H*3677 Session 112 (1997-1998)
H*3677(Rat #0238, Act #0134 of 1997) General Bill, By Klauber
A BILL TO AMEND CHAPTER 1, TITLE 35, CODE OF LAWS OF SOUTH CAROLINA, 1976,
RELATING TO THE UNIFORM SECURITIES ACT, SO AS TO REVISE THE PROVISIONS OF THE
CHAPTER BY DELETING CERTAIN LANGUAGE AND PROVISIONS, ADDING NEW PROVISIONS,
AND PROVIDING AMONG OTHER THINGS, FOR DEFINITIONS FOR THE TERMS "FEDERAL
COVERED ADVISER" AND "FEDERAL COVERED SECURITY", THAT INVESTIGATIVE RECORDS
AND COMPLAINTS FILED WITH THE SECURITIES COMMISSIONER ARE NOT CONSIDERED
PUBLIC INFORMATION BUT ISSUED ORDERS, INCLUDING CERTAIN COMPLAINTS, ARE
CONSIDERED PUBLIC RECORDS, THAT CERTAIN BROKER-DEALERS ARE EXEMPT FROM THE
LICENSING REQUIREMENTS OF SECTION 35-1-410, THAT CERTAIN ACTIVITY IS UNLAWFUL,
THAT EVERY INVESTMENT ADVISER REGISTRATION OR NOTICE FILING EXPIRES TWO YEARS
FROM ITS EFFECTIVE DATE UNLESS RENEWED, THAT REGISTRATION OF AN INVESTMENT
ADVISER AUTOMATICALLY CONSTITUTES REGISTRATION OF ANY INVESTMENT ADVISER
REPRESENTATIVE WHO IS A PARTNER, OFFICER, OR DIRECTOR OR A PERSON OCCUPYING A
SIMILAR STATUS OR PERFORMING SIMILAR FUNCTIONS, FOR CHANGES IN CERTAIN FEES,
THAT THE SECURITIES COMMISSIONER MAY REQUIRE, WITH RESPECT TO INVESTMENT
ADVISERS, THAT CERTAIN INFORMATION BE FURNISHED OR DISSEMINATED AS NECESSARY
OR APPROPRIATE IN THE PUBLIC INTEREST OR FOR THE PROTECTION OF INVESTORS AND
ADVISORY CLIENTS, FOR NOTICE FILINGS FOR FEDERAL COVERED SECURITIES, THAT
UNLESS PROHIBITED BY RULE OR ORDER OF THE SECURITIES COMMISSIONER, AND
INVESTMENT ADVISER REGISTERED UNDER THE INVESTMENT ADVISERS ACT OF 1940 MAY
TAKE OR RETAIN CUSTODY OF SECURITIES OR FUNDS OF A CLIENT, AND THAT THE
SECURITIES COMMISSIONER MAY REFER AVAILABLE EVIDENCE CONCERNING VIOLATIONS OF
THIS CHAPTER OR OF ANY RULE OR ORDER UNDER THIS CHAPTER TO THE APPROPRIATE
DIVISION OF THE ATTORNEY GENERAL'S OFFICE OR OTHER APPROPRIATE PROSECUTION,
LAW ENFORCEMENT, OR LICENSING AUTHORITIES WHO MAY INSTITUTE THE APPROPRIATE
PROCEEDINGS UNDER THIS CHAPTER.-AMENDED TITLE
03/18/97 House Introduced and read first time HJ-5
03/18/97 House Referred to Committee on Judiciary HJ-6
04/16/97 House Committee report: Favorable with amendment
Judiciary HJ-3
04/22/97 House Amended HJ-20
04/22/97 House Read second time HJ-21
04/23/97 House Read third time and sent to Senate HJ-14
04/24/97 Senate Introduced and read first time SJ-10
04/24/97 Senate Referred to Committee on Banking and Insurance SJ-10
05/13/97 Senate Recalled from Committee on Banking and Insurance SJ-9
05/29/97 Senate Read second time SJ-61
05/29/97 Senate Ordered to third reading with notice of
amendments SJ-61
06/03/97 Senate Amended SJ-87
06/03/97 Senate Read third time and returned to House with
amendments SJ-87
06/05/97 House Concurred in Senate amendment and enrolled HJ-54
06/09/97 Ratified R 238
06/13/97 Signed By Governor
06/13/97 Effective date 06/13/97
06/26/97 Copies available
06/26/97 Act No. 134
(A134, R238, H3677)
AN ACT TO AMEND CHAPTER 1, TITLE 35, CODE OF LAWS
OF SOUTH CAROLINA, 1976, RELATING TO THE UNIFORM
SECURITIES ACT, SO AS TO REVISE THE PROVISIONS OF THE
CHAPTER BY DELETING CERTAIN LANGUAGE AND
PROVISIONS, ADDING NEW PROVISIONS, AND PROVIDING,
AMONG OTHER THINGS, FOR DEFINITIONS FOR THE TERMS
"FEDERAL COVERED ADVISER" AND "FEDERAL
COVERED SECURITY", THAT INVESTIGATIVE RECORDS
AND COMPLAINTS FILED WITH THE SECURITIES
COMMISSIONER ARE NOT CONSIDERED PUBLIC INFORMATION
BUT ISSUED ORDERS, INCLUDING CERTAIN COMPLAINTS, ARE
CONSIDERED PUBLIC RECORDS, THAT CERTAIN
BROKER-DEALERS ARE EXEMPT FROM THE LICENSING
REQUIREMENTS OF SECTION 35-1-410, THAT CERTAIN
ACTIVITY IS UNLAWFUL, THAT EVERY INVESTMENT ADVISER
REGISTRATION OR NOTICE FILING EXPIRES TWO YEARS FROM
ITS EFFECTIVE DATE UNLESS RENEWED, THAT REGISTRATION
OF AN INVESTMENT ADVISER AUTOMATICALLY
CONSTITUTES REGISTRATION OF ANY INVESTMENT ADVISER
REPRESENTATIVE WHO IS A PARTNER, OFFICER, OR
DIRECTOR OR A PERSON OCCUPYING A SIMILAR STATUS OR
PERFORMING SIMILAR FUNCTIONS, FOR CHANGES IN
CERTAIN FEES, THAT THE SECURITIES COMMISSIONER MAY
REQUIRE, WITH RESPECT TO INVESTMENT ADVISERS, THAT
CERTAIN INFORMATION BE FURNISHED OR DISSEMINATED AS
NECESSARY OR APPROPRIATE IN THE PUBLIC INTEREST OR
FOR THE PROTECTION OF INVESTORS AND ADVISORY
CLIENTS, FOR NOTICE FILINGS FOR FEDERAL COVERED
SECURITIES, THAT UNLESS PROHIBITED BY RULE OR ORDER
OF THE SECURITIES COMMISSIONER, AN INVESTMENT
ADVISER REGISTERED UNDER THE INVESTMENT ADVISERS
ACT OF 1940 MAY TAKE OR RETAIN CUSTODY OF SECURITIES
OR FUNDS OF A CLIENT, AND THAT THE SECURITIES
COMMISSIONER MAY REFER AVAILABLE EVIDENCE
CONCERNING VIOLATIONS OF THIS CHAPTER OR OF ANY
RULE OR ORDER UNDER THIS CHAPTER TO THE APPROPRIATE
DIVISION OF THE ATTORNEY GENERAL'S OFFICE OR OTHER
APPROPRIATE PROSECUTION, LAW ENFORCEMENT, OR
LICENSING AUTHORITIES WHO MAY INSTITUTE THE
APPROPRIATE PROCEEDINGS UNDER THIS CHAPTER.
Be it enacted by the General Assembly of the State of South Carolina:
Uniform Securities Act revised
SECTION 1. Chapter 1, Title 35 of the 1976 Code is amended to read:
"CHAPTER 1
Uniform Securities Act
Article 1
General Provisions
Section 35-1-10. This chapter may be cited as the Uniform Securities
Act.
Section 35-1-20. When used in this chapter, unless the context
otherwise requires:
(1) 'Securities commissioner' means Attorney General, who shall be
ex officio securities commissioner.
(2) 'Agent' means any individual, other than a broker-dealer, who
represents a broker-dealer or issuer in effecting or attempting to effect
purchases or sales of securities. A partner, officer or director of a
broker-dealer or issuer, or a person occupying a similar status or
performing similar functions, is an 'agent' only if he otherwise comes
within this definition.
(3) 'Broker-dealer' means any person engaged in the business of
effecting transactions in securities for the account of others or for his own
account.
(4) 'Federal covered adviser' means a person who is registered under
Section 203 of the Investment Advisers Act of 1940 or who is excluded
from the definition of 'investment adviser' under Section 202(a)(11) of the
Investment Advisers Act of 1940.
(5) 'Federal covered security' means any security that is a covered
security under Section 18(b) of the Securities Act of 1933 or the rules and
regulations promulgated thereunder.
(6) 'Fraud', 'deceit' and 'defraud' are not limited to common-law deceit.
(7) 'Guaranteed' means guaranteed as to payment of principal, interest
or dividends.
(8) 'Investment adviser' means any person who, for compensation,
engages in the business of advising others, either directly or through
publications or writings, as to the value of securities or as to the
advisability of investing in, purchasing, or selling securities or who, for
compensation and as a part of a regular business, issues or promulgates
analyses or reports concerning securities. 'Investment adviser' also
includes financial planners and other persons who, as an integral
component of other financially related services, provide the foregoing
investment advisory services to others for compensation and as part of a
business or who hold themselves out as providing the foregoing
investment advisory services to others for compensation. 'Investment
adviser' does not include (a) an employee of an investment adviser; (b) a
bank, savings institution, or trust company; (c) a lawyer, accountant,
engineer, or teacher whose performance of these services is solely
incidental to the practice of his profession; (d) a broker-dealer whose
performance of these services is solely incidental to the conduct of his
business as a broker-dealer and who receives no special compensation for
them; (e) a publisher of any bona fide newspaper, news column,
newsletter, news magazine, or business or financial publication or service,
whether communicated in hard copy form, or by electronic means, or
otherwise, that does not consist of the rendering of advice on the basis of
the specific investment situation of each client; (f) any person that is a
federal covered adviser; or (g) such other persons not within the intent of
this item as the securities commissioner may by rule or order designate.
Until October 10, 1999, the exclusions provided in Section 35-1-20(8)(f)
shall not apply to a person who fails to pay the fees required under
Section 35-1-480(B) of this chapter.
(9) 'Investment adviser representative'
(a) with respect to any adviser registered or required to be registered
under this chapter, means any partner, officer, director of or person
occupying a similar status or performing similar functions or other
individual, except clerical or ministerial personnel, who is employed by
or associated with an investment adviser and, who does any of the
following:
(i) makes any recommendations or otherwise renders advice
regarding securities,
(ii) manages accounts or portfolios of clients,
(iii) determines which recommendations or advice regarding
securities should be given,
(iv) solicits, offers, or negotiates for the sale of or sells investment
advisory services, or
(v) supervises employees who perform any of the foregoing; or
(b) with respect to any person that is registered or required to be
registered under Section 203 of the Investment Advisers Act of 1940 or
that is excluded from the definition of an 'investment adviser' under
Section 202(a)(11) of the Investment Advisers Act of 1940, means any
person who is defined as an investment adviser representative' under SEC
Rule 203a-3 (17 CFR 275.203a-3) and who has a place of business
located in this State.
(10) 'Issuer' means any person who issues or proposes to issue any
security, except that (a) with respect to certificates of deposit, voting-trust
certificates or collateral-trust certificates, or with respect to certificates of
interest or shares in an unincorporated investment trust not having a board
of directors or persons performing similar functions or of the fixed,
restricted management or unit type, the term 'issuer' means the person or
persons performing the acts and assuming the duties of depositor or
manager pursuant to the provisions of the trust or other agreement or
instrument under which the security is issued and (b) with respect to
certificates of interest or participation in oil, gas or mining titles or leases
or in payments out of production under such titles or leases, there is not
considered to be any 'issuer'.
(11) 'Nonissuer' means not directly or indirectly for the benefit of the
issuer.
(12) 'Person' means an individual, a corporation, a partnership, an
association, a joint-stock company, a trust where the interests of the
beneficiaries are evidenced by a security, an unincorporated organization,
a government or a political subdivision of a government.
(13)(a) 'Sale' or 'sell' includes every contract of sale of, contract to
sell, or disposition of, a security or interest in a security for value.
(b) 'Offer' or 'offer to sell' includes every attempt or offer to dispose
of, or solicitation of an offer to buy, a security or interest in a security for
value.
(c) Any security given or delivered with, or as a bonus on account
of, any purchase of securities, or any other thing is considered to
constitute part of the subject of the purchase and to have been offered and
sold for value.
(d) A purported gift of assessable stock is considered to involve an
offer and sale.
(e) Every sale or offer of a warrant or right to purchase or subscribe
to another security of the same or another issuer, as well as every sale or
offer of a security which gives the holder a present or future right or
privilege to convert into another security of the same or another issuer, is
considered to include an offer of the other security.
(f) The terms defined in this item (12) do not include (i) any bona
fide pledge or loan, (ii) any stock dividend, whether the corporation
distributing the dividend is the issuer of the stock or not, if nothing of
value is given by stockholders for the dividend other than the surrender
of a right to a cash or property dividend when each stockholder may elect
to take the dividend in cash or property or in stock, (iii) any act incident
to a class vote by stockholders, limited partners, or members of a limited
liability company, pursuant to certificate of incorporation, partnership or
limited liability company agreement, or the applicable corporation,
limited liability company or partnership statute, on a merger,
consolidation, reclassification of securities, or sale of corporate assets in
consideration of the issuance of securities of another entity, (iv) any act
incident to a judicially approved reorganization in which a security is
issued in exchange for one or more outstanding securities, claims or
property interests, or partly in such exchange and partly for cash or (v) a
solicitation of interest the response to which does not legally obligate the
responding person to purchase or pay for the securities and which
conforms to such other requirements as the securities commissioner may
adopt by rule, order, or statement of policy.
(14) 'Securities Act of 1933', 'Securities Exchange Act of 1934', 'Public
Utility Holding Company Act of 1935', and 'Investment Company Act of
1940' mean the federal statutes of those names as amended before or after
June 14, 1961.
(15) 'Security' means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, preorganization
certificate of subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, certificate of
interest or participation in an oil, gas or mining title or lease or in
payments out of production under such a title or lease or, in general, any
interest or instrument commonly known as a 'security', or any 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. 'Security' does not include any insurance or endowment
policy or annuity contract under which an insurance company promises
to pay money either in a lump sum or periodically for life or for some
other specified period.
(16) 'State' means a state, territory, or possession of the United States,
the District of Columbia, and Puerto Rico.
Section 35-1-30. This chapter shall be administered by the Attorney
General who shall be ex officio the securities commissioner and who may
employ such additional assistants as he deems necessary. The securities
commissioner may delegate any or all of his duties pursuant to this act to
members of his staff, as he deems necessary or appropriate.
Section 35-1-40. It is unlawful for the securities commissioner or any
of his officers or employees to use for personal benefit any information
which is filed with or obtained by the securities commissioner and which
is not made public. No provision of this chapter authorizes the securities
commissioner or any of his officers or employees to disclose any such
information except among themselves or when necessary or appropriate
in a proceeding or investigation under this chapter. Investigative records
and complaints filed with the securities commissioner shall not be
considered public information. Orders issued by the commissioner,
including complaints of the commission, are to be considered public
records.
Section 35-1-50. The securities commissioner by rule or order may
require the filing of any prospectus, pamphlet, circular, form letter,
advertisement or other sales literature or advertising communication
addressed or intended for distribution to prospective investors, including
clients or prospective clients of an investment adviser, unless the security
or transaction is exempted by Section 35-1-310 or 35-1-320, or the
security is a federal covered security or the transaction is with respect to
a federal covered security.
Section 35-1-60. The securities commissioner may make, amend, and
rescind those rules, forms, and orders, including cease and desist orders,
as are necessary to carry out the provisions of this chapter, including rules
and forms governing registration statements, applications, and reports and
defining any terms, whether or not used in this chapter, insofar as the
definitions are not inconsistent with the provisions of this chapter. For the
purpose of rules and forms, the securities commissioner may classify
securities, persons, and matters within his jurisdiction and prescribe
different requirements for different classes.
No rule, form, or order may be made, amended, or rescinded unless the
securities commissioner finds that the action is necessary or appropriate
in the public interest or for the protection of investors and consistent with
the purposes fairly intended by the policy and provisions of this chapter.
In prescribing rules and forms, the securities commissioner may cooperate
with the securities administrators of the other states and the Securities and
Exchange Commission with a view to effectuating the policy of this
chapter to achieve maximum uniformity in the form and content of
registration statements, applications, and reports wherever practicable.
All rules and forms of the securities commissioner must be published.
Section 35-1-70. The securities commissioner may by rule or order
prescribe (a) the form and content of financial statements required under
this chapter, (b) the circumstances under which consolidated financial
statements shall be filed and (c) whether any required financial statements
shall be certified by independent or certified public accountants. All
financial statements shall be prepared in accordance with generally
accepted accounting practices.
Section 35-1-80. No provision of this chapter imposing any liability
applies to any act done or omitted in good faith in conformity with any
rule, form, order or policy statement of the securities commissioner,
notwithstanding that the rule, form, order or policy statement may later be
amended or rescinded or be determined by judicial or other authority to
be invalid for any reason. The burden of proving good faith rests on the
person claiming reliance.
Section 35-1-90. Every hearing in an administrative proceeding shall
be public unless the securities commissioner in his discretion grants a
request that the hearing be conducted privately.
Section 35-1-100. A document is filed when it is received by the
securities commissioner.
Section 35-1-120. The information contained in or filed with any
registration statement, notice filing, application, or report may be made
available to the public as the securities commissioner prescribes.
Section 35-1-130. Upon request and at such reasonable charges as he
prescribes, the securities commissioner shall furnish to any person
photostatic or other copies, certified under his seal of office if requested,
of any document which is a matter of public record. In any proceeding or
prosecution under this chapter, any copy so certified is prima facie
evidence of the contents of the entry or document certified.
Section 35-1-140. The securities commissioner in his discretion may
honor requests from interested persons for interpretative opinions.
Section 35-1-150. Fees for examinations, filings under Section
35-1-50, and other miscellaneous filings for which no fees are otherwise
specified by law shall be set by the securities commissioner.
Section 35-1-160. It is unlawful for any person to make or cause to be
made, in any document filed with the securities commissioner or in any
proceeding under this chapter, any statement which is, at the time and in
the light of the circumstances under which it is made, false or misleading
in any material respect.
Section 35-1-170. (1) Neither (a) the fact that an application for
registration under Article 5 of this chapter or a registration statement
under Article 7 of this chapter or a notice filing under Article 8 of this
chapter has been filed nor (b) the fact that a person or security is
effectively registered or a notice of filing has been made constitutes a
finding by the securities commissioner that any document filed under this
chapter is true, complete, and not misleading. Neither any such fact nor
the fact that an exemption or exception is available for a security or a
transaction means that the securities commissioner has passed in any way
upon the merits or qualifications of, or recommended or given approval
to, any person, security, or transaction.
(2) It is unlawful to make, or cause to be made, to any prospective
purchaser, customer, or client any representation inconsistent with
subsection (1) of this section.
Section 35-1-180. (1) Sections 35-1-170, 35-1-410, 35-1-810,
35-1-1210, and 35-1-1490 to 35-1-1560 apply to persons who sell or offer
to sell when (a) an offer to sell is made in this State or (b) an offer to buy
is made and accepted in this State.
(2) Sections 35-1-170, 35-1-410 and 35-1-1210 apply to persons who
buy or offer to buy when (a) an offer to buy is made in this State or (b) an
offer to sell is made and accepted in this State.
(3) For the purpose of this section, an offer to sell or to buy is made
in this State, whether or not either party is then present in this State, when
the offer (a) originates from this State or (b) is directed by the offeror to
this State and received at the place to which it is directed, or at any post
office in this State in the case of a mailed offer.
(4) For the purpose of this section, an offer to buy or to sell is
accepted in this State when acceptance (a) is communicated to the offeror
in this State and (b) has not previously been communicated to the offeror,
orally or in writing, outside this State, and acceptance is communicated
to the offeror in this State, whether or not either party is then present in
this State, when the offeree directs it to the offeror in this State reasonably
believing the offeror to be in this State and it is received at the place to
which it is directed, or at any post office in this State in the case of a
mailed acceptance.
(5) An offer to sell or to buy is not made in this State when (a) the
publisher circulates or there is circulated on his behalf in this State any
bona fide newspaper or other publication of general, regular, and paid
circulation which is not published in this State, or which is published in
this State but has had more than two-thirds of its circulation outside this
State during the past twelve months or (b) a radio or television program
originating outside this State is received in this State.
(6) Sections 35-1-420 and 35-1-1220 to 35-1-1240, as well as Section
35-1-170 so far as investment advisers are concerned, apply when any act
instrumental in effecting prohibited conduct is done in this State, whether
or not either party is then present in this State.
Section 35-1-200. All effective registrations under prior law, all
administrative orders relating to such registrations, and all conditions
imposed upon such registrations remain in effect so long as they would
have remained in effect if this chapter had not become effective. They are
considered to have been filed, entered, or imposed under this chapter, but
are governed by prior law.
Section 35-1-220. (A) Fee revenues collected pursuant to this chapter
in excess of such revenues credited to the general fund of the State in
Fiscal Year 1995-96 may be retained by the Attorney General and used
for the operations of the Securities Division.
(B) The Attorney General may retain the first two hundred fifty
thousand dollars received by the Division of Securities in a fiscal year in
settlement of litigation enforcement action and reimbursements of
expenses arising from violations under this chapter to offset investigative,
prosecutive, and administrative costs of enforcing this chapter.
Article 3
Exempt Securities and Transactions
Section 35-1-310. The following securities are exempted from
Sections 35-1-50, 35-1-810, and 35-1-1100:
(1) Domestic government securities. Any security, including a
revenue obligation, issued or guaranteed by the United States, any state,
any political subdivision of a state or any agency or corporate or other
instrumentality of one or more of the foregoing, or any certificate of
deposit for any of the foregoing;
(2) Foreign government securities. Any security issued or guaranteed
by Canada, any Canadian province, any political subdivision of any such
province, any agency or corporate or other instrumentality of one or more
of the foregoing or any other foreign government with which the United
States currently maintains diplomatic relations, if the security is
recognized as a valid obligation by the issuer or guarantor;
(3) Securities of banks, trusts and savings institutions. Any security
issued by and representing an interest in or a debt of, or guaranteed by,
any bank organized under the laws of the United States or any bank,
savings institution, or trust company organized and supervised under the
laws of any state;
(4) Securities of federal savings and loan and similar associations.
Any security issued by and representing an interest in or a debt of, or
guaranteed by, any federal savings and loan association, or any building
and loan or similar association, organized under the laws of any state and
authorized to do business in this State;
(5) Securities of federal or state credit unions. Any security issued or
guaranteed by any federal credit union or any credit union, industrial loan
association, or similar association organized and supervised under the
laws of this State;
(6) Securities of public service companies. Any security issued or
guaranteed by any railroad, other common carrier, public utility or
holding company which is (a) subject to the jurisdiction of the Interstate
Commerce Commission, (b) a registered holding company under the
Public Utility Holding Company Act of 1935 or a subsidiary of such a
company within the meaning of that act, (c) regulated in respect of its
rates and charges by a governmental authority of the United States or any
state or (d) regulated in respect of the issuance or guarantee of the security
by a governmental authority of the United States, any state, Canada or any
Canadian province;
(7) Securities listed on stock exchanges. Any security listed or
approved for listing upon notice of issuance on the New York Stock
Exchange, the American Stock Exchange, the Midwest Stock Exchange,
the NASDAQ/National Market System, or that other securities exchange
as the securities commissioner by regulation may designate, any other
security of the same issuer which is of senior or substantially equal rank,
any security called for by subscription rights or warrants so listed or
approved, or any warrant or right to purchase or subscribe to any of the
foregoing;
(8) Securities of religious, charitable, and trade organizations. Any
security issued by any person organized and operated not for private profit
but exclusively for religious, educational, benevolent, charitable, fraternal,
social, athletic, or reformatory purposes, or as a chamber of commerce or
trade or professional association;
(9) Short-term commercial paper. Any commercial paper which arises
out of a current transaction or the proceeds of which have been or are to
be used for current transactions and which evidences an obligation to pay
cash within nine months of the date of issuance, exclusive of days of
grace, or any renewal of such paper which is likewise limited, or any
guarantee of such paper or of any such renewal;
(10) Employees' investment plans. Any investment contract issued in
connection with an employees' stock purchase, savings, pension,
profit-sharing, or similar benefit plan if the securities commissioner is
notified in writing thirty days before the inception of the plan; and
(11) Securities of state cooperatives. Any security issued by a
cooperative association organized under the laws of this State.
Section 35-1-320. The following transactions are exempted from
Sections 35-1-50, 35-1-810, and 35-1-1100:
(1) Isolated nonissuer transactions. Any isolated nonissuer
transaction, whether effected through a broker-dealer or not;
(2) Distributions of outstanding securities. Any nonissuer distribution
of an outstanding security if (a) a recognized securities manual contains
the names of the issuer's officers and directors, a balance sheet of the
issuer as of a date within eighteen months and a profit and loss statement
for either the fiscal year preceding that date or the most recent year of
operations or (b) the security has a fixed maturity or a fixed interest or
dividend provision and there has been no default during the current fiscal
year or within the three preceding fiscal years, or during the existence of
the issuer and any predecessors if less than three years, in the payment of
principal, interest, or dividends on the security;
(3) Nonissuer transactions with broker-dealers. Any nonissuer
transaction effected by or through a registered broker-dealer pursuant to
an unsolicited order or offer to buy; but the securities commissioner may
by rule or otherwise require that the customer acknowledge upon a
specified form that the sale was unsolicited and that a signed copy of each
such form be preserved by the broker-dealer for a specified period;
(4) Underwriting transactions. Any transaction between the issuer or
other person on whose behalf the offering is made and an underwriter, or
among underwriters;
(5) Mortgage bonds sold as unit. Any transaction in a bond or other
evidence of indebtedness secured by a real or chattel mortgage or deed of
trust or by an agreement for the sale of real estate or chattels, if the entire
mortgage, deed of trust or agreement, together with all the bonds or other
evidences of indebtedness secured thereby, is offered and sold as a unit;
(6) Transactions by fiduciaries, etc. Any transaction by an executor,
administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian
or conservator;
(7) Transactions by pledgees. Any transaction executed by a bona
fide pledgee without any purpose of evading this chapter;
(8) Transactions with banks, and other financial institutions or
institutional buyers. Any offer or sale to a bank, savings institution, trust
company, insurance company, investment company as defined in the
Investment Company Act of 1940, pension or profit-sharing trust or other
financial institution or institutional buyer or to a broker-dealer, whether
the purchaser is acting for itself or in some fiduciary capacity;
(9) Limited offerings. Any transaction pursuant to an offer directed
by the offeror to not more than twenty-five persons, other than those
designated in item (8) of this section, in this State during any period of
twelve consecutive months, whether or not the offeror or any of the
offerees is then present in this State, if (a) the seller reasonably believes
that all the buyers in this State, other than those designated in item (8) of
this section, are purchasing for investment and (b) no commission or other
remuneration is paid or given directly or indirectly for soliciting any
prospective buyer in this State, other than those designated in item (8) of
this section; but the securities commissioner may by rule or order, as to
any security or transaction or any type of security or transaction,
withdraw or further condition this exemption, increase or decrease the
number of offerees permitted or waive the conditions in clauses (a) and
(b) with or without the substitution of a limitation on remuneration and
the securities commissioner, further, may require persons claiming this
exemption to notify him in writing of the claim of exemption, the number
of offers extended and to whom made at any point during the offering
process;
(10) Limited preorganization subscriptions. Any offer or sale of a
preorganization certificate or subscription if (a) no commission or other
remuneration is paid or given directly or indirectly for soliciting any
prospective subscriber, (b) the number of subscribers does not exceed
twenty-five and (c) no payment is made by any subscriber prior to filing
of the articles of incorporation, or limited partnership, limited liability
partnership, or limited liability company agreement with the Secretary of
State;
(11) Conversions and exercise of warrants. Any transaction pursuant
to an offer to existing security holders of the issuer, including persons
who at the time of the transaction are holders of convertible securities, if
(a) no commission or other remuneration, other than a standby
commission, is paid or given directly or indirectly for soliciting any
security holder in this State or (b) the issuer first files a notice specifying
the terms of the offer and the securities commissioner does not by order
disallow the exemption within the next five full business days;
(12) Offers after registration statements filed. Any offer, but not a sale
of a security for which registration statements have been filed under both
this chapter and the Securities Act of 1933 if no stop order or refusal order
is in effect and no public proceeding or examination looking toward such
an order is pending under this chapter.
Section 35-1-330. The securities commissioner may by order deny or
revoke any exemption specified in item (8) or (10) of Section 35-1-310 or
in Section 35-1-320 with respect to a specific security or transaction. No
such order may be entered without appropriate prior notice to all
interested parties, opportunity for hearing and written findings of fact and
conclusions of law, except that the securities commissioner may by order
summarily deny or revoke any of the specified exemptions pending final
determination of any proceeding under this section. Upon the entry of a
summary order, the securities commissioner shall promptly notify all
interested parties that it has been entered and of the reasons therefor and
that within fifteen days of the receipt of a written request the matter will
be set down for hearing. If no hearing is requested and none is ordered by
the securities commissioner, the order will remain in effect until it is
modified or vacated by the securities commissioner. If a hearing is
requested or ordered, the securities commissioner, after notice of an
opportunity for hearing to all interested persons, may modify or vacate the
order or extend it until final determination. No order under this section
may operate retroactively. No person may be considered to have violated
Section 35-1-50 or Section 35-1-810 by reason of any offer or sale
effected after the entry of an order under this section if he sustains the
burden of proof that he did not know, and in the exercise of reasonable
care could not have known, of the order.
Section 35-1-340. In any proceeding under this chapter the burden of
proving an exemption or an exception from a definition is upon the person
claiming it.
Article 5
Broker-Dealers, Agents, Investment Advisers, and
Investment
Adviser Representatives
Section 35-1-410. It is unlawful for any person to transact business in
this State as a broker-dealer or agent unless he is registered under this
chapter or exempt from licensing under this chapter. It is unlawful for
any broker-dealer or issuer to employ an agent unless the agent is
registered or exempt. The registration of an agent is not effective during
any period when he is not associated with a particular broker-dealer
registered under this chapter, or a particular issuer. When an agent begins
or terminates a connection with a broker-dealer or issuer, or begins or
terminates those activities which make him an agent, the agent as well as
the broker-dealer or issuer shall promptly notify the securities
commissioner.
Section 35-1-415. (1) The following broker-dealers are exempt from
the licensing requirements of Section 35-1-410:
(a) a broker-dealer who either is registered or, except as provided
in subsection (2), is not required to be registered under the Securities
Exchange Act of 1934 and who has no place of business in this State if:
(i) the transactions effected by the broker-dealer in this State are
exclusively with the issuer of the securities involved in the transactions,
other broker-dealers licensed or exempt under this section, and financial
or institutional investors;
(ii) the broker-dealer is licensed under the securities act of a state
in which the broker-dealer maintains a place of business and the
broker-dealer offers and sells in this State to a person who is an existing
customer of the broker-dealer and whose principal place of residence is
not in this State; or
(iii) the broker-dealer is licensed under the securities law of a state
in which the broker-dealer maintains a place of business and the
broker-dealer during any twelve consecutive months does not effect
transactions with more than five persons in this State in addition to
transactions with the issuers of the securities involved in the transactions,
financial or institutional investors, or broker-dealers, whether or not the
offeror or an offeree is then present in this State; and
(b) other broker-dealers the commissioner, by rule or order,
exempts.
(2) The exemption provided in subsection (1)(a)(i) is not available to
a broker-dealer who deals solely in government securities and is not
registered under the Securities Exchange Act of 1934 unless the
broker-dealer is subject to supervision as a dealer in government securities
by the Federal Reserve Board.
(3) The following agents are exempt from the licensing requirements
of Section 35-1-410:
(a) an agent acting for a broker-dealer exempt under subsection (1);
(b) an agent acting for an issuer in effecting transactions in a
security exempted by Section 35-1-310(1), (2), (3), (9), or (10);
(c) an agent acting for an issuer effecting offers or sales of
securities in transactions exempted by Section 35-1-320;
(d) an agent acting for an issuer effecting offers or sales of
securities that are covered securities under Section 18(b)(3) or Section
18(b)(4)(D) of the Securities Act of 1933, provided that no commission
or other remuneration is paid or given directly or indirectly for soliciting
any person in this State;
(e) an agent acting for an issuer effecting transactions with
employees, partners, officers, or directors of the issuer, a parent or a
wholly-owned subsidiary of the issuer, if no commission or other similar
compensation is paid or given directly or indirectly to the sales
representative for soliciting an employee, partner, officer, or director in
this State;
(f) an agent whose transactions in this State are limited to only
those transactions set forth in Section 15(h)(2) of the Securities Exchange
Act of 1934; and
(g) other agents the securities commissioner, by rule or order,
exempts.
Section 35-1-420. (1) It is unlawful for any person to transact
business in this State as an investment adviser or investment adviser
representative unless he is registered under this chapter or exempt from
licensing under this chapter. The following investment advisers are
exempt from the licensing requirements of Section 35-1-420:
(a) an investment adviser if:
(i) it has as its only clients in this State other investment
advisers, federal covered advisers, broker-dealers or financial or
institutional investors; or
(ii) it has no place of business in this State and the investment
adviser during the preceding twelve-month period has not had more than
five clients, other than those specified in sub-subitem (i), who are
residents of this State; and
(b) other investment advisers the commissioner, by rule or order,
exempts.
(2)(a) It is unlawful for any person required to be registered as an
investment adviser under this chapter to employ an investment adviser
representative unless the investment adviser representative is registered
under this chapter. The registration of an investment adviser
representative is not effective during any period when he is not employed
by an investment adviser registered under this chapter or a federal covered
adviser not required to be registered.
(b) It is unlawful for an investment adviser representative of a
federal covered adviser to transact business unless such investment
adviser representative is registered under this chapter, or is exempt from
registration.
(c) When an investment adviser representative begins or terminates
employment with an investment adviser or a federal covered adviser, the
investment adviser, in the case of Section 35-1-420(2)(a) and the
investment adviser representative in the case of Section 35-1-420(2)(b),
shall promptly notify the securities commissioner.
Section 35-1-430. Every broker-dealer and broker-dealer agent
registration expires at midnight on the last day of the calendar year in
which it became effective unless renewed. Every investment adviser
registration and federal covered adviser notice filing expires two years
from its effective date unless renewed and, unless renewed prior to
expiration, every investment adviser representative registration expires at
the same time the registration or notice filing of the associated investment
adviser or federal covered adviser would expire if not renewed.
Section 35-1-440. A broker-dealer, agent, investment adviser, or
investment adviser representative may obtain an initial or renewal
registration by filing with the securities commissioner an application
together with a consent to service of process pursuant to Section
35-1-1410. The application must contain whatever information the
securities commissioner by rule or order requires concerning such matters
as (a) the applicant's form and place of organization, (b) the applicant's
proposed method of doing business, (c) the qualifications and business
history of the applicant, (d) in the case of a broker-dealer or investment
adviser, the qualifications and business history of any partner, officer or
director, any person occupying a similar status or performing similar
functions or any person directly or indirectly controlling the broker-dealer
or investment adviser, (e) in the case of an investment adviser, the
qualifications and business history of any employee, (f) any injunction or
administrative order or conviction of a misdemeanor involving a security
or any aspect of the securities business and any conviction of a felony, (g)
the applicant's financial condition and history and (h) information to be
furnished or disseminated to any client or prospective client, if the
applicant is an investment adviser.
For all applicants who are not members of the National Association of
Securities Dealers (NASD), a criminal record history must be obtained,
at the rate set by law, from the South Carolina Law Enforcement Division
on an applicant's initial application for registration under this section. All
convictions of misdemeanors involving a security or any aspect of the
securities business and all felonies recorded within ten years of the date
of the application must be noted on the registration.
Section 35-1-450. The securities commissioner may by rule or order
require an applicant for initial registration to publish an announcement of
the application in one or more specified newspapers published in this
State.
Section 35-1-460. Registration becomes effective when the securities
commissioner so orders.
Section 35-1-470. Registration of a broker-dealer automatically
constitutes registration of any agent who is a partner, officer or director,
or a person occupying a similar status or performing similar functions.
Registration of an investment adviser or a notice filing by a federal
covered adviser automatically constitutes registration of any investment
adviser representative who is a partner, officer, or director, or a person
occupying a similar status or performing similar functions.
Section 35-1-480. (A) Every applicant for initial or renewal
registration as a broker-dealer, broker-dealer agent, investment adviser or
investment adviser representative shall pass one or more examinations,
pay a registration fee, and meet other requirements as required by the
securities commissioner.
(B) Except with respect to federal covered advisers whose only clients
are those described in Section 35-1-420(1)(a), a federal covered adviser
shall file with the commissioner, prior to acting as a federal covered
adviser in this State, such documents filed with the Securities and
Exchange Commission or such other notice filing document, as the
commissioner may by rule or otherwise require, together with such notice
fee and consent to service of process as the commissioner, by rule or
otherwise, may require. The notice filing provisions under this subsection
shall expire as provided in Section 35-1-430.
(C) The following filing fees shall remain in effect for all initial,
renewal and notice filings described in subsections (A) and (B) of this
section unless and until the securities commissioner promulgates a rule or
order establishing different fees:
(1) broker-dealer: three hundred dollars;
(2) agent: one hundred dollars;
(3) investment adviser and federal covered adviser: four hundred
dollars;
(4) investment adviser representative: one hundred dollars.
(D) When an application is denied or withdrawn the filing fee must not
be refunded.
Section 35-1-490. A registered broker-dealer or investment adviser
may file an application for registration of a successor, and a federal
covered adviser may file a notice filing for a successor, whether or not the
successor is then in existence, for the unexpired portion of the year.
There shall be no filing fee.
Section 35-1-500. The securities commissioner, by rule or order, may
require a minimum capital for registered broker-dealers not to exceed the
limitations of Section 15 of the Securities Exchange Act of 1934, and
establish minimum financial requirements for investment advisers, subject
to the limitations provided in Section 222 of the Investment Advisers Act
of 1940, which may include different requirements for those investment
advisers who maintain custody of clients' funds or securities or who have
discretionary authority over clients' funds and those investment advisers
who do not.
Section 35-1-510. The securities commissioner, by rule or order, may
require registered broker-dealers, agents, and investment advisers who
have custody of or discretionary authority over client funds or securities,
to post surety bonds in amounts as the securities commissioner may, by
rule or otherwise, prescribe, and may determine their conditions, subject
to the limitations of Section 15 of the Securities Exchange Act of 1934 for
broker-dealers and Section 222 of the Investment Advisers Act of 1940
for investment advisers. The bond may be so drawn as to cover the
original registration and any renewal of the registration. Any appropriate
deposit of cash or securities shall be accepted in lieu of any bond so
required. No bond may be required of any registrant whose net capital,
or, in the case of an investment adviser, whose minimum financial
requirements, which may be defined by rule, exceeds the amounts
required by the securities commissioner. Every bond shall provide for
suit thereon by any person who has a cause of action under Section
35-1-1210 and, if the securities commissioner by rule or order requires,
by any person who has a cause of action not arising under this act. Every
bond must provide that no suit may be maintained to enforce any liability
on the bond unless brought within three years after the sale or other act
upon which the suit is based.
Section 35-1-520. (1) The securities commissioner may by order
deny, suspend, or revoke any registration if he finds (a) that the order is
in the public interest and (b) that the applicant or registrant or, in the case
of a broker-dealer or investment adviser, any partner, officer, or director,
any person occupying a similar status or performing similar functions, or
any person directly or indirectly controlling the broker-dealer or
investment adviser:
(i) has filed an application for registration which as of its effective
date, or as of any date after filing in the case of an order denying
effectiveness, was incomplete in any material respect or contained any
statement which was, in light of the circumstances under which it was
made, false or misleading with respect to any material fact;
(ii) has wilfully violated or wilfully failed to comply with any
provision of this chapter or a predecessor law or any rule or order under
this chapter or a predecessor law;
(iii) has been convicted, within the past ten years, of any
misdemeanor involving a security or any aspect of the securities business
or any felony;
(iv) is permanently or temporarily enjoined by any court of
competent jurisdiction from engaging in or continuing any conduct or
practice involving any aspect of the securities business;
(v) is the subject of an order of the securities commissioner
denying, suspending, or revoking registration as a broker-dealer, agent,
investment adviser, or investment adviser representative;
(vi) is the subject of an order entered within the past five years by
the securities administrator of any other state or by the Securities and
Exchange Commission denying or revoking registration as a
broker-dealer, agent, investment adviser, or investment adviser
representative or the substantial equivalent of those terms as defined in
this chapter, is the subject of an order of the Securities and Exchange
Commission suspending or expelling him from a national securities
exchange or national securities association registered under the Securities
Exchange Act of 1934 or is the subject of a United States post office fraud
order; but (1) the securities commissioner may not institute a revocation
or suspension proceeding under this item (vi) more than one year from the
date of the order relied on and (2) he may not enter an order under this
item (vi) on the basis of an order under another state act unless that order
was based on facts which would currently constitute a ground for an order
under this section;
(vii) has engaged in dishonest or unethical practices in the
securities business;
(viii) is insolvent, either in the sense that his liabilities exceed his
assets or in the sense that he cannot meet his obligations as they mature,
but the securities commissioner may not enter an order against a
broker-dealer or investment adviser under this item (viii) without a
finding of insolvency as to the broker-dealer or investment adviser; or
(ix) is not qualified on the basis of such factors as training,
experience and knowledge of the securities business, except as otherwise
provided in Section 35-1-530.
(2) The securities commissioner may by order deny, suspend, or
revoke any registration if he finds (a) that the order is in the public interest
and (b) that the applicant or registrant has failed:
(i) reasonably to supervise his agents if he is a broker-dealer or his
employees if he is an investment adviser; or
(ii) to pay the proper filing fee; but the securities commissioner may
enter only a denial order under this item (ii), and he shall vacate any such
order when the deficiency has been corrected.
Section 35-1-530. The following provisions govern the application of
item (ix) of subsection (1) of Section 35-1-520:
(1) The securities commissioner may not enter an order against a
broker-dealer on the basis of the lack of qualification of any person other
than (a) the broker-dealer himself if he is an individual or (b) an agent of
the broker-dealer.
(2) The securities commissioner may not enter an order against an
investment adviser on the basis of the lack of qualification of any person
other than (a) the investment adviser himself if he is an individual or (b)
any other person who represents the investment adviser in doing any of
the acts which make him an investment adviser.
(3) The securities commissioner may not enter an order solely on the
basis of lack of experience if the applicant or registrant is qualified by
training or knowledge or both.
(4) The securities commissioner shall consider that an agent who will
work under the supervision of a registered broker-dealer need not have the
same qualifications as a broker-dealer.
(5) The securities commissioner may by rule provide for an
examination, which may be written or oral or both, to be taken by any
class of or all applicants, as well as persons who represent or will
represent an investment adviser in doing any of the acts which make him
an investment adviser.
Section 35-1-550. The securities commissioner may by order
summarily postpone or suspend registration pending final determination
of any proceeding under this section. Upon the entry of the order, the
securities commissioner shall promptly notify the applicant or registrant,
as well as the employer or prospective employer if the applicant or
registrant is an agent or investment adviser representative, that it has been
entered and of the reasons for the order and that within fifteen days after
the receipt of a written request the matter will be set down for hearing. If
no hearing is requested and none is ordered by the securities
commissioner, the order remains in effect until it is modified or vacated
by the securities commissioner. If a hearing is requested or ordered, the
securities commissioner, after notice of and opportunity for hearing, may
modify or vacate the order or extend it until final determination.
Section 35-1-560. If the securities commissioner finds that any
registrant or applicant for registration is no longer in existence or has
ceased to do business as a broker-dealer, agent, investment adviser, or
investment adviser representative, or is subject to an adjudication of
mental incompetence or to the control of a committee, conservator, or
guardian, or cannot be located after reasonable search, the securities
commissioner may by order cancel the registration or application.
Section 35-1-570. Withdrawal from registration as a broker-dealer,
agent, investment adviser, or investment adviser representative becomes
effective thirty days after receipt of an application to withdraw or within
that shorter period of time as the securities commissioner may determine,
unless a revocation or suspension proceeding is pending when the
application is filed or a proceeding to revoke or suspend or to impose
conditions upon the withdrawal is instituted within thirty days after the
application is filed. If a proceeding is pending or instituted, withdrawal
becomes effective at that time and upon those conditions as the securities
commissioner by order determines. If no proceeding is pending or
instituted and withdrawal automatically becomes effective, the securities
commissioner may nevertheless institute a revocation or suspension
proceeding under item (ii) of subsection (1) of Section 35-1-520 within
one year after withdrawal became effective and enter a revocation or
suspension order as of the last date on which registration was effective.
Withdrawal of a notice filing by a federal covered adviser shall become
effective upon receipt by the securities commissioner of notice of the
intention to withdraw.
Section 35-1-580. No order may be entered under any part of Sections
35-1-520 to 35-1-570 or Section 35-1-1475 except the first sentence of
Section 35-1-550 without (a) appropriate prior notice to the applicant or
registrant, as well as the employer or prospective employer if the
applicant or registrant is an agent or investment adviser representative, (b)
opportunity for hearing, and (c) written findings of fact and conclusions
of law.
Section 35-1-590. Every registered broker-dealer, shall comply with
the recordkeeping requirements of the Securities Act of 1934. A licensed
investment adviser, subject to the limitations of Section 222 of the
Investment Advisers Act of 1940, shall make and keep such accounts,
correspondence, memoranda, papers, books, and other records as the
securities commissioner prescribes by rule or order. All records so
required shall be preserved for three years, unless such period is modified
by the securities commissioner by rule or order, and subject to the
limitations of the Securities Exchange Act of 1934 and Section 222 of the
Investment Advisers Act of 1940 for broker-dealers and investment
advisers, respectively.
Section 35-1-595. With respect to investment advisers, the securities
commissioner may require that certain information be furnished or
disseminated as necessary or appropriate in the public interest or for the
protection of investors and advisory clients. To the extent determined by
the securities commissioner in his discretion, information furnished to
clients or prospective clients of an investment adviser that would be in
compliance with the Investment Advisers Act of 1940 and the rules
thereunder may be used in whole or partial satisfaction of this
requirement.
Section 35-1-600. All the records referred to in Section 35-1-590 are
subject at any time or from time to time to such reasonable periodic,
special or other examinations by representatives of the securities
commissioner, within or without this State, as the securities commissioner
deems necessary or appropriate in the public interest or for the protection
of investors. For the purpose of avoiding unnecessary duplication of
examinations, the securities commissioner, in so far as he deems it
practicable in administering this section, may cooperate with the securities
administrators of other states, the Securities and Exchange Commission,
and any national securities exchange or national securities association
registered under the Securities Exchange Act of 1934.
Section 35-1-610. Every registered broker-dealer, not to exceed the
limitations of Section 15 of the Securities Exchange Act of 1934, and
investment adviser, not to exceed the limitations of Section 222 of the
Investment Advisers Act of 1940, shall file such financial reports as the
securities commissioner prescribes by rule or order.
Section 35-1-620. If the information contained in any document filed
with the securities commissioner is or becomes inaccurate or incomplete
in any material respect, the registrant shall promptly file a correcting
amendment unless notification of the correction has been given under
Section 35-1-410. A federal covered adviser shall file a corrected notice
filing with the securities commissioner only if amended documents are
required to be filed with the Securities Exchange Commission.
Article 7
Registration of Securities
Section 35-1-810. It is unlawful for any person to offer or sell any
security in this State unless (a) it is registered under this chapter, (b) the
security or transaction is exempted under Section 35-1-310 or 35-1-320,
or (c) it is a federal covered security.
Section 35-1-820. The following securities may be registered by
notification, whether or not they are also eligible for registration by
coordination under Section 35-1-840:
(1) Any security whose issuer and any predecessors have been in
continuous operation for at least five years, if (a) there has been no default
during the current fiscal year or within the three preceding fiscal years in
the payment of principal, interest, or dividends on any security of the
issuer, or any predecessors, with a fixed maturity or a fixed interest or
dividend provisions and (b) the issuer and any predecessors during the
past three fiscal years have had average net earnings, determined in
accordance with generally accepted accounting practices, (i) which are
applicable to all securities without a fixed maturity or a fixed interest or
dividend provision outstanding at the date the registration statement is
filed and equal at least five percent of the amount of such outstanding
securities, as measured by the maximum offering price or the market price
on a day, selected by the registrant, within thirty days before the date of
filing the registration statement, whichever is higher, or book value on a
day, selected by the registrant, within ninety days of the date of filing the
registration statement to the extent that there is neither a readily
determinable market price nor a cash offering price, or (ii) which, if the
issuer and any predecessors have not had any security of the type
specified in clause (i) outstanding for three full fiscal years, equal at least
five percent of the amount, as measured in clause (i), of all securities
which will be outstanding if all the securities being offered or proposed
to be offered, whether or not they are proposed to be registered or offered
in this State, are issued; and
(2) Any security, other than a certificate of interest or participation in
an oil, gas or mining title, or lease or in payments out of production under
such a title or lease, registered for nonissuer distribution if (a) any security
of the same class has ever been registered under this chapter or a
predecessor law or (b) the security being registered was originally issued
pursuant to an exemption under this chapter or a predecessor law.
Section 35-1-830. A registration statement under Section 35-1-820 and
this section shall contain the following information and be accompanied
by the following documents in addition to the information specified in
Section 35-1-910 and the consent to service of process required by
Section 35-1-1410:
(1) a statement demonstrating eligibility for registration by
notification;
(2) with respect to the issuer and any significant subsidiary;
(a) its name, address, and form of organization,
(b) the state, or foreign jurisdiction, and the date of its organization,
and
(c) the general character and location of its business;
(3) with respect to any person on whose behalf any part of the offering
is to be made in a nonissuer distribution;
(a) his name and address,
(b) the amount of securities of the issuer held by him as of the date
of the filing of the registration statement, and
(c) a statement of his reasons for making the offering;
(4) a description of the security being registered;
(5) the information and documents specified in items (8), (9), (10) and
(12) of Section 35-1-880;
(6) in the case of any registration under item (2) of Section 35-1-820
which does not also satisfy the conditions of item (1) of Section 35-1-820,
a balance sheet of the issuer as of a date within four months prior to the
filing of the registration statement and a summary of earnings for each of
the two fiscal years preceding the date of the balance sheet and for any
period between the close of the last fiscal year and the date of the balance
sheet, or for the period of the issuer's and any predecessors' existence if
less than two years; and
(7) such additional information as the securities commissioner may by
rule or order require.
A registration statement under Section 35-1-820 and this section
becomes effective when the securities commissioner so orders.
Section 35-1-840. Any 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.
Section 35-1-850. A registration statement under Section 35-1-840 and
this section shall contain the following information and be accompanied
by the following documents in addition to the information specified in
Section 35-1-910 and the consent to service of process required by
Section 35-1-1410:
(1) two copies of the latest form of prospectus filed under the
Securities Act of 1933;
(2) if the securities commissioner by rule or otherwise requires, a copy
of the articles of incorporation and bylaws, or their substantial
equivalents, currently in effect, a copy of any agreements with or among
underwriters, a copy of any indenture or other instrument governing the
issuance of the security to be registered and a specimen or copy of the
security;
(3) if the securities commissioner requests, any other information or
copies of any other documents filed under the Securities Act of 1933; and
(4) an undertaking to forward all future amendments to the federal
prospectus, other than an amendment which merely delays the effective
date of the registration statement, promptly and in any event not later than
the first business day after the day they are forwarded to or filed with the
Securities and Exchange Commission, whichever first occurs.
Section 35-1-860. A registration statement under Sections 35-1-840
and 35-1-850 automatically becomes effective at the moment the federal
registration statement becomes effective if all the following conditions are
satisfied:
(1) no stop order is in effect and no proceeding is pending under
Sections 35-1-1010 to 35-1-1050;
(2) the registration statement has been on file with the securities
commissioner for at least ten days; and
(3) a statement of the maximum and minimum proposed offering
prices and the maximum underwriting discounts and commissions has
been on file for two full business days or such shorter period as the
securities commissioner permits by rule or otherwise and the offering is
made within these limitations.
The registrant shall promptly notify the securities commissioner by
telephone or telegram of the date and time when the federal registration
statement became effective and the content of the price amendment, if
any, and shall promptly file a post-effective amendment containing the
information and documents in the price amendment. 'Price amendment'
means the final federal amendment which 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. Upon failure to receive the required
notification and post-effective amendment with respect to the price
amendment, the securities commissioner may enter a stop order, without
notice or hearing, retroactively denying effectiveness to the registration
statement or suspending its effectiveness until compliance with this
section, if he promptly notifies the registrant by telephone or telegram,
and promptly confirms by letter or telegram when he notifies by
telephone, of the issuance of the order. If the registrant proves compliance
with the requirements of this section as to notice and post-effective
amendment, the stop order is void as of the time of its entry. The
securities commissioner may by rule or otherwise waive either or both of
the conditions specified in items (2) and (3) of this section. If the federal
registration statement becomes effective before all the conditions in this
section are satisfied and they are not waived, the registration statement
automatically becomes effective as soon as all the conditions are satisfied.
If the registrant advises the securities commissioner of the date when the
federal registration statement is expected to become effective, the
securities commissioner shall promptly advise the registrant by telephone
or telegram, at the registrant's expense, whether all the conditions are
satisfied and whether he then contemplates the institution of a proceeding
under Sections 35-1-1010 to 35-1-1050. But this advice by the securities
commissioner does not preclude the institution of such a proceeding at
any time.
Section 35-1-870. Any security may be registered by qualification.
Section 35-1-880. Filings pursuant to Section 35-1-870 and this
section shall contain, within the registration statement, prospectus,
offering circular, or other offering documents, the following information
and be accompanied by the following documents in addition to the
information specified in Section 35-1-910 and the consent to service of
process required by Section 35-1-1410:
(1) with respect to the issuer and any significant subsidiary
(a) its name, address and form of organization,
(b) the state or foreign jurisdiction and date of its organization,
(c) the general character and location of its business,
(d) a description of its physical properties and equipment, and
(e) a statement of the general competitive conditions in the industry
or business in which it is or will be engaged;
(2) with respect to every director and officer of the issuer or person
occupying a similar status or performing similar functions
(a) his name, address, and principal occupation for the past five
years,
(b) the amount of securities of the issuer held by him as of a
specified date within thirty days of the filing of the registration statement,
(c) the amount of the securities covered by the registration
statement to which he has indicated his intention to subscribe, and
(d) a description of any material interest in any material transaction
with the issuer or any significant subsidiary effected within the past three
years or proposed to be effected;
(3) with respect to persons covered by item (2) of this section, the
remuneration paid during the past twelve months and estimated to be paid
during the next twelve months, directly or indirectly, by the issuer,
together with all predecessors, parents, subsidiaries, and affiliates, to all
those persons in the aggregate;
(4) with respect to any person owning of record, or beneficially if
known, ten percent or more of the outstanding shares of any class of
equity security of the issuer, the information specified in item (2) of this
section other than his occupation;
(5) with respect to every promoter if the issuer was organized within
the past three years, the information specified in item (2) of this section,
the amount paid to him within that period or intended to be paid to him,
and the consideration for any such payment;
(6) with respect to any person on whose behalf any part of the offering
is to be made in a nonissuer distribution
(a) his name and address,
(b) the amount of securities of the issuer held by him as of the date
of the filing of the registration statement,
(c) a description of any material interest in any material transaction
with the issuer or any significant subsidiary effected within the past three
years or proposed to be effected, and
(d) a statement of his reasons for making the offering;
(7) the capitalization and long-term debt, on both a current and a 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, good will, or
anything else, for which the issuer or any subsidiary has issued any of its
securities within the past two years or is obligated to issue any of its
securities;
(8) 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
therefrom at which any proportion of the offering is to be made to any
person or class of persons other than the underwriters, with a specification
of any such 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 every underwriter and every recipient of a
finder's fee; a copy of any underwriting or selling-group agreement
pursuant to 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 which are to be
offered otherwise than through an underwriter;
(9) the estimated cash proceeds to be received by the issuer from the
offering; the purposes for which the proceeds are to be used by the issuer;
the 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 any such funds; and, if any part of the proceeds is to be used to acquire
any property, including good will, otherwise than in the ordinary course
of business, the names and addresses of the vendors, the purchase price,
the names of any persons who have received commissions in connection
with the acquisition and the amounts of any such commissions and any
other expense in connection with the acquisition, including the cost of
borrowing money to finance the acquisition;
(10) a description of any stock options or other security options
outstanding or to be created in connection with the offering, together with
the amount of any such options held or to be held by every person
required to be named in item (2), (4), (5), (6), or (8) of this section and by
any person who holds or will hold ten percent or more in the aggregate of
any such options;
(11) the dates of, parties to and general effect concisely stated of every
management or other material contract made or to be made otherwise than
in the ordinary course of business if it is to be performed in whole or in
part at or after the filing of the registration statement or was made within
the past two years, together with a copy of every such contract;
(12) a description of any pending litigation or proceeding to which the
issuer is a party and which materially affects its business or assets,
including any such litigation or proceeding known to be contemplated by
governmental authorities;
(13) two copies 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;
(14) a specimen or copy of the security being registered; a copy of the
issuer's articles of incorporation and bylaws, or their substantial
equivalents, as currently in effect; and a copy of any indenture or other
instrument covering the security to be registered;
(15) a signed or conformed copy of an opinion of counsel as to the
legality of the security being registered, with an English translation if it
is in a foreign language, which shall state whether the security when sold
will be legally issued, fully paid and nonassessable and, if a debt security,
a binding obligation of the issuer;
(16) the written consent of any accountant, engineer, appraiser, or other
person whose profession gives authority to a statement made by him, if
any such person is named as having prepared or certified a report or
valuation, other than a public and official document or statement, which
is used in connection with the registration statement;
(17) a balance sheet of the issuer as of a date within four months prior
to the filing of the registration statement; a profit and loss statement and
analysis of surplus for each of the three fiscal years preceding the date of
the balance sheet and for any period between the close of the last 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 three years; and, if any part of the
proceeds of the offering is to be applied to the purchase of any business,
the same financial statements which would be required if that business
were the registrant; and
(18) such additional information as the securities commissioner
requires by rule or order.
A registration statement under Section 35-1-870 and this section
becomes effective when the securities commissioner so orders.
Section 35-1-890. A registration statement may be filed by the issuer,
any other person on whose behalf the offering is to be made or a
registered broker-dealer.
Section 35-1-900. Every person filing a registration statement shall
pay a filing fee as required by the securities commissioner. A filing fee
of five hundred dollars shall remain in effect unless and until the
securities commissioner promulgates a rule or order establishing a
different fee. No registration statement may be renewed or reregistered
unless another filing fee of five hundred dollars or other appropriate
amount as may be specified by the commissioner is paid. When a
registration statement is withdrawn before the effective date or a
preeffective stop order is entered under Sections 35-1-1010 to 35-1-1050,
the securities commissioner shall retain the entire filing fee.
Section 35-1-910. Every registration statement shall specify (a) the
amount of securities to be offered in this State, (b) the states in which a
registration statement or similar document in connection with the offering
has been or is to be filed and (c) any adverse order, judgment or decree
entered in connection with the offering by the regulatory authorities in
each state or by any court or the Securities and Exchange Commission.
Section 35-1-920. Any document filed under this chapter or a
predecessor law, within five years preceding the filing of a registration
statement, may be incorporated by reference in the registration statement
to the extent that the document is currently accurate.
Section 35-1-930. The securities commissioner may by rule or
otherwise permit the omission of any item of information or document
from any registration statement.
Section 35-1-940. In the case of a nonissuer distribution, information
may not be required under Section 35-1-880 or Section 35-1-970 unless
it is known to the person filing the registration statement or to the persons
on whose behalf the distribution is to be made or can be furnished by
them without unreasonable effort or expense.
Section 35-1-950. The securities commissioner may by rule or order
require as a condition of registration by qualification or coordination (a)
that any security issued within the past three years or to be issued to a
promoter for a consideration substantially different from the public
offering price, or to any person for a consideration other than cash, be
deposited in escrow and (b) 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 securities commissioner may by rule or order require as a condition
of registration that any security registered by qualification or coordination
be sold only on a specified form of subscription or sale contract and that
a signed or conformed copy of each contract be filed with the securities
commissioner or preserved for any period up to three years specified in
the rule or order.
Section 35-1-960. Every registration statement is effective for one year
from its effective date, except during the time a stop order is in effect
under Sections 35-1-1010 to 35-1-1050. All outstanding securities of the
same class as a registered security are considered to be registered for the
purpose of any nonissuer transaction (a) so long as the registration
statement is effective and (b) no stop order suspending or revoking the
effectiveness of the registration statement has been entered under Sections
35-1-1010 to 35-1-1050. A registration statement may not be withdrawn
for one year from its effective date if any securities of the same class are
outstanding. A registration statement may be withdrawn otherwise only
in the discretion of the securities commissioner.
Section 35-1-970. So long as a registration statement is effective, the
securities commissioner may by rule or order require the person who filed
the registration statement to file reports, not more often than quarterly, to
keep reasonably current the information contained in the registration
statement and to disclose the progress of the offering.
Section 35-1-990. As a condition of registration a prospectus approved
by the securities commissioner shall be sent or given to each person to
whom an offer is made before or concurrently with (a) the first written
offer made to him, otherwise than by means of a public advertisement, by
or for the account of the issuer or any other person on whose behalf the
offering is being made or by any underwriter or broker-dealer who is
offering part of an unsold allotment or subscription taken by him as a
participant in the distribution, (b) the confirmation of any sale made by or
for the account of any such person, (c) payment pursuant to any such sale
or (d) delivery of the security pursuant to any such sale, whichever first
occurs.
Section 35-1-1000. Securities registered pursuant to Sections
35-1-820 to 35-1-880, become eligible for trading in the secondary market
at current market prices upon completion of the original offering when
such securities are outstanding and in the hands of the public.
Section 35-1-1010. The securities commissioner may issue a stop
order denying effectiveness to, or suspending or revoking the
effectiveness of, any registration statement if he finds (a) that the order is
in the public interest and (b) that:
(i) the registration statement as of its effective date or as of any earlier
date in the case of an order denying effectiveness, or any report under
Section 35-1-970, is incomplete in any material respect or contains any
statement which was, in the light of the circumstances under which it was
made, false or misleading with respect to any material fact;
(ii) any provision of this chapter or any rule, order or condition
lawfully imposed under this chapter has been wilfully violated, in
connection with the offering by (1) the person filing the registration
statement, (2) the issuer, any partner, officer or director of the issuer, any
person occupying a similar status or performing similar functions, or any
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 (3) any underwriter;
(iii) the security registered or sought to be registered is the subject of
an administrative stop order or similar order or a permanent or temporary
injunction of any court of competent jurisdiction entered under any other
federal or state act applicable to the offering but (1) the securities
commissioner may not institute a proceeding against an effective
registration statement under this item (iii) more than one year from the
date of the order or injunction relied on and (2) he may not enter an order
under this item (iii) on the basis of an order or injunction entered under
any other state act unless that order or injunction was based on facts
which would currently constitute a ground for a stop order under this
section;
(iv) the issuer's enterprise or method of business includes or would
include activities which are illegal where performed;
(v) the offering has worked or tended to work a fraud upon purchasers
or would so operate;
(vi) the offering has been or would be made with unreasonable
amounts of underwriters' and sellers' discounts, commissions or other
compensation, promoters' profits or participation or unreasonable amounts
or kinds of options;
(vii) when a security is sought to be registered by notification, it is
not eligible for such registration;
(viii) when a security is sought to be registered by coordination, there
has been a failure to comply with the undertaking required by item (4) of
Section 35-1-850; or
(ix) the applicant or registrant has failed to pay the proper filing fee;
but the securities commissioner may enter only a denial order under this
item (ix), and he shall vacate any such order when the deficiency has been
corrected.
Section 35-1-1030. The securities commissioner may by order
summarily postpone or suspend the effectiveness of the registration
statement pending final determination of any proceeding under this
section. Upon the entry of the order, the securities commissioner shall
promptly notify each person specified in Section 35-1-1040 that it has
been entered and of the reasons therefor and that within fifteen days after
the receipt of a written request the matter will be set down for hearing. If
no hearing is requested and none is ordered by the securities
commissioner, the order will remain in effect until it is modified or
vacated by the securities commissioner. If a hearing is requested or
ordered, the securities commissioner, after notice of and opportunity for
hearing to each person specified in Section 35-1-1040, may modify or
vacate the order or extend it until final determination.
Section 35-1-1040. No stop order may be entered under any part of
Sections 35-1-1010 to 35-1-1030 except the first sentence of Section
35-1-1030 without (a) appropriate prior notice to the applicant or
registrant, the issuer and the person on whose behalf the securities are to
be or have been offered, (b) opportunity for hearing and (c) written
findings of fact and conclusions of law.
Section 35-1-1050. The securities commissioner may vacate or
modify a stop order if he finds that the conditions which prompted entry
have changed or that it is otherwise in the public interest to do so.
Article 8
Notice Filings For Federal Covered Securities
Section 35-1-1100. (a) The securities commissioner, by rule or
order, may require the filing of any or all of the following documents with
respect to a federal covered security under Section 18(b)(2) of the
Securities Act of 1933:
(1) Prior to the initial offer of such federal covered security in this
State, all documents that are part of a current federal registration statement
filed with the United States Securities and Exchange Commission under
the Securities Act of 1933 or a notice form adopted by the commissioner
in lieu thereof, together with a consent to service of process signed by the
issuer and a notice filing fee of five hundred dollars.
(2) After the initial offer of such federal covered security in this
State, all documents that are part of an amendment to a current federal
registration statement filed with the United States Securities and
Exchange Commission under the Securities Act of 1933, or a notice form
adopted by the commissioner in lieu thereof which shall be filed
concurrently with the securities commissioner.
(3) All notice filings for federal covered securities are effective
upon receipt by the commission, unless another date is requested by the
issuer. These filings are effective for twelve months. If securities are to
be offered beyond this twelve-month period, the issuer must file an annual
notice filing consisting of any documents that the securities
commissioner, by rule or otherwise, may require and a fee of five hundred
dollars. The renewal notice filing shall be effective upon the expiration
of the prior filing period.
(4) Amendments to a notice filing are effective upon receipt by the
securities commissioner. Termination of a notice filing is effective upon
receipt by the securities commissioner of notice of the termination.
(b) With respect to any security that is a federal covered security
under Section 18(b)(4)(D) of the Securities Act of 1933, the securities
commissioner, by rule or order, may require the issuer to file a notice on
SEC Form D and a consent to service of process signed by the issuer no
later than fifteen (15) days after the first sale of such federal covered
security in this State, together with a fee of three hundred dollars.
(c) The securities commissioner, by rule or order, may require the
filing of any document filed with the United States Securities and
Exchange Commission under the Securities Act of 1933 with respect to
a federal covered security under Section 18(b)(3) or (4) of the Securities
Act of 1933, together with a filing fee of twenty-five dollars.
(d) The securities commissioner 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, if he finds
that (1) the order is in the public interest and (2) there is a failure to
comply with any condition established under this section.
(e) The securities commissioner, by rule or order, may modify,
change, or waive any or all of the provisions of this section.
Article 9
Fraudulent and Other Prohibited Practices
Section 35-1-1210. It is unlawful for any person, in connection with
the offer, sale, or purchase of any security, directly or indirectly, to:
(1) employ any device, scheme, or artifice to defraud;
(2) make any untrue statement of a material fact or to omit to state a
material fact necessary in order to make the statements made, in the light
of the circumstances under which they are made, not misleading; or
(3) engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any person.
Section 35-1-1220. It is unlawful for any person who receives any
consideration from another person primarily for advising the other person
as to the value of securities or their purchase or sale, whether through the
issuance of analyses or reports or otherwise:
(1) to employ any device, scheme, or artifice to defraud the other
person;
(2) to engage in any act, practice, or course of business which would
operate as a fraud or deceit upon the other person;
(3) acting as principal for his own account, knowingly to sell any
security to or purchase any security from a client, or acting as broker for
a person other than such client, knowingly to effect any sale or purchase
of any security for the account of such client, without disclosing to such
client in writing before the completion of such transaction the capacity in
which he is acting and obtaining the consent of the client to such
transaction. The prohibitions of this subparagraph shall not apply to any
transaction with a customer of a broker-dealer if such broker-dealer is not
acting as an investment adviser in relation to such transaction;
(4) to engage in dishonest or unethical practices as the commissioner
may define by rule;
(5) The provisions of items (3) and (4) of this section do not apply to
federal covered advisers.
The commissioner may by rule or order adopt exemptions from item (3)
of this section where such exemptions are consistent with the public
interest and within the purposes fairly intended by the policy and
provisions of this chapter.
Section 35-1-1230. Except as may be permitted by rule or order of
the securities commissioner, it is unlawful for any investment adviser to
enter into, extend, or renew any investment advisory contract unless it
provides in writing that:
(1) the investment adviser shall not be compensated on the basis of a
share of capital gains upon or capital appreciation of the funds or any
portion of the funds of the client;
(2) no assignment of the contract may be made by the investment
adviser without the consent of the other party to the contract; and
(3) the investment adviser, if a partnership, shall notify the other party
to the contract of any change in the membership of the partnership within
a reasonable time after the change.
Item (1) does not prohibit an investment advisory contract which
provides for compensation based upon the total value of a fund averaged
over a definite period, or as of definite dates, or taken as of a definite
time. 'Assignment', as used in item (2), includes any direct or indirect
transfer or hypothecation of an investment advisory contract by the
assignor or of a controlling block of the assignor's outstanding voting
securities by a security holder of the assignor; but, if the investment
adviser is a partnership, no assignment of an investment advisory contract
is considered to result from the death or withdrawal of a minority of the
members of the investment adviser having only a minority interest in the
business of the investment adviser, or from the admission to the
investment adviser of one or more members who, after admission, will be
only a minority of the members and will have only a minority interest in
the business.
The commissioner may by rule or order adopt exemptions from the
provisions of this section where such exemptions are consistent with the
public interest and within the purposes fairly intended by the policy and
provisions of this chapter.
Section 35-1-1240. To the extent permitted by rule or order of the
securities commissioner, an investment adviser licensed under this chapter
may take or retain custody of securities or funds of a client.
Article 11
Judicial Review of Securities Commissioner's Orders
Section 35-1-1310. Any person aggrieved by a final order of the
securities commissioner may obtain a review of the order in the court of
common pleas for Richland County or in the county wherein the person
resides by filing in court, within thirty days after the entry of the order, a
written petition praying that the order be modified or set aside in whole
or in part. The filing of a written petition for review, accompanied by the
posting of any bond set by the court in which a petition is filed, shall stay
the effectiveness of the commissioner's final order until such time as the
court has reviewed the order. A copy of the petition must be served upon
the securities commissioner, and the securities commissioner shall certify
and file in court a copy of the filing and evidence upon which the order
was entered. When these have been filed, the court has exclusive
jurisdiction to affirm, modify, enforce or set aside the order, in whole or
in part. The findings of the securities commissioner as to the facts, if
supported by competent, material, and substantial evidence, are
conclusive.
Section 35-1-1320. If either party applies to the court for leave to
adduce additional material evidence, and shows to the satisfaction of the
court that there were reasonable grounds for failure to adduce the
evidence in the hearing before the securities commissioner, the court may
order the additional evidence to be taken before the securities
commissioner and to be adduced upon the hearing in such manner and
upon such conditions as the court considers proper. The securities
commissioner may modify his findings and order by reason of the
additional evidence and shall file in court the additional evidence together
with any modified or new findings or order.
Section 35-1-1330. The commencement of proceedings under
Section 35-1-1310 does not, unless specifically ordered by the court,
operate as a stay of the securities commissioner's order.
Article 13
Enforcement, Remedies, Liabilities and Penalties
Section 35-1-1410. Every applicant for registration under this
chapter, federal covered adviser, and every issuer which proposes to offer
a security in this State through any person acting on any agency basis in
the common-law sense shall file with the securities commissioner, in such
form as he by rule prescribes, an irrevocable consent appointing the
securities commissioner or his successor in office to be his attorney to
receive service of any lawful process in any noncriminal suit, action, or
proceeding against him or his successor, executor, or administrator which
arises under this chapter or any rule or order hereunder after the consent
has been filed, with the same force and validity as if served personally on
the person filing the consent. A person who has filed such a consent in
connection with a previous registration need not file another. Service may
be made by leaving a copy of the process in the office of the securities
commissioner, but it is not effective unless (a) the plaintiff, who may be
the securities commissioner in a suit, action, or proceeding instituted by
him, forthwith sends notice of the service and a copy of the process by
registered mail to the defendant or respondent at his last address on file
with the securities commissioner and (b) the plaintiff's affidavit of
compliance with this section is filed in the case on or before the return day
of the process, if any, or within such further time as the court allows.
Section 35-1-1420. When any person, including any nonresident of
this State, engages in conduct prohibited or made actionable by this
chapter or any rule or order hereunder, has not filed a consent to service
of process under Section 35-1-1410 and personal jurisdiction over him
cannot otherwise be obtained in this State, that conduct shall be
considered equivalent to his appointment of the securities commissioner
or his successor in office to be his attorney to receive service of any
lawful process in any noncriminal suit, action, or proceeding against him
or his successor, executor, or administrator which grows out of that
conduct and which is brought under this chapter or any rule or order
hereunder, with the same force and validity as if served on him
personally. Service may be made by leaving a copy of the process in the
office of the securities commissioner, and it is not effective unless (a) the
plaintiff, who may be the securities commissioner in a suit, action, or
proceeding instituted by him, forthwith sends notice of the service and a
copy of the process by registered mail to the defendant or respondent at
his last-known address or takes other steps which are reasonably
calculated to give actual notice and (b) the plaintiff's affidavit of
compliance with this section is filed in the case on or before the return day
of the process, if any, or within such further time as the court allows.
Section 35-1-1430. When process is served under Section 35-1-1410
or Section 35-1-1420, the court or the securities commissioner in a
proceeding before him shall order such continuance as may be necessary
to afford the defendant or respondent reasonable opportunity to defend.
Section 35-1-1440. The securities commissioner in his discretion (a)
may make such public or private investigations within or outside of this
State as he deems necessary to determine whether any person has violated
or is about to violate any provision of this chapter or any rule or order
hereunder or to aid in the enforcement of this chapter or in the prescribing
of rules and forms hereunder, (b) may require or permit any person to file
a statement in writing, under oath or otherwise as the securities
commissioner determines, as to all the facts and circumstances concerning
the matter to be investigated and (c) may publish information concerning
any violation of this chapter or any rule or order hereunder.
Section 35-1-1450. For the purpose of any investigation or
proceeding under this chapter, the securities commissioner or any officer
designated by him may administer oaths and affirmations, subpoena
witnesses, compel their attendance, take evidence and require the
production of any books, papers, correspondence, memoranda,
agreements, or other documents or records which the securities
commissioner deems relevant or material to the inquiry.
Section 35-1-1460. In case of contumacy by, or refusal to obey a
subpoena issued to, any person, the court of common pleas, upon
application by the securities commissioner, may issue to the person an
order requiring him to appear before the securities commissioner or the
officer designated by him, to produce documentary evidence, if so
ordered, or to give evidence touching the matter under investigation or in
question. The court may fine the person not exceeding three thousand
dollars if it finds that the person's failure to respond fully to the subpoena
was not in good faith or was for purposes of delay. In any case the court
may award the securities commissioner fees and costs incurred in
appearing before the court. Failure to obey the order of the court may be
punished by the court as a contempt of court in addition to the other
penalties authorized by this section.
Section 35-1-1470. No person is excused from attending and
testifying or from producing any document or record before the securities
commissioner or in obedience to the subpoena of the securities
commissioner or any officer designated by him or in any proceeding
instituted by the securities commissioner, on the ground that the testimony
or evidence, documentary or otherwise, required of him may tend to
incriminate him or subject him to a penalty or forfeiture. But no
individual may be prosecuted or subjected to any penalty or forfeiture for
or on account of any transaction, matter or thing concerning which he is
compelled, after claiming his privilege against self-incrimination, to
testify or produce evidence documentary or otherwise, except that the
individual testifying is not exempt from prosecution and punishment for
perjury or contempt committed in testifying.
Section 35-1-1475. The securities commissioner may impose and
collect an administrative fine against any person found to have violated
any provision of this chapter, any rule or order promulgated by the
commissioner, or any written agreement entered into with the
commissioner in an amount not exceeding five thousand dollars for each
violation.
Section 35-1-1480. Whenever it appears to the securities
commissioner that any person has engaged or is about to engage in any
act or practice constituting a violation of any provision of this chapter or
any rule or order hereunder, he may in his discretion bring an action in the
court of common pleas for Richland County or in the county wherein such
person resides to enjoin the acts or practices and to enforce compliance
with this chapter or any rule or order hereunder. Upon a proper showing
a permanent or temporary injunction, restraining order or writ of
mandamus shall be granted and a receiver or conservator may be
appointed for the defendant or the defendant's assets. The court may not
require the securities commissioner to post a bond.
Section 35-1-1490. Any person who:
(1) offers or sells a security in violation of subsection (2) of Section
35-1-170 or Section 35-1-410 or Section 35-1-810, or of any rule or order
under Section 35-1-50 which requires the affirmative approval of sales
literature before it is used or of any condition imposed under Section
35-1-950 or Section 35-1-990; or
(2) Offers or sells a security by means of any untrue statement of a
material fact or any omission to state a material fact necessary in order to
make the statements made, in the light of the circumstances under which
they are made, not misleading, the buyer not knowing of the untruth or
omission, and who does not sustain the burden of proof that he did not
know, and in the exercise of reasonable care could not have known, of the
untruth or omission;
Is liable to the person buying the security from him, who may sue either
at law or in equity to recover the consideration paid for the security,
together with interest at six percent per year from the date of payment,
costs, and reasonable attorneys' fees, less the amount of any income
received on the security, upon the tender of the security, or for damages
if he no longer owns the security. Damages are the amount that would be
recoverable upon a tender less the value of the security when the buyer
disposed of it and interest at six percent per year from the date of
disposition.
Section 35-1-1500. Every person who directly or indirectly controls
a seller liable under Section 35-1-1490, every partner, officer or director
of such a seller, every person occupying a similar status or performing
similar functions, every employee of such a seller who materially aids in
the sale, and every broker-dealer or agent who materially aids in the sale
are also liable jointly and severally with and to the same extent as the
seller, unless the nonseller who is so liable sustains the burden of proof
that he did not know, and in exercise of reasonable care could not have
known, of the existence of the facts by reason of which the liability is
alleged to exist. There is contribution as in cases of contract among the
several persons so liable.
Section 35-1-1510. Any tender specified in Section 35-1-1490 may
be made at any time before entry of judgment.
Section 35-1-1520. Every cause of action under this chapter survives
the death of any person who might have been a plaintiff or defendant.
Section 35-1-1530. No person may sue under Sections 35-1-1490 and
35-1-1500 more than three years after the contract of sale. No person may
sue under either section (a) if the buyer received a written offer, before
suit and at a time when he owned the security, to refund the consideration
paid together with interest at six percent per year from the date of
payment, less the amount of any income received on the security, and he
failed to accept the offer within thirty days of its receipt or (b) if the buyer
received such an offer before suit and at a time when he did not own the
security, unless he rejected the offer in writing within thirty days of its
receipt.
Section 35-1-1540. No person who has made or engaged in the
performance of any contract in violation of any provision of this chapter
or any rule or order hereunder or who has acquired any purported right
under any such contract with knowledge of the facts by reason of which
its making or performance was in violation, may base any suit on the
contract.
Section 35-1-1550. Any condition, stipulation, or provision binding
any person acquiring any security to waive compliance with any provision
of this chapter or any rule or order hereunder is void.
Section 35-1-1560. The rights and remedies provided by this chapter
are in addition to any other rights or remedies that may exist at law or in
equity, but this chapter does not create any cause of action not specified
in this section or in Section 35-1-510.
Section 35-1-1570. Nothing in this chapter limits the power of the
State to punish any person for any conduct which constitutes a crime by
statute or at common law.
Section 35-1-1580. The securities commissioner may refer that
evidence as is available concerning violations of this chapter or of any
rule or order under this chapter to the appropriate Division of the Attorney
General's Office or other appropriate prosecution, law enforcement, or
licensing authorities who may, institute the appropriate proceedings under
this chapter.
Section 35-1-1590. Any person who wilfully violates any provision
of this chapter except Section 35-1-160, who wilfully violates any rule or
order under this chapter or who wilfully violates Section 35-1-160,
knowing the statement made to be false or misleading in any material
respect, is guilty of a misdemeanor and, upon conviction, must be fined
not more than fifty thousand dollars or imprisoned not more than three
years, or both. However, no person may be imprisoned for the violation
of any rule or order if he proves that he had no knowledge of the rule or
order."
Time effective
SECTION 2. This act takes effect upon approval by the Governor.
Approved the 13th day of June, 1997. |