Legislature(2015 - 2016)BELTZ 105 (TSBldg)
02/18/2016 01:30 PM Senate LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB18 | |
| SB158 | |
| SB141 | |
| SB108 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 136 | TELECONFERENCED | |
| *+ | SB 134 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 18 | TELECONFERENCED | |
| += | SB 158 | TELECONFERENCED | |
| += | SB 141 | TELECONFERENCED | |
| += | SB 108 | TELECONFERENCED | |
SB 108-AK SECURITIES ACT; PENALTIES; CRT. RULES
2:46:12 PM
VICE CHAIR GIESSEL announced the consideration of SB 108.
2:46:45 PM
KEVIN ANSELM, Director, Division of Banking and Securities,
Department of Commerce, Community and Economic Development
(DCCED), walked through the sectional analysis for SB 108. She
advised that in addition to the sectional analysis, she may
refer to the Alaska Securities Act, Penalties, Court Rules Table
of Contents that provides a guide of the significant changes to
the current law, and a side-by-side that compares the present
and proposed law section-by-section and gives specific
information in comparison to the existing Securities Act.
She clarified that references to the Uniform Securities Act of
2002 (USA) means the recent Uniform Act. The existing Alaska Act
is based on the 1956 Uniform Securities Act with a few revisions
since it was passed in 1959.
She reminded the committee that the statutory provisions are
reordered in SB 108 and will hopefully make it easier for
industry and investors to locate information.
SECTIONAL ANALYSIS of SB 108:
Article 1. General Provisions (pp. 1-2)
Sec. 45.56.105. Securities registration requirement -
same as current law (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. 2-17)
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 - generally the
same as 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 (including
crowdfunding).
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. 17-29)
Note: 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. Currently, a 10 day 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 interest 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.
2:55:40 PM
VICE CHAIR GIESSEL requested the definition of "viatical."
MS. ANSELM explained that it relates to a financial transaction
in which a company buys life insurance policies from the
terminally ill at less than face value. She noted that these
became popular during the AIDS epidemic
Article 4. Broker-dealers, Agents, Investment
Advisers, Investment Adviser Representatives, and
Federal Covered Investment Advisers. (pp. 29-54)
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 statute 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 were 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 files a
notification with the division. Allows an immediate
temporary effective registration with a new firm when
no new disciplinary information is 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. 54-56)
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.
3:05:42 PM
SENATOR STEVENS asked if it's difficult for a person to get
registered.
MS. ANSELM explained that they register both the securities and
the persons who sell them. Some securities are exempt and do not
need to be registered. For securities that are registered by
qualification, the division works with other states that have
the same security offering, offers comments and opines on
whether the disclosure is adequate. As far as determining
whether it is a good investment or not and whether the
investment has merit, the state of Alaska is not a merit state
but rather a full disclosure state. An investor has an
opportunity to look at the relevant information and determine
whether or not an investment is appropriate for them.
SENATOR STEVENS asked how Alaska compares to merit states and
how many have that classification.
MS. ANSELM recalled there are nine merit states, including
Washington and Oregon.
SENATOR STEVENS assumed it would be expensive for the division
to determine merit.
MS. ANSELM confirmed it would require more review of the
registration statements. This would require more background
checking than is done currently. Full disclosure doesn't require
a determination that the investment has merit. The division does
not do site visits, but does ask a lot of questions to obtain
full disclosure. She added that the test for a merit state is
fair, just and equitable.
SENATOR STEVENS expressed concern that Sec 220, Crowdfunding,
seems to open an entirely new field and questioned whether the
state wanted to get into this.
MS. ANSELM said she understands the concern; it's been expressed
in other states that have entered the Crowdfunding arena. She
said it's helpful that the Crowdfunding will be with Alaska-
based businesses so it will be easier to check backgrounds.
Depending on the Crowdfunding provisions that pass, there will
be an application procedure that requires full information on
the backgrounds of each of the control persons. The expectation
is that the division will be able to do a good job of discerning
that the proper disclosures have been made.
SENATOR STEVENS asked if the division will treat investment
opportunities for Crowdfunding differently than for other
investment opportunities.
MS. ANSELM said yes; the application process will be different
and deposits must be made in a financial institution that is
authorized to do business in the state. The banks also do a
vetting and the division will coordinate that information. She
added that it's relatively easy to check on people who are
residents of Alaska.
3:11:45 PM
Continuation of sectional analysis of SB 108:
Article 6. Administration and Judicial Review. (pp.
56-78)
Sec. 45.56.605. Administration - allows acceptance of
grants or donations for investor education and creates
a securities and investor education and training fund
with 33% of civil penalties received. Clarifies that
variable annuities are subject to both the Insurance
law and the Securities Act. (See also Article 7,
Section 2)
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. Jurisdiction - application of the law
to interstate or international transactions.
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.
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
Alaskan" (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 Alaskan" (person over 60
years old).
Sec. 45.56.660. Civil liability - outlines instances
where the seller is liable to the purchaser and
potential remedies (actual damages generally); 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 his or her 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.
3:19:19 PM
SENATOR MEYER asked if the industry had voice opposition to the
proposed changes.
MS. ANSELM said no, but consumers have said they'd like to have
stronger penalties. She noted cases pending now where the
penalties don't seem to fit the violations. For example, Fortune
Oil received about $4.2 million in fraudulent gains from
investors, many from Alaska, and the maximum penalty for that
enforcement action was $25,000.
Continuation of sectional analysis of SB 108:
Article 7. Miscellaneous and Additional General
Provisions. (pp. 78-109)
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 references to an agency of the United States is
also a reference to a successor agency. Senate Bill
108 Sectional Analysis January 25, 2016 Page 6
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 Alaskan - a person residing in the state
that is age 60 or older (from AS
47.26.290(6))
· Price amendment
· Record
· Self-regulatory organization
· Sign
Sec. 45.56.735. Short title. This chapter may be cited
as the Alaska Securities Act.
Sections 2 - 35 (pp. 89-109) include the corresponding
changes to statutes that refer to former AS 45.55
provisions that have been moved to AS 45.56.
SECTION 2 - SECTION 6 - Citations are modified to
reflect Chapter 45.56 in place of Chapter 45.55
references and terms are updated.
SECTION 7- SECTION 8 - Modifies AS 21.96 variable
annuity and viatical provisions.
SECTION 9 - SECTION 15 - Citations are modified to
reflect Chapter 45.56 in place of Chapter 45.55
references and terms are updated.
SECTION 16 - SECTION 25 - Modifies 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 26 - SECTION 28 - Citations are modified to
reflect Chapter 45.56 in place of Chapter 45.55
references and correct federal law references.
SECTION 29 - 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 - Amends indirect Court Rules relating to
changes in AS 45.56.
SECTION 31 - Allows the department to adopt transition
regulations to implement the Act.
SECTION 32 - Amends the law to effect transition and
application of AS 45.55 for existing proceedings,
existing rights and duties.
SECTION 33 - Reviser's instruction to rename AS 45.55
to Alaska Native Claims Settlement Act Corporations
Proxy Solicitations.
SECTION 34 - Conditional Effect. Certain of the
changes to the Securities Act will only take effect if
Court Rule changes in Section 24 is passed by two-
thirds majority vote of each the House and Senate.
3:24:41 PM
VICE CHAIR GIESSEL thanked Ms. Anselm for the overview.
SENATOR STEVENS said he needs to know more about Crowdfunding.
He asked, "Why is it in here? Who asked for it? Who needs it?
What are the negatives and positives? What are other states
doing?"
VICE CHAIR GIESSEL asked Ms. Anselm to forward the answers to
those questions to Chair Costello before the next hearing and
she will distribute them to members.
MS. ANSELM agreed.
3:25:42 PM
VICE CHAIR GIESSEL held SB 108 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 18 - Version H.PDF |
SL&C 2/18/2016 1:30:00 PM |
SB 18 |
| SB 18 - Fiscal Note.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 18 |
| SB 18 - Sponsor Statement.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 18 |
| SB 108 - Fiscal Note DCCED.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 108 |
| SB 108 - Fiscal Note DOA.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 108 |
| SB 108 - Testimony - R. Banks - Alaska Securitites Act Reform-Crowdinvesting.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 108 |
| SB 108 Sectional Analysis.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 108 |
| SB 141 - Fiscal Note.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 141 |
| SB 108.PDF |
SL&C 2/18/2016 1:30:00 PM |
SB 108 |
| SB 141 - Sectional Analysis.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 141 |
| SB 141 - Sponsor Statement.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 141 |
| SB 141.PDF |
SL&C 2/18/2016 1:30:00 PM |
SB 141 |
| SB 158 - Assoc. Realtor Letter.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 158 |
| SB 158 - Comparative Education Experience Other States.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 158 |
| SB 158 - Fiscal Note.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 158 |
| SB 158 - Real Estate Commission Letter.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 158 |
| SB 158.PDF |
SL&C 2/18/2016 1:30:00 PM |
SB 158 |
| Public Comment - Concerns with SB 158.pdf |
SL&C 2/18/2016 1:30:00 PM |
SB 158 |