03/14/2016 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB214 | |
| HB194 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 214 | TELECONFERENCED | |
| *+ | HB 313 | TELECONFERENCED | |
| += | HB 194 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 14, 2016
3:21 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Shelley Hughes, Vice Chair
Representative Jim Colver
Representative Gabrielle LeDoux
Representative Cathy Tilton
Representative Andy Josephson
Representative Sam Kito
MEMBERS ABSENT
Representative Mike Chenault (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 214
"An Act repealing the Workers' Compensation Appeals Commission;
relating to decisions and orders of the Alaska Workers'
Compensation Board; relating to superior court jurisdiction over
appeals from Alaska Workers' Compensation Board decisions and
orders; repealing Rules 201.1, 401.1, and 501.1, Alaska Rules of
Appellate Procedure, and amending Rules 202(a), 204(a) - (c),
210(e), 508(g), 601(b), 602, and 603, Alaska Rules of Appellate
Procedure; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 194
"An Act repealing and reenacting the Alaska Securities Act,
including provisions relating to exempt securities and
transactions; relating to registration of securities, firms, and
agents that offer or sell securities and investment advice;
relating to administrative, civil, and criminal enforcement
provisions, including restitution and civil penalties for
violations; allowing certain civil penalties to be used for an
investor training fund; establishing increased civil penalties
for harming older Alaskans; retaining provisions concerning
corporations organized under the Alaska Native Claims Settlement
Act; amending Rules 4, 5, 54, 65, and 90, Alaska Rules of Civil
Procedure; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 313
"An Act relating to the public construction contracts, including
the application of prevailing wage rates."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 214
SHORT TITLE: REPEAL WORKERS' COMP APPEALS COMMISSION
SPONSOR(s): REPRESENTATIVE(s) OLSON
01/19/16 (H) PREFILE RELEASED 1/8/16
01/19/16 (H) READ THE FIRST TIME - REFERRALS
01/19/16 (H) L&C, JUD
03/14/16 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 194
SHORT TITLE: AK SECURITIES ACT; PENALTIES; CRT. RULES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
04/13/15 (H) READ THE FIRST TIME - REFERRALS
04/13/15 (H) L&C, JUD, FIN
02/01/16 (H) L&C AT 3:15 PM BARNES 124
02/01/16 (H) Heard & Held
02/01/16 (H) MINUTE(L&C)
02/08/16 (H) L&C AT 3:15 PM BARNES 124
02/08/16 (H) -- MEETING CANCELED --
02/10/16 (H) L&C AT 3:15 PM BARNES 124
02/10/16 (H) <Bill Hearing Canceled>
02/12/16 (H) L&C AT 3:15 PM BARNES 124
02/12/16 (H) <Bill Hearing Canceled>
02/13/16 (H) L&C AT 10:00 AM BARNES 124
02/13/16 (H) <Bill Hearing Canceled>
03/14/16 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
LAURA STIDOLPH, Staff
Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of Representative Olson, Chair of
the House Labor and Commerce Standing Committee, sponsor,
introduced HB 214.
HEIDI DRYGAS, Commissioner
Department of Labor & Workforce Development
Juneau, Alaska
POSITION STATEMENT: Stated that the Department of Labor &
Workforce Development is in support of HB 214, and answered
questions.
ANDREW HEMENWAY, Chair
Workers' Compensation Appeals Commission
Division of Workers' Compensation
Department of Labor & Workforce Development
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
214.
NANCY MEADE, General Counsel
Office of the Administrative Director
Alaska Court System
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
214.
KEVIN ANSELM, Director
Division of Banking and Securities
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Summarized the changes from current law
proposed in HB 194.
ACTION NARRATIVE
3:21:12 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:21 p.m. Representatives Olson,
Colver, Tilton, Kito, Josephson, Hughes, and LeDoux were present
at the call to order.
HB 214-REPEAL WORKERS' COMP APPEALS COMMISSION
3:21:41 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 214, "An Act repealing the Workers' Compensation
Appeals Commission; relating to decisions and orders of the
Alaska Workers' Compensation Board; relating to superior court
jurisdiction over appeals from Alaska Workers' Compensation
Board decisions and orders; repealing Rules 201.1, 401.1, and
501.1, Alaska Rules of Appellate Procedure, and amending Rules
202(a), 204(a) - (c), 210(e), 508(g), 601(b), 602, and 603,
Alaska Rules of Appellate Procedure; and providing for an
effective date."
3:21:52 PM
LAURA STIDOLPH, Staff to Representative Olson, informed the
committee HB 214 would repeal the Worker's Compensation Appeals
Commission. The commission was established in 2005 to expedite
the worker's compensation appeals process; however, during the
past decade the commission has had a 50 percent decision
reversal rate, and the bill has been requested by the
commissioner of the Department of Labor & Workforce Development
(DLWD). She asked for the adoption of proposed Version E which
was provided in the committee packet.
3:23:06 PM
REPRESENTATIVE HUGHES moved to adopt the proposed committee
substitute (CS) for HB 214, Version 29-LS0854\E, Wallace,
2/24/16, as the working document.
CHAIR OLSON objected for the purpose of discussion.
3:23:29 PM
HEIDI DRYGAS, Commissioner, Department of Labor & Workforce
Development, said DLWD is in support of repealing the Workers'
Compensation Appeals Commission and returning the appeals
process to the courts. The commission was created to provide
expertise in Workers' Compensation cases, but since its
inception, nearly 50 percent of its decisions appealed to the
Alaska Supreme Court have been reversed. The commission serves
as an appellant court, but is comprised of lay commissioners and
although they are dedicated, they do not have the necessary
legal training. She has learned that the commissioners
contribute little to the legal analysis required, thus the
chairman must resolve legal issues and write the commission's
decisions; therefore, the decisions are not the work of a panel
with legal expertise and experience in Workers' Compensation,
which was the intent of the legislation. The bill would have
minimal impact on the public, and subsequent appeals would be
referred to the superior court as prior to 2005. The increase
in cases to the court system is estimated at 20-30 cases
statewide per year, which would be absorbed into the court
system.
REPRESENTATIVE HUGHES inquired as to the impetus for the
creation of the commission.
COMMISSIONER DRYGAS explained that the court system was slow
[processing appeals] and it was expected that the commission
would be faster. However, the commission is not significantly
more efficient, and accrues costs of approximately $400,000.
In response to Representative Hughes, she clarified that the
cost of the commission is $439,600 per year.
REPRESENTATIVE LEDOUX asked whether the commission primarily
decides in favor of workers or employers.
COMMISSIONER DRYGAS said she did not have that information.
3:28:14 PM
REPRESENTATIVE LEDOUX recalled that in 2005 the administration
thought that the courts were too worker-friendly, and the intent
was that the commission would not be as worker-friendly.
COMMISSIONER DRYGAS said her frustration with the process is
that an administrative decision is appealed to the Workers'
Compensation Board, and then to another administrative agency,
which is a "double layer that doesn't make a whole lot of sense
... and the way that the Workers' Compensation Appeals
Commission is set up right now, it is, it is essentially
dysfunctional."
REPRESENTATIVE KITO asked for the number of appeals submitted
from the board to the commission per year. He clarified that
his question related to the number of cases that would go to the
superior court if the commission was eliminated.
COMMISSIONER DRYGAS said over the course of 10 years, 342
decisions have been appealed to the commission; of those, 219
resulted in decisions, and 97 were appealed to the Alaska
Supreme Court.
REPRESENTATIVE KITO surmised that the state would not save
$439,000, because there would be a cost to the court system.
COMMISSIONER DRYGAS deferred to the court system.
REPRESENTATIVE COLVER asked for a description of the process
before 2005, and after 2005.
COMMISSIONER DRYGAS stated that a Workers' Compensation hearing
officer renders a decision, and either party can appeal to the
Workers' Compensation Board, whose members are appointed by the
governor and confirmed by the legislature. Before 2005, a
decision from the board could be appealed to the superior court,
then to the Alaska Supreme Court. Currently, an appeal after a
decision by the board goes to the appeals commission, bypassing
the superior court, and then to the Alaska Supreme Court.
REPRESENTATIVE LEDOUX, referred to before 2005, and asked
whether a decision from the board was for an appeal "as of right
to the superior court, or was it discretionary."
3:35:11 PM
ANDREW HEMENWAY, Chair, Workers' Compensation Appeals
Commission, Division of Workers' Compensation, Anchorage Office,
Department of Labor & Workforce Development, advised that both
before 2005 when the superior court heard appeals, and under
current law, when appealing to the Workers' Compensation Appeals
Commission it is an appeal "as of right," and is not
discretionary. He noted that the superior court was required to
hear the appeal, as is the Workers' Compensation Appeals
Commission. Similarly, he said, the appeal to the Supreme Court
was an appeal "as of right." Therefore, he offered, there is no
change in terms of the appellant's right to get a hearing.
REPRESENTATIVE LEDOUX questioned whether the appeal courts
address findings of fact, or rely upon the rulings of the
previous entity.
MR. HEMENWAY said there is no change in that regard; the
superior court was required to defer to the factual findings of
the board, and the commission is as well.
REPRESENTATIVE LEDOUX understood that the appeals commission -
composed of members who are not lawyers - has the responsibility
for making legal decisions.
MR. HEMENWAY said correct, although the commission chair is
required to be an attorney. He added that the proposed original
legislation called for three attorney members on the commission,
but the legislature changed the composition of the commission to
match that of the board.
3:38:39 PM
MS. STIDOLPH paraphrased from the following sectional analysis
of the proposed committee substitute for HB 214, Version E
[original punctuation provided]:
Section 1. Amends AS 23.30.005 by adding new
subsection to read: The board, in its administrative
capacity, shall make available the decisions and
orders of the board and the former Workers'
Compensation Appeals Commission. Decisions and orders
of the former Workers' Compensation Appeals Commission
are final and conclusive unless appealed to the Alaska
Supreme Court and shall stand instead of the order of
the board from which review was taken. Unless reversed
by the Alaska Supreme Court, decisions of the former
Workers' Compensation Appeals Commission have the
force of legal precedent.
Section 2. AS 23.30.107(b) removes language
referencing the Commission.
Section 3. AS.23.30.108(d) removes language
referencing the Commission.
Section 4. AS 23.30.108 (e) removes language
referencing the Commission.
Section 5. AS 23.30 is amended by adding a new section
to read: A decision or order of the board becomes
effective when filed in the office of the board under
AS 23.30.110 and becomes final when a party files a
petition, or a notice of appeal. Final order is not
subject to judicial review. A director may intervene.
A court shall award a successful party reasonable
costs.
Section 6. AS 23.30.155(f) removes statutory reference
to the powers and duties of the Commission and adds a
reference to the board in AS 23.30.126
Section 7. AS 39.50.200(b)(31) is amended to remove
language defining the Workers' Compensation Appeals
Commission.
Section 8. Repeal Rules 201.1, 401.1, and 501.1,
Alaska Rules of Appellate Procedure.
Section 9. Repeals statutes referencing the creation,
appointment of members, jurisdiction, powers and
duties of the commission, powers and duties of the
chair of the commission, administrative review,
appeals to the commissions, commission proceedings,
appointment of the members through OAH, appointment of
the chair.
Section 10. Changes the Alaska Rules of Appellate
Procedure by providing that appeals from the Alaska
Workers' Compensation Board can be brought in the
superior court.
Section 11. The Workers' Comp Appeals Commission
continues to function as they presently are until
December 1, 2016.
Section 12. Transitional Provisions - for appeals not
completed before December 2nd shall be automatically
transferred to the superior court. Appeals seeking
review of Workers' Comp Board decisions that haven't
been filed before May 31, 2016 must be filed in the
superior court before June 1, 2016. Before June 1,
2016 a party may file for review by the workers' comp
appeals commission, after June 1, 2016 a party files
for review in the superior court. Before November 1,
2016 a party may request reconsideration of a Workers'
Compensation Appeals Commission decision. After
November 1, 2016 a party may file an appeal with the
Alaska Supreme Court.
Section 13. Terms out commissioners on February 2,
2017.
Section 14. Conditional effect: this Act takes effect
only if secs. 8 and 10 of this Act receive a 2/3
majority vote of each house required by art. IV, sec.
15, Constitution of the State of Alaska.
Section 15. Effective date of June 1, 2016.
3:43:22 PM
REPRESENTATIVE COLVER referred to the chart entitled, "Alaska
Workers' Compensation Appeals Commission," provided in the
committee packet. He requested a brief abstract describing
types of appeal issues, possible trends, medical issues,
disability compensation, and decisions or resolutions that would
provide a "thumbnail sketch of what's going on." His experience
is that worker's compensation cases can be difficult to resolve.
CHAIR OLSON pointed out that the last column on the
aforementioned chart indicated 50 percent to 75 percent of the
cases going to the Alaska Supreme Court were unchanged.
REPRESENTATIVE LEDOUX asked for clarification of the chart.
3:46:43 PM
MR. HEMENWAY explained that the Alaska Supreme Court may dismiss
a case for several reasons, such as late filing or a settlement.
Also, a case can be remanded to the lower court if there are
questions, and vacated when laws have changed; these are
examples of when the court disposes of a case, but does not make
a decision on whether the appeals commission was correct, and
the case can make a reappearance. Affirmed, reversed, and
affirmed in part/reversed in part are cases in which the court
has issued a decision that addresses the merits of the appeals
commission's decision.
REPRESENTATIVE JOSEPHSON suggested that the Alaska Supreme Court
would hear all of the cases eventually, unless they are affected
by the statute of limitations.
MR. HEMENWAY said:
I wouldn't necessarily say that's the case. ... Most
of the cases that are dismissed, I'm sure well over
half, are dismissed because the parties have settled.
... Sometimes it might be that there's some, some
grounds on which the court shouldn't hear it, but a
dismissal for reasons other than ... the parties have
settled, is, is [a] relatively small number of cases.
The cases that are remanded or vacated, they're kind
of all over the place ....
3:50:50 PM
NANCY MEADE, General Counsel, Office of the Administrative
Director, Alaska Court System, advised that she has been working
with the bill sponsor who has incorporated some of her
suggestions in the proposed committee substitute. Ms. Meade
said the court system is neutral on the bill, and will implement
it upon passage. The court system's concerns are related to the
wording of the bill, so that the case law and interpretation
would easily transfer to the court system. Also, the court
system seeks to ensure that the cases are transferred in a form
conforming to the rules of the appellate court.
REPRESENTATIVE KITO asked Mr. Hemenway whether the ten pending
cases indicated on the chart are recent.
MR. HEMENWAY answered that the number of cases pending are: one
from 2011, one from 2013, two from 2014, and six from 2015.
REPRESENTATIVE COLVER asked Ms. Meade to comment on how appeals
cases affect the workload of the Alaska Supreme Court.
MS. MEADE responded that an average of 33 cases per year could
be absorbed by the superior court. Further, 10-15 cases could
be handled by the Alaska Supreme Court in the course of its
normal business, without adverse effects. In further response
to Representative Colver, she explained that in 2005, there was
a perceived lack of consistency in workers' compensation
decisions from the superior court. In order to set precedent, a
case would have to go to the Alaska Supreme Court because its
decisions bound the superior court and the board. One basis for
the change was the concept that moving to an expert commission
within DLWD would establish that its decisions would bind the
department, but the number of cases that were appealed after
2005 did not change. Therefore, the workload of the Alaska
Supreme Court would be not affected, but the workload of the
superior court judges would increase with difficult and complex
cases.
3:59:05 PM
REPRESENTATIVE HUGHES questioned whether the number of cases can
be seasonal.
MS. MEADE said no. The bill phases-in the cases coming to the
court from the commission during a certain period of time.
REPRESENTATIVE HUGHES observed that the number of cases before
the Alaska Supreme Court rose beginning in 2011, and questioned
why the ratio of appeals also increased beginning in 2010 and
2011.
MS. MEADE said she was unsure why more cases were appealed.
COMMISSIONER DRYGAS deferred to Mr. Hemenway.
MR. HEMENWAY noted that from 2005 to 2010, a higher number of
cases were appealed and decisions published; after 2010, there
was a decrease in the number of decisions published.
REPRESENTATIVE HUGHES restated her question.
MR. HEMENWAY observed that there was a new commission chair
appointed in 2010.
4:04:23 PM
CHAIR OLSON opened public testimony on HB 214. After
ascertaining that no one wished to testify, Chair Olson
announced that public testimony would remain open.
[HB 214 was held over.]
4:04:54 PM
The committee took an at ease from 4:04 p.m. to 4:07 p.m.
HB 194-AK SECURITIES ACT; PENALTIES; CRT. RULES
4:07:16 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 194, "An Act repealing and reenacting the Alaska
Securities Act, including provisions relating to exempt
securities and transactions; relating to registration of
securities, firms, and agents that offer or sell securities and
investment advice; relating to administrative, civil, and
criminal enforcement provisions, including restitution and civil
penalties for violations; allowing certain civil penalties to be
used for an investor training fund; establishing increased civil
penalties for harming older Alaskans; retaining provisions
concerning corporations organized under the Alaska Native Claims
Settlement Act; amending Rules 4, 5, 54, 65, and 90, Alaska
Rules of Civil Procedure; and providing for an effective date."
4:07:53 PM
REPRESENTATIVE HUGHES moved to adopt the proposed committee
substitute (CS) for HB 194, labeled 29-GH1060\E, Bannister,
3/11/16 as the working document. There being no objection,
Version E was before the committee.
4:08:12 PM
KEVIN ANSELM, Director, Division of Banking and Securities,
Anchorage Office, Department of Commerce, Community & Economic
Development, said she would discuss the changes to HB 194.
4:09:54 PM
The committee took an at ease from 4:09 p.m. to 4:10 p.m.
4:10:49 PM
MS. ANSELM paraphrased from the following brief sectional
analysis for the proposed CS for HB 194, Version E [original
punctuation provided]:
SECTIONS 1 - 14 (pp. 1-11) include the corresponding
changes to statutes that refer to former AS 45.55
provisions that have been moved to AS 45.56.
SECTIONS 15 - 24 (pp. 11-24) modify AS 45.55 as
necessary to delete references to statutes that have
no bearing on the Alaska Native Claims Settlement Act
corporations because of the enactment of AS 45.56.
SECTION 25 (p. 14) Proposed new Chapter AS 45.56
Article 1. General Provisions (pp. 14-15)
Sec. 45.56.105. Securities registration requirement -
same as current law (AS 45.55.070). Securities must be
registered before offer or sale unless federally
covered or specifically exempt from registration.
Article 2. Exemptions from Registration of Securities
(pp. 15-29)
Sec. 45.56.205. Exempt securities - generally the same
as current law (AS 45.55.900(a)) with a few additions
including securities issued by an insurance company;
certain options, warrants and rights that are not
federal covered securities; certain cooperatives and
equipment trust certificates.
Sec. 45.56.210. Exempt transactions - similar to
current law AS 45.55.900(b), reorganized with
additions reflecting transactions allowed under the
Uniform Securities Act of 2002 (USA).
Sec. 45.56.220. Small intrastate securities offerings
(referred to as "Crowdfunding") Allows Alaskans to
invest up to $5,000 per person, per offering, in an
Alaskan business. Businesses can raise up to $1
million per offering and requires a notice filing with
the state and certain investor disclosures and
protections. Sec. 45.56.230. Disqualifier - prohibits
persons who have been subject to regulatory action or
participated in certain crimes from using the
available exemptions from the registration
requirement.
Sec. 45.56.240. Waiver and modification - broadens the
administrator's authority to waive or change
requirements or conditions for exemptions.
Sec. 45.56.250. Denial, suspension, revocation,
condition, or limitation of exemptions - same,
although the appeal rights and hearing information is
moved to Article 6.
Article 3. Registration of Securities and Notice
Filing of Federal Covered Securities. (pp. 29-42) No
significant changes to registration provisions from AS
45.55. Material changes are noted by section.
Sec. 45.56.305. Securities registration by
coordination - registration statement must be on file
with the Administrator for 20 days unless reduced by
regulation. 10 days is the current requirement.
References to prompt notice by telegram are deleted.
Sec. 45.56.310. Securities registration by
qualification - adds a new requirement that filers
disclose pending litigation that materially affects
the issuer or litigation that is known to be
contemplated by governmental authorities.
Sec. 45.56.320. Securities registration filings -
allows the administrator to set escrow time by
regulation or order for certain securities issued to a
promoter or to other persons at a price substantially
less than the public offering price.
Sec. 45.56.330. Notice filing of federal covered
securities - allows imposition of late fees.
Sec. 45.56.340. Viatical settlement interests -
combines current AS 45.55.120 and AS 45.55.905(c) to
explain the joint regulation of these interests by the
Securities and Insurance statutes. Sec. 45.56.350.
Waiver and modification - administrator allowed waiver
authorities consolidated from other sections.
Sec. 45.56.360. Denial, suspension, and revocation of
securities registration - adds requirement to
establish regulations explaining what conduct may be
fraud upon purchasers; unreasonable discounts,
compensation, profits (including options, etc.) and
terms that are unfair, unjust or inequitable.
Article 4. Broker-dealers, Agents, Investment
Advisers, Investment Adviser Representatives, and
Federal Covered Investment Advisers. (pp. 42-66)
Firm, salesperson, and adviser registration
(licensing) provisions are reorganized into one
article, making it more user-friendly than current
law. Notable changes are listed below.
Sec. 45.56.405. Broker-dealer registration requirement
and exemptions - includes a new "snowbird exemption"
to facilitate ongoing broker-customer relationships
with customers who have established a second or other
residence and clarifies the number of transactions a
broker-dealer may effect annually (3) if not
registered in Alaska.
Sec. 45.56.410. Limited registration of Canadian
broker-dealers and agents - changed annual renewal to
December 31 from December 1.
Sec. 45.56.420. Registration exemption for merger and
acquisition broker - this new provision exempts
mergers and acquisitions brokers from registration
(licensing) requirements because these transactions
are typically between knowing parties with adequate
legal counsel and scrutiny. The exemption is not
available if the broker actually handles the
securities exchanged in the transaction or otherwise
represents an issuer or public shell company, or is
subject to Securities and Exchange Commission action.
Sec. 45.56.430. Agent registration requirement and
exemptions - the rewrite of this section includes a
statement of the types of business covered here
instead of in a definitional section.
Sec. 45.56.435. Investment adviser registration
requirement and exemptions - includes a new "snowbird"
exemption that matches the broker-dealer exemption in
Sec. 45.56.405.
Sec. 45.56.440. Investment adviser representative
registration requirement and exemptions - these
provisions mirror the broker-dealer agents in Sec.
45.56.430.
Sec. 45.56.445. Federal covered investment adviser
notice filing requirement - these provisions are not
separately stated in the current law.
Sec. 45.56.450. Registration by broker-dealer, agent,
investment adviser, and investment adviser
representative - combines provisions in current
statute and regulations and extends the automatic
registration from 30 to 45 days unless the
registration is denied.
Sec. 45.56.455. Succession and change in registration
of broker-dealer or investment adviser - clarifies
that an organizational change can generally be
completed by amendment instead of a new registration
(for instance a sole proprietorship moving to a
limited liability company).
Sec. 45.56.460. Termination of employment or
association of agent and investment adviser
representative and transfer of employment or
association - requires the registrant file a
notification with the division. Allows for an
immediate temporary effective registration with a new
firm when there is no new disciplinary information
added.
Sec. 45.56.465. Withdrawal of registration of broker-
dealer, agent, investment adviser, and investment
adviser representative - extends the effective date of
registration withdrawal up to 60 days and allows a
revocation proceeding to commence within one year.
Sec. 45.56.470. Filing fees - are established and may
be paid through a designee by regulation.
Sec. 45.56.475. Post registration requirements -
allows establishing continuing education by
regulation.
Sec. 45.56.480. Denial, revocation, suspension,
withdrawal, restriction, condition, or limitation of
registration - in addition to current provisions,
allows the administrator to bar registration and
includes actions taken by other regulators. Civil
penalty for registrants is increased from $2,500-
$10,000 per violation to up to $100,000 per violation.
Article 5. Fraud and Liabilities. (pp. 66-69)
Sec. 45.56.505. General fraud - same as current AS
45.55.010. Sec. 45.56.510. Prohibited conduct in
providing investment advice - allows administrator to
define prohibited conduct by regulation.
Sec. 45.56.520. Misleading filings - same as current
AS 45.55.160.
Sec. 45.56.530. Misrepresentations concerning
registration or exemption - same content as AS
45.55.170.
Sec. 45.56.540. Evidentiary burden - same content as
AS 45.55.900(c).
Sec. 45.56.550. Filing of sales and advertising
literature - same content as AS 45.55.150.
Sec. 45.56.560. Qualified immunity - registered
persons are not liable to other registered persons,
under state defamation laws, for statements contained
in disclosure records required to be filed with the
administrator for purposes of licensing and potential
discipline. This provision encourages full disclosure
to the administrator.
Article 6. Administration and Judicial Review. (pp.
69-89)
Sec. 45.56.605. Administration - allows the
administrator to develop and implement investor
education initiatives and accept grants or donations
for investor education.
Sec. 45.56.610. Administrative files and opinions -
requires the administrator keep records according to a
retention schedule and outlines publicly disclosable
documents.
Sec. 45.56.615. Public records; confidentiality -
clarifies and specifies record confidentiality.
Sec. 45.56.620. Uniformity and cooperation with other
agencies - expands opportunity for cooperation and
sharing with governmental units, regulatory
organizations for collaborative efforts including
regulation, enforcement and coordination to reduce the
burden of raising capital by small business.
Sec. 45.56.625. Securities investor education and
training fund - Creates a securities and investor
education and training fund within the general fund to
provide funds for investor education. 33% of the money
received in civil penalties may be used for investor
education and training if so appropriated by the
legislature.
Sec. 45.56.630. Service of process - same as current
AS 45.55.980.
Sec. 45.56.635. Applicability of the chapter - same as
current AS 45.55.980.
4:30:59 PM
REPRESENTATIVE JOSEPHSON returned attention to proposed Section
45.56.625 and asked whether licensees could pay for their
education and training, instead of the state, as do members of
the Alaska Bar Association.
MS. ANSELM said those who violate the Alaska Securities Act
should pay for investor education through one-third of the civil
penalties they are assessed, and that is the source of the
funds.
REPRESENTATIVE COLVER asked what is currently being collected in
fines.
MS. ANSELM advised that there are two kinds of securities cases:
consent orders result when the division negotiates with parties
in violation, and civil penalties are assessed; non-consent
securities fines imposed from 2012-2015, under the current law,
totaled $525,000. She noted that the maximum penalty for a
violation is currently $25,000; if the limit was removed, the
potential fines would total $7.7 million and $3.4 million in
restitution. In further response to Representative Colver, she
confirmed that the revised fines are part of the proposed
statute, which would increase the maximum from $25,000 for total
violations, to $100,000 per violation.
REPRESENTATIVE COLVER observed that the regulation changes and
increase in revenue are not reflected in the fiscal note
[document not identified].
MS. ANSELM stated that enforcement actions are unknown to the
division; in fact, there are times when few actions are taken,
thus revenue to the division is indeterminate.
REPRESENTATIVE COLVER suggested that if the fiscal note
reflected more revenue the legislature would be more amenable to
regulatory reform. The business community seeks less
bureaucracy and to increase productivity, and he encouraged the
legislature to support the business sector as the state heads
for "a bit of bad weather, and anything we can do to keep our
corporations healthy is, is something we need to be working on."
4:36:58 PM
MS. ANSELM agreed to further discuss the bill's fiscal note.
REPRESENTATIVE JOSEPHSON surmised that in addition to $100,000
per violation, through criminal proceedings the division could
recapture losses and collect restitution.
MS. ANSELM explained that it is difficult to collect any amount,
and she described three pending cases in the court system:
Fortune Oil and Gas, a Texas corporation, caused a loss to
Alaskan investors of over $3 million, and orders from the
division have been ignored; Global Arena Capital Corporation, a
New York firm, cold-called and pitched an investment to an
elderly resident who lost $16,000, and who only recovered
$10,000; two Alaskans formed a firm and collected $40,000 from a
fellow Alaskan for the new company, which subsequently
dissolved, and an agreement for rescission was reached, but the
investor was never paid.
4:42:45 PM
REPRESENTATIVE LEDOUX asked for an idea of how many "bad actors"
have money to pay the state or their victims, and how many are
judgement-proof.
MS. ANSELM answered that many are judgement-proof, but there is
money behind the three aforementioned perpetrators. In further
response to Representative LeDoux, she advised that civil
penalties are paid to the general fund and a provision in the
bill directs restitution to the investor, and penalties for
violations to the state. Ms. Anselm returned to the sectional
analysis [original punctuation provided]:
Sec. 45.56.640. Regulations, forms, orders,
interpretative opinions, and hearings - combines
existing AS 45.55.950 and 45.55.970 and clarifies that
GAAP compliant financial statements may only be
required as allowed by federal law.
Sec. 45.56.645. Investigations and subpoenas - similar
to existing AS 45.55.910 and allows broader
cooperation with other regulators.
Sec. 45.56.650. Administrative enforcement - time for
a respondent to make a request for hearing after an
action is taken is extended from 15 days to 30 days.
Civil penalties are increased from $2,500 for a single
violation and $25,000 for multiple violations to a
maximum of $100,000 for a single violation with no cap
for multiple violations. If a victim is an "older
person" (a person over 60 years old), the respondent
is subject to treble damages. Restitution and actual
costs of investigation may be ordered. The
administrator may deny the use of securities
exemptions under Article 2 and registration
(licensing) exemptions under Article 4 if a person
violates the Act. The administrator may petition the
Superior Court to enforce a final order and the Court
may hold a person in contempt for violating an order
of the administrator, punishable by up to $100,000 per
violation, in addition to any administrative penalties
that were originally assessed.
Sec. 45.56.655. Civil enforcement - the administrator
may seek remedies such as asset freezes, an order of
rescission, restitution, and civil penalties of up to
$100,000 per violation, and all damages may be trebled
if the victim is an "older person" (person over 60
years of age).
Sec. 45.56.660. Civil liability - outlines instances
where the seller is liable to the purchaser and
potential remedies (actual damages including interest
as determined by the court); also describes instances
where the buyer may be liable to the seller. Sec.
45.56.665. Rescission offers - outlines the rescission
offer process, including a new requirement that the
offeror must demonstrate the ability to pay and then
actually pay as promised.
Sec. 45.56.670. Criminal enforcement - knowing
violations of the Act and fraud are punishable as
class C felonies punishable under AS 12.55.125.
Unknowing violations are punishable as class A
misdemeanors and fine of not more than $100,000.
Individuals who alter or destroy evidence are guilty
of a class C felony and a fine of not more the
$500,000 or both.
Sec. 45.56.675. Judicial review - appellants have 30
days to request review of a final order.
4:49:01 PM
REPRESENTATIVE LEDOUX returned attention to proposed Section
45.56.670 [text previously provided] and asked for an example of
an unknowing violation.
MS. ANSELM explained that if a person can prove that they were
unaware of securities laws, even when they should have been
aware, a lesser fine is assessed. She returned to the sectional
analysis [original punctuation provided]:
Article 7. Miscellaneous and Additional General
Provisions. (pp. 89-100)
Sec. 45.56.710. Reimbursement of expenses incident to
examination or investigation - same as AS 45.55.915.
Sec. 45.56.720. Electronic records and signatures -
facilitates filing of electronic records and
signatures. Consumers must consent and have the option
to withdraw such consent.
Sec. 45.56.730. References to federal statutes - a
list of all federal statutes referenced in the Act.
Sec. 45.56.740. References to federal agencies - notes
that a reference to an agency of the United States is
also a reference to a successor agency.
Sec. 45.56.900. Definitions.
- Updates federal citations
- New definitions include:
- Disqualifier
- Filing
- Institutional investor (reflects federal law)
- Insurance company
- Insured
- International Banking Institution
- Offer to purchase
- Older person - a person that is age 60 or older
(from AS 47.65.290(6))
- Price amendment
- Record
- Self-regulatory organization
- Sign
Sec. 45.56.995. Short title. This chapter may be cited
as the Alaska Securities Act.
SECTIONS 26 - 28 (pp. 101-105). Citations are modified
to reflect Chapter 45.56 in place of Chapter 45.55
references; federal law citations are updated.
SECTION 29 (p. 105) - Repeals statutes that are no
longer needed in AS 45.55 because they do not apply to
Alaska Native Claims Settlement Act corporation proxy
solicitations.
SECTION 30 (p. 105) - Amends indirect Court Rules
relating to changes in AS 45.56.
SECTION 31 (pp. 105-106) - Allows the department to
adopt transition regulations.
SECTION 32 (pp. 106-107) - Amends the law to effect
transition and application of AS 45.55 for existing
proceedings, existing rights and duties.
SECTION 33 (p. 107) - Reviser's instruction to rename
AS 45.55 to Alaska Native Claims Settlement Act
Corporations Proxy Solicitations and Initial Issuance
of Stock.
SECTION 34 (p. 107) - Conditional effect of certain
provisions upon constitutionally required vote of each
house. SECTION 35 - July 1, 2016 effective date.
4:54:06 PM
REPRESENTATIVE LEDOUX returned attention to proposed Section 45.
56.305 [text previously provided], and asked whether email was
substituted for prompt notice by telegram.
MS. ANSELM said yes.
REPRESENTATIVE LEDOUX directed attention to proposed Section
45.56.310 [text previously provided] and recalled a proposed
change that would require disclosure of any litigation, whether
or not contemplated by a government authority.
MS. ANSELM agreed to make this change.
REPRESENTATIVE LEDOUX directed attention to proposed Section
45.56.560 [text previously provided], and confirmed that
qualified immunity would not be granted if there is reckless
disregard of the truth, or a known untruth.
MS. ANSELM said absolutely.
REPRESENTATIVE JOSEPHSON directed attention to proposed Section
45.56.670 [text previously provided], and asked whether there
are [Alaska Statutes] Title 11 crimes that could be filed in
addition to the class C felony in the proposed statute.
MS. ANSELM deferred to the Department of Law.
REPRESENTATIVE JOSEPHSON surmised that the impetus for the
proposed bill was that the pertinent legislation was outdated,
and asked whether HB 194 was based on a model.
MS. ANSELM said the bill is a combination of a 2002 model act,
modifications from other states, experiences in Alaska, and an
increase in investor protection.
[HB 194 was held over.]
5:00:00 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:00 p.m.