Legislature(2017 - 2018)BARNES 124
03/24/2017 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB144 | |
| HB86 | |
| HB170 | |
| HB132 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 170 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 144 | TELECONFERENCED | |
| += | HB 86 | TELECONFERENCED | |
| += | HB 132 | TELECONFERENCED | |
HB 170-AK SECURITIES ACT; PENALTIES; CRT. RULES
3:51:51 PM
CHAIR KITO announced that the next 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."
3:52:33 PM
KEVIN ANSELM, Director, Division of Banking & Securities,
Department of Commerce, Community & Economic Development
(DCCED), presented PowerPoint presentation "Alaska Securities
Act, HB 170" and reminded the committee that she had spoken to
the need to update the Alaska Securities Act in late January.
While a portion of the presentation may be a bit redundant, she
said she does not want to confuse anyone by leaving out any
steps.
3:53:08 PM
MS. ANSELM turned to slides 2-3, and explained the Securities
Act provides the legal framework for offering and selling
securities to Alaskans, including the registration of firms and
sales persons, registration or filing of securities, and
enforcement. Currently, the Securities Act also regulates the
Alaska Native Claims Settlement Act (ANCSA) Corporation and
shareholder proxy related provisions. Securities, she offered,
is the largest of the division's 12 programs and includes
registering and monitoring over 95,000 securities registered
salespersons, over 1,000 firms which are mostly out-of-state.
She referred to HB 170, [Sec. 45.56.900(32), page 103, lines 9-
31, and page 104, lines 1-8] and noted the definition of
security was not changed, it includes a long list of investments
including stocks, bonds, limited partnerships, investments in
common enterprises, investment contracts, and viaticals.
3:54:33 PM
MS. ANSELM turned to slide 4, and advised that HB 170 updates
the Alaska Securities Act by adopting many of the most recent
model act provisions while retaining the Alaska centric
provisions. The bill proposes to lift the Alaska Securities Act
out of the Native Claims Settlement Act, the ANCSA provisions,
which would highlight the vast differences between the programs
and allow ANCSA constituents a clear view of the applicable law.
Also, she explained, the bill's new provisions are included to
protect older and vulnerable Alaskans from financial
exploitation and give those investment professionals who make
those reports immunity from administrative and civil liability.
MS. ANSELM pointed out that currently, there is no provision in
the law regarding restitution, and the civil penalty is capped
at $25,000. The bill asks the legislature to designate civil
penalties funds toward consumer protection and education because
currently there is no requirement for continuing education of
industry professionals, and those provisions are included in HB
170.
3:56:02 PM
MS. ANSELM turned to slide 5, and reiterated that ANCSA
provisions remain unchanged under AS 45.55. The new statute
would be located under AS 45.56, the references to exempt ANCSA
securities transactions are also included in the new Act under
AS 45.56.210, Sec. 27.
MS. ANSELM turned to slide 6, pointed to the top four highlights
in HB 170, and advised as follows: the bill eliminates filings
for all Alaska-based exemptions from registration, except
crowdfunding; updates entity and law references; includes "bad
actor" disqualifiers (coughing) basically states that anyone
with certain types of crimes such as dishonesty or theft cannot
be licensed as an Alaska salesperson; and improves enforcement
and investor protection and education provisions.
3:57:27 PM
MS. ANSELM turned to slide 7, and explained the slide depicts
the general articles of the Alaska Securities Act. The first 14
pages of the bill would change the statute number and other
statutes that reference the Securities Act; and Secs. 15-24
repeal and modify statutes under AS 45.55 relating to the ANCSA
Corporations and proxy solicitations.
MS. ANSELM turned to slides 8-10, and reminded the committee
that the division does take enforcement actions: in FY2016, it
issued 36 final orders, and 17 of those orders were securities
related. She explained most of the division's orders are posted
online, and the division is in the process of making sure all of
its orders are posted "back to the beginning of time." In
calendar year 2016, the division issued 27 final orders, and 13
of those orders were securities related.
MS. ANSELM turned to slide 9, and explained some of the scams
and subsequent orders. Mr. Michael Scow took money from an
Alaskan for his Arizona-based insurance firm, wherein an order
for $25,000 was issued by the division, and Mr. Scow has not
paid the Alaskan or the division. She advised that when she
discussed the Fortune Oil and Gas scam during her testimony in
January, at that time the division was awaiting a court order.
She reminded the committee that people from Texas came to
Alaska, sold Alaskans approximately $3.1 million worth of
worthless limited partnerships. The division issued an order
for the maximum amount possible of $25,000, the judge agreed and
issued his order in March of 2016, granting $25,000 in civil
penalty on losses of $3.1 million. She commented, "We're out of
date." The SOS Disasterplan.com scam and the Troy Stafford and
Patrick Williams scam were two different sorts of scams, wherein
SOS Disasterplan.com had a website and issued approximately
$540,000 in worthless securities, again, with the maximum civil
penalty limit being $25,000. She related that it is the same
with Troy Stafford and Patrick Williams, except their scam was a
bit different because they were in Alaska and sold another
Alaskan a business opportunity with an employment opportunity in
a bogus Alaska company. Subsequent to the division speaking
with the two men, the men agreed to rescind and return the
money, except they did not return any money. She explained that
there are provisions in the new HB 170 that would resolve some
of those issues.
4:00:57 PM
MS. ANSELM advised that the Global Arena Capital Corp. is a New
York firm that found Mr. Burk, a retired halibut fisherman, on a
call list, called him at home, and sold him junk bonds. This
firm had advised Mr. Burk that he would make 16-18 percent,
except he did not. The division was able to get his money back,
but the maximum penalty was $25,000, she said.
4:01:40 PM
MS. ANSELM presented oral testimony from Mr. Burk who had since
passed, and noted that, ultimately, the case was settled.
[Mr. Burk's oral testimony 4:01:40 through 4:03:41. See pages
13-15 of the PowerPoint presentation for written testimony.]
4:03:41 PM
MS. ANSELM advised that the division took action against six
individuals and was able to get Mr. Burk's money back because it
found a salesperson with a conscience. Stronger tools are
necessary in order to deal with bad actors and this type of
fraudulent activity should make everyone in the state angry.
She then described Mr. Burk as angry and smart because when he
received another call from someone trying to sell him Bio-
Technology stock, he called the division, and it was able to put
another firm in a different state out of business and take away
its license. As far as fines, she reiterated, that the maximum
fine was $25,000, and the only way to hurt the firms that hurt
Alaskans is usually in the pocketbook. She stressed that it is
the division's hope the legislature help the division through
enacting the new Alaska Securities Act, HB 170.
4:05:00 PM
REPRESENTATIVE STUTES asked how the Alaska Native Claims
Settlement Act (ANCSA) Corporations feel about the separation.
MS. ANSELM responded that the corporations have advised they
have no objection to separating the statutes.
4:05:27 PM
REPRESENTATIVE KNOPP referred to the Troy Stafford and Patrick
Williams scenario, and asked how it falls under securities.
MS. ANSELM answered that the two men were selling the Alaskan
stock in a company and the gentleman would become part owner;
therefore, it was a common enterprise. She said that for a
while he was not directly involved in that enterprise, but part
of the fraud was that he would be a manager of the company.
REPRESENTATIVE KNOPP referred to slide 4 and the last two bullet
points, noting concern about the creation of an investor
education fund, and asked why it is the role of state agencies
to educate the public in investments. He referred to the last
bullet point requiring continuing education, and asked whether
it means the state is not providing the continuing education for
investment advisors. He further asked whether there are
investment advisors registered in Alaska who do not perform
continuing education.
4:07:21 PM
MS. ANSELM responded that as far as education, it is not
required in Alaska currently, and there are a number of
representatives that do not perform continuing education whether
they are stock brokers or investment advisors. The division
would like to be more synthesized with the rest of the nation,
and the division would require the continuing education and not
provide the continuing education. As to why the division would
want to have investor education, she responded that it is part
of the division's mission which read is to:
Protect consumers of financial services and promote
safe and sound financial systems. The division also
supports the department's mission, which is to:
Promote a healthy economy, support strong communities,
and protect consumers in Alaska.
MS. ANSELM explained that the division's mission is to protect
consumers of financial services, and promote safe and sound
financial systems. In supporting the department's mission, the
department is promoting a healthy economy, supporting strong
communities, and protecting consumers in Alaska. Therefore, she
said, when protecting consumers, they must be given the tools to
protect themselves, and the Investor Education Funds would be
set up so approximately one-third of the civil penalties could
be put into another account which would have consumer education
on the account. However, she noted, it would be at the
legislature's behest whether or not the funds would be spent on
consumer education because the legislature controls the budget.
Currently, consumer education is performed in partnership with
other states and sometimes federal organizations. The
Securities and Exchange Commission came to Alaska and performed
joint outreach events with the division for the military,
government workers, and the public. There have been joint-
"scam-jams" with the Department of Justice, U.S. Attorney's
Office, FBI, Better Business Bureau, and others to reach out to
the public so it knows what is going on and can be forewarned
and forearmed. She said that Alaska was able to use some
investor protection funds from the Investor Protection Trust,
which came from a settlement with some large stock brokerage
firms in the 1990s. Those funds are almost depleted, and Alaska
used those funds primarily to partner with AARP and perform a
series of instructive television shows on 360 North. The
instructive television shows were on various topics relating to
seniors and everyone in the state in order to understand how to
protect themselves when working with investments, knowing what
they needed to know about social security and other issues
affecting their livelihood. She said the division speaks in
schools, speaks at civic organizations, and will do pretty much
anything when it can advise people about how they can protect
themselves and hold onto their hard-earned money.
REPRESENTATIVE KNOPP acknowledged that Alaska's aging population
are targets, and as the economy tightens up people get creative.
4:11:31 PM
REPRESENTATIVE JOSEPHSON asked whether there was a draft of HB
170, or some type of reform in the [Twenty-Ninth Alaska State
Legislature].
MS. ANSELM responded that within the [Twenty-Ninth Alaska State
Legislature] House Bill 194 and Senate Bill 108 were similar to
HB 170, there were a couple of additions, including the
vulnerable adult provisions for reporting financial
exploitation.
4:12:15 PM
REPRESENTATIVE WOOL noted his surprise that the education
programs are performed through the Department of Health and
Social Services (DHSS) and asked Ms. Anselm to explain
navigating through the healthcare system, but also through
securities fraud. He asked whether the same people offer the
training on health issues and securities fraud.
MS. ANSELM explained that the new provision, protection for
vulnerable and older Alaskans, read that if there is a suspicion
of financial exploitation, a report is required to be filed with
the division or Adult Protective Services. She deferred to the
Division of Senior and Disabilities Services.
4:14:20 PM
DEB ETHERIDGE, Deputy Director, Central Office, Division of
Senior and Disabilities Services, Department of Health, and
Social Services (DHSS), opined that Representative Wool was
asking how the system responds to allegations of financial
exploitation currently.
REPRESENTATIVE WOOL said she was correct within the discussion
of investor education and prevention of fraud.
4:15:23 PM
MS. ETHERIDGE answered that the Division of Senior and
Disability Services oversees the adult protection unit, and the
authority and requirement in adult protection is to investigate
all allegations of financial exploitation. She explained there
are civil investigations, partnering with law enforcement if
there is a crime, but the adult protection unit also receives
reports of financial exploitation from a mandatory reporters or
citizens, family members, or neighbors. In the event the person
is deemed a vulnerable adult, through that reporting, the
division performs investigations and makes findings, and also
performs protective services. Oftentimes, she said, when the
division receives these reports the money has already been spent
and the division is actually cleaning up, and "this is an
opportunity to receive the reports prior to."
CHAIR KITO opened public testimony on HB 170.
[HB 170 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB170 DCCED Presentation 3.23.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 170 |
| HB170 Fiscal Note DHSS-SDSA 3.17.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 170 |
| HB170 Fiscal Note DCCED-DBS 3.13.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 170 |
| HB170 Repealers List 3.21.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 170 |
| HB170 Sectional Analysis 3.21.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 170 |
| HB170 Sponsor Statement 3.21.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 170 |
| HB086 ACPE Response HLAC 3.23.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 86 |
| HB141 DOLWD Response HLAC 3.10.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 141 |
| HB170 DCCED Whitepaper 3.20.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 170 |
| HB170 DCCED Presentation 3.23.17.pdf |
HL&C 3/24/2017 3:15:00 PM |
HB 170 |