Legislature(2017 - 2018)GRUENBERG 120

04/07/2017 01:00 PM JUDICIARY

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Audio Topic
02:08:17 PM Start
02:09:05 PM HB170
03:21:52 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 30 Minutes Following Session --
+ HB 170 AK SECURITIES ACT; PENALTIES; CRT. RULES TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE JUDICIARY STANDING COMMITTEE                                                                             
                         April 7, 2017                                                                                          
                           2:08 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Matt Claman, Chair                                                                                               
Representative Jonathan Kreiss-Tomkins                                                                                          
Representative Gabrielle LeDoux                                                                                                 
Representative David Eastman                                                                                                    
Representative Chuck Kopp                                                                                                       
Representative Lora Reinbold                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Zach Fansler, Vice Chair                                                                                         
Representative Charisse Millett (alternate)                                                                                     
Representative Louise Stutes (alternate)                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
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."                                                                                                                
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 170                                                                                                                  
SHORT TITLE: AK SECURITIES ACT; PENALTIES; CRT. RULES                                                                           
SPONSOR(s): LABOR & COMMERCE                                                                                                    
                                                                                                                                
03/10/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/10/17       (H)       L&C, JUD                                                                                               
03/24/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/24/17       (H)       Heard & Held                                                                                           
03/24/17       (H)       MINUTE(L&C)                                                                                            
03/27/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/27/17       (H)       Moved HB 170 Out of Committee                                                                          
03/27/17       (H)       MINUTE(L&C)                                                                                            
03/29/17       (H)       L&C RPT 6DP 1NR                                                                                        
03/29/17       (H)       DP:   SULLIVAN-LEONARD,  STUTES,   WOOL,                                                               
                         JOSEPHSON, BIRCH, KITO                                                                                 
03/29/17       (H)       NR: KNOPP                                                                                              
04/07/17       (H)       JUD AT 1:00 PM GRUENBERG 120                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KEVIN ANSELM, Director                                                                                                          
Division of Banking and Securities                                                                                              
Department of Commerce, Community & Economic Development (DCCED)                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During the  hearing of HB 170, presented the                                                             
legislation on  behalf of the  House Labor &  Commerce Committee,                                                               
chaired by Representative Kito.                                                                                                 
                                                                                                                                
RENEE WARDLAW, Assistant Attorney General                                                                                       
Commercial and Fair Business Section                                                                                            
Department of Law (DOL)                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   During  the hearing  of  HB 170,  answered                                                             
questions.                                                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
2:08:17 PM                                                                                                                    
                                                                                                                                
CHAIR MATT  CLAMAN called the House  Judiciary Standing Committee                                                             
meeting  to order  at 2:08  p.m. Representatives  Claman, LeDoux,                                                               
Kreiss-Tomkins,  and Kopp  were  present at  the  call to  order.                                                               
Representatives Eastman  and Reinbold arrived as  the meeting was                                                               
in progress.                                                                                                                    
                                                                                                                                
        HB 170-AK SECURITIES ACT; PENALTIES; CRT. RULES                                                                     
                                                                                                                                
2:09:05 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced  that the only 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."                                                                                           
                                                                                                                                
2:09:53 PM                                                                                                                    
                                                                                                                                
KEVIN  ANSELM,  Director,  Division of  Banking  and  Securities,                                                               
Department   of  Commerce,   Community  &   Economic  Development                                                               
(DCCED), referred  to the  need to  update the  Alaska Securities                                                               
Act  and  offered  a   PowerPoint  presentation  titled,  "Alaska                                                               
Securities Act,  HB 170."  Ms.  Anselm turned to slides  2-3, and                                                               
explained that  the Securities Act  provides the  legal framework                                                               
for [technical difficulties] securities  in Alaska, for Alaskans,                                                               
registration of  firms and sales persons,  registration or filing                                                               
of  securities,  and  enforcement.     The  Securities  Act  also                                                               
regulates  the  Alaska  Native   Claims  Settlement  Act  (ANCSA)                                                               
corporations   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                                                               
salespersons,  such as  stock brokers,  investment advisors,  and                                                               
approximately  1,000   firms,  and  all  of   those  out-of-state                                                               
individuals.   She  referred to  [Sec.  45.56.900(32), page  103,                                                               
lines  9-31,  and  page  104,  lines  1-8]  and  noted  that  the                                                               
definition  of   security  was  not  changed,   and  it  includes                                                               
investments   such  as   stocks,  bonds,   limited  partnerships,                                                               
investments  in  common  enterprises, investment  contracts,  and                                                               
viaticals.   Basically,  she explained,  a security  involves the                                                               
investment  of   money  or  other   consideration  in   a  common                                                               
enterprise with  the reasonable expectation of  profit, primarily                                                               
from the entrepreneurial or management efforts of others.                                                                       
                                                                                                                              
2:12:29 PM                                                                                                                    
                                                                                                                                
MS. ANSELM  turned to slide  4, and  advised that HB  170 updates                                                               
the Securities Act by adopting many  of the most recent model act                                                               
provisions  while retaining  Alaska's  centric  provisions.   The                                                               
bill  proposes to  lift  the  Securities Act  out  of the  Native                                                               
Claims Settlement  Act (ANCSA) provisions and  making that change                                                               
would highlight  the differences between the  programs, and allow                                                               
ANCSA constituents  a clear  view of the  applicable law.   Also,                                                               
she  explained, the  bill's provisions  are  included to  protect                                                               
older and  vulnerable Alaskans  from financial  exploitation, and                                                               
give  investment professionals  immunity from  administrative and                                                               
civil  liability  if they  report  possible  exploitations.   She                                                               
noted the  division has been  working with the industry  on those                                                               
provisions and she would later discuss a possible amendment.                                                                    
                                                                                                                                
MS. ANSELM pointed  out that, currently there is  no provision in                                                               
the law  regarding restitution, and  the civil penalty  is capped                                                               
at  $25,000 per  violation.   The  bill asks  the legislature  to                                                               
designate  some of  those civil  penalties funds  toward consumer                                                               
protection  and education.    Currently, she  said,  there is  no                                                               
requirement for  continuing education of  industry professionals,                                                               
whereas most other industries require continuing education.                                                                     
                                                                                                                                
2:14:09 PM                                                                                                                    
                                                                                                                                
MS. ANSELM turned  to slide 5, and related  that ANCSA provisions                                                               
remain  unchanged  in AS  45.55,  including  the enforcement  and                                                               
administration  of  those related  securities  laws.   The  ANCSA                                                               
regional corporations  do not  oppose this change  as noted  by a                                                               
letter included  within the committee  packets.   [3/27/17 letter                                                               
directed  to The  Honorable Sam  Kito, from  Kim Reitmeir,  ANCSA                                                               
Regional Association.]                                                                                                          
                                                                                                                                
2:14:35 PM                                                                                                                    
                                                                                                                                
MS. ANSELM turned to slide 6,  pointed to the top four highlights                                                               
in HB  170, and advised as  follows:  the bill  eliminates filing                                                               
for  all exemptions  from registration,  except crowdfunding,  to                                                               
make  it easier  for  Alaskan businesses  to  use the  exemptions                                                               
allowed under the  law; it updates entity and  law references; it                                                               
includes  "bad  actor" qualifiers  who  will  not be  allowed  to                                                               
register  securities in  Alaska, such  as people  convicted of  a                                                               
crime,  including fraud,  dishonesty,  or inappropriately  taking                                                               
someone's  money;  and  it   improves  enforcement  and  investor                                                               
protection, as well as education provisions.                                                                                    
                                                                                                                                
2:15:19 PM                                                                                                                    
                                                                                                                                
MS. ANSELM turned  to slide 7, and explained that  the slide is a                                                               
general outline of the Securities Act,  of which is 111 pages and                                                               
there is not  quite as much substance as it  may appear.  Article                                                               
1 begins at  page 15 because there are a  number of provisions to                                                               
modify due  to the  change in  the statute  numbering.   She then                                                               
read the  entire outline, and  explained that Article  4, broker-                                                               
dealers,   agents,   investment  advisers,   investment   adviser                                                               
representatives,   and  federal   covered  investment   advisors,                                                               
basically  all  of  the  people  regulated  who  must  be  either                                                               
licensed  or registered  with the  state, are  now covered  under                                                               
Article 4.                                                                                                                      
                                                                                                                                
2:17:01 PM                                                                                                                    
                                                                                                                                
MS. ANSELM, in response to  Representative Reinbold's request for                                                               
an explanation of  Article 4, explained that it  is the licensing                                                               
or  registration provision  that basically  advises what  someone                                                               
must do  in the State  of Alaska in order  to be a  stock broker,                                                               
investment advisor, or registered as a brokerage house.                                                                         
                                                                                                                                
2:18:14 PM                                                                                                                    
                                                                                                                                
MS. ANSELM  turned to  slides 8-10, and  advised that  the slides                                                               
cover   administrative   enforcement,  civil   enforcement,   and                                                               
criminal enforcement changes.   As to slide 8,  she advised that,                                                               
administratively,  outside of  court unless  there is  an appeal,                                                               
the  changes include  extending the  time to  request a  hearing.                                                               
She  explained  that the  division  can  issue various  types  of                                                               
orders currently, and there is a  15 days period wherein a person                                                               
can request a hearing if they do  not agree with the order, or if                                                               
it was not a consent order.   Also, civil penalties are increased                                                               
from the current  standard of $2,500 per  [occurrence] or $25,000                                                               
per  [violation], to  a maximum  of $100,000  per violation,  she                                                               
advised.                                                                                                                        
                                                                                                                                
2:18:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD asked  how  many  [orders] the  division                                                               
[files] each year, the types of  penalties, and why it changed to                                                               
$100,000 per violation.                                                                                                         
                                                                                                                                
MS.  ANSELM responded  that in  FY 2016,  the division  issued 36                                                               
filed  orders  across the  division,  and  it had  17  securities                                                               
related orders, which is its  typical number of assessments.  She                                                               
explained that the $25,000 or the  $100,000 penalty is at the top                                                               
of the range, and the division  tries to match the penalty to the                                                               
activity.   For  instance,  there are  occasions  where no  civil                                                               
penalties are issued, such that  someone didn't register for some                                                               
reason and  it wasn't to  avoid the  law.  Oftentimes,  she said,                                                               
the division will  write a letter of warning, or  issue a consent                                                               
order advising the person not to  do whatever they did again, and                                                               
there is no penalty.                                                                                                            
                                                                                                                                
CHAIR  CLAMAN noted  that Ms.  Anselm  had testified  in a  prior                                                               
hearing that  the current penalty  level of $25,000  was creating                                                               
an  enforcement  problem,  and  he  asked  her  to  describe  the                                                               
enforcement problem created with the current penalty levels.                                                                    
                                                                                                                                
MS. ANSELM  referred to a  recent case wherein people  from Texas                                                               
came  to  Alaska and  sold  Alaskans  approximately $3.1  million                                                               
worth of  bogus oil and  gas securities, and the  maximum penalty                                                               
the division  could access was  $25,000, with no  opportunity for                                                               
rescission for those Alaskans.   In this case, she explained, the                                                               
division issued  an order  for the  maximum amount  possible, the                                                               
judge agreed  and issued  his order in  March 2016,  granting the                                                               
$25,000  civil penalty.    She related  that  the division  could                                                               
probably collect on that amount,  but the Alaskans cannot collect                                                               
on  anything   because  there  was  not   a  restitution  option.                                                               
Therefore,  the  maximum penalty  for  the  firm that  sold  $3.1                                                               
million worth of worthless securities  was $25,000.  She remarked                                                               
that the  state have better  tools in order to,  hopefully, deter                                                               
any sort of  bad deeds, but with  HB 170, if there  are bad deeds                                                               
the division  will have the  tools in its toolbox  to effectively                                                               
enforce the law.                                                                                                                
                                                                                                                                
2:22:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD asked for a  description of the 16 orders                                                               
and an actual snapshot of the problems.                                                                                         
                                                                                                                                
MS.  ANSELM  referred  to  the  spreadsheet  titled,  "Securities                                                               
Enforcement  Comparison: Current  45.55  versus Proposed  45.56,"                                                               
and advised it is an outline  of each case the division has taken                                                               
during the time period 2012 to present.                                                                                         
                                                                                                                                
2:23:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  asked whether  the division's  desire to                                                               
move to the  $100,000 penalty was due to one  particular case and                                                               
noted she  was trying to  understand the division's  reasoning in                                                               
quadrupling the penalty.                                                                                                        
                                                                                                                                
MS. ANSELM responded that civil  penalties have not been adjusted                                                               
in 40  years, and in  order to get  the attention of  bad actors,                                                               
the division needs  a civil penalty that will deter  that sort of                                                               
activity, and  she pointed out  that civil penalties go  into the                                                               
state's general fund.                                                                                                           
                                                                                                                                
2:23:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD referred  to  slide 7,  bullet point  5,                                                               
"Restitution  to a  victim can  be ordered"  and asked  how often                                                               
restitution is ordered.                                                                                                         
                                                                                                                                
MS.  ANSELM  reiterated  that  the division  does  not  have  the                                                               
ability to  order restitution, for instance,  a halibut fisherman                                                               
was "ripped off" by an  unregistered New York brokerage firm, and                                                               
the division was able to return  some of his money because one of                                                               
the  involved   persons  actually  had  a   conscience  but,  she                                                               
reiterated, the division cannot  order restitution [under current                                                               
law].                                                                                                                           
                                                                                                                                
CHAIR CLAMAN clarified  that under HB 170 the  division will have                                                               
the authority to order restitution.                                                                                             
                                                                                                                                
MS. ANSELM answered in the affirmative.                                                                                         
                                                                                                                                
2:24:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD asked  who would  have the  authority to                                                               
order the restitution.                                                                                                          
                                                                                                                                
MS. ANSELM answered that the  division and the courts could order                                                               
restitution.                                                                                                                    
                                                                                                                                
2:25:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   EASTMAN  asked   what  constitutes   a  specific                                                               
violation, because  he was surprised  there would be  an instance                                                               
wherein someone  could defraud many  people and receive  a single                                                               
violation penalty  of $25,000,  such as  the case  she previously                                                               
described.                                                                                                                      
                                                                                                                                
MS.  ANSELM  answered that  there  are  multiple violations,  and                                                               
currently the  single [occurrence] fine  is $2,500 and  the total                                                               
violation fine is $25,000.                                                                                                      
                                                                                                                                
REPRESENTATIVE EASTMAN  commented that it did  not appear logical                                                               
in an instance where someone  defrauded people in the millions of                                                               
dollars, and the  division is only asking for  a penalty increase                                                               
to $100,000 as an effective deterrent.                                                                                          
                                                                                                                                
MS. ANSELM  advised that the  fine is up $100,000  per violation,                                                               
which is  not to say the  division would impose that  amount, but                                                               
it needs  the range.   She referred  to the spreadsheet  and said                                                               
that once  it is copied,  the grid  will show what  happens under                                                               
current law,  and what the  division probably would have  done as                                                               
to the $3.1 million case.                                                                                                       
                                                                                                                                
REPRESENTATIVE  EASTMAN noted  that the  bill gives  the division                                                               
authority to  assess penalty fees  up to $100,000  per violation,                                                               
and asked what checks would  be in place regarding an inadvertent                                                               
technical violation.                                                                                                            
                                                                                                                                
MS.  ANSELM replied  that currently  there are  internal controls                                                               
because the  division is careful  to review what was  accessed in                                                               
the past  for similar types  of violations, and consider  what it                                                               
does in  the future.   She pointed out  that a person  always has                                                               
the opportunity to request a  hearing, which is heard through the                                                               
Office  of  Administrative  Hearings   or  through  the  "circuit                                                               
court."                                                                                                                         
                                                                                                                                
2:28:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX referred to  the current $2,500 and $25,000                                                               
penalty fines, and surmised that  those people have the remedy of                                                               
going  before a  civil court,  which could  allow them  to obtain                                                               
money.                                                                                                                          
                                                                                                                                
MS.  ANSELM responded  that those  people do  have the  remedy of                                                               
civil  court  with  the  possibility   of  receiving  a  positive                                                               
judgment.                                                                                                                       
                                                                                                                                
REPRESENTATIVE LEDOUX  noted that  the maximum would  be $100,000                                                               
per violation,  and if this  fine was just restitution,  not pain                                                               
and  suffering  or anything  of  that  nature, why  wouldn't  the                                                               
person seek restitution for the actual amount of their loss.                                                                    
                                                                                                                                
MS.  ANSELM  explained  that  the $100,000  maximum  is  a  civil                                                               
penalty  which is  different from  restitution, and  the division                                                               
would seek restitution [under HB 170].                                                                                          
                                                                                                                                
2:29:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  offered  that currently  the  penalty  is                                                               
$2,500-$25,000,  and HB  170 moves  the maximum  to $100,000  per                                                               
violation, and  questioned whether  the division would  also seek                                                               
restitution for these folks.                                                                                                    
                                                                                                                                
MS. ANSELM answered  that the division would  seek restitution if                                                               
it was appropriate, and noted that  it may be appropriate in some                                                               
cases to simply  order restitution because that  person should be                                                               
paid and not the state.                                                                                                         
                                                                                                                                
MS. ANSELM,  in response to Representative  LeDoux, answered that                                                               
civil penalties are deposited into the state's general fund.                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  asked why  the division wouldn't  have the                                                               
money go to the [coughing].                                                                                                     
                                                                                                                                
MS.  ANSELM answered  that the  money  would go  to the  [injured                                                               
person],  except the  division  does not  have  the authority  to                                                               
order  restitution  currently.   Although,  she  explained,  with                                                               
regard to  a consent order,  the division does have  authority to                                                               
ask a  consenting scammer  to return  the injured  party's money,                                                               
and she emphasized  that it must be  on a consent basis  as it is                                                               
not an order.                                                                                                                   
                                                                                                                                
2:31:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX pointed out that  she wants to make certain                                                               
the injured parties are paid before the state is paid.                                                                          
                                                                                                                                
MS. ANSELM said, "That is absolutely the division's intent."                                                                    
                                                                                                                                
2:31:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP  said that  in reading  the bill,  he guessed                                                               
the division would follow criminal law  such that when there is a                                                               
criminal  fine and  a restitution  order,  the restitution  order                                                               
always has precedent over the criminal fine.                                                                                    
                                                                                                                                
MS.  ANSELM   opined  that  is   exactly  how  the   bill  reads.                                                               
Unfortunately,  she said,  if  the division  does  issue a  civil                                                               
penalty and is able to collect  on the penalty, the money goes to                                                               
the  state's  general  fund because  the  division  cannot  order                                                               
payment to an injured party at this time.                                                                                       
                                                                                                                                
REPRESENTATIVE KOPP suggested reviewing  the statute and aligning                                                               
that procedure with criminal law.                                                                                               
                                                                                                                                
CHAIR  CLAMAN agreed,  and he  pointed  out that  Ms. Anselm  was                                                               
discussing current practice, and once  the bill was in place that                                                               
problem would be void.                                                                                                          
                                                                                                                                
MS. ANSELM answered in the affirmative.                                                                                         
                                                                                                                                
2:32:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD  commented  that  when this  law  is  in                                                               
place,  it could  potentially generate  generous revenue  for the                                                               
state coffers, especially  if the penalty was up  to $100,000 per                                                               
violation.   She  suggested an  amendment stipulating  the bill's                                                               
intention  that  if  any  money was  collected  it  was  strictly                                                               
restitution for  the injured party,  and not to  generate revenue                                                               
for the state.                                                                                                                  
                                                                                                                                
2:34:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP asked whether he  was correct in stating that                                                               
this discussion relates to stock and investment fraud.                                                                          
                                                                                                                                
MS. ANSELM  agreed, and  she pointed to  the broad  definition of                                                               
"securities" because  people do take advantage  of others through                                                               
business and other opportunities.                                                                                               
                                                                                                                                
2:34:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP asked whether  this bill is important because                                                               
this  type  of fraud  happens  to  vulnerable people  who  cannot                                                               
afford to lose the capital,  or are otherwise unable to recognize                                                               
the risk of the investment.                                                                                                     
                                                                                                                                
MS.  ANSELM answered  "Yes and  beyond," there  are smart  people                                                               
duped because they are presented  with fine looking documents, or                                                               
other  evidence.   For  instance,  two  individuals convinced  an                                                               
Alaskan he could  join them in a business opportunity  if he gave                                                               
them,  she opined,  $40,000.   These individuals  promised him  a                                                               
management position in this new  business venture, and they had a                                                               
credit  line of  $10 million  from  some other  source that  they                                                               
could tap, except it all ended  up being bogus.  She related that                                                               
the  division  contacted  the  individuals   to  have  the  money                                                               
returned, they agreed, and then they skipped town.                                                                              
                                                                                                                                
REPRESENTATIVE KOPP remarked that  the state is "absolutely doing                                                               
the right  thing" in recognizing  this increase in fees  as these                                                               
injuries  can be  in the  many  millions of  dollars in  stealing                                                               
people's life  savings and pensions.   Alaskan banks  are victims                                                               
of this,  he offered, but  it is  never advertised because  it is                                                               
bad for the  clientele, and sometimes the  people investing their                                                               
life  savings  will  pull  banks  down with  them  in  their  bad                                                               
decisions.    He described  $100,000  as  a  drop in  the  bucket                                                               
because  it does  not  even  begin to  address  the problems  out                                                               
there.                                                                                                                          
                                                                                                                                
2:37:05 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  noted there is a  long body of case  law in Alaska,                                                               
and  throughout   the  country,   requiring  that  any   fine  be                                                               
proportional, and a  minor error in filing would not  result in a                                                               
$100,000  fine.   The high  cost  per violation  limit points  to                                                               
firms  such as  the  Texas firm  who  may have  sold  to just  10                                                               
investors,  but  there are  10  different  violations.   Thereby,                                                               
putting the message  out that people cannot come  to Alaska, dupe                                                               
investors,  and the  largest penalty  they will  face is  $25,000                                                               
when duping  people for over  $3 million,  he said.   Those firms                                                               
need  to know  that  Alaska is  prepared  to aggressively  pursue                                                               
those not  following the  rules and  taking advantage  of people.                                                               
At  the  same  time,  he remarked,  fine  proportionality  offers                                                               
comfort to firms that they  will not receive an unreasonable fine                                                               
for conduct that does not merit a heavy application.                                                                            
                                                                                                                                
2:39:03 PM                                                                                                                    
                                                                                                                                
MS. ANSELM continued the presentation  and referred to changes in                                                               
the in  administrative enforcement  area, slide 7,  and explained                                                               
that  under HB  170,  the division  can bar  a  "bad actor"  from                                                               
operating in  the state.   The division can also  deny exemptions                                                               
from  registration for  securities, it  can tell  an entity  they                                                               
have not done such  good things in the past, it  wants to see the                                                               
paperwork first, and  makes the entity go  through a registration                                                               
process.  Under  this bill, if a civil penalty  was accessed with                                                               
no  request for  a court  hearing,  and the  person decided  they                                                               
didn't want  to pay the civil  penalty, the division could  go to                                                               
court and  ask that  the civil  penalty be  enforced.   Also, she                                                               
said, in the  event a person already has  an administrative order                                                               
against them and then repeats  the same offense, the division can                                                               
ask the court to hold them in contempt.                                                                                         
                                                                                                                                
2:40:38 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN  surmised that  she  had  been discussing  remedies                                                               
without going  to court because  they are  administrative actions                                                               
authorized to the department.                                                                                                   
                                                                                                                                
MS. ANSELM agreed.                                                                                                              
                                                                                                                                
2:40:45 PM                                                                                                                    
                                                                                                                                
MS.  ANSELM  referred  to   the  spreadsheet  titled,  Securities                                                               
Enforcement Comparison: Current 45.55  versus Proposed 45.56" and                                                               
asked that the spreadsheet be  copied for the members, noting the                                                               
copied  spreadsheets  would  not  be   in  color,  which  may  be                                                               
difficult.                                                                                                                      
                                                                                                                                
2:41:24 PM                                                                                                                    
                                                                                                                                
MS. ANSELM  pointed to the  top of the spreadsheet  depicting the                                                               
date of the  case, case name, description,  enforcement action by                                                               
division, fine/penalty, whether a  vulnerable adult was involved,                                                               
the potential  fine or  penalty under HB  170, and  the potential                                                               
for the  Investor Education  Fund.  She  explained that  the bill                                                               
proposes  up  to  33  percent of  collected  civil  penalties  be                                                               
deposited into  a line  item the  legislature would  have control                                                               
over  for  the  Investor  Education  Fund.    In  the  event  the                                                               
legislature  determined  the  money  should not  be  used  [in  a                                                               
certain year] and  there was a budget deficit,  for example, that                                                               
money might be used for the deficit.                                                                                            
                                                                                                                                
CHAIR CLAMAN noted  his understanding of the  spreadsheet in that                                                               
after  moving through  the type  of  enforcement action,  columns                                                               
five  and six  are the  current scenario,  and columns  seven and                                                               
eight are how it would change under the proposed law.                                                                           
                                                                                                                                
2:42:54 PM                                                                                                                    
                                                                                                                                
MS.  ANSELM agreed,  and she  advised that  the blue  columns are                                                               
ANCSA  related, and  the green  columns are  national settlements                                                               
negotiated generally  with all 50 states.   She turned to  page 5                                                               
of the spreadsheet,  pointed to "12/3/15, LPL  Financial, LLC and                                                               
11/6/15,  Citigroup  Global  Markets, Inc."  and  explained  that                                                               
Alaska participated  with a  number of states  in putting  all of                                                               
the  actions together  so  there  was only  one  action, and  the                                                               
[parties] settled with the states.                                                                                              
                                                                                                                                
2:43:49 PM                                                                                                                    
                                                                                                                                
[Due  to  the  black  and  white copies  of  the  spreadsheet,  a                                                               
discussion ensued  explaining how  to determine the  white, blue,                                                               
and green columns on each page.]                                                                                                
                                                                                                                                
2:46:37 PM                                                                                                                    
                                                                                                                                
MS. ANSELM  referred to the  bottom of  page 10, 5th  column from                                                               
the left,  "Fine/Penalty" and offered that  the division accessed                                                               
2012  to  present  day  at $1,487,239.29,  and  that  the  actual                                                               
collected  fines were  far lower.    She referred  to the  column                                                               
titled "Potential  fine/penalty under  proposed law"  and offered                                                               
that the maximum  amount would be $9,901,239.29,  with 33 percent                                                               
of that  amount going  to the  Investor Education  Fund, totaling                                                               
$3,301,023.18.                                                                                                                  
                                                                                                                                
2:47:24 PM                                                                                                                    
                                                                                                                                
MS. ANSELM  referred to page  1, second column down,  and advised                                                               
that  the  "2/8/17,  Codawn  Consulting  Corporation"  matter  is                                                               
currently in litigation.  She  explained the reason the number is                                                               
greater with Codawn Consulting Corporation  was that the division                                                               
was  able to  access $25,000  to each  participant in  that scam.                                                               
She  moved  down one  column  to  "11/28/16, Michael  Scow,"  and                                                               
explained  that Mr.  Scow  defaulted on  a  couple of  promissory                                                               
notes which is why  his fine was $25,000.  She  then moved to the                                                               
bottom  column   regarding  "6/10/16,   SOSDisasterplan.com"  and                                                               
advised it is currently in litigation.                                                                                          
                                                                                                                                
2:48:41 PM                                                                                                                    
                                                                                                                                
MS.  ANSELM, in  response to  Representative Reinbold,  explained                                                               
that  she skipped  over the  ANCSA cases  as those  would not  be                                                               
involved in the new Securities  Act because they are separate and                                                               
nothing will change for the ANCSA cases.                                                                                        
                                                                                                                                
REPRESENTATIVE REINBOLD  asked why  nothing would change  for the                                                               
ANCSA cases.                                                                                                                    
                                                                                                                                
MS.  ANSELM explained  that the  Alaska Native  Claims Settlement                                                               
Act  (ANCSA) provisions  relate  solely  to proxy  solicitations,                                                               
which  is different  from the  fraud  and types  of issues  being                                                               
discussed  for  regular  security  violations.    The  ANCSA  was                                                               
established  through the  federal  government, and  put into  the                                                               
Securities  Act  because  there   was  a  connection  with  proxy                                                               
solicitation  in that,  initially,  they  were given  inalienable                                                               
stock.   Therefore, she explained,  there are regulations  in the                                                               
Securities Act that instructs the  ANCSA corporations, as well as                                                               
people who  are shareholders  who want  to run  for the  board of                                                               
directors, on certain  required disclosures.  She  noted that the                                                               
types  of civil  penalties  being discussed  for true  securities                                                               
related violations do  not fit with the ANCSA provisions.   It is                                                               
important to  list the securities  provisions out of what  is now                                                               
called the ANCSA provisions so  they are not treated disparately,                                                               
and  offered,  that is  one  of  the  problems the  division  has                                                               
experienced  because  anything  done   with  the  securities  law                                                               
affects  the  ANCSA  corporations, their  shareholders,  and  how                                                               
proxy  solicitations  are  handled.   Nationally,  she  remarked,                                                               
securities  proxy  solicitations  are covered  through  the  U.S.                                                               
Securities  and Exchange  Commission  (SEC), which  is a  federal                                                               
overlay.  The only reason the  division has anything like that at                                                               
all is  due to  the ANCSA  corporations, and  the fact  that with                                                               
their  securities  ownership and  the  things  that go  with  it,                                                               
including  the proxy  solicitations, "there  was no  one else  to                                                               
deal  with it"  so  the  federal government  said  to  put it  in                                                               
Alaska, she explained.                                                                                                          
                                                                                                                                
2:51:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD   asked  Ms.   Anselm  to   explain  the                                                               
protection provisions  in this  bill that "were  not in  the bill                                                               
before, you know, for ANCSA, but are now."                                                                                      
                                                                                                                                
MS. ANSELM reiterated  that the division has  proposed no changes                                                               
to the  ANCSA provisions as  it is simply lifting  out everything                                                               
securities related, not  ANCSA related, and put into  a whole new                                                               
chapter  of   statute,  which  is   AS  45.56,   currently  being                                                               
discussed.                                                                                                                      
                                                                                                                                
2:51:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  said she  wondered why  something having                                                               
to do with the bill was held up due to ANCSA.                                                                                   
                                                                                                                                
MS. ANSELM responded  that when the division  proposed changes to                                                               
the  Securities  Act,  the ANCSA  corporations  and  shareholders                                                               
offered concern that it would  affect something inadvertently, or                                                               
intentionally,  having to  do  with its  holding  of their  ANCSA                                                               
shares.  For instance, she said, all ...                                                                                        
                                                                                                                                
2:52:36 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN interrupted  and asked  whether it  had to  do with                                                               
proxy solicitations, or another issue.                                                                                          
                                                                                                                                
MS.  ANSELM answered  "Yes, with  regard to  proxy solicitations"                                                               
but also violations,  which is why the division wants  to make it                                                               
clear that it is not changing anything relating to the ANCSA.                                                                   
                                                                                                                                
2:52:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  suggested uploading the  spreadsheet for                                                               
the public,  and noted that  the ANCSA corporations  or penalties                                                               
tend to  be approximately $1,000-$1,550,  but the others  tend to                                                               
be $100,000, $125,000,  and $75,000, and asked why  it was $1,500                                                               
or  $1,000  for  many,  and  others are  upwards  of  $25,000  to                                                               
$125,000.                                                                                                                       
                                                                                                                                
MS.  ANSELM said  that most  of the  ANCSA related  penalties are                                                               
small  because that  is  what is  appropriate  for a  shareholder                                                               
issue within  the State  of Alaska,  "that it's  an informational                                                               
thing,  it's   not  taking  other  people's   money,  generally."                                                               
Typically, the  division's orders  explain why the  civil penalty                                                               
is what it is and commented that  the truth of the matter is that                                                               
if it  is a filing  issue, the division  does not take  an action                                                               
with a civil penalty attached unless  it is a repeat offense with                                                               
the ANCSA corporations.  She  referred to other cases depicted on                                                               
the spreadsheet, and  advised that many of the  more recent cases                                                               
have been  taken by default  wherein the offender would  not talk                                                               
to the division so it moved on  a default order.  She referred to                                                               
page  3, 5th  column  down, "12/10/2013,  Daniel Digiacomo,"  and                                                               
explained that  this case involved  crowdfunding, and  posting on                                                               
the  internet  which was  just  beginning  to  take place.    Mr.                                                               
Digiacomo  lived  in   the  State  of  Maryland   and  posted  an                                                               
opportunity  for  investors  in   Alaska  on  Craig's  List,  the                                                               
division  then  advised  him  not  to post,  he  asked  why,  the                                                               
division explained, and he continued  to post.  The division then                                                               
issued a Cease and Desist Order  and when Mr. Digiacomo agreed to                                                               
take everything  down and  not post again,  the division  did not                                                               
access a civil penalty.                                                                                                         
                                                                                                                                
2:55:56 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  noted that he  hadn't had a  meaningful opportunity                                                               
to review it  and rather than taking  time reviewing page-by-page                                                               
and case-by-case on  the fly, the spreadsheet would  be set aside                                                               
for questions during the next hearing  on the bill.  He asked Ms.                                                               
Anselm to continue through to the end of the presentation.                                                                      
                                                                                                                                
2:56:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  noted that the cases  he briefly reviewed                                                               
appeared, for  the most  part, to  be violations  on the  part of                                                               
Americans, and asked how the  division would deal with a Canadian                                                               
violator.                                                                                                                       
                                                                                                                                
CHAIR  CLAMAN  interjected  that  the  question  relates  to  the                                                               
spreadsheet,  and  he  asked  Ms.  Anselm  to  get  back  to  the                                                               
committee  in  writing  or  during  the  next  hearing,  but  the                                                               
committee would  not go down  that path at  this time.   He asked                                                               
that Ms. Anselm forward the  electronic scanned color copy to his                                                               
office  and  it  would  be  uploaded online,  and  given  to  the                                                               
committee members.                                                                                                              
                                                                                                                                
MS. ANSELM agreed.                                                                                                              
                                                                                                                                
2:57:59 PM                                                                                                                    
                                                                                                                                
MS. ANSELM  turned to  slide 9, Civil  Enforcement Changes.   She                                                               
advised  that  HB  170  clarifies as  follows:  the  actions  the                                                               
administrator can pursue in civil  court, including asset freezes                                                               
and receivership;  treble monetary  penalties in  cases involving                                                               
older or  vulnerable adults; allows rescission,  disgorgement and                                                               
restitution  orders as  well as  pre  or post-judgment  interest;                                                               
provides  that salespersons  who violate  the Act  are liable  to                                                               
their  clients; both  sellers  and buyers  of  securities can  be                                                               
liable for  their actions, as  a buyer  would be liable  when not                                                               
truthful;  and  the Statute  of  Limitations  is typically  three                                                               
years, or  two years from discovery  of the fraud.   The interest                                                               
rate is  set by statute,  AS 09.30.070,  and the minimum  rate is                                                               
[coughing] percent, but it can be  set through looking at the "12                                                               
Federal  Reserve   district  discount   rate  plus   3  percent."                                                               
Attorney's  fees  are  also  recoverable  by  a  plaintiff  where                                                               
allowed,  it does  not  have a  prevailing  party provision,  she                                                               
explained.                                                                                                                      
                                                                                                                                
3:00:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD   requested  an   explanation  regarding                                                               
prevailing attorney fees.                                                                                                       
                                                                                                                                
MS. ANSELM  explained, for instance,  a person sues  because they                                                               
believe they bought a bad security  and lost money, if they go to                                                               
court  and whoever  sold it  to  them wins,  that party  receives                                                               
attorney fees  under the prevailing  party provision  even though                                                               
they did not bring the case in the first place.                                                                                 
                                                                                                                                
CHAIR  CLAMAN  asked   whether  she  was  saying   that  in  this                                                               
particular Act, the  bill is actually exempting it  from the Rule                                                               
82 prevailing party attorney fee  provisions by the nature of the                                                               
Act, or  whether it says  nothing in the  Act that Rule  82 would                                                               
apply under the civil rules.                                                                                                    
                                                                                                                                
MS.  ANSELM   deferred  to  Renee  Wardlaw,   Assistant  Attorney                                                               
General.                                                                                                                        
                                                                                                                                
3:01:34 PM                                                                                                                    
                                                                                                                                
RENEE WARDLAW,  Assistant Attorney  General, Commercial  and Fair                                                               
Business  Section, Department  of  Law (DOL),  answered that  the                                                               
proposed  amendment would  actually  exempt  this provision  from                                                               
Rule 82, that  a prevailing party [technical  difficulties.]  She                                                               
said,  that in  fact  [technical difficulties]  trying to  exempt                                                               
this  particular provision  from  Rule 82  allowing a  [technical                                                               
difficulty]  actually be  awarded attorney's  fees.   She offered                                                               
that  the division  does not  want to  discourage investors  from                                                               
bringing lawsuits if  they believe they were wronged  by a seller                                                               
of said investment.                                                                                                             
                                                                                                                                
3:02:41 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN interpreted  Ms.  Wardlaw's  garbled testimony  and                                                               
offered that the intent of this  bill is to actually exempt these                                                               
lawsuits  from the  prevailing party  attorney  fee provision  in                                                               
Rule 82  because the division did  not want a barrier  that could                                                               
potentially harm investors from being  able to sue those who took                                                               
advantage  of them,  and face  the prospect  of prevailing  party                                                               
attorney fees.                                                                                                                  
                                                                                                                                
MS. WARDLAW agreed.                                                                                                             
                                                                                                                                
REPRESENTATIVE REINBOLD  commented that  attorney fees  should be                                                               
posted as well, and then sent on  to the state.  She advised that                                                               
"a bill may be coming soon."                                                                                                    
                                                                                                                                
CHAIR  CLAMAN informed  Representative  Reinbold that  prevailing                                                               
attorney fees are posted currently, which is Rule 82.                                                                           
                                                                                                                                
3:04:21 PM                                                                                                                    
                                                                                                                                
MS. ANSELM turned to slide  10, Criminal Enforcement, and advised                                                               
that most of the provisions  are similar to current law; however,                                                               
"willfully"   is  changed   to   "knowingly,"   and  noted   that                                                               
"willfully"  is   not  currently   defined  in   Alaska  Statute.                                                               
Generally, she explained, "a class  C felony, if someone violates                                                               
the law  without knowledge though,  it is a class  A misdemeanor"                                                               
and the person will not receive jail time.                                                                                      
                                                                                                                                
3:05:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOPP surmised  that "willfully"  is not  a mental                                                               
state recognized  in the  law, and  he offered  concern regarding                                                               
the  statement  that  the  state can  apply  a  criminal  penalty                                                               
without knowledge,  removing the mens rea.   It would still  be a                                                               
misdemeanor with up to  one year in jail and a  $10,000 fine.  He                                                               
asked whether the bill was  saying that "without knowledge" would                                                               
mean  a lesser  standard than  "knowingly," or  whether it  meant                                                               
with criminal negligence  still applies, or whether  a person can                                                               
"just flat  out" not know they  broke the law and  still have the                                                               
criminal sanctions and misdemeanor apply.                                                                                       
                                                                                                                                
MS. ANSELM deferred to Ms. Wardlaw.                                                                                             
                                                                                                                                
CHAIR  CLAMAN  advised  that  Representative  Kopp  question  was                                                               
whether the bill  created a strict liability  offense without the                                                               
need  for  a mental  state  requirement  in the  provision  about                                                               
misdemeanors, or whether it was something different.                                                                            
                                                                                                                                
3:06:46 PM                                                                                                                    
                                                                                                                                
MS. WARDLAW  responded that it  is a strict  liability assessment                                                               
and the mens  rea has been removed  [technical difficulties] into                                                               
that offense.                                                                                                                   
                                                                                                                                
CHAIR CLAMAN, due  to the garbled audio, offered  that the answer                                                               
is that  the bill  creates a strict  liability offense  without a                                                               
mens rea requirement.                                                                                                           
                                                                                                                                
MS. WARDLAW agreed.                                                                                                             
                                                                                                                                
3:07:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOPP  opined that  the  legislature  needs to  be                                                               
watchful of attaching criminal liability  without any mens rea to                                                               
be  certain  people  are not  inadvertently  convicted  criminals                                                               
without any  intent.  A  violation may be appropriate  for strict                                                               
liability, but  if they truly do  not have any intent  to violate                                                               
the law,  mens rea is always  something that should be  looked at                                                               
when criminal liability is attached, he stated.                                                                                 
                                                                                                                                
3:08:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  said he has  a similar concern  and asked                                                               
what  types of  situation  Ms. Anselm  would  perceive as  strict                                                               
liability.                                                                                                                      
                                                                                                                                
MS.  ANSELM referred  to  [HB 170,  Sec.  45.56.670(a), page  92,                                                               
lines 16-18] which read as follows:                                                                                             
                                                                                                                                
        (a) a person convicted of violating a regulation                                                                        
      or order issued under the chapter may be fined, but                                                                       
      may not be imprisoned, if the person did not know of                                                                      
     the regulation or order.                                                                                                   
                                                                                                                                
3:09:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP argued that it does  not appear to refer to a                                                               
class  A misdemeanor,  as  it  is clearly  referring  to class  C                                                               
felony conduct with  a mental state of  intentionally attached on                                                               
lines 12-16.  He referred to  lines 16-18, and said if that's the                                                               
misdemeanor language there, where there  is no intent, it doesn't                                                               
identify it as  a misdemeanor and possibly could  be construed to                                                               
actually just be that on (indisc.) of violation.                                                                                
                                                                                                                                
MS. ANSELM asked  whether there was something to look  at in that                                                               
provision.                                                                                                                      
                                                                                                                                
REPRESENTATIVE KOPP noted that it  read "class A misdemeanor" and                                                               
[technical difficulties] then  somewhere in here there  has to be                                                               
a reference back to it setting the  ... is it possible it is just                                                               
a violation and not a class A misdemeanor, he asked.                                                                            
                                                                                                                                
MS. ANSELM said she would check with the bill drafter.                                                                          
                                                                                                                                
CHAIR  CLAMAN  requested  that  she get  back  to  the  committee                                                               
because it is  clearly an area of some complication.   He related                                                               
that  under Morissette  v. United  States, 342  U.S. 246  (1952),                                                             
there  was  a question  of  knowledge  with regard  to  different                                                               
offenses, more narrowly  tailored to theft offenses,  but it gets                                                               
to the issue of mental states and crimes.                                                                                       
                                                                                                                                
3:10:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN asked  that after  meeting with  the bill                                                               
drafter and it turns out there  is strict liability here, to then                                                               
advise the  committee as  to why there  was the  expectation that                                                               
strict liability would be necessary.                                                                                            
                                                                                                                                
MS. ANSELM agreed.                                                                                                              
                                                                                                                                
CHAIR  CLAMAN suggested  that from  the  chair's perspective  and                                                               
echoing the sentiments raised by  Representative Kopp, perhaps an                                                               
amendment  with  the  mental  state  being  something  less  than                                                               
"knowingly," as  he related  that he is  wary of  criminal issues                                                               
that don't involve the mental state.                                                                                            
                                                                                                                                
3:11:48 PM                                                                                                                    
                                                                                                                                
MS.  ANSELM turned  to slide  11, and  noted that  last year  the                                                               
division filed 36  final orders, 17 were  securities related, and                                                               
in calendar year  2016, the division issued 27  final orders, and                                                               
13 were securities related.   She reminded the committee that the                                                               
division has 10  other substantive programs it deals  with on the                                                               
financial side.                                                                                                                 
                                                                                                                                
3:12:30 PM                                                                                                                    
                                                                                                                                
MS. ANSELM turned to slide 12,  and noted that some of the recent                                                               
scams in  Alaska include, Fortune  Oil &  Gas, and opined  it had                                                               
not gone  past its appeal  timeline.  SOSDisasterplan.com  was an                                                               
Alaskan business  that touted investments  on an  online disaster                                                               
preparedness  website,  and   issued  approximately  $540,000  in                                                               
unregistered/worthless shares.  The Global  Arena Capital Corp is                                                               
the  New  York firm  she  mentioned  earlier that  solicited  Mr.                                                               
Burke, an ailing retired Alaskan  halibut fisherman, and sold him                                                               
junk bonds.                                                                                                                     
                                                                                                                                
MS. ANSELM presented oral testimony  from Mr. Burke who had since                                                               
passed, and noted that, ultimately, the case was settled.                                                                       
                                                                                                                                
3:13:43 PM                                                                                                                    
                                                                                                                                
[Mr. Burke's  oral testimony, see  pages 13-15 of  the PowerPoint                                                               
for written testimony.]                                                                                                         
                                                                                                                                
3:15:28 PM                                                                                                                    
                                                                                                                                
MS. ANSELM advised that the division  was able to get Mr. Burke's                                                               
money back because  it found a salesperson with  a conscience and                                                               
he had parents concerned their son was in trouble.                                                                              
                                                                                                                                
Mr. Burke was  lucky, she described, except he  only received his                                                               
money back, and not  all of the pain and issues  he dealt with in                                                               
trying  to receive  his money.   She  stressed that  the division                                                               
needs stronger tools to deal with  bad actors and that these type                                                               
of  fraudulent  activities  should  make everyone  in  the  state                                                               
angry.  She then described Mr.  Burke as a smart man because when                                                               
he received  another call  from someone trying  to sell  him Bio-                                                               
Tech  stock, he  called the  division, and  it was  able to  help                                                               
another firm  understand their responsibilities  in the  State of                                                               
Alaska.   Consequently, the division  did not allow that  firm to                                                               
operate in  the state  and it  was fined for  trying to  use that                                                               
same scam on other people, she advised.                                                                                         
                                                                                                                                
3:16:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  asked that in the  event other consumers                                                               
are being  taken advantage of  in this area, whether  they should                                                               
call the division, or whether she had another recommendation.                                                                   
                                                                                                                                
MS.  ANSELM  responded,  "Call  us,"  and  an  investigator  will                                                               
determine who to contact because  it is the division's mission to                                                               
protect  consumers regarding  financial  services,  to promote  a                                                               
safe, sound,  and healthy financial  system, to  strongly support                                                               
communities, and to protect consumers  in Alaska.  The department                                                               
wants  to take  a  balance  approach by  modernizing  the law  to                                                               
encourage businesses  in Alaska,  and protect  Alaska's citizens,                                                               
including  letting citizens  know that  "we're out  here and  can                                                               
help them, and that's  another part of what we need  to do."  She                                                               
described it  as one step at  a time because the  department does                                                               
not   have  the   financial   outreach  capabilities   necessary,                                                               
although, the division does bring in  more than it expends due to                                                               
the civil penalty  pieces and some of the licensing  pieces.  Ms.                                                               
Anselm estimated  that the  department operates  on approximately                                                               
$2.5-$2.6   million,  and   the   division   usually  brings   in                                                               
approximately $13 million per year.                                                                                             
                                                                                                                                
3:18:09 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN  listed  the  four   names  of  people  online  for                                                               
questions,  and  he  assumed  they  would  return  for  the  next                                                               
hearing.                                                                                                                        
                                                                                                                                
MS. ANSELM offered that was her understanding.                                                                                  
                                                                                                                                
3:19:08 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN  opened   public  testimony  on  HB   170.    After                                                               
ascertaining no one wished to testify, closed public testimony.                                                                 
                                                                                                                                
CHAIR CLAMAN announced that HB 170 would be held over.                                                                          
                                                                                                                                
3:21:52 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Judiciary Standing Committee meeting was adjourned at 3:21 p.m.                                                                 

Document Name Date/Time Subjects
HB170 ver J 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Sponsor Statement 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Sectional Analysis 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Repealers List 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 DCCED Whitepaper 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Supporting Document-Letter ANCSA Regional Association 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Supporting Document-Letter NASAA 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 HJUD Slide Presentation 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Additional Document-Enforcement Comparison Chart 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Fiscal Note DCCED-DBS 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Fiscal Note DHSS-SDSA 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170