Legislature(1999 - 2000)
05/03/1999 02:02 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HB 83-ALASKA SECURITIES ACT
REPRESENTATIVE NORM ROKEBERG, sponsor of HB 83, made the following
comments. HB 83 amends the Alaska Security Act to mainline with
the National Security Marketing Improvement Act. Alaska has until
October 1999 to enact HB 83 or it will lose over $4 million in
revenue from the registered security industry from program
receipts. Forty states have adopted similar legislation. The
major banking institutions in the state are in agreement with this
legislation. HB 83 preempts from registration a new class of
securities, called federal covered securities. Without this
legislation, investment advisors and their agents would be totally
unregulated. HB 83 has been thoroughly reviewed by three
committees already.
Number 414
SENATOR DONLEY asked why Alaska will lose $4 million in revenue if
HB 83 is not enacted. REPRESENTATIVE ROKEBERG explained the revenue
is comprised of registration fees from, primarily, the mutual fund
industry. Every mutual fund and registered agent must pay a
registration fee.
SENATOR DONLEY asked if that money would come to the state to help
regulate the industry. REPRESENTATIVE ROKEBERG replied that is
correct.
Number 427
TERRY ELDER, Director of the Division of Banking, Securities and
Corporations, Department of Commerce and Economic Development
(DCED), informed committee members that HB 83 will bring Alaska
into compliance with the National Securities Market Improvement Act
(NSMIA) which passed in October of 1996. That Act created federal
covered securities and federal covered advisors. NSMIA preempted
state registration of those but provided that the states, in order
to be revenue neutral, could continue to collect fees and require
notice filings for those securities. The states were given three
years to bring their securities acts into compliance with federal
law. State laws were to cover securities and advisors and could
continue to require the filing of notices and the payment of fees.
In Alaska, the fees equal about $4 million. The Investment Company
Institute, the major association representing the mutual fund
industry, has provided a letter of support for HB 83. The
Institute expects the fees collected to be used to regulate the
securities industry, however Alaska, like almost every other state,
does not spend as much as it collects on regulation. The House
passed HB 83 with a unanimous vote as did the Senate Labor and
Commerce Committee. The bill has broad bipartisan support and
essentially no opposition.
Number 452
MR. ELDER said because passage of NMSIA required a substantial re-
write of the Alaska Securities Act, other improvements were made to
the Alaska Securities Act as well. First, an accredited investor
exemption was added to the list of those exempted from
registration. The language was drafted by the North American
Securities Administrators' Association. Its purpose is to allow
Alaskan businesses to use the Small Business Administration's
ACENET program which is an electronic matching service. Second, HB
83 exempts transactions conducted solely within a family. Third,
HB 83 contains a provision to allow the division to go to court to
reduce a fine to a judgment when a final order has been made. That
provision will help the division go after out-of-state people who
cheat Alaskans. In addition, changes were made to the recision
provisions for securities sold without registration. Under current
law, one who sells securities in Alaska without registration is
liable to the buyer for a period of three years. The buyer could
sue for the cost of the securities plus six percent interest per
year. The new proposal changes the six percent interest rate to
eight percent or the stated rate on the note, whichever is less.
The three year time period remains unless the transaction was
fraudulent, in which case an additional two years to sue, from the
date of which the fraud became known, will be allowed.
SENATOR DONLEY asked what the time limit is for an unlicensed sale.
MR. ELDER replied if the seller is unregistered but the transaction
is not fraudulent, the time limit is three years.
Number 472
SENATOR DONLEY asked if an unlicensed person committed fraud, and
the seller was aware of the fraud when the transaction occurred,
whether the time period would be two or three years.
MR. ELDER replied if an element of fraud can be proved, then the
longer time period would be appropriate. He clarified that the
bill provides for whichever time period is longer.
CHAIRMAN TAYLOR noted the time period is a minimum of three years,
but if fraud is involved an additional two years would be allowed.
SENATOR DONLEY asked what types of investment professionals, not
currently licensed, will be required to get licensed if HB 83
passes. MR. ELDER said no one who is not currently licensed will
be licensed under this bill.
SENATOR DONLEY asked if the revenue will be in the form of federal
funds. MR. ELDER stated the revenue will come from filing notice
and registration fees that are collected from the industry.
SENATOR DONLEY questioned whether that is current practice, however
the new federal law removes the state's authority to continue to do
so without adopting the Uniform Act. MR. ELDER said that is
correct.
SENATOR DONLEY asked if the fees will increase. MR. ELDER said the
fees are set by state regulation so they can change periodically.
CHAIRMAN TAYLOR maintained that by regulation, Alaska could
increase the notice and registration fees paid by municipal funds,
and yet it would not have the authority under federal law to
enforce those regulations.
MR. ELDER stated if HB 83 is not enacted, Alaska could adopt a fee
structure but it would not have the authority to take action if the
fee was not paid.
CHAIRMAN TAYLOR pointed out the real policing mechanism is found
with the citizen's ability to file a civil action against the
seller. He asked if the division has enforcement mechanisms. MR.
ELDER replied the division has enforcement mechanisms but federal
law preempts registration and allows notice filings, but the fact
that the investment advisor or mutual fund filed a notice makes
them subject to Alaska's anti-fraud rules. Federal law continues
to give the states authority to investigate fraud.
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