative proceeding.
(f) Sharing and exchanging personnel.
(g) Coordinating registrations under sections 301 and 401
through 404 and exemptions under section 203.
(h) Sharing and exchanging records.
(i) Formulating rules, statements of policy, guidelines,
forms, and interpretative opinions and releases.
(j) Formulating common systems and procedures.
(k) Notifying the public of proposed rules, forms, statements
of policy, and guidelines.
(l) Attending conferences and other meetings among securities
regulators, which may include representatives of governmental and
private organizations involved in capital formation, considered to
be necessary or appropriate to promote or achieve uniformity.
(m) Developing and maintaining a uniform exemption from
registration for small issuers and taking other steps to reduce the
burden of raising investment capital by small businesses.
Sec. 609. (1) Final orders issued by the administrator under
this act are subject to judicial review pursuant to the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328.
(2) Rules adopted under this act are subject to judicial
review pursuant to the administrative procedures act of 1969, 1969
PA 306, MCL 24.201 to 24.328.
Sec. 610. (1) Sections 301, 302, 401(1), 402(1), 403(1),
404(1), 501, 506, 509, and 510 apply to a person that sells or
offers to sell a security if the offer to sell or the sale is made
in this state or the offer to purchase or the purchase is made and
accepted in this state.
(2) Sections 401(1), 402(1), 403(1), 404(1), 501, 506, 509,
and 510 apply to a person that purchases or offers to purchase a
security if the offer to purchase or the purchase is made in this
state or the offer to sell or the sale is made and accepted in this
state.
(3) For the purpose of this section, an offer to sell or to
purchase a security is made in this state, whether or not either
party is then present in this state, if either of the following
apply to the offer:
(a) It originates from this state.
(b) It is directed by the offeror to a place in this state and
received at the place to which it is directed.
(4) For purposes of this section, an offer to purchase or to
sell is accepted in this state whether or not either party is then
present in this state, if both of the following apply to the
acceptance:
(a) It is communicated to the offeror in this state, the
offeree reasonably believes the offeror to be present in this
state, and the acceptance is received at the place in this state to
which it is directed.
(b) It has not previously been communicated to the offeror,
orally or in a record, outside this state.
(5) An offer to sell or to purchase is not made in this state
when a publisher circulates or there is circulated on the
publisher's behalf in this state a bona fide newspaper or other
publication of general, regular, and paid circulation that is not
published in this state, or that is published in this state but has
had more than 2/3 of its circulation outside this state during the
previous 12 months, or when a radio or television program or other
electronic communication originating outside this state is received
in this state. A radio, television program, or other electronic
communication is considered as having originated in this state if
either the broadcast studio or the originating source of
transmission is located in this state, unless any of the following
are met:
(a) The program or communication is syndicated and distributed
from outside this state for redistribution to the general public in
this state.
(b) The program or communication is supplied by a radio,
television, or other electronic network with the electronic signal
originating from outside this state for redistribution to the
general public in this state.
(c) The program or communication is an electronic
communication that originates outside this state and is captured
for redistribution to the general public in this state by a
community antenna or cable, radio, cable television, or other
electronic system.
(d) The program or communication consists of an electronic
communication that originates in this state, but which is not
intended for distribution to the general public in this state.
(6) Sections 403(1), 404(1), 405(1), 502, 505, and 506 apply
to a person if the person engages in an act, practice, or course of
business instrumental in effecting prohibited or actionable conduct
in this state, whether or not either party is then present in this
state.
Sec. 611. (1) A consent to service of process complying with
this section required by this act must be signed and filed in the
form required by a rule or order under this act. A consent
appointing the administrator the person's agent for service of
process in a noncriminal action or proceeding against the person,
or the person's successor, or personal representative under this
act or a rule adopted or order issued by the administrator under
this act after the consent is filed, has the same force and
validity as if the service were made personally on the person
filing the consent. A person that has filed a consent complying
with this subsection in connection with a previous application for
registration or notice filing need not file an additional consent.
(2) If a person, including a nonresident of this state,
engages in an act, practice, or course of business prohibited or
made actionable by this act or a rule adopted or order issued by
the administrator under this act and the person has not filed a
consent to service of process under subsection (1), that act,
practice, or course of business constitutes the appointment of the
administrator as the person's agent for service of process in a
noncriminal action or proceeding against the person, the person's
successor, or personal representative.
(3) Service under subsection (1) or (2) may be made by
providing a copy of the process to the office of the administrator,
but it is not effective unless both of the following are met:
(a) The plaintiff, which may be the administrator, promptly
sends notice of the service and a copy of the process, return
receipt requested, to the defendant or respondent at the address
given in the consent to service of process or, if a consent to
service of process has not been filed, at the last known address,
or takes other reasonable steps to give notice.
(b) The plaintiff files an affidavit of compliance with this
subsection in the action or proceeding on or before the return day
of the process, if any, or within the time that the court or the
administrator in a proceeding before the administrator allows.
(4) Service as provided in subsection (3) may be used in a
proceeding before the administrator or by the administrator in a
civil action in which the administrator is the moving party.
(5) If the process is served under subsection (3), the court
or the administrator in a proceeding before the administrator shall
order continuances as are necessary or appropriate to afford the
defendant or respondent reasonable opportunity to defend.
Sec. 612. If any provision of this act or its application to
any person or circumstances is held invalid, the invalidity does
not affect other provisions or applications of this act that can be
given effect without the invalid provision or application, and to
this end, the provisions of this act are severable.
ARTICLE 7
TRANSITION
Sec. 701. This act takes effect 180 days after the date this
act is enacted.
Sec. 702. The uniform securities act, 1964 PA 265, MCL 451.501
to 451.818, is repealed.
Sec. 703. (1) The predecessor act exclusively governs all
actions, prosecutions, or proceedings that are pending or may be
maintained or instituted on the basis of facts or circumstances
occurring before the effective date of this act, but a civil action
shall not be maintained to enforce any liability under the
predecessor act unless commenced within any period of limitation
that applied when the cause of action accrued or within 3 years
after the effective date of this act, whichever is earlier.
(2) All effective registrations under the predecessor act, all
administrative orders relating to the registrations, statements of
policy, interpretative opinions, declaratory rulings, no action
determinations, and all conditions imposed upon the registrations
under the predecessor act remain in effect for the same time period
they would have remained in effect if this act had not been
enacted. They are considered to have been filed, issued, or imposed
under this act, but are exclusively governed by the predecessor
act.
(3) The predecessor act exclusively governs any offer or sale
made within 1 year after the effective date of this act pursuant to
an offering made in good faith before the effective date of this
act on the basis of an exemption available under the predecessor
act.