Legislature(2015 - 2016)BELTZ 105 (TSBldg)
02/11/2016 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Crowdinvesting and Economic Development in Alaska | |
| SB126 | |
| SB108 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 126 | TELECONFERENCED | |
| *+ | SB 165 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 108 | TELECONFERENCED | |
SB 108-AK SECURITIES ACT; PENALTIES; CRT. RULES
2:37:56 PM
CHAIR COSTELLO announced the consideration of SB 108.
2:38:28 PM
At ease
2:39:04 PM
KEVIN ANSELM, Director, Division of Banking and Securities,
Department of Commerce, Community and Economic Development
(DCCED), provided information related to SB 108. She suggested
seeking information from two documents: a table of contents with
major points, and a document that compares the bill to the
changes made from the old bill.
2:40:45 PM
MS. ANSELM explained that SB 108 recognizes and incorporates
current securities industry terms and standards. She pointed out
that these have not been updated since the Model Act was
originally adopted in 1959. In 2014 several requirements for
filing for exemptions for friends and family investments were
deleted. The other big change was in 1999 after the 1996
National Securities Market Improvement Act.
She said the bill synthesizes with other states' laws to make it
easier for businesses, entrepreneurs, and investors to
understand their rights and responsibilities, and to expand
opportunities in Alaska. It opens crowdfunding opportunities to
Alaskans and deters investment scams. It enhances penalties
against those who harm older Alaskans, and it will separate
securities statutes from the Alaska Native Claims Settlement Act
(ANCSA) related statutes to reduce confusion and improve
understanding of both Acts.
MS. ANSELM addressed what the Alaska Securities Act does now. It
allows for the registration of securities, for the registration
of persons and firms that sell securities, and allows for
actions and penalties against those who would violate the law or
defraud Alaskans, or both.
She related that ANCSA provisions remain unchanged in AS 45.55,
including the enforcement and administration of related
securities laws. The securities provisions would move to AS
45.56. There are still references to exempt ANCSA securities
transactions included in AS 45.56.210(27).
She described the new logical, topical format of SB 108. It
outlines securities registration requirements, generally, covers
exemptions from the registration requirement, licenses firms and
salespersons, includes enforcement provisions, and adds new
definitions. She said it also eliminates filings for all
exemptions from registration, except rescission offers and
crowdfunding. It updates entity and law references, includes
"bad actor" disqualifiers, and improves enforcement and investor
education provisions and a way for funding them.
2:45:11 PM
MS. ANSELM said the bill has seven articles that related to the
Alaska Securities Act. Article 1 updates securities registration
requirements in language only. Article 2 deals with securities
exempt from registration and adds the crowdfunding provision -
small intrastate securities offerings. She related that the bill
contains language proposed by Senator Costello in House Bill 303
in 2013.
MS. ANSELM reported that Article 4 contains licensing
requirements for broker-dealers, agents, investment advisers,
investment adviser representatives, and federally covered
investment advisers. It also contains new registration
exemptions for mergers and acquisition brokers and "snow birds."
She related that Article 5 contains fraud and liability
provisions. The fraud provisions generally remain the same,
however, a qualified immunity clause has been added to protect
brokers from liability for defamation when they report true
information to the administrator regarding another person's
activities. She described it as a whistleblower protection.
2:48:15 PM
MS. ANSELM said Article 6 deals with the administration of the
Act. It allows for development and implementation of investor
education initiatives through collaboration and the legal
ability to accept grants or donations for that specific purpose.
It sets up an investor education fund with one-third of the
money received through civil penalties. The legislature may
appropriate the funds to support investor education and
training. Article 6 also provides for variable annuity
transactions with investors, subject to applicable provisions of
the Securities Act. She noted the department is in discussion
with insurance industry representatives to resolve their
concerns.
2:50:02 PM
MS. ANSELM turned to administrative, civil, and criminal
enforcement also contained in Article 6. The basic provisions
remain the same, although they are significantly reorganized and
expanded from current law, primarily in the area of increasing
civil penalties. Civil penalties are currently limited to $2,500
per violation and $25,000 per group. The bill proposes that
civil penalties be increased to $100,000 per violation with no
maximum limit per case. There would be treble damages when the
victim is an older Alaskan - a person 60 or older. Restitution
may be ordered by the administrator, and the superior court can
hold a person in violation of a final administrative order in
civil contempt, subject to a potential $100,000 fine per
violation.
2:51:32 PM
MS. ANSELM discussed civil enforcement and liability. She said
civil liability is separated from rescission (undoing a
transaction) and she described liability circumstances and
remedies. Salespeople who violate the Act are liable to their
clients, who may recover damages. The statute of limitations is
generally three years from the date of sale, unless there is
fraud, which extends it to five years.
2:52:08 PM
MS. ANSELM reported on rescission offers updates. The aggrieved
party has 30 days to accept a rescission offer. The offeror must
demonstrate the ability to pay. The rescission offer must be
delivered in a way that ensures receipt, and the offeror must
actually pay as promised.
She pointed out that criminal enforcement has increased
penalties. There is a five-year statute of limitations. For
certain provisions, "willful violation" is changed to "knowing
violations," which are Class C felonies, and the fine increases
from $5,000 to $100,000. She added that altering or destroying
evidence is a class C felony.
2:53:06 PM
MS. ANSELM highlighted the size of the securities industry in
Alaska. There are over 1,200 broker-dealers, about 765
investment advisers, and over 90,000 salespersons. There are
over 6,000 mutual fund/unit investment trust filings and 599
securities registrations filings. Alaska is a target state due
to its high per capita income.
2:54:53 PM
MS. ANSELM reported that there were 35 securities enforcement
actions in FY2015, 17 of which were securities related. She
provided an example of fraud totaling $3.2 million by a Texas
company. She noted that securities cases are posted on the
division's web page.
She said Article 7 adds new and updated definitions.
2:56:19 PM
MS. ANSELM concluded with the Division of Banking and
Securities' mission statement: "Protect consumers of financial
service and promote safe and sound financial systems." This
supports the department's mission: "Promote a healthy economy,
support strong communities, and protect consumers in Alaska."
CHAIR COSTELLO thanked Ms. Anselm and held SB 108 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 126.PDF |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 126 Sectional Analysis.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 126 - Fiscal Note.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| 2015.10.07 DCCED Background Document - Essence of Crowdfunding.pdf |
SL&C 2/11/2016 1:30:00 PM |
|
| SB 126 - Background Document - NASAA State Crowdfunding Legislation Index.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 126 - Background Document - NCSL Intrastate Crowdfunding Update 2015.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 126 - Background Document - Pew Charitable Trust Article - States Clear Way for Crowdfunding.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| SB 108 - Testimony - R. Banks - Alaska Securitites Act Reform-Crowdinvesting.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 108 |
| SB 126 - Sponsor Statement.pdf |
SL&C 2/11/2016 1:30:00 PM |
SB 126 |
| 2016.02.11 - Why Crowdfunding Matters Presenation – Michael Shuman.pdf |
SL&C 2/11/2016 1:30:00 PM |