Legislature(2017 - 2018)GRUENBERG 120
04/12/2017 01:00 PM House JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| HB208 | |
| HB175 | |
| HB170 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 170 | TELECONFERENCED | |
| += | HB 200 | TELECONFERENCED | |
| += | HB 208 | TELECONFERENCED | |
| + | HB 175 | TELECONFERENCED | |
| *+ | HB 223 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
April 12, 2017
2:16 p.m.
MEMBERS PRESENT
Representative Matt Claman, Chair
Representative Zach Fansler, Vice Chair
Representative Jonathan Kreiss-Tomkins
Representative Gabrielle LeDoux
Representative David Eastman
Representative Chuck Kopp
Representative Lora Reinbold
MEMBERS ABSENT
Representative Charisse Millett (alternate)
Representative Louise Stutes (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 208
"An Act relating to trusts and powers of appointment; and
providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 175
"An Act ratifying an interstate compact to elect the President
and Vice-President of the United States by national popular
vote; and making related changes to statutes applicable to the
selection by voters of electors for candidates for President and
Vice- President of the United States and to the duties of those
electors."
- HEARD & HELD
HOUSE BILL NO. 170
"An Act relating to securities, registration, exempt securities,
exempt transactions, broker-dealers, agents, investment advice,
investment advisers, investment adviser representatives, federal
covered securities, federal covered investment advisers,
viatical settlement interests, small intrastate security
offerings, Canadian broker-dealers, and Canadian agents;
relating to administrative, civil, and criminal enforcement
provisions, including restitution and civil penalties for
violations; relating to an investor training fund; establishing
increased civil penalties for harming older persons and
vulnerable adults; relating to corporations organized under the
Alaska Native Claims Settlement Act; amending Rules 4, 5, 54,
65, and 90, Alaska Rules of Civil Procedure, and Rule 602,
Alaska Rules of Appellate Procedure; and providing for an
effective date."
- MOVED CSHB 170(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 200
"An Act establishing a top two nonpartisan open primary election
system for elective state executive and state and national
legislative offices; repealing the special runoff election for
the office of United States senator or United States
representative; changing appointment procedures relating to
precinct watchers and members of precinct election boards,
election district absentee and questioned ballot counting
boards, and the Alaska Public Offices Commission; requiring
certain written notices to appear in election pamphlets and
polling places; relating to declarations of candidacy and
letters of intent; and amending the definition of 'political
party.'"
- HEARING CANCELED
HOUSE BILL NO. 223
"An Act relating to municipal penalties for violation of a
municipal ordinance when there is a comparable state crime; and
providing for an effective date."
- HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: HB 208
SHORT TITLE: TRUSTS; COMM PROP TRUSTS; POWERS OF APPT
SPONSOR(s): REPRESENTATIVE(s) JOHNSON
03/31/17 (H) READ THE FIRST TIME - REFERRALS
03/31/17 (H) JUD
04/10/17 (H) JUD AT 1:00 PM GRUENBERG 120
04/10/17 (H) Scheduled but Not Heard
04/12/17 (H) JUD AT 1:00 PM GRUENBERG 120
BILL: HB 175
SHORT TITLE: US PRESIDENT ELECT. COMPACT: POPULAR VOTE
SPONSOR(s): REPRESENTATIVE(s) FANSLER
03/13/17 (H) READ THE FIRST TIME - REFERRALS
03/13/17 (H) STA, JUD
03/16/17 (H) STA AT 3:00 PM GRUENBERG 120
03/16/17 (H) Heard & Held
03/16/17 (H) MINUTE(STA)
03/23/17 (H) STA AT 3:00 PM GRUENBERG 120
03/23/17 (H) Heard & Held
03/23/17 (H) MINUTE(STA)
03/28/17 (H) STA AT 3:00 PM GRUENBERG 120
03/28/17 (H) Moved HB 175 Out of Committee
03/28/17 (H) MINUTE(STA)
03/29/17 (H) STA RPT 2DP 3DNP 2NR
03/29/17 (H) DP: TUCK, KREISS-TOMKINS
03/29/17 (H) DNP: JOHNSON, KNOPP, BIRCH
03/29/17 (H) NR: WOOL, LEDOUX
04/12/17 (H) JUD AT 1:00 PM GRUENBERG 120
BILL: HB 170
SHORT TITLE: AK SECURITIES ACT; PENALTIES; CRT. RULES
SPONSOR(s): LABOR & COMMERCE
03/10/17 (H) READ THE FIRST TIME - REFERRALS
03/10/17 (H) L&C, JUD
03/24/17 (H) L&C AT 3:15 PM BARNES 124
03/24/17 (H) Heard & Held
03/24/17 (H) MINUTE(L&C)
03/27/17 (H) L&C AT 3:15 PM BARNES 124
03/27/17 (H) Moved HB 170 Out of Committee
03/27/17 (H) MINUTE(L&C)
03/29/17 (H) L&C RPT 6DP 1NR
03/29/17 (H) DP: SULLIVAN-LEONARD, STUTES, WOOL,
JOSEPHSON, BIRCH, KITO
03/29/17 (H) NR: KNOPP
04/07/17 (H) JUD AT 1:00 PM GRUENBERG 120
04/07/17 (H) Heard & Held
04/07/17 (H) MINUTE(JUD)
04/11/17 (H) JUD AT 5:30 PM GRUENBERG 120
04/11/17 (H) Heard & Held
04/11/17 (H) MINUTE(JUD)
04/12/17 (H) JUD AT 1:00 PM GRUENBERG 120
WITNESS REGISTER
REPRESENTATIVE DELENA GOODWIN JOHNSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 208 as prime sponsor.
SHAE SIEGART, Staff
Representative DeLena Goodwin Johnson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During the hearing of HB 208, offered a
PowerPoint Presentation, and answered questions.
MATHEW BLATTMACHR
Peak Trust Company
Anchorage, Alaska
POSITION STATEMENT: During the hearing of HB 208, offered
testimony and answered questions.
RICHARD HOMPESCH, Attorney
Hompesch Evans & Averett
Fairbanks, Alaska
POSITION STATEMENT: During the hearing of HB 208, answered
questions.
BETH CHAPMAN, Attorney
Faulkner Banfield
Juneau, Alaska
POSITION STATEMENT: During the hearing of HB 208, offered
support for the legislation, and answered questions.
JONATHAN BATTMACHR, Attorney
Garden City, New York
POSITION STATEMENT: During the hearing of HB 208, testified in
support of the legislation.
BARRY FADEM, President
National Popular Vote
Lafayette, California
POSITION STATEMENT: During the hearing of HB 175, testified in
support of the legislation.
KEVIN ANSELM, Director
Division of Banking and Securities
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: During the hearing of HB 170, answered
questions.
RENEE WARDLAW, Assistant Attorney General
Commercial and Fair Business Section
Department of Law
Juneau, Alaska
POSITION STATEMENT: During the hearing of HB 170, answered
questions.
ACTION NARRATIVE
2:16:42 PM
CHAIR MATT CLAMAN called the House Judiciary Standing Committee
meeting to order at 2:16 p.m. Representatives Claman, Fansler,
and Kopp were present at the call to order. Chair Claman
advised that, currently, the committee did not have a quorum.
Representatives Eastman, Reinbold, LeDoux, and Kreiss-Tomkins
arrived as the meeting was in progress.
HB 208-TRUSTS; COMM PROP TRUSTS; POWERS OF APPT
2:17:22 PM
CHAIR CLAMAN announced that the first order of business would be
HOUSE BILL NO. 208, "An Act relating to trusts and powers of
appointment; and providing for an effective date."
2:18:32 PM
REPRESENTATIVE DELENA GOODWIN JOHNSON, Alaska State Legislature,
paraphrased her sponsor statement, as follows [original
punctuation provided]:
Alaska has set a precedence as being a leader in the
Nation's estate and tax planning Industry. Banks,
trust companies, Alaskans, and Americans from all over
seek out Alaska to be the home of their financial
assets due to our environment which promotes economic
security, strength, and growth. House Bill 208, seeks
to continue the prosperity of this environment through
further fostering a conducive place where people can
invest their assets and know that our statutes will
insure their integrity, and ability to benefit their
intended audience.
We can look at House Bill 208 as a "flexibility" bill
which provides for those looking to perform the best
estate planning, whether they are residents or non-
residents, assurance that their irrevocable document
won't hinder its beneficiaries through unintended
results including; providing financial resource to a
dangerous habit, not providing ability to pay for
treatment of an unforeseeable disability, or by
providing financial resource to someone who would
rather put it towards a suitable charity. Decanting
may also provide the ability to keep documents viable
in response to changes in State or Federal tax laws.
Since 1997, Alaska has been a leader in adopting laws
to improve estate and tax planning options for both
Alaskans and non-Alaskans. House Bill 208 is a
continuation of this leadership as it provides
expansion and clarification to our existing statutes.
House Bill 208 focusses on expanding and clarifying
four key areas of our State Statutes surrounding
irrevocable trusts.
The four areas are Decanting of Trusts, Powers of
Appointment, traceability of Trust Assets for Tax
Efficiency, and Clarification of Trustees' Specific
Powers. These four areas have since, and in some cases
prior to, 1997 been forced to be decided by a Judge.
Providing the ability for these four areas to be
clearly outlined by the original settlor, and by
providing beneficiaries the ability to adapt to
unforeseen events, we continue to provide an
environment where irrevocable trusts, like our State
and National Constitution, may be amended to provide,
or not provide, in clearly outlined, yet commonly
unforeseen, circumstances.
Keeping all of these things in mind, I humbly ask for
your support in keeping Alaska a leader in innovation
in the trust industry as the financial industry
continues it's perpetually changing mentality by
passing House Bill 208.
2:21:23 PM
SHAE SEGART, Staff, Representative DeLena Goodwin Johnson,
Alaska State Legislature, paraphrased the PowerPoint
presentation, titled "House Bill 208," as follows [original
punctuation provided]:
Why is House Bill 208 being introduced? What problem
is being solved?
House bill 208 seeks to expand, and clarify current
State Statutes surrounding one of our most successful
industries. The piece of legislation in front of you
is seeking to continue the process started in 1997 by
giving the State of Alaska a competitive advantage to
once again be the best jurisdiction for Alaskans, and
non-alaskans, to keep their trusts and estates in.
Trust and Estate planning is one of these things that
commonly gets overlooked in the search for industries
that really strengthen our economy. We saw a value to
this industry in 1997 when the Alaska State
Legislature passed the Alaska Trust Act which quickly
propelled our State to the top of the nation's ranking
in Estate and Tax Planning Industry. It holds vast
benefits to Alaskans as well as financial institutions
in Alaska.
I would like to point you all to a few documents in
your bill packet, the first one, as we go forward to
the four main areas of this bill is a matrix what you
decant, what happens when you decant, and some kind of
hypotheticals in moving forward. The other one is a
trust and estate glossary, it has some helpful terms.
As we move through this law that has a vernacular all
to itself, and it is a very nuanced part of our state
statute books. The next one would be our ranking
comparatively to other states in the trust and estate
planning industry. We are currently number 7, we used
to be farther up on this list when we passed the
Alaska Trust Act in 1997, and have since sunk in the
rankings.
2:23:30 PM
Online I have Matthew Blattmachr of Peak Trust
Company, who will be able to answer any really
professional questions that get really technical into
the trust profession and industry. Going forth, there
are four areas where this bill really seeks to add
expansion, as well as clarify in our existing
statutes.
Since 1997, Alaska has been a leader in adopting laws
to improve estate and tax planning options for both
Alaskan and non-Alaskans. House Bill 208 is a
continuation of this leadership as it adds expansion
and clarification to our existing statutes.
Decanting. Decanting, of course, is the act of pouring
liquid from one container to another as often occurs
with wine. When one trust pays (or pours) its assets
to another trust, this too is referred to as
decanting. Decanting is used to correct drafting
errors, reduce costs of trust administration, enhance
tax effects and many other reasons. While Alaska has
had decanting statutes for nearly 20 years, House Bill
208 would provide additional flexibility and
clarification to this great statutory provision.
Decanting is commonly used by Alaskans who are looking
to update their trust documents. Additionally, non-
residents bring their business to Alaska because of
this progressive statute.
2:25:02 PM
Powers of Appointment. One of the most powerful estate
planning tools is to grant someone, such as a
beneficiary, a "power of appointment," which allows
that person the right to specify where property will
pass at certain times, such as when the beneficiary
dies.
The proposal would clarify certain aspects of Alaska
law relating to these powers so they can be used more
efficiently for tax and other reasons.
Tracing of Trust's Assets for Tax Efficiency. Trusts
are often created by more than one settlor. Under
Internal Revenue Code Section 671, a settlor is
treated as the owner of the portion of the trust to
which the settlor contributed, if the settlor reserves
certain powers over the trust property.
Under AS 13.36.169, a trustee may divide a trust into
one or more separate trusts if certain tax elections
are made. However, the statute does not contemplate
dividing a trust into separate portions when there are
multiple settlors and treating each separate portion
as being contributed to solely by one settlor.
Although a trust instrument might grant this power,
Alaska law does not.
The proposal would allow a trustee who has traced
contributions to a trust, as well as earnings and
reinvestments on such contributions, to divide the
trust into one more separate trusts of which each
settlor would be treated as the sole settlor of the
trust as to the portion to which he or she
contributed. This power would provide more clarity as
to the tax treatment of trusts with more than one
settlor. No other state appears to have a similar law
in effect at this time. This bill would help Alaska
remain at the forefront of trust legislation.
2:27:04 PM
Clarification of Certain Trustee Powers. Alaska law
grants trustees certain powers. Among these are the
right to acquire insurance to protect the trust from
claims from third parties; however, certain aspects of
the powers are not clear.
The proposal would clarify Alaska law to say that a
trustee can acquire insurance to protect the trust
assets from claims of third parties and the trustee
from third party and beneficiary claims and to charge
the premiums to the trust.
These and many other Alaska laws the Legislature has
enacted have benefitted Alaskans, has resulted in
millions of dollars being deposited in financial
institutions in the state which, in turn, have
provided funding for Alaska businesses, and provided
significant work for many Alaskans. We hope to see
this success continue for years to come.
2:28:58 PM
MATHEW BLATTMACHR, Peak Trust Company, offered that in 1997, the
legislature passed the Alaska Trust Act, which put Alaska not
only as the first state, but made Alaska the premier
jurisdiction for trust and estate planning. These laws were
powerful and created a desire from other states to copy Alaska's
laws in that this would be a good industry to have in their
state, it's a clean industry, it doesn't require any outlay from
the state in order to bring it to a state, or requires maintain
the industry. Therefore, he said, it created a competitive
environment with options for clients and their advisors, and in
the event Alaska wants to maintain its standing, it must
frequently consider additional bills that not only clarify but
add to existing statutes.
[MR. SIEGERT read each slide on the PowerPoint word for word,
please review each slide for his testimony.]
2:30:41 PM
MR. SIEGERT turned to slide 2, "4 Areas of Concern" and
paraphrased as follows:
4 Areas of Concern, Decanting of Trusts, Powers of
Appointment, Traceability of Trust Assets for Tax
Efficiency, and Clarification of Trustees' Specific
Powers
MR. SIEGERT turned to slide 3, "Helpful Definitions" and advised
these definitions are not located in the glossary.
MR. SIEGERT turned to slide 4, "Decanting a Trust," questions
posed to Mr. Blattmachr, and paraphrased as follows [original
punctuation provided]:
Decanting a Trust. Why would someone want to decant a
trust? We already have decanting statute, isn't that
enough?! What instances are most common that call for
a trust to be decanted?
2:32:04 PM
MR. BLATTMACHR answered there are a variety of reasons someone
would want to decant, and advised that the matrix provided
within the materials assists in setting up some examples as to
how decanting can help. Decanting, he explained, may include a
potential scrivener's error in the original document, and
because the issue was dealing with irrevocable trusts and there
was no way to revoke them, the technical way would be to decant.
An additional reason for decanting may be changes in tax law,
and pointed to the shift in the national presidential regime
which may bring about tax law changes, thereby, rendering some
planning documents as inefficient or ineffective. The current
decanting statute is almost 20 years old, he described, and due
to advancements in decanting and estate planning law, this bill
would add some flexibility for Alaskan practitioners to match
what other states currently allow. He explained that most of
these instances are brought up due to a certain need to amend
the document in some manner, and is done so for the best
interests of the beneficiaries, whether it was updating
provisions in the document or changing dispositive provisions,
he explained.
2:34:01 PM
MR. SIEGERT turned to slide 5, "Sec. 29, 30" having to do with
decanting, and paraphrased as follows [original punctuation
provided]:
Section 29 Adds a new section 13.36.380 (Distribution of
principal)
(a) Authorizes a court to authorize a trustee to
invade the principal of a trust if the court makes
certain findings
(b) Limits the application of this section to an
irrevocable trust for which the trust instrument
provides for certain distributions
Section 30
(a) indicates that a second power, as defined in the
subsection, created by a first power may be validly
exercised to postpone the vesting of property without
regard to the creation of the first power
(b) states that if a first power is exercised to
create a second power as defined in the subsection,
the second power is not valid unless all property
interests vest not later than 1000 years after the
creation of the first power.
(c) defines "first power" for the section.
MR. SIEGERT turned to slide 6, "Powers of Appointment,"
questions for Mr. Blattmachr, and paraphrased as follows
[original punctuation provided]:
Powers of Appointment. Do Powers of Appointment have
to do with more than just the distribution of assets?
Who holds the Power of Appointment in a trust? Does
this bill change that to more people? Is the Power of
Appointment a Fiduciary or Non-fiduciary power? Why
do they matter?
MR. BLATTMACHR responded that powers of appointment can do more
than the distribution of assets because that provision broadly
gives the beneficiary the ability to appoint assets for a
variety of reasons, such as winning the lottery and appointing
the assets to a charity, putting assets into a trust for a child
with substance abuse problems. The powers of appointment can be
used for tax planning reasons, for example, to pull the assets
out of someone's estate and into their estate. Typically, he
advised, the powers of appointment is given to the beneficiary
of the document, although sometimes they can be further
assigned, and the bill does not change who is appointed or the
number of people. He offered that powers of appointment can be
held in a fiduciary or non-fiduciary power depending upon the
document and the power itself, and they matter as they increase
flexibility within trust documents.
2:37:04 PM
CHAIR CLAMAN referred to slide 5, Section 30, subsection (b),
which read as follows:
(b) states that if a first power is exercised to
create a second power as defined in the subsection,
the second power is not valid unless all property
interests vest not later than 1000 years after the
creation of the first power.
CHAIR CLAMAN noted there is a rule of perpetuity making it 1,000
years after the creation of the first power, and asked the
justification for 1,000 years.
MR. SIEGERT answered that under current statute [AS 34.27.051]
there is a statutorily protected section of 1,000 years of
perpetuity, and this does not change the common 21 year rule of
perpetuity. He advised there are many states with expanded
rules against perpetuities and Alaska is one state that contains
1,000 years.
CHAIR CLAMAN commented that that is existing statute and
surmised that nothing was being changed today with respect to
trusts.
MR. SIEGERT agreed.
2:39:15 PM
MR. SIEGERT turned to slides 7-12, "Sections 1, 5-7, 10-22
(Powers of Appointment), and read each slide word-for-word.
[Please see PowerPoint "House Bill 208."]
2:45:15 PM
MR. SIEGERT turned to slide 13, "Traceability of Assets,"
questions for Mr. Blattmachr to answer, and paraphrased as
follows [original punctuation provided]:
Traceability of Assets. Isn't this just a way of
avoiding taxes? Why don't we already have a statute
protecting this already; if it is such a big deal?
MR. BLATTMACHR responded that traceability of assets has nothing
to do with avoiding taxes, in that it provides practitioners a
provision with which to rely when unwinding a trust and
separating assets. For example, practitioners can rely upon
this provision when "planning the event" and they have multiple
grantors of a single trust, for whatever reason, and would like
to separate the assets of the trust. This provision is not a
big deal, but it adds clarity to Alaska law, he commented.
2:46:35 PM
REPRESENTATIVE KOPP surmised that this is technical area of law
and some of these terms should be discussed for clarity, such as
the definitions of fiduciary versus non-fiduciary.
MR. BLATTMACHR responded that fiduciary versus non-fiduciary
comes down to who holds that power. In the event a person is
already acting in a fiduciary capacity, such as a trustee, they
typically hold a fiduciary power. In the event they hold that
power as a beneficiary and are not in a fiduciary capacity to
begin with, typically it is a non-fiduciary power. Generally,
he explained, the entity or person that holds the power dictates
whether it is fiduciary or non-fiduciary.
2:48:21 PM
REPRESENTATIVE KOPP referred to non-fiduciary, and asked that
when a person is the holder of a non-fiduciary power, that means
the person is not a beneficiary, the person is holding it in
trust for another person.
MR. BLATTMACHR said, "No, not necessarily." For example, in the
event Peak Trust Company held a fiduciary power of appointment
over trust assets, it would hold that in a fiduciary capacity,
most likely. Wherein, he said, the Peak Trust Company would be
held to the same standard with that power as with any other
action or inaction. He related that for a beneficiary holding
that power, they typically do not have to hold it in a fiduciary
capacity. There may be standards to who they can appoint it to,
such as a defined class of beneficiaries, and there may not be,
that goes into different types of powers. He advised that they
do not have a fiduciary duty when exercising that power, but
again, if they are a beneficiary, they would be appointing the
assets for their benefit.
2:49:46 PM
REPRESENTATIVE KOPP noted that he would research the issue a bit
on his own, and asked that "invasion of trust" be explained.
MR. BLATTMACHR explained that invasion is typically a term that
defines the appointment of assets from one trust to another
trust as far as decanting. Typically, he said, it is not
separated between whether that was income or principle, it is
that the current trust was being invaded, pulling assets out and
putting them into a new trust.
2:50:53 PM
REPRESENTATIVE KOPP surmised that it has nothing to do with
getting into earnings of a trust versus getting into an
appropriation or a withdrawal of the principle of the trust, it
doesn't break it down in that manner. He further surmised that
an invasion means taking anything out of a trust.
MR. BLATTMACHR responded in the sense of decanting, yes.
Typically, the entirety of the original trust is put into a new
trust. Although, he commented, that might change when decanting
one trust and separating it out into three trusts, one trust for
the benefit of three different beneficiaries and take a pro rata
share. He agreed that it is typically, not necessarily the
definition of principle versus income.
2:51:58 PM
REPRESENTATIVE FANSLER asked that the tax structure, currently
in place in Alaska, be explained, whether they are all taxed
equally, and whether there are different structures.
MR. SIEGERT deferred to attorney Richard Hompesch.
2:53:43 PM
REPRESENTATIVE FANSLER noted that different types of trusts are
available, and requested that tax liability structures be
explained within the different trusts set up in the State of
Alaska.
2:53:54 PM
RICHARD HOMPESCH, Attorney, Hompesch Evans & Averett, advised
that Alaska does not tax the income of trusts or estates under
current law, trusts and estates are subject to federal income
and transfer taxes. He advised that he was testifying today on
his own behalf, and not on behalf of any party.
2:54:31 PM
REPRESENTATIVE FANSLER specifically asked whether all trusts tax
in the exact same manner, whether it be a federal or state tax
structure.
MR. HOMPESCH replied that the taxation of trust income varies
from state-to-state, and the federal taxation income and
transfer tax of trusts is generally the same. There are
exceptions, some trusts are exempt from federal income taxation,
known as Charitable Trusts, but most of the trusts being
discussed today may be decanted into another trust and are
subject to federal income taxes.
REPRESENTATIVE FANSLER referred to allowing decanting due to
innovations in trusts or changes in the tax code, for example,
and asked whether it would be possible for a person to decant
their current trust into a new trust that would suddenly occur
into a tax liability.
MR. HOMPESCH answered "Not to my knowledge, no."
2:56:23 PM
MR. SIEGERT turned to slide 14, "23 - Dividing trust into
separate portions for income tax purposes," and paraphrased as
follows [original punctuation provided]:
This section adds a new subsection to read:
Unless a governing instrument specifically refers to
this section and provides otherwise, if a trust is
created by more than one settlor, and if a trustee
keeps records tracing contributions, a trustee may
divide the trust into one or more separate trusts for
which a specific settlor shall be treated as the sole
settlor of the separate portion of the trust to which
the settlor contributed. A trustee may exercise this
power at any time, whether before, or, or after a
settlor's death. A trustee may exercise this power
whether or not the trust was initially governed by the
law of this state or the situs of a trust was moved to
this state.
2:57:36 PM
MR. SIEGART turned to slide 15, "Clarification of Specific
Powers of a Trustee," having to do with clarification of
specific powers of a trustee, and paraphrased as follows
[original punctuation provided]:
What are Specific Powers of a Trustee? Can't specific
powers be given by the trust?
MR. BLATTMACHR advised that under Alaska law, the specific
powers of a trustee are quite broad and include anything that
might be reasonably expected for a trustee to perform to
administer a trust. He further advised there are some specific
definitions under Alaska law that can be further clarified under
the trust documents. In addition, he explained, Alaska law
allows for different trustees to hold different powers, and for
certain powers to be taken away from trustees. Specific powers
can be given by the trust and give more flexibility to the
trustee than what Alaska law allows, or it can also restrict
abilities of trustees in the document, he explained.
2:58:57 PM
MR. SIEGERT turned to slide 16, "Section 2," and paraphrased as
follows [original punctuation provided]:
Specific Powers of Trustees. Except as otherwise
provided by this chapter, in addition to the powers
conferred by the terms of the trust, a trustee may
perform all actions necessary to accomplish the proper
management, investment, and distribution of the trust
property, including the power?
This is followed by the 29 powers that are
statutorily protected.
(17) to insure the property of the trust against
damage or loss and to insure the trustee against
liability with respect to third persons or
beneficiaries of the trust;
2:59:29 PM
MR. SIEGERT turned to slide 17, "Section 3," having to do with
the clarification of specific powers of trustees, and
paraphrased as follows [original punctuation provided]:
(b) A trustee may pay as a charge against trust
property the cost incurred to perform an action
authorized under (a) of this section
2:59:50 PM
MR. SIEGERT turned to slide 18, "Sections 25-28 (Definitions),"
changes in definition to accommodate new sections, and
paraphrased as follows [original punctuation provided]:
Sec. 25 - Changes definition to accommodate new subsections
of Definition
Sec. 26 - (b)(2) updates to include new legal term "power"
instead of authority. Deletes clarification of "trustee" to
agree with powers given in the proposal.
Sec. 27 - includes a revocable trust in definition of
"invaded trust"
Sec. 28 - Adds definition of beneficiary
3:00:43 PM
REPRESENTATIVE KOPP offered appreciation for the technical bill
and acknowledged the capacity of Alaska to be a vanguard for
setting up trusts in estates because it is a significant
industry in and of itself. He offered his understanding that
clean-up keeps the state in a leadership role, and asked when
the committee would hear from the Department of Law.
CHAIR CLAMAN advised the bill would not move today, and asked
that the Department of Law be available during the next bill
hearing.
CHAIR CLAMAN opened public testimony on HB 208.
3:02:36 PM
BETH CHAPMAN, Attorney, Faulkner Banfield, advised she has
practiced in estate planning and the special needs planning area
for the past 29 years, and supports HB 208. She pointed out
that not only will the legislation continue to improve Alaska's
laws in bringing trust business to the state, but it will also
help Alaskans. The decanting provisions, in particular, are
used quite frequently to help Alaskan families' correct trusts
and protect beneficiaries. These amendments continue to provide
flexibility and more opportunities to help their, mostly,
Alaskan clients, and respond to changed circumstances in a cost
efficient manner so that the court system was not involved, she
said. Oftentimes, these trusts are written when children are
young and may terminate at a certain age, and that child may
later develop disabilities or sometimes substance abuse
problems. These laws allow the correction of those trusts, to
make sure the funds stay in trust for the individual, provide a
safety net, and give their clients certainty that their families
will be cared for in the future.
3:04:07 PM
REPRESENTATIVE KREISS-TOMKINS asked Ms. Chapman to speak to the
nature of the trust industry in Alaska, the industries attracted
to the state with the most appealing statutory environment, the
attractiveness of Alaska to the industry, and the scope of the
industry relative to other states.
MS. CHAPMAN responded that the industry has been comprised of
various components since 1997, the financial industry, the trust
companies, and the financial institutions that receive the trust
funds required to be deposited in Alaska for non-residents to
use the trust laws. Since 1997, Alaska had been the premiere
jurisdiction and it was the first jurisdiction to start
modernizing trust laws, other states started to compete and the
states copied whatever was done in Alaska, in particular,
Delaware, South Dakota, and Nevada. Over the years, she said,
"we have tried to limit" how many times they go before the
legislature to seek modernization of these laws, and [due to
those efforts] other states leaped over [Alaska]. Several
rankings are provided, one was included in the materials
regarding decanting, and Alaska previously was at the top, but
it is no longer at the top. She said, "We are trying to strike
a balance" that will continue to attract those trusts to Alaska,
and also continue to ensure that Alaskans want to keep their
funds in Alaska because, she explained, similar to anyone,
Alaskans will look for the best laws for their particular
financial needs.
3:06:21 PM
REPRESENTATIVE KREISS-TOMKINS described that the notion of
modernizing laws was interesting and it suggested that the laws
are neutral and merely reacting to the changing financial
industry or evolving technologies. In the event his description
was correct, he asked whether the trust industry had considered
trying to get around the legislative process if the revisions
were merely technical, and whether it considered regulations
with a board. He then asked, if that was not the case, what the
points of pushback were, and why had not all 50 states adopted
laws appropriately modern.
MS. CHAPMAN reminded Representative Kreiss-Tomkins that she is
an attorney in private practice, and while she drafts trusts,
she is not part of the trust industry and was appearing today as
a private practitioner. The trust industry, whether it be the
Peak Trust Company or other trust companies in Alaska, are
regulated by regulation and one state department. She related
that when she first started practicing, the state did not have a
trust code and when she had a question she had to look to other
states to find the answer. She said, "What we are trying to do"
is create a statutory framework offering practitioners, clients,
and anyone using those laws, some certainty as to what they are,
with some standards. Other states are starting to also move
forward with new changes, she opined, as 22 states adopted the
decanting statutes, and Alaska was the second state in 1997.
Also, more and more states are moving toward the repeal of the
rule against perpetuity and states are looking to make it more
assessable for people to use trusts as part of their estate
plan, she explained.
3:09:44 PM
JONATHAN BATTMACHR, Attorney, advised he is a member of the New
York, California, and Alaska bar associations, and is currently
retired. He described HB 208 as "excellent" in that it will
help Alaska maintain its position as one of the premiere trust
jurisdictions in the country.
CHAIR CLAMAN, after ascertaining no one wished to testify,
closed public testimony on HB 208.
[HB 208 was held over.]
HB 175-US PRESIDENT ELECT. COMPACT: POPULAR VOTE
3:11:24 PM
CHAIR CLAMAN announced that the next order of business would be
HOUSE BILL NO. 175, "An Act ratifying an interstate compact to
elect the President and Vice-President of the United States by
national popular vote; and making related changes to statutes
applicable to the selection by voters of electors for candidates
for President and Vice-President of the United States and to the
duties of those electors."
3:12:22 PM
REPRESENTATIVE FANSLER introduced himself as prime sponsor of HB
175, the U.S. Presidential Election Compact, commonly referred
to as the "National Popular Vote."
3:12:44 PM
REPRESENTATIVE FANSLER advised that the purpose of the bill is
to get to the core value of "What does a vote mean?" He
described voting as a sacred right that many women and men
struggled to gain and fought hard and gave their lives to defend
this right, of which is held in the highest regard in this
country. With that highest regard, he said, most important is
that every vote is equal. Although, he noted, that right has
not always been held in that regard, but the nation is moving
more and more to the point where it wants that to be the case.
He reminded the committee that laws had been modified to allow
minorities and women the right to vote and, he described this as
just another step on that journey to make certain every person's
vote counts exactly the same.
REPRESENTATIVE FANSLER pointed out that the current electoral
college system favors swing states that are, essentially, 12
states that determine who is elected as the President of the
United States. Within that system, he commented, predominant
attention for the race for president is given to those 12
states, involving not only money, but attention to each state's
desires and issues. This bill, he pointed out, is "very, very,
much" meant to start a discussion as to that system, and related
that it is the belief of the compact organizers that every vote
should count equally toward determining who would be the
President of the United States, whether in Ohio or Alaska. This
bill ratifies a compact intended to grant the presidency to the
candidate who receives the most popular votes, rather than
counting vote's state-by-state. It is important to note, he
said, that currently it takes 270 electoral votes to win the
presidency, and this [compact takes effect when enough states
pass this compact with their electoral votes totaling 270.] He
explained that the states that sign on at that time will then,
rather than voting necessarily for how just the people in their
state vote, will vote how the national popular vote goes.
Currently, 10 states and the District of Columbia have ratified
this compact representing a total of 165 electoral votes, 15
states have passed the compact through one legislative body and,
he stressed that it is time for Alaska to start thinking about
this compact, which is why it was brought forward.
3:16:38 PM
REPRESENTATIVE FANSLER offered that a key issue important to
this vote is that Alaska, currently, holds a large seat at the
table when it comes to the nation. By far, he described, Alaska
is the greatest resource development state in the nation, it is
the reason the United States is considered an Arctic Nation, it
has 36 percent of all federal lands, and 40 percent of all
federally recognized tribes. Yet, rarely are those facts
brought up in a presidential election because to win the
presidency, the candidates need to cater to the 12 swing states.
By ratifying the National Popular Vote, Alaska can get on the
record with Alaskan values as part of that national picture. He
advised he believes in this compact because it increases
Alaska's count around the nation and, hopefully during the next
presidential election, candidates will speak to Alaska's issues,
such as, resource development, drilling in the Arctic National
Wildlife Refuge (ANWR), climate change affecting its villages,
and stressing the importance of Alaska's federally recognized
tribes moving forward. This compact stresses the importance to
each candidate to speak to Alaskan issues in order to win every
vote cast in this state, he pointed out.
3:18:55 PM
REPRESENTATIVE LEDOUX stated that she is not thrilled with the
electoral college system, but she has real problems with this
bill. She surmised that a significant portion of Alaska's
population could vote for one candidate, and because the states
of California and New York vote for another candidate, the votes
of Alaska would be for the candidate of New York and California
who received the most votes. She ask Representative Fansler,
why he doesn't change the system according to what the framers
anticipated and offer an amendment to the Constitution of the
United States to abolish the current system.
3:20:02 PM
REPRESENTATIVE FANSLER, in response to Representative LeDoux's
point regarding Alaska voting one way and the electoral votes
another way, countered that Alaska has statewide elections for
governor and federal senators and representatives. Alaska law
reads that every vote in Alaska counts and it does not partition
off votes district-by-district wherein a gubernatorial candidate
must win 21 out of the 40 house districts in order to be elected
governor. The office the country elects as a nation is the
Office of the President of the United States, and this bill is
saying to take the same idea Alaska uses to elect its governor
and spread that out to the entire nation, he explained.
REPRESENTATIVE FANSLER responded to Representative LeDoux's
point regarding an amendment to the Constitution of the United
States, and countered that to change and amend the constitution
is an "extremely monumental task." Quite honestly, he stated,
the nation has not had an amendment for quite some time, let
alone an attempt to amend the constitution since the 1970s.
This bill, he pointed out, allows a mechanism in which to obtain
the desired goal of a national popular vote, and at the same
time offers security because Alaska could "pull out if we wanted
to," he related. Representative Fansler offered a hypothetical
situation in which Alaska decided to enact this compact and move
forward, Alaska could then drop out before, or after, the
compact was ever initiated if the people of Alaska decided this
was not what they wanted, "or if we put in together a place
where we say the electoral college is something that, in the old
form, was much more beneficial to us." This compact provides an
additional safety net in which to make decisions, he expressed.
Furthermore, in the event the Constitution of the United States
was amended and abolished the electoral college system, it would
be just as difficult to turn around and re-amend it to add the
system back in, such as prohibition, he explained.
3:23:17 PM
REPRESENTATIVE LEDOUX noted that Representative Fansler was an
eloquent speaker, but she still wasn't convinced. As to
prohibition, she remarked, at one point people were fed up
enough with what they perceived as alcohol abuse to abolish the
use of liquor in this country and passed the amendment. Except,
she offered, prohibition turned out to not exactly work in the
manner people desired, so the amendment was repealed. She noted
her belief that the constitution is a document that should not
be easy to amend, and asked whether there had been a real
movement to amend the constitution to abolish the current
system.
3:24:47 PM
REPRESENTATIVE FANSLER commented that the electoral college had
been in dispute and debated since its inception, and its history
was brought up regarding the powers of large states versus small
states, and with regard to the Founding Fathers possibly not
trusting the wellbeing of the general populous to directly
elect, and the electoral college came about as a means of
compromise between the states as they were coming together.
Since that time, there have been constant debates as to whether
it should or should not be there, with movements to change the
constitution, and the prevailing thought appears to be whether
to maintain the status quo, or to try the National Popular Vote
and the flexibility of this compact, he offered.
CHAIR CLAMAN noted that the bill would not move today.
3:26:24 PM
REPRESENTATIVE KOPP referred to the statement that the 12
battleground states often determine the outcome of the election
with all of the focus on those states, and commented that by
going to a popular vote, the battlegrounds would be reduced to
11 states to get to the 270 electoral votes. The population
centers would then become the real focus and Alaska would be
even further left out. He offered that Representative Fansler
made a good argument against National Popular Vote when he
pointed out some of the unique features of Alaska that only the
people living here can appreciate with its diversity of
interests and, he commented, which is probably why direct peer
democracy up to the governor level is ideal. He stated that
Alaskans would never trust someone outside of Alaska to see
things in the same manner as Alaskans, and noted there are
issues many democrats, republicans, and independents in Alaska
agree on simply by virtue of living here and overreaching
policies are rarely fought. He commented that in getting away
from the current representative republic to a direct peer
democracy, this state would lose because, while it never comes
down to the state's two electoral votes, it probably would never
come down to the last Alaskan vote. He expressed fear that the
population centers, being 11 states, would become the focus of
all of the money garnered in Alaska's campaign funding, and
Alaska would be further irrelevant and more left out.
3:28:58 PM
REPRESENTATIVE FANSLER briefly answered that to be quite honest,
no one knows how this would change elections, but elections
would change because suddenly, every vote was in play, and which
ever candidate cobbled together 50.00001 percent of the votes
would win the presidency. Possibly, he said, a candidate would
go straight to these major cities, but possibly they would
actually start to speak directly to the issues of the states,
realizing that in order to win the 700,000 votes in Alaska, they
must speak to Alaska's issues and set up campaign headquarters
throughout the state, not just in Anchorage. Alaska typically
trends red, and California typically trends blue, and by
typically, he offered, he meant massively. Therefore, a red
voter in California may think it doesn't matter whether they
vote because the democrat will win, whereas under the National
Popular Vote, suddenly the typical color of a state doesn't
matter because every vote is important. Hopefully, he
commented, one of the nice byproducts of this [compact] is that
it will also drive up voter turnout, which everyone wants.
3:31:19 PM
BARRY FADEM, President, National Popular Vote, advised that he
has been the president of National Popular Vote since its
inception in 2005. He said he would quickly run through the
five benefits that accrue to Alaska if the National Popular Vote
passes. Under the National Popular Vote, the most dramatic
change for Alaskans is that every vote cast in Alaska counts
just as much as a vote cast around the country. An Alaskan
voter will know on election night when the news shows are
running the totals, their vote was including in the totals.
There will be a presidential campaign in all 50 states and under
the National Popular Vote, every vote in every state is equal.
He related that the organization could not guarantee that
presidential candidates or their surrogates would come to
Alaska, but there would be specific television and radio ads on
issues important to that state. In 2016, 94 percent of the
campaign visits were in 12 states. For the first time in
Alaska's history, he stressed, the state would actually be
participating in the presidential election and discussing issues
important to Alaska.
3:33:25 PM
MR. FADEM remarked that currently both national parties pump
millions of dollars into the 12 battleground states for
grassroots activities. Under the National Popular Vote in a 50
state campaign, it is expected that the national parties will
spread that money out and build a grassroots structure in all 50
states because every four years all 50 states would be
battleground states under the National Popular Vote. In 2012,
$2.1 million was raised by both parties in the State of Alaska,
and every cent of that money exported out to the 12 battleground
states. Under the National Popular Vote the money raised in
Alaska by both parties could actually stay in Alaska. As to an
emotional benefit, he said he guaranteed that no voter in Alaska
would ever go to the voting booth with the presidential election
already being decided. During the last 20 years, most of the
elections have been called by the media long before the polls
closed in California or Alaska, and under the National Popular
Vote, no winner would be declared until all of the votes in all
50 states had been counted. Thereby, allowing Alaskans to go to
the voting booth and the President of the United States had not
yet been determined.
3:34:52 PM
MR. FADEM noted that last year, two books were published and
documented that battleground states do better [during the term
of the president] than non-battleground states because [they
receive] 7 percent more in presidential controlled grants, and
twice as much in disaster relief. He pointed out that it is
difficult to attract the attention of the White House when
standing in line behind the 12 battleground states that will
receive the primary attention of the president, for the next
four years. The only reason for this bill today is that the
Founding Fathers gave citizens the exclusive right to make this
decision, and referred to the Constitution of the United States,
Article II, Section 1, and he paraphrased that it gave citizens
the exclusive right to make that decision. He reminded the
committee that the decision to make is, what system of awarding
Alaska's electoral votes is in the best interests of Alaska.
Now, he commented, contrast the current system wherein Alaska
has zero influence in the presidential election versus the
attributes he had described under the National Popular Vote.
3:36:12 PM
MR. FADUM, in response to Representative Kopp's previous
question, answered that Representative Kopp's point about the 11
states was interesting because that point would be true
currently, as opposed to the National Popular Vote. When
looking at the 11 largest states in the country, if everyone in
those 11 states voted for the same candidate, the big states
would control today, just as Representative Kopp argued
regarding the National Popular Vote, except, he pointed out,
that's not the real world. For instance, with regard to the 12
biggest states, he related that in 2004, six were red and six
were blue; and in 2016, seven were red and six were blue.
Therefore, the 12 biggest states do not guarantee a significant
margin for either political party. In 2004, when looking at the
12 largest states, the difference turned out to be 244,657
between Mr. Kerry and President Bush in the 12 biggest states,
although, a corollary to that was the big cities. He pointed
out that big cities, such as New York, Chicago, Los Angeles,
don't control elections today and they would not control it
under the National Popular Vote. The total population of the 50
largest cities in the country is 15 percent of the population of
America, and the 50th largest city is Arlington, Texas with a
population of 365,000. He suggested looking at the money in
terms of campaigning, the average cost per vote was as follows:
New York-$5.02; Los Angeles-$5.06; but the 25th largest median
market being Indianapolis-$0.04; and the 101th market being Fort
Smith, Arkansas-$0.03. Television ads and radio ads cost less
in rural areas of the country and in Alaska, and when
presidential campaigns calculate the fact that every vote counts
in all 50 states, candidates will campaign everywhere.
3:39:40 PM
REPRESENTATIVE KOPP asked whether he understood correctly that
the interstate compact that the National Popular Vote requires,
would be that each state would pledge its electoral votes to the
overall winner regardless of who its citizens voted. Therefore,
he related, the candidate running in Alaska is always
subservient to whoever wins nationally because the bottom line
is that if a state signs on to this, that state's vote is
subservient to the national will, and that where the electors
are going.
MR. FADUM offered that this is an issue of state identity and he
would not quite characterize it in the same manner as
Representative Kopp. He said, in a national election voters
care whether their candidate became the president, and state
identity, whether a state voted for their person as President of
the United States, is a footnote because voters care whether
their person won the presidency.
3:41:27 PM
REPRESENTATIVE KOPP commented that Mr. Fadum hit on the 20 mile
philosophical divide between them because the role of a state is
not a footnote. He argued that the states are the entities in
the constitution that elect the president, it is not a peer
democracy and "we do care" who we vote for as a state. He
remarked that possibly in California it is a footnote, but not
in Alaska.
3:42:02 PM
REPRESENTATIVE EASTMAN commented that in speaking for the
residents of his district, he did not know whether the promise
to bring more political ads to television was a winning point,
and possibly should not be considered one of the top five
points.
3:42:34 PM
REPRESENTATIVE KREISS-TOMKINS, in response to Representative
Kopp's comments, noted that there are two predominantly rural
states that already do exactly what "you are" describing. In
2016, he pointed out, Bruce Poliquin's Maine Congressional
District has a system of allocating electoral votes by
congressional district and the overall popular vote winner of
that state receives the two "electoral votes that are
represented by the senators cast its vote for Donald Trump,
whereas the other three electoral votes went for Hillary
Clinton." He explained that if someone voted for Hillary
Clinton in Maine, that voter saw one of their electors go the
other way, allegedly contrary to the will of that state. In
2008, the exact inverse occurred in Lee Terry's Nebraska
Congressional District regarding President Obama and Senator
McCain, so this system is already happening, he pointed out.
There is a logical jump that has to be made, and while he
appreciates how it appears, the overall point is that people
want a system that will vest and franchise the state in a
national political conversation. He remarked that it appears
blindingly clear that currently a political conversation is
directed to a dozen elite states, which is not in any state's
best interests, red or blue.
[HB 175 was held over.]
HB 170-AK SECURITIES ACT; PENALTIES; CRT. RULES
3:44:55 PM
CHAIR CLAMAN announced that the final order of business would be
HOUSE BILL NO. 170, "An Act relating to securities,
registration, exempt securities, exempt transactions, broker-
dealers, agents, investment advice, investment advisers,
investment adviser representatives, federal covered securities,
federal covered investment advisers, viatical settlement
interests, small intrastate security offerings, Canadian broker-
dealers, and Canadian agents; relating to administrative, civil,
and criminal enforcement provisions, including restitution and
civil penalties for violations; relating to an investor training
fund; establishing increased civil penalties for harming older
persons and vulnerable adults; relating to corporations
organized under the Alaska Native Claims Settlement Act;
amending Rules 4, 5, 54, 65, and 90, Alaska Rules of Civil
Procedure, and Rule 602, Alaska Rules of Appellate Procedure;
and providing for an effective date."
3:45:20 PM
REPRESENTATIVE LEDOUX moved to adopt Amendment 1, Version 30-
LS0333\J.2, Bannister, 4/10/17, which read as follows:
Page 34, lines 18 - 19:
Delete "by a governmental authority"
REPRESENTATIVE FANSLER objected for purposes of discussion.
3:45:28 PM
REPRESENTATIVE LEDOUX explained that the amendment deletes the
phrase "by a governmental authority" because, she opined, there
should be a description of any pending litigation action or
proceeding that materially affects the issuer's business or
assets, whether or not it was contemplated by a governmental
entity, or anyone.
REPRESENTATIVE FANSLER withdrew his objection.
3:46:11 PM
REPRESENTATIVE EASTMAN objected for purposes of discussion, and
noted that he was not sure he understood exactly how expansive
it would be when removing that language. He offered a scenario
of making a motion to change a bylaw for his political party,
and asked how he draws that barrier to make sure it's not too
expansive.
REPRESENTATIVE LEDOUX responded that if someone sent
Representative Eastman a letter that read, "Dear David, We're
going to sue you, and we're going to sue you for $1 million."
In that scenario, if Representative Eastman was a billion dollar
entity being sued for $1 million, possibly it would be no big
deal, but if $1 million was other than chump change to
Representative Eastman, it would materially affect his business
or assets.
3:47:13 PM
REPRESENTATIVE EASTMAN asked whether there was some other part
of this chapter that had the word "legal" before the word
"action" so that an action must be a legal action.
REPRESENTATIVE LEDOUX referred to the first portion of Sec.
45.56.310(b)(12). Securities registration by qualification,
which read as follows:
(12) a description of any pending
litigation, action, or proceeding ...
REPRESENTATIVE LEDOUX advised that this is boiler plate
language.
3:47:46 PM
REPRESENTATIVE EASTMAN withdrew his objection. There being no
further objection, Amendment 1 was adopted.
[CHAIR CLAMAN passed gavel to Vice Chair Fansler.]
3:48:06 PM
CHAIR CLAMAN moved to adopt Amendment 2, Version 30-LS0333\J.1,
Bannister, 4/11/17, which read as follows:
Page 1, line 5, following "agents;":
Insert "relating to protecting older and
vulnerable adults from financial exploitation;"
Page 62, line 12, following "a":
Insert "broker-dealer, investment adviser, or"
Page 62, line 14:
Following "the":
Insert "broker-dealer, investment adviser, or"
Delete "promptly"
Page 62, line 15, following "administrator":
Insert "not later than five days after the
broker-dealer, investment adviser, or qualified
individual develops the reasonable belief that the
financial exploitation or attempted financial
exploitation has or may have occurred, or is being
attempted, except that the broker-dealer, investment
adviser, or qualified individual shall notify adult
protective services and the administrator immediately
upon confirmation of the financial exploitation or
attempted financial exploitation of the covered adult"
Page 62, lines 16 - 19:
Delete all material and insert:
"(b) The requirements of (a) of this section may
not be construed to require more than one notification
for each occurrence of exploitation or attempted
exploitation."
Page 62, line 20, following the first occurrence of
"a":
Insert "broker-dealer, investment adviser, or"
Page 62, line 21, following "a":
Insert "broker-dealer, investment adviser, or"
Page 62, line 22, following "adult":
Insert "previously"
Page 62, line 23:
Following "adult,":
Insert "as well as any other person allowed under
state or federal law or regulation, or the rules of a
self-regulatory organization,"
Following the second occurrence of "the":
Insert "broker-dealer, investment adviser, or"
Page 62, lines 26 - 28:
Delete all material.
Reletter the following subsections accordingly.
Page 63, line 9:
Delete the second occurrence of "person"
Insert "individual"
Page 63, line 16:
Delete "results"
Insert "status"
Page 63, line 17, following "administrator":
Insert ", and provides additional status updates
to the administrator and adult protective services
upon request"
Page 63, line 18:
Delete "(e)"
Insert "(d)"
Page 63, line 31:
Delete "(e), (f), or (g)"
Insert "(d) or (e)"
Page 64, line 2:
Delete "person"
Insert "adult"
Page 64, lines 4 - 7:
Delete all material.
Reletter the following subsections accordingly.
Page 64, following line 18:
Insert a new subsection to read:
"(h) A broker-dealer, investment adviser, or
qualified individual acting in good faith and
exercising reasonable care under (a) - (g) of this
section is immune from administrative or civil
liability for a notification, disclosure, disbursement
delay, or record sharing under (a) - (g) of this
section."
Reletter the following subsections accordingly.
Page 65, line 12:
Delete "investment adviser,"
REPRESENTATIVE KOPP objected for purposes of discussion.
3:48:25 PM
KEVIN ANSELM, Director, Division of Banking and Securities,
Department of Commerce, Community & Economic Development,
explained that the Division of Banking and Securities worked
with the industry to create this amendment so the bill would
work better for its business practices, and was clearer for the
community. This amendment, in and of itself, protects elder and
vulnerable Alaskans by requiring the financial industry to
report when it believed that financial exploitation was about to
take place, or had taken place. It allows the financial
industry to hold onto a disbursement regarding a securities
trade, for instance, until it was determined there was, or was
not, exploitation, she explained. She noted that the two
reporting pieces include the Administrator of Securities,
Division of Banking and Securities, Department of Commerce,
Community & Economic Development (DCCED), and also the Adult
Protective Services (APS), Division of Senior and Disabilities
Services, Department of Health and Social Services. She offered
that in the event those reports are made, the industry, the
stockbroker, investment advisor, the advisor's firm, are granted
administrative and civil immunity from violation of the act.
Immunity is a large piece for industry, she described, and the
industry works together with the division to resolve the issue.
REPRESENTATIVE KOPP withdrew his objection. There being no
objection, Amendment 2 was adopted.
3:50:03 PM
CHAIR CLAMAN moved to adopt Amendment 3, Version 30-LS0333\J.4,
Bannister, 4/12/17, which read as follows:
Page 92, lines 13 - 15:
Delete ", a regulation adopted under this
chapter, or an order issued under this chapter, except
AS 45.56.550 or the notice filing requirements of
AS 45.56.330 or 45.56.445,"
Page 92, lines 16 - 18:
Delete "A person convicted of violating a
regulation or order issued under this chapter may be
fined, but may not be imprisoned, if the person did
not know of the regulation or order."
REPRESENTATIVE EASTMAN objected for purposes of discussion.
3:51:08 PM
CHAIR CLAMAN explained that Amendment [3] was in response to the
in-depth and extended discussion during the last bill hearing
with regard to criminal violations and issues. He reminded the
committee that the concerns expressed involved having a charge
that did not include a mental state, and questions about whether
it did, or did not, actually create a misdemeanor. During the
course of the discussions, the Department of Law offered a
potential amendment to delete [Sec. 45.56.670(a), page 92, lines
13-15] to read as follows:
(a) ... , a regulation adopted under this
chapter, or an order issued under this chapter, except
AS 45.56.550 or the notice filing requirements of AS
45.56.330 or 45.56.445.
CHAIR CLAMAN explained that deleting the language regarding
regulations and orders would not only be satisfactory with the
Department of Law, but it would make the last sentence of Sec.
45.56.670(a), lines 16-18 superfluous because it related to
regulations and orders. In adopting Amendment 3, he further
explained, the language would be more consistent with
traditional criminal provisions, and there would not be the
issue of regulations that might create a crime that the
legislature had not created.
3:52:38 PM
MS. ANSELM advised that the Department of Commerce, Community &
Economic Development has no objection to Amendment 3.
3:52:53 PM
REPRESENTATIVE EASTMAN asked the exact effect this amendment
would have on violations of notice filing requirements, and
whether that would increase the penalties for someone merely
making a notice filing requirement violation.
CHAIR CLAMAN opined that this narrows it, as opposed to the
range of regulations that could be issued that one would have to
show knowledge. Under this amendment, the only issue that could
be a basis for a criminal charge would be violations of the
statutes. He explained that when "they reference violates this
chapter" means Alaska Statutes within Chapter 45, and they would
have to show "knowing violation" of those statutes, rather than
violations of regulations or orders. It actually narrows the
scope of conduct that could be subject to criminal charges, he
said.
3:54:13 PM
REPRESENTATIVE EASTMAN noted that currently AS 45.56.330 and
45.56.445 include notice filing requirements, and they are
currently exempted because there is [page 92, line 14] "except
... or." In the event that exemption was removed, and those are
included within this chapter, he paraphrased, "A person who
intentionally violates this chapter, including these notice
filing requirements is guilty of a class C felony" [page 92,
lines 12-15]. He asked whether the intent of the committee is
that a simple notice filing requirement violation would now be a
felony under Amendment 3.
CHAIR CLAMAN related that he did not follow Representative
Eastman's question.
3:55:05 PM
REPRESENTATIVE KOPP asked, in explaining Representative
Eastman's question, the committee to turn to Sec. 46.56.550, and
he pointed out that it currently exempts this as being a felony,
and paraphrased, "filing of sales and advertising literature."
Under Amendment 3, he explained, it takes out this section
dealing with advertising to clients and the proper manner in
which to advertise. It also removes the filing requirements
under AS 45.56.330 and 45.56.445, as those are specifically
exempted from being felonies. Representative Eastman had asked
whether the intent of the committee was to now make those
felonies because the amendment pulls out the exceptions and by
default would fall into felony territory.
3:56:46 PM
RENEE WARDLAW, Assistant Attorney General, Commercial and Fair
Business Section, Department of Law, [audio difficulties]
responded that excluding the following language in the
amendment, and paraphrased, "except AS 45.56.550, or the notice
filing requirements of AS 45.56.330 or 45.56.445" means that a
violation of those statutes could result in a class C felony.
3:57:50 PM
REPRESENTATIVE LEDOUX commented that she agrees with
Representative Eastman and possibly with Ms. Wardlaw, although
she was unsure [due to audio difficulties]. Representative
LeDoux advised that she had to leave the meeting but would like
to see an amendment to Amendment 3.
REPRESENTATIVE FANSLER commented that there was no suggestion
from Ms. Wardlaw, other than her confirmation that
Representative Eastman's point was correct.
3:58:57 PM
REPRESENTATIVE KOPP moved to adopt Conceptual Amendment 1 to
Amendment 3, for the purpose of not "felonizing" conduct that
would become a felony, which is not currently a felony. In
order to be consistent moving forward, he suggested that this
amendment would keep everything as currently excepted from a
felony prosecution, the same as it is currently. In reference
to amending Amendment 3, to simply delete [page 1] line 3,
"except AS 45.56.550 or the notice filing requirements of AS
45.56.330 or 45.56.445."
REPRESENTATIVE FANSLER surmised that Conceptual Amendment 1 to
Amendment 3 deletes line 3, "except AS 45.56.550 or the notice
filing requirements of AS 45.56.330 or 45.56.445."
CHAIR CLAMAN noted he would like input from Ms. Anselm and Ms.
Wardlaw as to Conceptual Amendment 1.
MS. ANSELM commented that the Department of Commerce, Community
& Economic Development is fine with Conceptual Amendment 1, and
asked that Ms. Wardlaw speak to the conceptual amendment.
MS. WARDLAW advised that the Department of Law has no objection
to Conceptual Amendment 1.
CHAIR CLAMAN, as maker of the amendment, advised he has no
objection to Conceptual Amendment 1. He commented that,
interestingly, by deleting "the last sentence of the amendment,"
the committee was keeping that language in the bill.
Consequently, there was a bit of a mirror effect, but he had no
objection, he said.
REPRESENTATIVE FANSLER noted there being no objection,
Conceptual Amendment 1 to Amendment 3 was adopted.
4:02:03 PM
REPRESENTATIVE EASTMAN withdrew his objection to Amendment 3.
There being no objection, Amendment 3, as amended, was adopted.
[VICE CHAIR FANSLER returned the gavel to Chair Claman.]
4:02:36 PM
REPRESENTATIVE EASTMAN referred to Amendment 1, noting that the
committee removed the parameter that "contemplated as yet
unexecuted litigation actions or proceedings by a governmental
authority." He asked Ms. Wardlaw, whether it was clear, with
this amendment now going forward in the bill, exactly what types
of proceedings would be wrapped up in this which were not
previously included.
MS. WARDLAW responded that the amendment actually expands legal
proceedings beyond governmental agencies to include other
parties, and at this time the Department of Law has no objection
to Representative LeDoux's amendment.
REPRESENTATIVE EASTMAN clarified that his question was, what it
now includes because the word "contemplated" remains, which
means it has not yet happened. He asked what sorts of
contemplated things haven't happened yet, actions, proceedings,
and such, which now fall under the scope of this statute.
MS. WARDLAW answered that "contemplated" would be inclusive of
any proceedings that had not yet occurred, such as something
under consideration by "this agency," and was not yet at the
point of filing a complaint.
CHAIR CLAMAN referred to "governmental authority" and explained
that it was fairly common, especially in securities settings,
for an entity "regulated by these" to receive a letter from the
government advising the person they made some errors. The
government's "demand letter," or a private entity's demand
letter, serves as putting the person on notice that within 30,
60 days, or whatever time period, if the person had not fixed
the errors, the government may file civil or criminal action
with regard to the violation, or the private entity may file a
civil lawsuit. He explained that an entity must take
affirmative action in the form of the demand letter giving a
party notice that a lawsuit may be filed, in private as well as
public actions.
MS. WARDLAW advised that Chair Claman was correct.
4:07:23 PM
REPRESENTATIVE EASTMAN referred to [Sec. 45.56.670(a), page 92],
lines 16-17, and commented that it was simply saying that it is
any proceeding to which the issuer is a party. He said that the
issuer could be on either side of the action because it did not
appear to be limited in any manner. He then referred to line
18, and paraphrased, "any contemplated proceeding," and asked
whether the language here limits this so that it only applies
when the party is on the receiving end of a litigation action or
a proceeding was being contemplated. He further asked whether
it would not apply in a case not yet filed wherein someone was
going the other direction where proprietary information might be
involved, i.e., the fact that they are about to file the
lawsuit, and obviously if the lawsuit had not yet been filed
there was probably a reason.
MS. ANSELM responded "No, it does not affect that," and
explained that this is for a registration by qualification which
is used in many states. The intent, she explained, is that it
does not matter whether a party was on the receiving side or the
promulgation side of situation, it needs to be disclosed because
if a party is being sued or is suing another party, "it can
affect what the value of the securities are, and it should be
disclosed."
4:09:57 PM
REPRESENTATIVE EASTMAN asked, to whom this information would go
to and whether there was adequate protection that no proprietary
information would be disclosed to the detriment of the party.
MS. ANSELM answered that when registrations come in, until they
are final, are considered proprietary, and the issuers are
allowed to point out to the division which pieces are
proprietary. She offered that it would be kept confidential
until it couldn't be kept confidential any longer, and depending
upon the situation, it may not be approved for sale in the State
of Alaska due to problems with a registration.
REPRESENTATIVE EASTMAN questioned that if the information would
become public at some point, at what point does it become
public, and further questioned whether the fact that someone was
contemplating a lawsuit whether that would meet her
understanding of proprietary.
MS. ANSELM responded that "it would depend on what it was,"
typically, if there was a problem for the insurer in a
securities transaction, the issuer would withdraw the potential
offer of securities until the problem was resolved because that
is not something they want hanging out there. She pointed out
that investors, and the marketplace, do not like uncertainty;
therefore, the insurer would probably pull it back, get it
resolved, and then move forward. In the event it was a
sensitive matter, the insurer would ask the division to keep it
cloaked, and under the privacy pieces of the Securities Act, the
division can keep the information cloaked, or it can open an
investigation and cloak it in that manner.
REPRESENTATIVE EASTMAN asked whether it would be cloaked
indefinitely.
MS. ANSELM answered that it would be cloaked indefinitely for an
investigation because those investigatory records are not
disclosable.
4:12:16 PM
REPRESENTATIVE FANSLER moved to report HB 170, Version 30-
LS0333\J, as amended, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, HB 170(JUD) moved from the House Judiciary
Standing Committee.
4:13:36 PM
ADJOURNMENT
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 4:13 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB208 ver A 4.10.17.PDF |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Sponsor Statement 4.10.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Sectional Analysis ver A 4.10.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 PowerPoint Sectional 4.10.17.pptx |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Supporting Document-Decanting Matrix 4.10.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Supporting Document-Decanting Rankings 4.10.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Supporting Document-Trust Estate Glossary 4.10.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Supporting Document-Letter Peak Trust Company 4.10.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Supporting Document-Letter Manley & Brautigam 4.10.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Supporting Document-Letter ABA 4.10.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Supporting Document-Letter Northern Law Group 4.10.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB208 Fiscal Note LAW-CIV 4.7.17.pdf |
HJUD 4/10/2017 1:00:00 PM HJUD 4/12/2017 1:00:00 PM HJUD 4/14/2017 1:00:00 PM |
HB 208 |
| HB175 ver A 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 175 |
| HB175 Sponsor Statement 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 175 |
| HB175 Sectional Analysis ver A 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 175 |
| HB175 Additional Document-Legal Memo 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 175 |
| HB175 Supporting Document-Supplemental Information 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 175 |
| HB 175 Supporting Document-Letters of Support 4.11.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 175 |
| HB 175 Opposing Document-Letters of Opposition 4.11.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 175 |
| HB175 Additional Document-Letter on Congressional Consent 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 175 |
| HB175 Fiscal Note OOG-DOE 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 175 |
| HB170 ver J 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Sponsor Statement 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Sectional Analysis 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Repealers List 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 DCCED Whitepaper 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Supporting Document-Letter ANCSA Regional Association 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Supporting Document-Letter NASAA 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 HJUD Slide Presentation 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Additional Document-Enforcement Comparison Chart 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Additional Document-Sponsor's Reply to House Judiciary Committee Questions 4.11.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Additional Document-Violations in Statute 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Amendments #1-3 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Amendments #1-3 HJUD Final Votes 4.12.17.pdf |
HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Fiscal Note DCCED-DBS 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |
| HB170 Fiscal Note DHSS-SDSA 4.7.17.pdf |
HJUD 4/7/2017 1:00:00 PM HJUD 4/11/2017 5:30:00 PM HJUD 4/12/2017 1:00:00 PM |
HB 170 |