Legislature(2017 - 2018)BELTZ 105 (TSBldg)

04/17/2018 09:00 AM JUDICIARY

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Moved SCS CSHB 307(JUD) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
        HB 170-AK SECURITIES ACT; PENALTIES; CRT. RULES                                                                     
10:06:20 AM                                                                                                                   
CHAIR COGHILL  announced the consideration  of HB 170.  [SCS CSHB
170(L&C) was  before the committee.]  He noted who  was available                                                               
to answer questions.                                                                                                            
10:07:29 AM                                                                                                                   
REPRESENTATIVE SAM  KITO III,  Alaska State  Legislature, Juneau,                                                               
Alaska,  Chair of  the House  Labor and  Commerce Committee  that                                                               
sponsored  HB  170,  stated  that the  bill  updates  the  Alaska                                                               
Securities  Act  and provides  the  legal  framework for  selling                                                               
securities  in Alaska  to Alaskans.  It  includes provisions  for                                                               
crowdfunding,  registration   of  securities  and   sales  force,                                                               
enforcement actions for violating  the Alaska Securities Act, and                                                               
education.  It  ensures  that  Alaska  is  keeping  up  with  the                                                               
securities industry.                                                                                                            
10:08:37 AM                                                                                                                   
CHRYSTAL  KOENEMAN, Staff,  Representative Sam  Kito III,  Alaska                                                               
State  Legislature,  Juneau,  Alaska,  stated  that  the  current                                                               
Alaska Securities  Act has been in  place since 1961. The  Act is                                                               
out of date and includes  provisions for things like notification                                                               
by  telegraph. The  bill also  separates the  securities statutes                                                               
from  the  Alaska  Native  Claims   Settlement  Act  and  related                                                               
statutes to facilitate a better  understanding of each. It deters                                                               
investment scams  using Alaska entities  or harming  Alaskans. It                                                               
helps  protect   older  and  vulnerable  adults   from  financial                                                               
exploitation  and  requires  financial  professionals  to  report                                                               
suspected exploitation and gives them immunity.                                                                                 
10:10:26 AM                                                                                                                   
KRISTY  NAYLOR,   Acting  Director,   Division  of   Banking  and                                                               
Securities,  Department  of   Commerce,  Community  and  Economic                                                               
Development  (DCCED), Anchorage,  Alaska, stated  that HB  170 is                                                               
important to the  operation of the division,  to their regulation                                                               
of  securities in  Alaska, and  to Alaskan  consumers. She  noted                                                               
The  bill updates  the  1961  law to  better  align with  current                                                               
industry practices.  Most importantly,  it enhances  the consumer                                                               
protection and enforcement provisions in current law.                                                                           
HB 170  is about protecting  consumers and  effectively punishing                                                               
bad actors who prey on  Alaskans. The existing low administrative                                                               
civil and criminal  penalties are so insufficient they  are not a                                                               
deterrent  but  rather are  seen  by  some  as  a cost  of  doing                                                               
business.   The   bill   solves  this   problem   by   increasing                                                               
administrative civil  and criminal  penalties for those  who harm                                                               
Alaskans,  especially  vulnerable   adults  and  seniors.  Recent                                                               
investigations  of fraud  have involved  millions  of dollars  in                                                               
losses  yet  current  enforcement   provisions  allow  a  maximum                                                               
penalty of just $25,000 per  violation. The new law increases the                                                               
penalty up to $100,000 per violation  and more if the victim is a                                                               
senior or  vulnerable adult  and allows the  division to  bar bad                                                               
actors  from  the securities  industry  in  Alaska. The  division                                                               
could  order restitution  for victims  and  brokers and  advisors                                                               
would be  required to report suspected  financial exploitation to                                                               
both  the  Division  of  Banking  and  Securities  and  to  Adult                                                               
Protective  Services. She  cited examples  of recent  and ongoing                                                               
cases   to  demonstrate   the  need   for   enhanced  tools   for                                                               
enforcement, penalties, and consumer protections.                                                                               
10:16:50 AM                                                                                                                   
CHAIR  COGHILL  asked  if   the  Alaska-specific  provisions  are                                                               
readily identified.                                                                                                             
MS.  NAYLOR said  80-90  percent  of the  bill  is  based on  the                                                               
Uniform Securities  Act. The existing  Alaska-specific provisions                                                               
were  retained,  but  since  more   were  added  they  took  that                                                               
opportunity to rearrange the Act to make if more user friendly.                                                                 
10:18:12 AM                                                                                                                   
BRIAN PINKSTON, Owner, Bright  Road Wealth Management, Anchorage,                                                               
Alaska, stated  that as  a member of  the securities  industry he                                                               
supports  further regulation.  He spends  time every  day helping                                                               
clients work through things they  bought and don't understand. It                                                               
is important  to have stronger criminal  protections for seniors,                                                               
especially those  with diminished capacity. This  is relevant for                                                               
Alaska  because  Alzheimer  cases   in  Alaska  are  expected  to                                                               
increase  54.9  percent  by  2025.  The  Alzheimer's  Association                                                               
reports that Alaska is number one  in the nation for seniors with                                                               
10:21:36 AM                                                                                                                   
DAVID GOTTSTEIN, President and  Chief Investment Officer, Dynamic                                                               
Capital Management Inc., Anchorage,  Alaska, said he was speaking                                                               
in  support of  HB  170 and  wanted to  applaud  the Banking  and                                                               
Securities Division for  advancing the proposal. He  said a large                                                               
portion of  the securities industry  operates at the  most modest                                                               
fiduciary standard so it's important  to have strong penalties in                                                               
place  to  protect  investors when  those  modest  standards  are                                                               
broken.  Every year  big investment  institutions  are fined  for                                                               
their misconduct but the individuals  who offered the poor advise                                                               
aren't penalized.  It's the shareholders  that pay  the penalties                                                               
so it's  important to  have these  tools in  the toolbox  for the                                                               
banking and securities regulators to push back.                                                                                 
MR.  GOTTSTEIN  said he  was  pleased  that  the bill  keeps  the                                                               
existing exemptions that makes it  easier for small businesses to                                                               
start and raise capital. He  also applauds the efforts to protect                                                               
the elderly because this is a growing and important area.                                                                       
CHAIR  COGHILL asked  Ms. Naylor  to be  prepared to  discuss the                                                               
Alaska-specific provisions at the next hearing.                                                                                 
10:25:16 AM                                                                                                                   
SENATOR   COSTELLO  highlighted   that   the  previous   division                                                               
director, Kevin Anselm,  worked very hard on this  bill. She said                                                               
she  considers it  the  unsung  hero of  the  session. It's  been                                                               
through the process  before but there are  compelling reasons for                                                               
giving it a thorough vetting.                                                                                                   
10:26:08 AM                                                                                                                   
CHAIR COGHILL held HB 170 in committee for future consideration.                                                                

Document Name Date/Time Subjects
HB 355 - Letter of Support - Alaska Fire Chiefs.pdf SJUD 4/17/2018 9:00:00 AM
HB 355
HB 355 - Letter of Support - Kenai Peninsula Borough.pdf SJUD 4/17/2018 9:00:00 AM
HB 355
HB 355 - Sponsor Statement.pdf SJUD 4/17/2018 9:00:00 AM
HB 355
HB 355 - Sectional Summary (ver. O).PDF SJUD 4/17/2018 9:00:00 AM
HB 355
HB 355 - Letter of Support - DOF.pdf SJUD 4/17/2018 9:00:00 AM
HB 355
HB 355 - Supporting Document - DOF One-Pager.pdf SJUD 4/17/2018 9:00:00 AM
HB 355
HB 170 - Supporting Document - NASAA.PDF SJUD 4/17/2018 9:00:00 AM
HB 170
HB 170 - Supporting Document - ANCSA.pdf SJUD 4/17/2018 9:00:00 AM
HB 170
HB 170 - Sponsor Statement.pdf SJUD 4/17/2018 9:00:00 AM
HB 170
HB 170 - Supporting Document - Repealers.pdf SJUD 4/17/2018 9:00:00 AM
HB 170
HB 170 - Summary of Changes (ver. O to ver. R).PDF SJUD 4/17/2018 9:00:00 AM
HB 170
CS for HB 307 - Version U.PDF SJUD 4/17/2018 9:00:00 AM
HB 307
HB 307 - Sectional Summary (ver. U).pdf SJUD 4/17/2018 9:00:00 AM
HB 307
HB 307 - Explanation of Changes (ver. J to ver. U).pdf SJUD 4/17/2018 9:00:00 AM
HB 307