Legislature(1997 - 1998)

04/24/1998 03:28 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
    HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                
                   April 24, 1998                                              
                     3:28 p.m.                                                 
MEMBERS PRESENT                                                                
Representative Norman Rokeberg, Chairman                                       
Representative John Cowdery, Vice Chairman                                     
Representative Bill Hudson                                                     
Representative Jerry Sanders                                                   
Representative Joe Ryan                                                        
MEMBERS ABSENT                                                                 
Representative Tom Brice                                                       
Representative Gene Kubina                                                     
COMMITTEE CALENDAR                                                             
* HOUSE BILL NO. 389                                                           
"An Act relating to an exemption from the requirement for payment              
for overtime under a voluntary written agreement for certain                   
employees in the airline industry; and providing for an effective              
     - HEARD AND HELD                                                          
* HOUSE BILL NO. 486                                                           
"An Act relating to the Alaska Securities Act; and providing for an            
effective date."                                                               
     - HEARD AND HELD                                                          
     - SCHEDULED BUT NOT HEARD                                                 
HOUSE BILL NO. 477                                                             
"An Act relating to common interest communities; and amending Rule             
72(k), Alaska Rules of Civil Procedure."                                       
     - REMOVED FROM AGENDA                                                     
* HOUSE BILL NO. 276                                                           
"An Act relating to the compensation and terms and conditions of               
employment of the heads and deputy heads of principal executive                
departments of the state."                                                     
     - REMOVED FROM AGENDA                                                     
HOUSE BILL NO. 350                                                             
"An Act requiring that the cost of contraceptives and related                  
health care services be included in health insurance coverage."                
     - REMOVED FROM AGENDA                                                     
(* First public hearing)                                                       
PREVIOUS ACTION                                                                
BILL: HB 389                                                                   
SPONSOR(S): REPRESENTATIVES(S) COWDERY                                         
Jrn-Date    Jrn-Page           Action                                          
02/11/98      2279     (H)  READ THE FIRST TIME - REFERRAL(S)                  
02/11/98      2279     (H)  LABOR & COMMERCE                                   
04/22/98               (H)  L&C AT  3:15 PM CAPITOL 17                         
04/22/98               (H)  MINUTE(L&C)                                        
04/24/98               (H)  L&C AT  3:15 PM CAPITOL 17                         
BILL: HB 486                                                                   
SHORT TITLE: ALASKA SECURITIES ACT                                             
SPONSOR(S): LABOR & COMMERCE BY REQUEST                                        
Jrn-Date    Jrn-Page           Action                                          
04/16/98      3014     (H)  READ THE FIRST TIME - REFERRAL(S)                  
04/16/98      3014     (H)  LABOR & COMMERCE                                   
04/24/98               (H)  L&C AT  3:15 PM CAPITOL 17                         
WITNESS REGISTER                                                               
DOUGLAS ORCUTT                                                                 
P.O. Box 198043                                                                
Anchorage, Alaska 99519                                                        
Telephone:  (907) 561-0436                                                     
POSITION STATEMENT:  Testified in support of HB 389, suggested                 
                     additional language.                                      
MICHELLE BUCKMASTER                                                            
P.O. Box 111306                                                                
Anchorage, Alaska 99511                                                        
Telephone:  (907) 344-5878                                                     
POSITION STATEMENT:  Testified in support of HB 389.                           
DANIEL SMITH                                                                   
7453 Tana Circle                                                               
Anchorage, Alaska 99504                                                        
Telephone:  (907) 333-1008                                                     
POSITION STATEMENT:  Testified in support of HB 389.                           
MICHAEL BROADWAY                                                               
3536 East 19th Avenue                                                          
Anchorage, Alaska 99508                                                        
Telephone:  (907) 258-5606                                                     
POSITION STATEMENT:  Testified in support of HB 389.                           
DAVID ATHEARN                                                                  
4237 Marion Drive                                                              
Juneau, Alaska 99801                                                           
Telephone:  (907) 789-2331                                                     
POSITION STATEMENT:  Testified in support of HB 389.                           
CHRIS MONAGLE                                                                  
P.O. Box 34652                                                                 
Juneau, Alaska 99803                                                           
Telephone:  (907) 789-5674                                                     
POSITION STATEMENT:  Testified in support of HB 389.                           
MANO FREY, President                                                           
Alaska State AFL-CIO                                                           
2501 Commercial Drive                                                          
Anchorage, Alaska 99501                                                        
Telephone:  (907) 272-4571                                                     
POSITION STATEMENT:  Testified against HB 389.                                 
DWIGHT PERKINS, Special Assistant                                              
Office of the Commissioner                                                     
Department of Labor                                                            
P.O. Box 21149                                                                 
Juneau, Alaska 99802-1149                                                      
Telephone:  (907) 465-2700                                                     
POSITION STATEMENT:  Testified on HB 389.                                      
FRANKLIN TERRY ELDER, Senior Securities Examiner                               
Division of Banking, Securities and Corporations                               
Department of Commerce and Economic Development                                
P.O. Box 110807                                                                
Juneau, Alaska 99811-0807                                                      
Telephone:  (907) 465-2521                                                     
POSITION STATEMENT:  Testified in support of HB 486.                           
VINCE USERA, Assistant Attorney General                                        
Commercial Section                                                             
Civil Division                                                                 
Department of Law                                                              
P.O. Box 110300                                                                
Juneau, Alaska 99811-0300                                                      
Telephone:  (907) 465-3600                                                     
POSITION STATEMENT:  Provided information on HB 389.                           
ACTION NARRATIVE                                                               
TAPE 98-50, SIDE A                                                             
Number 0001                                                                    
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce                   
Standing Committee meeting to order at 3:28 p.m.  Members present              
at the call to order were Representatives Rokeberg, Cowdery, Hudson            
and Sanders.  Representative Ryan arrived at 4:09 p.m.                         
HB 389 - OVERTIME WAGE EXEMPTION AIRLINE EMPLOYEES                             
Number 0101                                                                    
CHAIRMAN ROKEBERG announced the committee's first order of business            
was HB 389, "An Act relating to an exemption from the requirement              
for payment for overtime under a voluntary written agreement for               
certain employees in the airline industry; and providing for an                
effective date."                                                               
Number 0103                                                                    
REPRESENTATIVE JOHN COWDERY presented HB 389 as the legislation's              
sponsor.  He commented HB 389 was introduced at the request of an              
ad hoc group of employees from United Airlines, noting one of the              
employees was his neighbor.  Representative Cowdery read the                   
sponsor statement, making some additional comments and omitting the            
sentence, "However, we expect organized labor to oppose it."  He               
noted the current overtime practice made it difficult or impossible            
for employees to trade shifts to have, for example, an extra day               
off during salmon season.  He said he thought this had been done               
quite a lot in the past.  Representative Cowdery stated he was sure            
organized labor would prefer the status quo, but he said they have             
indicated they will work with them on this bill and he indicated he            
hoped the legislation would find a way to provide a mechanism for              
the airline employees to legally trade shifts.  Representative                 
Cowdery mentioned he was not feeling completely well that day and              
Marco Pignalberi, a member of his staff, was present to answer                 
questions on the legislation.  The sponsor statement read:                     
     HB 389 was introduced at the request of an ad hoc group                   
     of employees from United Airlines.  Since its                             
     introduction, support has broadened to include the entire                 
     commercial airline industry in Alaska.  The Alaska Air                    
     Carriers Association, its individual constituent members                  
     and their employees are asking the legislature to pass                    
     this legislation.  Management and employees support it.                   
     However, we expect organized labor to oppose it.                          
     HB 389 is intended to allow airline employees to trade                    
     workdays with each other without invoking overtime pay                    
     requirements.  Under strict interpretation of current                     
     statute, a substitute employee who works a shift for                      
     another employee must be paid overtime if the substitute                  
     employee already worked 8 hours in the same work day or                   
     40 hours in the same work week.  Consequently, shift                      
     trading can only occur when the substitute employee has                   
     a day off from his/her regular shift.  This situation                     
     narrows the available pool of substitute workers and                      
     makes it impossible or very difficult to trade shifts.                    
     Airline employees in Alaska are vexed under Alaska's                      
     statute (A.S. 23.10.160) because we are the only state in                 
     the U.S. that has a daily overtime requirement.  This                     
     bill gives Alaskan employees of airlines the same                         
     treatment as their counterparts in the other 49 states.                   
     Shift trading among employees in the airline industry is                  
     a very common practice.  Usually it is done informally                    
     with tacit approval of the employer.  HB 389 will                         
     legitimize the practice that has become the custom in the                 
     industry.  Without it, employer airlines would violate                    
     the law if they allow their employees to trade shifts.                    
     Organized Labor would prefer the status quo.  They are                    
     against any weakening of the overtime pay requirements in                 
     statutes.  There is no problem with the status quo as                     
     long as the Department of Labor doesn't enforce the                       
     overtime statutes.  However, neither the legislature, nor                 
     the governor, should be party to any practice that                        
     condones arbitrary enforcement.  Either we must tell the                  
     employees of the airline industry in Alaska that they can                 
     no longer trade shifts, or, we must provide a mechanism                   
     for them to do it legally.                                                
Number 0385                                                                    
CHAIRMAN ROKEBERG stated the committee would take teleconference               
testimony and confirmed members of the audience wishing to testify             
on HB 389 had signed the witness register.  He asked witnesses to              
limit their testimony to three minutes or less.                                
Number 0443                                                                    
DOUGLAS ORCUTT testified via teleconference from Anchorage.  He                
stated he worked for Alaska Airlines and was the vice president for            
the International Association of Machinists and Aerospace Workers              
(IAM), representing Alaska Airlines employees out of District 143              
in Seattle.  Mr. Orcutt spoke from his prepared statement, "I've               
worked for Alaska Airlines for 23 years.  I've enjoyed the ability             
to trade days and shifts off between the course of my employment               
both in Seattle and in Anchorage.  (Indisc.--coughing) practice of             
trading days off or shifts by employees of Alaska Airlines have                
been in effect for over 30 years.  Alaska Airlines, like other                 
airlines in the industry, operates 24 hours a day 365 days a year.             
The voluntary day and shift trading among employees is a                       
longstanding airline industry practice which allows an employee to             
obtain additional time off from work to address personal and                   
professional needs which would otherwise be unavailable to them.               
These needs can range from time off not covered by a working                   
agreement and the relative (indisc.) to the ability to spend                   
quality time with family when work and school schedule conflict or             
to perform charitable work in the community and to obtain                      
additional education."                                                         
Number 0530                                                                    
MR. ORCUTT continued, "The International Association of Machinists             
and Aerospace Workers, the IAM, currently represents the mechanic              
and related MRP [mechanic and ramp personnel] employees as well as             
the clerical office and passenger service (indisc.) [COPS]                     
employees under separate contracts (indisc.) Alaska Airlines.  ...             
I have been elected and currently serve as an IAM District 143 vice            
president for the union at Alaska Airlines and help administer and             
enforce both contracts throughout the Alaska system.  Although the             
MRP agreement is silent, the practice of trading days off or shifts            
has always been allowed and does not, and was never intended to,               
jeopardize overtime rules or pay for that work group.  Moreover,               
the current working agreement between Alaska Airlines and the IAM              
for the clerical office passenger service employees does have                  
negotiated contract language under its article 5, hours and                    
service, paragraph 'f,' page 14, which states, 'Employees in the               
same classification and work group may participate in the trade of             
days off or shift with their managers approval 48 hours in                     
advance.'  I emphasize, 'employees shall be compensated as if they             
remained on their original days off and shift.  When employees                 
trade days off or shifts, they will be considered for pay purposes             
to have remained in their scheduled days off and/or shifts.'  The              
mechanical-related employee group is currently in contract                     
negotiations with Alaska Airlines and with support from the carrier            
is seeking to adopt contract language identical to the COPS                    
Number 0622                                                                    
MR. ORCUTT stated, "I have reviewed HB 389 and would offer only the            
following suggestion.  The Act should include further language                 
under paragraph 'd' which would clarify when employees trade days              
off or shifts that they will be considered for pay purposes to have            
remained in their scheduled days off or shifts, as it is described             
in the COPS working agreement which I have read.  As an employee               
and a union representative of Alaska Airlines, I certainly support             
HB 389 because it maximizes schedule flexibility for employees                 
while minimizing administrative scheduling for management, and                 
provides a positive voluntary benefit to all employees."  Mr.                  
Orcutt indicated anyone who wanted further information on the                  
union's position on the legislation could phone either him or Tom              
Gibbs (ph), the general chairman of Air Transport District 143,                
Seattle, Washington, 1-800-248-0143.                                           
Number 0727                                                                    
REPRESENTATIVE BILL HUDSON asked Mr. Orcutt if it was correct this             
had been a practice for 30 years.                                              
Number 0730                                                                    
MR. ORCUTT replied in the affirmative.  He indicated Mr. Gibbs (ph)            
had said the practice for at least 30 years and probably longer.               
Mr. Orcutt noted Alaska Airlines has had a contract with the IAM               
since 1958.                                                                    
Number 0744                                                                    
REPRESENTATIVE HUDSON asked why it needed to be changed if it had              
been working for 30 years.                                                     
Number 0749                                                                    
MR. ORCUTT indicated the process might need to be legitimized in               
the state of Alaska.                                                           
Number 0762                                                                    
REPRESENTATIVE COWDERY stated, "As I understand, even though it's              
been in existence it ... could lead to the employer facing a                   
lawsuit - a class action lawsuit or something for -- or that time,             
some sort of a legal problem if ... they endorse this as ... it                
stands now."  He asked if he was correct.                                      
Number 0787                                                                    
MR. ORCUTT replied, "Yes, I think I'm in - in agreement with that              
although there's never been any times for many employees on ...                
Alaska Airlines."  Mr. Orcutt said he had spoken with Mr. Perkins,             
of the Department of Labor (DOL) the other day who had indicated               
the department had never received any complaints from Alaska                   
Number 0806                                                                    
REPRESENTATIVE COWDERY said, "I understand, but that's not to say              
some ambitious lawyer could come around and offer some employees               
money (indisc.) enter into a suit ..."                                         
MR. ORCUTT indicated he was not saying that could not happen and               
stated he was in favor of the bill.                                            
Number 0825                                                                    
CHAIRMAN ROKEBERG asked Mr. Orcutt if he had had any communications            
with the AFL-CIO (American Federation of Labor - Congress of                   
Industrial Organizations) or the International Brotherhood of                  
MR. ORCUTT replied he had not.                                                 
CHAIRMAN ROKEBERG recommended he do so and try to get those                    
organizations behind his union.  The chairman stated, "It's been               
our experience that the organized labor takes a jaundiced eye at               
amending this particular provision of the statute, so I recommend              
that you get those chaps on your side where they belong as a pro-              
worker group."                                                                 
Number 0885                                                                    
MICHELLE BUCKMASTER testified next via teleconference from                     
Anchorage.  She stated she had worked for United Airlines for ten              
years and noted she was a customer service representative for the              
airline in Anchorage.  She commented she had faxed several pages of            
text to the committee the day before, including a revised copy of              
HB 389 and a copy of a similar bill passed recently in the state of            
Washington.  Ms. Buckmaster stated, "In May 1997 United Airlines               
informed (indisc.) employees in Alaska that because of the state               
labor laws in our state, the trade policy and company regulations              
would no longer pertain to us.  This trade policy is a significant             
benefit to us as employees as well as all airline employees in                 
Alaska.  ... In an industry that spends 24 hour a day, 7 days a                
week, 52 weeks a year in promoting and supporting the economic                 
growth of our state through tourism, conventions, sporting events              
and numerous other activities, the trade policy is a valuable                  
benefit and tool to its employees who would otherwise miss out on              
precious time with family, observance of religious holidays,                   
educational opportunities, summer vacations and extra time for                 
those who require it.  In an industry where competition is always              
a priority, we have come together to make a change that will                   
benefit and create a win-win situation for all airline employees.              
Over the past year, employees from ... several air carriers have               
worked together to encourage the implementation of this bill.  As              
you are aware from the numerous phone calls and letters from                   
concerned airline employees, there has been a great deal of grass              
root support for this legislation.  In closing, we understand and              
respect the labor are here to protect us, however this particular              
law which may be a protection in your eyes (indisc.) eliminating a             
benefit in ours.  Therefore I'm here on behalf of these employees              
to request the amendment we have brought before you not only be                
passed but be passed in a timely manner so that this valuable                  
benefit may be reimplemented as soon as possible."                             
Number 1020                                                                    
REPRESENTATIVE COWDERY said Ms. Buckmaster had been the first                  
person to bring this problem to his attention and had done a lot of            
work on it.  He indicated she had gathered signatures from other               
employees with similar concerns.                                               
Number 1033                                                                    
CHAIRMAN ROKEBERG indicated he had worked as a passenger service               
agent for Northwest Airlines at the Anchorage International Airport            
34 years ago and 31 years ago for Alaska Airlines.  He said the                
practice of trading days off and shifts existed at that time [tape             
states "34 years" and "Alaska Airlines," Chairman Rokeberg                     
corrected information in further testimony].                                   
Number 1065                                                                    
DANIEL SMITH testified next via teleconference from Anchorage.  He             
stated he was an employee with United Airlines in Alaska and would             
just like to reiterate the comments of Mr. Orcutt and Ms.                      
Buckmaster.  He said the trade policy was an important tool to                 
assist the employees, and as previously mentioned, it was almost an            
industry standard.  Mr. Smith indicated Alaska was the only area               
where they were having problems with this policy.                              
Number 1113                                                                    
MICHAEL BROADWAY testified next via teleconference from Anchorage.             
He stated he worked for United Airlines and was there to show his              
support for what the people before him had basically said.  He                 
indicated the trading policy was an airline industry standard; it              
made a more friendly work environment, creating better jobs.                   
Number 1188                                                                    
DAVID ATHEARN came forward to testify in Juneau.  He stated he was             
an Alaska Airlines employee and indicated he had been employed with            
Alaska Airlines in Juneau for 22 years.  He stated his airline                 
career extended back 35 years, noting the trade had been in effect             
back in the "dark ages" of the industry as well.  Mr. Athearn said             
it had, if anything, become more of an integral part of the                    
business among the employee groups.  He stated, "On a daily basis              
in my work group there's probably 30 employees on the various                  
shifts throughout the 24 hour time period and about that number in             
the COPS group, I being in the MRP, mechanic and related, and the              
COPS, they're the ones at the ticket counter, the freight office               
and what have you.  ... I individually maintain a trade book to                
keep track ... and there is anywhere from five to ten or a dozen               
daily people that are very dependent upon a good, viable day trade             
policy to have time off available for a variety of reasons -                   
vacation, personal time, et cetera.  This is such an ingrained part            
of ... the way we do business out at Alaska Airlines that there's              
no way that I can conceive that we could operate unless we had the             
policy like this in effect."  He indicated he had a question about             
the accountability of time which would be brought up by Mr. Monagle            
and commented their appearance to testify had been on very short               
notice.  Mr. Athearn spoke in support of the legislation's passage             
and commented it needed to be "cut in stone."  He indicated the                
language did not exist in the MRP contract but as Mr. Orcutt had               
mentioned, the other half of their work group did have that                    
Number 1338                                                                    
REPRESENTATIVE COWDERY asked what the normal practice was for                  
trading days off, questioning whether it was done just between                 
individuals or if they worked through management.                              
Number 1348                                                                    
MR. ATHEARN noted there was what they call a lead ramp service or              
lead passenger service as management's representative for these                
purposes.  He said, "The person desiring a trade initiates the                 
paperwork between themselves with the approval ... of whoever                  
happens to be the straw boss of their work group that day, and then            
it's entered into a trade log so when shifts change the new lead               
coming on duty can just simply look at the piece of paper and say,             
'Joe for Sam on such and such a shift,' and know who's going to be             
Number 1383                                                                    
REPRESENTATIVE COWDERY asked what happened if one person fulfilled             
his or her part of a trade agreement but the counterpart did not.              
He asked, "Are you looking upon the management to do that -- to                
step in and pay you for that?"                                                 
Number 1397                                                                    
MR. ATHEARN said, "Then that becomes a -- if you've held up your               
end of the bargain and someone, the person that had agreed to trade            
with you did not show up, you're not going to be held accountable              
for that because you had a viable trade established with them.  If             
the other person spaced out or called in sick or whatever, ...                 
you're not held responsible for that.  It would be considered ...              
unauthorized leave of absence or (indisc.)."                                   
Number 1423                                                                    
REPRESENTATIVE COWDERY confirmed that if an employee made a trade              
it did not show up in his or paycheck, it was just in the operation            
Number 1427                                                                    
MR. ATHEARN replied there was record made of it, noting there was              
a provision on their timecards.  He said, "You circle the day, say             
you took Tuesday, and it says, 'Trade day worked,' you would circle            
that, or 'Trade day off,' you would circle that."                              
Number 1443                                                                    
REPRESENTATIVE COWDERY confirmed the practice was so common the                
timecards were printed to indicate that possibility.                           
Number 1452                                                                    
MR. ATHEARN agreed, stating it was an innovation which came eight              
to ten years ago for accountability purposes.                                  
Number 1463                                                                    
REPRESENTATIVE HUDSON commented the committee had heard United                 
Airlines had essentially put its employees on notice the airline               
was not continuing this practice because of the law.  He asked Mr.             
Athearn if Alaska Airlines had notified him the airline would not              
continue the current trade practice.                                           
MR. ATHEARN answered in the negative.  He said, "They're pretty                
much on the same page with us on this I think."                                
Number 1498                                                                    
CHRIS MONAGLE came forward to testify next.  He stated, "I                     
(indisc.) past president here the last five years ... of Local 2263            
which is the local that covers all of Southeast [Southeast Alaska]             
for Alaska Airlines, the ramp maintenance divisions.  I think that             
what we're looking for here is protection ... for things [to]                  
remain the same.  The United [United Airlines] situation has ...               
certainly given us a scare, taking away our trade benefits."  Mr.              
Monagle said people relied on trades benefits on a daily basis,                
giving the example of how he used the trade practice to be able to             
coach Little League Baseball without having Saturdays off.  He said            
he usually gave his days to returning college kids and he noted it             
was common for people to use trades for an extra weekend day in the            
summertime to go fishing.  Mr. Monagle indicated the work group at             
Alaska Airlines in Juneau felt very strongly about the issue.  He              
passed around a timecard for the committee members to see,                     
indicating the practice was so common it was on the timecard for               
every employee.  He added, "I wanted to say that when we do trade,             
it's always at a regular straight-time rate, there's never ... any             
advantage to stockpile overtime or to violate any state laws                   
regarding the use of, or accumulation of, overtime.  ... I see it              
as nothing but a benefit and would strongly favor the bill."                   
Number 1599                                                                    
REPRESENTATIVE COWDERY said to Mr. Monagle, "You say ... it's a                
common thing, but on the same token, your airline hasn't sent                  
notice, but we had -- I think I had communication with ... Alaska              
Airline, well with the airline industry as a whole.  They felt --              
the management felt that if we didn't -- something similar to this             
bill happen, that it could be selectively enforced to -- and - and             
that was their concern.  It wasn't that they -- the airline                    
industry as you said, and this testimony showed, that they're all              
in favor of this, they just want to have it so they don't get                  
something stacked up on 'em and then they have to defend it."                  
MR. MONAGLE said he would agree.                                               
Number 1642                                                                    
CHAIRMAN ROKEBERG commented Alaska Airlines was the largest carrier            
in Juneau but he noted there were other small commuter-type air                
taxis and other scheduled carriers.  He asked if those people were             
members of any unions or generally nonunion.                                   
MR. MONAGLE answered he thought most of the small carriers were                
Number 1660                                                                    
CHAIRMAN ROKEBERG asked, "How many people (indisc.) you think work             
on the ramps and as passenger service agents or would be covered               
under this bill with your firm working those same capacities for               
all the other kind of carriers in 'Anchorage' that are not union               
members?" [Note: "Anchorage" stated on tape, although it appeared              
the question was in reference to Juneau.]                                      
Number 1680                                                                    
MR. MONAGLE confirmed Chairman Rokeberg was referring to people                
working for the other carriers.                                                
CHAIRMAN ROKEBERG indicated he was looking for a rough estimate.               
MR. MONAGLE with an aside to Mr. Athearn, indicated the number in              
Juneau would be probably less than 40 total.  He said he was not               
sure how many people Wings of Alaska employed, noting it was                   
probably the largest other carrier in Juneau.                                  
CHAIRMAN ROKEBERG asked if that estimate included the pilots.                  
MR. MONAGLE answered in the affirmative.                                       
Number 1738                                                                    
MANO FREY, President, Alaska State AFL-CIO, testified next via                 
teleconference from Anchorage.  Mr. Frey said he sincerely                     
appreciated the comments and questions, noting, "You have, I                   
believe, become enlightened about some of our concerns and issues              
regarding overtime and wage and hour laws, and I appreciate you and            
your committee members concern.  As you know, we're ... very                   
reluctant when there are efforts to change the wage and hour laws."            
Mr. Frey commented they have had many opportunities through the                
last two legislative sessions to discuss with the chairman and the             
committee members the AFL-CIO's concern about downgrading Alaska's             
strong overtime and wage and hour laws.  Mr. Frey indicated the                
AFL-CIO thinks those strong laws are good, and not a negative.  He             
noted, "I think it's good for the workers of this state to know                
that ... if they work overtime they're going to get paid overtime,             
and, generally, it amounts to employers scheduling those employees             
off rather than pay the overtime which really was originally the               
... very intent of having overtime -- is to allow people more time             
with their families and to do things ... that they'd rather do than            
necessarily be working, even at an overtime rate.  Having said                 
that, I take very seriously your questions with regards to Doug's              
[Mr. Orcutt] testimony.  We have not spoken about this until just              
prior to the hearing and it is very rare that the state AFL-CIO is             
in opposition to the bill supported strongly by one of its                     
affiliates, but that is the case today.  We do oppose the bill.                
But let me assure you that we will, when we push the button and                
listen today to the rest of the testimony, the machinists' union               
and the AFL-CIO will schedule a meeting to sit down and discuss                
this, see if there are ways that would provide some reassurances               
that - that we might feel necessary and if we can make the bill                
palatable we would change our position ... we'll try to set up a               
meeting as quickly as we can, depending on our schedules.  ... We              
will try to schedule a meeting so that we can see if there's not a             
way to ... reach a middle ground on this, because it is a very                 
uncomfortable position ...."  He indicated he agreed with                      
Representative Cowdery that a "rascal" attorney could cause some               
legal problems with the current situation, noting he would do                  
almost anything to try to prevent that.                                        
Number 1936                                                                    
REPRESENTATIVE COWDERY said it wasn't his intention or he thought              
the intention of the employees requesting the legislation to do any            
downgrading of organized labor, but he commented it was something              
they had to work out someway.  He indicated he would be glad to                
work with Mr. Frey to avoid some sort of selective enforcement or              
a future class action lawsuit.                                                 
Number 1925                                                                    
MR. FREY said he agreed with that and reiterated that they would               
try to set up a meeting with the machinists' group.  He indicated              
they would attempt to reach something the AFL-CIO could support.               
Number 1945                                                                    
CHAIRMAN ROKEBERG indirectly asked Mr. Frey if he was serious about            
meeting with the machinists before the end of the legislative                  
session on May 12.                                                             
MR. FREY. indicated he was serious about the meeting.                          
Number 1960                                                                    
CHAIRMAN ROKEBERG stated, "As my constituent, I would not want to              
do anything to ruffle your feathers but I think this is an                     
excellent piece of legislation and ... I am very familiar with this            
situation from my own personal experience.  ... This is a                      
longstanding traditional practice and it's so pro-worker I would               
not even want to have ... any idea that you ... as a chief                     
representative of organized labor in this state would stand in the             
way ... of workers of this state.  I mean I just cannot conceive of            
that, I mean it's beyond my understanding."                                    
Number 1996                                                                    
MR. FREY humorously commented to Chairman Rokeberg he was curious              
why the chairman had downgraded himself by leaving the airline                 
industry represented by a good strong union to go into the real                
estate business.  He commented, "I can't believe it."                          
CHAIRMAN ROKEBERG discussed his employment history briefly, noting             
he had worked for the airlines after college and the army.  He said            
he took a leave of absence from Alaska Airlines and opened his                 
first business, "The Birdhouse," commenting he never went back to              
Alaska Airlines.  He said he eventually sold "The Birdhouse" and               
went back to college.                                                          
Number 2023                                                                    
REPRESENTATIVE HUDSON declared a conflict of interest, noting his              
son was a commercial pilot in Anchorage and his son's wife, his                
daughter-in-law, was a flight attendant.                                       
Number 2048                                                                    
REPRESENTATIVE COWDERY asked Mr. Frey if he could come up with a               
"date certain" for Mr. Frey's recommendation on this.                          
MR. FREY indicated he and Mr. Orcutt would meet the afternoon of               
Monday, April 27, 1998.  He stated he would contact the committee              
as early as possible, either late Monday or early Tuesday.                     
Number 2064                                                                    
CHAIRMAN ROKEBERG said the committee would look kindly upon Mr.                
Frey's recommendation to the department not to try to enforce this             
or anything else until it was resolved.                                        
MR. FREY replied he absolutely would go on record supporting that.             
He said they would not want to see any kind of conflict rise up on             
the situation.                                                                 
CHAIRMAN ROKEBERG asked him if he would make the "other step" and              
put that into writing to United Airlines.                                      
MR. FREY answered in the affirmative, asking to whom he should                 
address that.                                                                  
CHAIRMAN ROKEBERG recommended he ask Ms. Buckmaster if she was                 
still at the Anchorage Legislative Information Office (LIO).                   
Number 2095                                                                    
DWIGHT PERKINS, Special Assistant, Office of the Commissioner,                 
Department of Labor, came forward to testify.  Mr. Perkins noted he            
had had some discussion recently with the IAM's representative, Mr.            
Orcutt.  Mr. Perkins said in response to the sponsor's statement               
regarding the other 49 states, he said he believed, in all due                 
respect to the sponsor, the research on that was slightly                      
incorrect.  Mr. Perkins commented he had recently received a notice            
from the state of Hawaii that similar legislation was going through            
there.  He said the state of Washington had adopted similar                    
legislation the past year.  Mr. Perkins indicated he was not sure              
how many states had similar legislation but he knew Alaska was not             
the only state that did not allow this.  He indicated he didn't                
necessarily disagree with the legislation's intent but was just                
clearing the record.  Mr. Perkins commented United Airlines was                
pushing the legislation in Hawaii, stating, "And based on testimony            
that was made by a couple of United Airlines employees, I'm sorry              
that it sounds to me like the employer is getting this whipped up              
to a frenzy ... threatening the employees, 'If you don't take care             
of it, we're not gonna do it,' and - and that's what it sounds                 
like, and I have a little concern with that ... if that's the                  
REPRESENTATIVE COWDERY indicated he strongly did not feel that was             
the case.                                                                      
Mr. Perkins noted the employees had been put on notice the practice            
would no longer be allowed if this legislation was not passed.  He             
said everyone had been on record and he would also go on record                
saying it has been a past practice for many years.  He indicated               
the department did not have the finances to "go out and look for               
trouble in this type of area."  He stated "Mr. Orcutt did tell me              
that in the 20-some years ... he's worked for Alaska Airlines,                 
there's been one or two people, employees, that have come and asked            
them about this.  After they explain it to them and how it's                   
worked, ... their opposition was withdrawn.  Representative                    
Cowdery, you make a very good point as ... Mr. Frey said, there are            
some ... not over-zealous, but ... out of employed attorneys,                  
maybe, that would like to ... make some money on this, and there               
certainly is a concern there, and I would agree with you,                      
Representative Cowdery ... The department is in the process of - of            
trying to reach out.  We did, with Mr. Gibbs (ph) down in Seattle,             
he got me in touch with Orcutt.  I've talked to a couple friends               
that work for Alaska Airlines out here, I understand the concern,              
I've addressed the concern to the commissioner; he does want to                
work this out.  There is language that does touch on, and Mr.                  
Orcutt and I believe maybe the representatives from Alaska                     
Airlines, we want to make sure that ... and it's in federal                    
statute, to make sure ... that they aren't, for lack of other                  
words, cheated out of their overtime pay when it's due them.                   
(Indisc.--coughing) other (indisc.), and I only know of Alaska                 
Airlines because I live here in Juneau and they've been a good ...             
employer to the employees of Alaska Airlines here.  They have a                
good track record ... with their employees.  I ... personally have             
several friends that work for Alaska Airlines that ... talk very               
highly of that particular company."  Mr. Perkins stated, however,              
he would like to have the parties work together, indicating Mr.                
Frey and Mr. Orcutt would be meeting on April 27.  Mr. Perkins                 
indicated he had received some legislation from the state of                   
Washington the previous day which he would examine and compare to              
the bill's language.  He said, "It might be so that it is clear in             
other states that we use some language that ... would fit this and             
maybe offer a substitute to the ... legislation.  But at this                  
point, ... I'd like to just say give us a few days to let us work              
the constituent groups, to let us work with the air carriers                   
associations and try to come back in a timely manner and get this              
taken care of."                                                                
Number 2328                                                                    
CHAIRMAN ROKEBERG said Mr. Perkins's comment about United Airlines             
was a bit injudicious.  He indicated it was the chairman's reading             
that the airline was trying to abide by the law the DOL was                    
mandated to enforce.                                                           
MR. PERKINS apologized for any misunderstanding he might have                  
presented.  He stated, "It kind of bothered me that -- ... it                  
sounded to me like there ... may be undue pressure put onto the                
employees for legislation ... that would cause a hardship for 'em              
... and quite rightly give them some stress in their workplace."               
Mr. Perkins apologized if he misinterpreted or misspoke or offended            
anyone from United Airlines.                                                   
Number 2378                                                                    
CHAIRMAN ROKEBERG asked if there was anything in the statutes the              
DOL was in charge of enforcing that would allow for this type of               
shift trading.                                                                 
Number 2385                                                                    
MR. PERKINS answered there was nothing under current statute.                  
CHAIRMAN ROKEBERG noted the people interested in the legislation               
had identified a defect in Alaska's statutory construction and that            
was the problem.                                                               
Number 2394                                                                    
REPRESENTATIVE COWDERY indicated other carriers besides United                 
Airlines were involved, noting PenAir, the Alaska Air Carriers                 
Association and others had endorsed the legislation.  He stated he             
hoped Mr. Perkins thought it was a good bill and they could work it            
out.  He indicated the issue needed to be resolved.                            
Number 2422                                                                    
MR. PERKINS said he believed the legislation had merit and it was              
truly the employees coming forward wanting this done in light of               
what one of the air carriers saw as a deficiency in Alaska's                   
statutes regarding wage and overtime laws.  Mr. Perkins indicated              
it was something they needed to resolve.  He noted the commissioner            
appreciated the opportunity to work with the Alaska Air Carriers               
Association, with the constituent groups, the employees and with               
the AFL-CIO, trying address this concern in a timely manner.                   
Number 2448                                                                    
CHAIRMAN ROKEBERG stated, "Mr. Perkins ... I'm sure that the                   
commissioner wouldn't want to make himself open to the accusation              
that he was ... not for the working man of the state.  ... I'm sure            
that ... the commissioner would not take kindly to that kind of a              
charge if it was ... leveled against him under these circumstances,            
I would think."                                                                
MR. PERKINS asked, "What leveled against the commissioner?"                    
CHAIRMAN ROKEBERG replied, "That he didn't support ..." [TESTIMONY             
INTERRUPTED BY AUTOMATIC TAPE CHANGE]                                          
TAPE 98-50, SIDE B                                                             
Number 0001                                                                    
MR. PERKINS stated, "... (indisc.) I said, I believe I said, was,              
I would like -- I believe he would like to have the opportunity to             
work with the groups ... to try to come to a resolution so that it             
can be moved forward.  I think ... there is some potential, and Mr.            
Orcutt addressed it, in the proposed legislation, there is some                
potential for abuse, and we'd like to address that with some                   
possibility of some language ... that is being used around the                 
country that may make it simpler and address ... Mr. Orcutt's                  
concern about the overtime provisions."                                        
Number 0023                                                                    
CHAIRMAN ROKEBERG stated, "No, it wasn't what you said, it's what              
I said."                                                                       
Number 0027                                                                    
REPRESENTATIVE HUDSON indicated he thought the department needed to            
examine this in a general sense.  He mentioned he had brought the              
problem of his wife's hairdresser to Mr. Perkins, and commented,               
"But at any rate, you know, we really got into this before, and I              
can see it here and again, and I would really urge the department              
to try to look at this in a more general sense, because there has              
to be other sort of general applications like this that doesn't                
totally blow away or violate, you know, the working man's right to             
overtime pay when it's due and payable.  So I would just urge you              
to take a look at that and see if there isn't some way ...."                   
Number 0064                                                                    
MR. PERKINS thanked Representative Hudson and said he would carry              
the message to the commissioner.                                               
Number 0070                                                                    
REPRESENTATIVE COWDERY said he had been just told the federal                  
government exempted airline employees from this, asking if Mr.                 
Perkins was aware.                                                             
Number 0089                                                                    
MR. PERKINS replied it was to some degree but not across the board.            
He stated, "And that's something that I have ... and actually it's             
... under the ... railway Act, and I believe it's US Code 181, and             
so we are looking at that, and that is what I was referring to as              
tying into this legislation."                                                  
REPRESENTATIVE COWDERY said he would provide Mr. Perkins a copy of             
the statute they had.                                                          
CHAIRMAN ROKEBERG stated, "Mr. Perkins, I would suggest that you do            
this very expeditiously or we'll remove the reference to airline               
business in this thing and move the bill."                                     
MR. PERKINS laughed and mentioned "fast track."  He replied he                 
would contact Mr. Frey and Mr. Orcutt, commenting they might                   
possibly even have a teleconference over the weekend.                          
Number 0115                                                                    
CHAIRMAN ROKEBERG indicated the commissioner should be informed as             
well.  He stated HB 389 would be held over.                                    
Number 0119                                                                    
CHAIRMAN ROKEBERG called a brief at ease at 4:19 p.m.  The                     
committee came back to order at 4:21 p.m.                                      
HB 486 - ALASKA SECURITIES ACT                                                 
Number 0154                                                                    
CHAIRMAN ROKEBERG announced the committee's next order of business             
was HB 486, "An Act relating to the Alaska Securities Act; and                 
providing for an effective date."                                              
Number 0170                                                                    
FRANKLIN TERRY ELDER, Senior Securities Examiner; Division of                  
Banking, Securities and Corporations; Department of Commerce and               
Economic Development (DCED), came forward to testify in support of             
HB 486 which he called an Act to amend the Alaska securities Act.              
He thanked the committee for its willingness to introduce this                 
important piece of legislation which the department believes helps             
preserve significant state revenues while improving investor                   
protection and providing new, easier access to capital markets for             
Alaska businesses.  He indicated the questions might be asked, "Why            
are we amending the securities Act and why is the bill so long?"               
He said they were amending the securities Act for a number of                  
reasons.  Congress passed the National Securities Markets                      
Improvement Act (NSMIA) in 1996, which created a new class of                  
securities called "federal covered securities" and a new type of               
investment advisers called "federal covered advisers."  He said                
NSMIA preempts states from requiring registration and collecting               
registration fees for these securities and advisers.  However, in              
order to be revenue neutral, roughly, it allows states to amend                
their statutes and regulations to require notice filings and notice            
fees, which is what HB 486 does.  Alaska currently receives annual             
revenues from these sources in excess of $4 million and these                  
revenues have been growing at an approximately 14 percent rate over            
the last few years.  At that rate, the revenues from these sources             
would roughly double in five years.  Mr. Elder stated, "To preserve            
our revenues, we must amend our Act to include these new types of              
securities and investment advisers, and to provide for notice                  
filings and notice fees.  We must also amend our Act to preserve               
the authority NSMIA gives to the states to continue to provide                 
assistance to Alaska investors who complain about abusive sales                
practices by their investment advisers.  If we do not amend our                
Act, the general fund loses this revenue and we lose the authority             
to enforce the anti-fraud provisions of the securities Act with                
respect to federal covered advisers and their representatives."                
Number 0265                                                                    
CHAIRMAN ROKEBERG asked, "Who are those (indisc.) people?  Are they            
investment banking account executives ... 'cause they are federally            
licensed but you can also regulate them here in the state ...?                 
MR. ELDER replied that they are large investment advising firms                
who, with NSMIA, only register with the Securities and Exchange                
Commission (SEC).  In the past these large firms registered with               
both the SEC and the states.  He said, "However, in NSMIA [it] said            
that we can continue to require that they pay notice fees here and             
we can continue to enforce the anti-fraud provisions of our Act.               
So, the SEC sees the states as the cop on the beat 'cause we're                
closer to the investors.  ... If we don't do this, we don't have               
the authority to help investors.  We basically would have to tell              
'em to call the SEC if they have a problem."                                   
CHAIRMAN ROKEBERG asked if there was a threshold size for large.               
MR. ELDER replied $25 million under management, roughly.  He noted             
it was more complicated than that but that was essentially the                 
threshold.  He said that anything with $25 million or more under               
assets is a "federal covered advisory (indisc.)."                              
CHAIRMAN ROKEBERG said, "A large local investment adviser like                 
McKinley Capital Management [McKinley Capital Management,                      
Incorporated] in Anchorage ..."                                                
MR. ELDER said, "That's federal ..."                                           
CHAIRMAN ROKEBERG continued, "... SEC, but then what relations or              
what ..."                                                                      
Number 0322                                                                    
MR. ELDER stated that McKinley Capital Management, Incorporated, is            
large enough; it will be a federal covered adviser, and therefore              
it is registered with the SEC.                                                 
CHAIRMAN ROKEBERG asked what Mr. Elder's department had to do with             
that company, for example.                                                     
MR. ELDER answered, "Nothing, except for enforcing anti-fraud                  
provisions.  So, if they commit fraud, ... we could go after 'em.              
We don't anticipate that of course, but ... that's what we could               
CHAIRMAN ROKEBERG asked about registered securities dealers and so             
MR. ELDER replied that broker-dealers are not affected in that way.            
They still register broker-dealers and still have similar authority            
over broker-dealer to what they had before.                                    
CHAIRMAN ROKEBERG asked, "Without regard to capital size or                    
MR. ELDER said that was correct.                                               
CHAIRMAN ROKEBERG indicated that could go from a one-man shop to               
Merrill Lynch and Company, Incorporated.                                       
MR. ELDER answered that was correct.  He indicated NSMIA does                  
affect some areas regarding broker-dealers, noting the department              
could no longer, for example, require different capital                        
requirements, or books and records requirements for broker dealers             
than required by the SEC.  Mr. Elder said there was no change in               
terms of the general regulation of broker-dealers.                             
Number 0373                                                                    
MR. ELDER continued, "The next question is, 'Why is the bill so                
long?'  First, NSMIA is the most significant change to federal                 
securities laws in the last 50 years.  It affects not only                     
securities regulations by creating federal covered securities but -            
but makes changes to the regulation of broker-dealers and                      
especially to the regulation of investment advisers.  This means               
that a lot of sections of our statute have to be changed to conform            
to the new regulatory regime.  Our current statutes do not include             
notice filings and fees.  They don't include federal covered                   
securities, federal covered advisers, investment adviser                       
representatives, state investment advisers - the smaller ones that             
are no longer subject to SEC regulations at all but only to those              
of the states, or prohibitions against specific unethical and                  
fraudulent business practices, especially for investment advisers,             
which NSMIA provided was the proper domain for the states to                   
enforce.  So, we have to make changes to accommodate all of those              
... in our Act.  All of these require numerous changes and                     
additions to the securities Act resulting in a long bill.  Most of             
the language of these changes ... in this bill was drafted by the              
North American Securities Administrators Association (NASAA) ... I             
call it the NASAA that doesn't go to the moon.  ... It's an                    
organization of securities administrators of which we - we belong,             
in all the 50 states including Puerto Rico and D.C. [Washington,               
D.C.], also provinces of Canada and - and Mexico.  We also worked              
with industry and we have received and given you in your packets               
copies of letters endorsing this legislation from the Investment               
Company Institute and the Investment Council Association of America            
(ph), both associations that represent the major players that are              
affected by this legislation, mutual funds and investment                      
CHAIRMAN ROKEBERG asked if he had had a chance to circulate this               
among the people in the state who would be impacted.                           
Number 0466                                                                    
MR. ELDER answered in the affirmative.  He stated, "We provided                
drafts of our proposed changes to persons who requested them,                  
mostly attorneys who are practicing in the field.  We also                     
participated in a continuing legal education seminar in October of             
'97 in Anchorage with the Alaska Bar Association, and we provided              
the bar association copies of a draft of the changes and solicited             
... comments ....  In addition to the changes required by NSMIA, we            
are proposing new or updated language to other sections of the                 
securities Act, sometimes to modernize language, and sometimes to              
improve access to capital markets for Alaska businesses."  He said             
he would give a few examples, stating, "There's a new exemption                
from registration that's added for businesses that are seeking                 
capital but limiting their search to a select category of wealthy              
investors and institutions called accredited investors.  It's                  
called the accredited investor exemption.  This will allow Alaska              
businesses to participate in new methods of raising capital such as            
ACE-Net, that's the Angel Capital Electronic Network, which was a              
creation of the Small Business Administration.  There's a new                  
exemption added for businesses making their initial issuance of                
shares to the people forming the business and not to the general               
public.  Some small businesses form and never intend to sell shares            
to the public.  This exemption will remove the requirement for                 
those people to file a request for exemption with the state.                   
There's a new exemption added for the sellers of a business who                
transfer stock to the buyers of the business when ... the transfer             
is solely incidental to the sale of that business.  That'll remove             
the potential liability that exists today when a small business                
owner sells his business to someone and neglects, when he transfers            
that stock because he had incorporated, ... to either file a                   
registration or exemption with - with the state.  Next, there's a              
new reciprocal limited registration created for Canadian broker-               
dealers to provide service to their existing clients who happen to             
be in Alaska for whatever reason, without having to be subject to              
the full examination and registration requirements of the Act.                 
They are subject to the anti-fraud provisions of the Act.  They                
cannot compete for new customers, but only service their existing              
Canadian customers who are in Alaska."                                         
Number 0575                                                                    
MR. ELDER continued, "It is reciprocal in that for a Canadian                  
broker-dealer to be able to do this, that Canadian province must               
allow the same for a US [United States] broker-dealer.  These are              
probably the largest changes to the Act, so, in the interests of               
the committee's time, I won't go ... into the other changes, but               
will refer you to the comments that we have provided on sections of            
the bill, both for all the sections and specifically for the non-              
NSMIA sections ...."  He noted he would be happy to answer any                 
questions after he finished his presentation, but commented there              
were some corrects to the current draft of HB 486.  He stated the              
division worked with legislative counsel in drafting the bill, and             
appreciated counsel's hard and careful work, but he said there had             
not been an opportunity for the division to proofread the bill                 
before it was introduced.  He referred to a letter from himself to             
the the chairman, dated April 16, 1998, containing the needed 13               
changes in amendment form.  He stated, "The first 10 changes ...               
that are numbered are replacements for sections as they exist in               
the current draft of the bill, so it'd be simply a matter of                   
replacing the current sections with ... those that are in - in the             
letter ....  Change number 11 in the letter is a new paragraph                 
which is added to the definition of investment adviser.  This is a             
paragraph that I had discussed verbally with legislative counsel,              
and we had agreed ... to insert it but somehow it got left out.                
This is the only correction that would add a new paragraph to the              
bill, and it would be on page 63.  If adding a new paragraph to the            
bill would cause a logistical problem in - in moving the bill, then            
we can do without it, but ... if that wouldn't cause a problem then            
- then this would be useful.  The last two changes in the letter               
are changes to the dates. ... When I was speaking with legislative             
counsel they told me they were going to put in a November 1, 1998,             
effective date, and I noticed that it's November 1, 1999, which                
unfortunately would cause us to lose our authority to collect                  
notice fees ... and require notices."                                          
Number 0750                                                                    
CHAIRMAN ROKEBERG asked if there was anything in there that would              
preclude the department from drafting regulations prior to their               
effective dates, noting the committee had gone through this with               
another bill that year.  He said the committee was concerned                   
because the effective date in certain sections was "out some time,"            
that without those sections being adopted, they didn't have                    
authority to do the "regs" until that effective date.                          
MR. ELDER stated, "My reading of this allows us to go out and - and            
draft the regulations, but they wouldn't take effect until November            
1, 1999."                                                                      
CHAIRMAN ROKEBERG confirmed the authority was in specific language             
in the bill.                                                                   
MR. ELDER agreed, stating, "In the last page ... of the bill it has            
-- Section 78, it says notwithstanding Section 82, the Department              
of Commerce may immediately proceed to adopt regulations necessary             
to implement the changes in the regulations take effect but not                
before November 1, 1999.  And so we - we could do that ... I'm                 
simply saying that that would be too late because the ..."                     
CHAIRMAN ROKEBERG noted the committee had gone into that before,               
particularly on similar large things where there were prospective              
future dates.                                                                  
Number 0820                                                                    
MR. ELDER indicated he suspected, based on his communication with              
legislative counsel who had said, November 1, 1998, that this had              
been a mistake.                                                                
REPRESENTATIVE HUDSON commented, because of his extreme confidence             
in Willis Kirkpatrick [Director, Division of Banking, Securities               
and Corporations] and Mr. Elder, he would like to consider the                 
suggested amendments 1 through 10 in Mr. Elder's letter as                     
Amendment 1.                                                                   
CHAIRMAN ROKEBERG commented that was not a problem.                            
Amendment 1 (taken from Mr. Elder's April 16, 1998, letter) read:              
     1. (Section 1, page 2, line 14) Replace current AS                        
     14.43.148(h)(1)(A)(xiii) with the following:                              
          (xiii) registration as a broker-dealer, an agent, a                  
     state [OR] investment adviser, or an investment adviser                   
     representative under AS 45.55.030;                                        
     2. (Section 2, page 3, line 24) Replace current AS                        
     25.27.244(s)(2)(A)(xii) with the following:                               
          (xii) registration as a broker-dealer, an agent, a                   
     state [OR] investment adviser, or an investment adviser                   
     representative under AS 45.55.030;                                        
     3. (Section 3, page 5, line 5) Replace current AS                         
     25.27.244(s)(2)(A)(xii) with the following:                               
          (xii) registration as a broker-dealer, an agent, a                   
     state [OR] investment adviser, or an investment adviser                   
     representative under AS 45.55.030;                                        
     4. (Section 4, page 5, line 30) Replace current AS                        
     37.23.050(a)(2) with the following:                                       
          (2) a state [AN] investment adviser registered under                 
     AS 45.55.030 [AND UNDER 15 U.S.C. 80b-3 (INVESTMENT                       
     ADVISERS ACT OF 1940)] or a federal covered adviser that                  
     has made a notice filing under AS 45.55.040(h);                           
     5. (Section 29, page 32, line 12) Replace current AS                      
     45.55.060(d)(6) with the following:                                       
          (6) the administrator may by regulation provide for                  
     an examination, which may be written or oral or both, to                  
     be taken by any class of or all applicants, [AS WELL AS                   
     ADVISER IN DOING ANY OF THE ACTS WHICH MAKE THE                           
     INVESTMENT ADVISER AN INVESTMENT ADVISER] including                       
     applicants for registration as investment adviser                         
     representatives of state investment advisers or federal                   
     covered advisers, if [PROVIDED THAT] examinations                         
     required by this paragraph are not required of a                          
     registrant under this chapter who was doing business in                   
     this state and was a resident of this state on May 9,                     
     6. (Section 46, page 39, line 20) Replace current AS                      
     45.55.900(a)(5) with the following:                                       
          (5) a security issued in connection with an                          
     employee's stock purchase, savings, pension, profit-                      
sharing, or similar employee's benefit plan, or a security issued              
by or an interest or participation in a church plan, company, or               
account that is excluded from the definition of an investment                  
company under 15 U.S.C. 80a-3(c)(14) (Investment Company Act of                
     7. (Section 47, page 44, line 7) Replace current AS                       
     45.55.900(b)(5)(C)(i) with the following:                                 
          (i) the persons are promoters as the administrator                   
     may define "promoter" by regulation or order; and                         
     8. (Section 47, page 44, line 18) Replace current AS                      
     45.55.900(b)(5)(D)(ii) with the following:                                
          (ii) the seller provides full access to the buyer of                 
     the books and records of the enterprise or business; and                  
     9. (Section 47, page 52, line 2) Replace current AS                       
     45.55.900(b)(18)(H) with the following:                                   
          (H) dissemination of the general announcement of the                 
     proposed offering to persons who are not accredited                       
     investors will not disqualify the issuer from claiming                    
     this exemption;                                                           
     10. (Section 68, page 58, line 25) Replace current AS                     
     45.55.980(f) with the following:                                          
          (f) AS 45.55.020, 45.55.023, 45.55.030(c),                           
     45.55.030(e), 45.55.040(h), and 45.55.170, so far as                      
     state investment advisers, federal covered advisers, and                  
     investment adviser representatives are concerned, apply                   
     when any act instrumental in effecting prohibited conduct                 
     is done in this state, regardless of whether [OR NOT]                     
     either party is then present in this state.                               
Number 0841                                                                    
REPRESENTATIVE HUDSON made a motion to adopt Amendment 1.  There               
being no objections, Amendment 1 was adopted.                                  
Number 0873                                                                    
REPRESENTATIVE HUDSON made a motion to move the proposed amendment             
11 in Mr. Elder's letter as Amendment 2, noting it was a complete              
sectional addition to the bill.                                                
Amendment 2 (taken from Mr. Elder's April 16, 1998, letter) read:              
     11. (Section 75, page 63, line 17) Add to AS                              
     45.55.990(23) a new section (C) as follows:                               
          (C) except for (37)(A)(ii) of this section,                          
     "investment adviser representative" does not include a                    
     person that would not be defined as an investment adviser                 
     representative under 17 C.F.R. 275.203A-3 adopted under                   
     15 U.S.C. 80b-3A (Investment Advisors Act of 1940).                       
CHAIRMAN ROKEBERG objected, indicating it was for discussion.  He              
asked Mr. Elder to explain what the new Section 75 would be doing.             
Number 0896                                                                    
MR. ELDER responded, "In NSMIA, the SEC is given the authority to              
define 'investment adviser representative' and so we have crafted              
... the definition in our ... Act according to the definition that             
the SEC has already come up with."  He said this paragraph would               
allow the department to automatically track with the SEC, noting               
investment adviser representative had never been defined before and            
there could be changes, especially in the first few years.  If the             
SEC deleted someone from the definition of investment adviser, then            
the person would be automatically deleted from Alaska's definition             
as well.  He noted the state could not differ from the SEC's                   
definition of investment adviser representative.                               
Number 0958                                                                    
CHAIRMAN ROKEBERG asked for a definition of this representative.               
MR. ELDER said essentially an investment adviser representative is             
an agent of an investment adviser, whether it's a state investment             
adviser or federal covered investment adviser.  When you walk into             
the office of a broker-dealer, the person you talk to about buying             
and selling stocks is an agent of that broker-dealer; he said the              
person actually giving the investment advice, representing that                
investment adviser is called an investment adviser representative.             
Number 0979                                                                    
CHAIRMAN ROKEBERG asked where the line of demarcation was.  He                 
asked if the person had to be an employee, an adviser with a                   
register corporation and additionally licensed themselves.                     
MR. ELDER replied the person would have to be a supervised person              
of an investment adviser by definition, so he or she would either              
be the representative of state investment adviser registered with              
the state or a federal covered adviser registered with the SEC and             
noticed with the state.                                                        
CHAIRMAN ROKEBERG confirmed that this person was advising in the               
actual acquisition, sales and purchasing of securities.                        
Number 1019                                                                    
MR. ELDER agreed, noting this person is giving the advice.                     
CHAIRMAN ROKEBERG asked if the distinction was made that this                  
person is not what is known as a financial planner or financial                
MR. ELDER said if a financial planner does not give investment                 
advice and does not receive income for that advice separate from               
financial planning then that is correct.                                       
CHAIRMAN ROKEBERG commented many times a no-fee financial planner              
receives his or her compensation from fees provided by securities              
companies when the planner recommends securities, asking if these              
planners would be covered under this.                                          
MR. ELDER indicated that person would be required to be registered             
if he or she gives investment advice with respect to allocation of             
assets and specific securities.  He confirmed someone who                      
recommended a mutual fund purchase, for example, would be giving               
investment advice and would have to a registered investment adviser            
Number 1067                                                                    
REPRESENTATIVE JOE RYAN asked if the father of a friend, who gives             
very good investment advice, would have to become licensed under               
this, or only if he asked for a fee.                                           
MR. ELDER indicated the requirement would apply if the person held             
himself out to the public for a fee.                                           
Number 1077                                                                    
CHAIRMAN ROKEBERG asked if the state of Alaska or the Division of              
Banking, Securities and Corporations had any particular regulatory             
authority over the area called financial planning unless these                 
planners fall under the investment adviser representative                      
MR. ELDER answered in the negative.                                            
CHAIRMAN ROKEBERG said he wondered because it is a growing industry            
with very little regulation, definition, educational requirements,             
et cetera.  He said there are national organizations that are                  
somewhat self-policing, but there seems to be little state or                  
federal regulation of these activities.                                        
MR. ELDER said that was correct, noting the department adds some               
language in here to make it very clear to people in that business              
that if they are giving investment advice, then they are investment            
adviser representatives.                                                       
CHAIRMAN ROKEBERG asked if fee-based financial planners not                    
compensated by mutual fund companies but receiving fees from the               
clients they were advising would be covered under the definition.              
MR. ELDER said it depends on what kind of advice the planners are              
giving.  If these planners are giving financial planning advice,               
then they would not be covered by the investment adviser                       
representative.  If these planners were recommending something like            
additional equity exposure, specifying specific mutual funds that              
would fit the client's objectives, then they would be giving                   
investment advice.                                                             
Number 1180                                                                    
CHAIRMAN ROKEBERG withdrew his objection to Amendment 2.  There                
being no further objections, Amendment 2 was adopted.                          
Number 1196                                                                    
REPRESENTATIVE HUDSON made a motion to adopt amendments 12 and 13              
in the April 16, 1998, letter as Amendment 3, indicating both                  
suggested amendments were changing the date from November 1, 1999,             
to November 1, 1998.  There being no objections, Amendment 3 was               
Amendment 3 (taken from Mr. Elder's April 16, 1998, letter) read:              
     12. (Section 78, page 67, line 6) Change the date from                    
     November 1, 1999 to November 1, 1998.                                     
     13. (Section 82, page 67, line 13) Change the date from                   
     November 1, 1999 to November 1, 1998.                                     
Number 1235                                                                    
CHAIRMAN ROKEBERG noted Representative Ryan had provided an                    
amendment to the committee, asking if Mr. Elder had seen this                  
Representative Ryan's amendment, labeled 0-LS1426\A.1, Bannister,              
dated 4/24/98, later referred to as Amendment 4, reads:                        
     Page 44, lines 4 - 12:                                                    
          Delete all material and insert:                                      
               "(C) to 10 or fewer persons who are to receive                  
          the initial issue of shares of a nonpublicly traded                  
          corporation, limited liability company, limited                      
          partnership, or limited liability partnership if a                   
          legend is placed on the certificate or other                         
          document evidencing ownership of the security                        
          stating that the security is not registered under                    
          this chapter and cannot be resold without                            
          registration or exemption from it;"                                  
Page 44, lines 4 through 12, in HB 486 read (as amended by                     
Amendment 1):                                                                  
          (C) to 10 or fewer persons in this state who are to                  
     receive the initial issue of shares of a nonpublicly                      
     traded corporation or limited liability company organized                 
     in this state if                                                          
               (i) the persons are promoters, as the                           
          administrator may define "promoter" by regulation                    
          or order; and                                                        
               (ii) a legend is placed on the certificate or                   
          other document evidencing ownership of the                           
          security, stating that the security is not                           
          registered under this chapter and cannot be resold                   
          without registration under this chapter or                           
          exemption from it;                                                   
MR. ELDER said he saw the amendment shortly before this meeting.               
CHAIRMAN ROKEBERG stated it was not his intention to move HB 486               
that day, he indicated it was his intention to move it at the next             
meeting, April 27, 1998.  He asked if Mr. Elder would like more                
time to look over the suggested amendment or if he cared to comment            
at this time.                                                                  
Number 1278                                                                    
MR. ELDER chose to comment, stating that the change that this would            
make to the new exemption that they had proposed, "(b)(5)(C),"                 
would not affect the people they had in mind for "(b)(5)(C)."  He              
indicated the amendment would broaden the exemption but not affect             
the people it was originally intended for.  He said, "What we had              
in mind specifically for the '(b)(5)(C)' exemption was people who              
are incorporating their business and ... they're issuing the                   
initial shares to themselves and not to the general public ...."               
He said this still deals specifically with the initial issuance,               
but said he sees two primary differences.  He noted they have                  
corporations and limited liability companies, and he said this adds            
limited partnerships and limited liability partnerships.  He                   
doesn't think that is a problem.  The other thing it does is remove            
a reference to a requirement that the entity be organized in the               
state of Alaska; he also doesn't think that is a problem.  The                 
third thing he said it does is removes the requirement that these              
people, the ten or fewer persons, be promoters as defined by                   
regulation.  Promoters are currently defined in regulation                     
essentially as people who directly or indirectly take an active                
role in forming the company.  He noted that since this exemption is            
still limited to the initial issue of shares, presumably all of                
those people probably would be involved in the formation of the                
entity, and so that probably is also not a problem.  On that basis,            
he said, while it is not their proposal and therefore they are not             
recommending it, they won't oppose it either.                                  
Number 1400                                                                    
REPRESENTATIVE RYAN noted it was his amendment and explained why it            
was offered.  He said, "Last year I submitted a bill, since the IRS            
[Internal Revenue Service] restrictions on limited liability                   
companies (indisc.) criteria you had to meet depending on whether              
you're gonna be treated for taxation as a corporation or you could             
have passed from taxation or repealed by the IRS, and so we updated            
the limited liability company Act to reflect that IRS update, which            
makes it very easy to form, and so far Alaska's the only state                 
that's done that, so we have got a major stake in business with the            
exception of this sticky point in registering these (indisc.).                 
Companies are getting the exemption.  Now, the agency or the                   
department's been issuing a letter saying that, yeah, these aren't             
securities as such.  And this has been the fly in the ointment for             
people who want to use these in the formations of trust and number             
of other things throughout the world, not just in Alaska.  Alaska              
has this new updated limited liability company law and (indisc.)               
have these limited (indisc.--rustling) various purposes they want              
to outside of Alaska and there's no registration in other states,              
but Alaska had this thing, so I'm putting this amendment here to               
clean that up so that this will be open and we can take advantage              
of that Act and we can do the business we want to do.  There was a             
very large company going to be (indisc.--coughing) million dollars             
(indisc.) assets and because of this sticky provision, they don't              
have to register in Florida and they don't want to register here,              
so the deal went sour.  We stand to make a lot of money, and part              
of what this whole business in (indisc.) with trust and limited                
liability companies and so forth -- like to have Alaska as a -                 
noticed as an estate planning venue, and this amendment would                  
facilitate that, that's why it was offered."                                   
Number 1530                                                                    
MR. ELDER added that simply because a security is exempt from                  
registration does not mean it is exempt from the anti-fraud                    
provision, so, if in fact, there was a problem with an abuse of                
some type the department would have authority to go after the                  
Number 1552                                                                    
REPRESENTATIVE RYAN requested to offer his amendment as Amendment              
4.  He mentioned an accompanying letter from Richard W. Hompesch,              
II, of Hompesch and Associates, Attorneys at Law.                              
CHAIRMAN ROKEBERG asked if deleting the term "promoter" caused any             
problems, and if there were other purposes for having that term in             
Number 1612                                                                    
MR. ELDER replied the reason they had added promoter was simply                
that what they had in mind was to provide an exemption for people              
who are forming their own companies, issuing stock to themselves,              
and not to the general public, with the reasoning of, "Why make                
them go through filing with the state?"  He said they see this a               
lot, giving the example of a fisherperson in Petersburg who decides            
to incorporate, with the two spouses owning the business,                      
incorporating, putting the assets of the fishing business into the             
corporation and issuing stock to themselves.  In this example,                 
these people currently have to send the state a letter and the                 
department has to grant an exemption or write a letter stating the             
department won't take action against them.  He said the department             
simply thought it would provide an automatic mechanism to cover                
people in those situations.  Mr. Elder said that because those are             
people who are forming the company, they fit the definition of                 
promoter which is why it was in there.  He said it was in                      
particular to distinguish these people from passive investors,                 
commenting the committee would notice there is no disclosure                   
Number 1721                                                                    
REPRESENTATIVE RYAN commented that when a corporation is formed, a             
$40 fee and letter to the director of the Division of Banking,                 
Securities and Corporations stating that these stocks aren't going             
to be publicly traded and are exempt from the SEC requirements.                
Number 1746                                                                    
CHAIRMAN ROKEBERG said he understood, but noted he had not seen                
this letter and the department had not seen the letter.  He said he            
respects Mr. Hompesch, but Mr. Hompesch says that the department               
"is gutting the benefit of new law by narrowly defining promoter,"             
noting the chairman was not sure what that meant.  Chairman                    
Rokeberg said, "I don't think we're gonna have any trouble with                
this, but I certainly would have them have a chance to look at                 
this.  Would you have any objections to that ...."                             
REPRESENTATIVE RYAN asked if he had seen the letter from Mr.                   
MR. ELDER said he had not seen the letter.                                     
REPRESENTATIVE RYAN apologized, indicating he thought copies had               
been conveyed.  Copies of the letter were distributed to the                   
committee.  Mr. Hompesch's April 23, 1998, letter via facsimile to             
Representative Ryan read:                                                      
     You asked if HB 486 in its current form resolves the                      
     securities bottleneck upon formation of Alaska limited                    
     liability companies and limited partnerships.  HB 486                     
     does not eliminate the problem.  Section 47 of HB 486                     
     should be amended (AS 45.55.900(b)(5)(C); lines 4 through                 
     12 on page 44).  Proposed language is attached.                           
     HB 486 adds new AS 45.55.900(b)(5)(C), but this provision                 
     has three defects.  There are three problems.  First, the                 
     exemption applies for sales made to 10 or fewer person in                 
     this state.   There is no reason why an exemption should                  
     apply when sales are made in Alaska, but should not apply                 
     when sales are made outside Alaska.  Any sales made                       
     outside Alaska are subject to regulation by federal and                   
     other state law.  Federal and other state law is                          
     sufficient to regulate sales outside of Alaska without                    
     additional regulation from Alaska.                                        
     Second, HB 486's version of AS 45.55.900(b)(5)(C)(i) does                 
     not apply to limited partnerships.                                        
     Third, HB 486's version of AS 45.55.900(b)(5)(C)(i) would                 
     allow the Division to "gut" the benefit of the new law by                 
     narrowly defining "promotor" in such a way that few                       
     transactions would qualify for this exemption.  Alaska                    
     would not benefit if HB 486 was passed and then the                       
     Division "took-away" the benefits by administrative                       
     I understand that Bob Manley and Dave Shaftel spoke with                  
     Terry Elder this morning and that Mr. Elder agreed to an                  
     amendment that would allow an exemption for family                        
     members.  A copy of this amendment is attached along with                 
     a cover sheet from Dave Shaftel's office.  Unfortunately                  
     the amendment does not include a good definition of                       
     "family members."  It is unclear whether step-parents                     
     would be considered to be "family members."                               
     If you have any questions, please call me.                                
Number 1800                                                                    
CHAIRMAN ROKEBERG indicated his intention was allow everyone the               
opportunity for review, taking HB 486 up first thing at the next               
committee meeting.  He noted that if the department wanted to look             
at that, and if there were any other amendments, the committee                 
could take them up and proceed quickly with them.                              
REPRESENTATIVE RYAN asked if the chairman had any objection to his             
CHAIRMAN ROKEBERG indicated he brought it up to see if the                     
department had any objections.  He asked for an explanation of                 
limited liability partnership, asking Representative Ryan if they              
created that with the bill last year.                                          
MR. ELDER said it was a relatively new entity.                                 
REPRESENTATIVE RYAN commented he thought it was created a couple of            
years ago in a bill by Representative Gene Therriault.                         
MR. ELDER said it is a fairly new entity and the department is                 
simply adding it because it and limited liability companies are                
entities that didn't exist when the securities Act was passed.                 
CHAIRMAN ROKEBERG noted it was not in the department's version but             
it was in Representative Ryan's.                                               
MR. ELDER said that did not, by itself, present a problem.                     
CHAIRMAN ROKEBERG asked about limited partnerships, questioning if             
there were restrictions relating to the ten or under, and how those            
limited partnerships were handled because those entities are                   
brought into this amendment.                                                   
MR. ELDER answered in the negative, stating that limited                       
partnerships would not create a problem.  He said the expansion                
from corporations and limited liability companies to include                   
limited partnerships and limited liability partnerships would not              
present a problem.                                                             
CHAIRMAN ROKEBERG asked if that was because of the numbers of                  
MR. ELDER said because of the numbers of people and because this is            
limited to the initial issuance.                                               
CHAIRMAN ROKEBERG asked what the threshold was for limited                     
partnerships.  He asked if registration was required for over ten              
people or if it was a dollar amount.                                           
MR. ELDER replied that was not his area and he did not know.                   
REPRESENTATIVE RYAN stated, "Basically limiting the liability of               
the partners -- in previous in a partnership, everybody is                     
(indisc.) -- you owe whatever your partner runs up.  In a limited              
partnership you have ..."                                                      
CHAIRMAN ROKEBERG interjected he knew that, but was wondering what             
the restrictions are in the balance of the laws related to limited             
partnership because they are not spoken to in this section.                    
Number 1963                                                                    
VINCE USERA, Assistant Attorney General, Commercial Section, Civil             
Division, Department of Law, offered his assistance.  He said the              
limitation is no more than 10 investors and $500,000 for a limited             
partnership that does not have to go through registration.                     
CHAIRMAN ROKEBERG noted, then, there was an another requirement                
relating to the dollar amount.                                                 
REPRESENTATIVE RYAN commented it was (indisc.) capitalization.                 
CHAIRMAN ROKEBERG asked Representative Ryan if adding that would               
have any bearing on this.                                                      
REPRESENTATIVE RYAN said the flexibility of limited liability                  
companies and partnerships are the reason for passing this law.                
CHAIRMAN ROKEBERG confirmed Mr. Usera was familiar with the                    
amendment and had no comments on it.                                           
MR. ELDER indicated he did not think the department's position on              
the amendment would change between that meeting and the Monday,                
April 27 meeting.  He said that while they had something specific              
in mind when they added the "(b)(5)(C)" exemption, he does not                 
think they would have any objection to this although they are not              
recommending it.  Mr. Elder said their major concern is to get the             
bill through as expeditiously as possible.                                     
Number 2125                                                                    
CHAIRMAN ROKEBERG indicated the bill would be moved very rapidly at            
the next meeting, but he was wondering about Mr. Hompesch's                    
statement that the department narrowly defines promoter, noting the            
bill allows the department to define promoter by regulation in the             
future and he wonders how narrow that is.                                      
Number 2137                                                                    
MR. ELDER noted he had not spoken with Mr. Hompesch about that and             
he has never heard that the department defined promoter too                    
narrowly.  He said it is defined in regulation and the department              
will be redoing its regulations as a result of this legislation,               
noting there would be ample opportunity for recommendations to the             
department regarding the definition of promoter or anything else.              
CHAIRMAN ROKEBERG asked if promoter was used elsewhere in the bill             
so that its removal here would not damage the department's ability             
to define it.                                                                  
MR. ELDER said it is used elsewhere and this would not hurt that               
ability of the department.                                                     
Number 2171                                                                    
REPRESENTATIVE RYAN made a motion to move the amendment he had                 
submitted, labeled 0-LS1426\A.1, Bannister, dated 4/24/98, as                  
Amendment 4.  There being no objections, Amendment 4 was so                    
REPRESENTATIVE RYAN asked Mr. Elder for his opinion of Mr.                     
Shaftel's proposed amendment for family transactions included with             
Mr. Shaftel's April 23, 1998, facsimile.  Representative Ryan noted            
the language "fourth degree of affinity or consanguinity (including            
MR. ELDER indicated he was familiar with the amendment and the                 
department would not have any problem at all with that amendment.              
CHAIRMAN ROKEBERG interjected that the committee did not have                  
copies of Mr. Shaftel's communication and amendment.  Copies were              
provided to the committee.                                                     
Number 2280                                                                    
CHAIRMAN ROKEBERG called a brief at ease at 4:05 p.m.  The                     
committee came back to order at 4:08 p.m. [THE TAPE WAS CHANGED                
WHILE THE COMMITTEE WAS AT EASE]                                               
TAPE 98-51, SIDE A                                                             
Number 0001                                                                    
CHAIRMAN ROKEBERG stated the committee has before it an amendment              
recommended by Mr. Shaftel regarding transactions involving family             
members.  He asked Mr. Elder to speak to the amendment.                        
Number 0038                                                                    
MR. ELDER explained that he spoke to some members, including Mr.               
Shaftel of the Anchorage Bar Association, who have worked in the               
area of state planning and probate.  He said, "They're also fairly             
active in making filings with our division.  They indicated a                  
desire to add an exemption, and this is the exemption they sent me,            
which would essentially exempt transactions involving only family              
members.  And to a large extent, these are - the way they are now              
these are limited partnerships often that are created and funded by            
the parents that go into children's and grandchildren's trust                  
accounts and things like that, that currently they may not fit an              
exemption.  And the way it is now, the attorneys write us a letter             
and ask us not to take action against them for not registering the             
transactions and we routinely provide that letter to them.  And so             
on that basis, we wouldn't have a problem with this.  This simply              
says if you're doing something in the family then we won't get                 
involved, you're not doing it to the general public."                          
Number 0175                                                                    
CHAIRMAN ROKEBERG said that it looks like there are 19 exemptions.             
Number 0198                                                                    
MR. ELDER agreed and said the proposed amendment would go under                
[AS] 45.55.900 which lists the exemptions.  In the bill it would be            
on page 52 and it would probably be item 20.                                   
Amendment 5 reads:                                                             
     Add a new subsection to AS 45.55.900(b), as follows:                      
     (Number) a transaction involving only family members who                  
     are related within the fourth degree of affinity or                       
     consanguinity (including adoption).                                       
Number 0231                                                                    
CHAIRMAN ROKEBERG said, "The committee will mark the amendment up              
to make this subsection 20 and then mark it up as Amendment Number             
5.  The Chair would entertain a motion on Amendment 5."                        
REPRESENTATIVE JERRY SANDERS moved that Amendment 5 be adopted.                
There being no objection, Amendment 5 was adopted.                             
CHAIRMAN ROKEBERG referred to the fiscal note and asked Mr. Elder              
to explain the "notice and fee" comments.  He asked how the money              
is collected and how would it be jeopardized by the failure to                 
adopt the bill.                                                                
Number 0305                                                                    
MR. ELDER stated that before NSMIA passed in 1996, securities had              
to be either registered or exempted and with that, they had to pay             
a registration fee or an exemption fee.  When NSMIA passed and                 
created the federal covered security, it defined a certain type of             
security that it calls "covered security" and it says that states              
may not register those securities.  If that's all it did, then they            
would no longer have to register in the state to sell those                    
securities in the state and wouldn't pay any fees.  But Congress               
wanted NSMIA to be revenue neutral to the states so it said, "Even             
though the states can't register them, we will allow the states to             
require a notice filing so that the states will at least know that             
those securities are being offered here and pay a notice fee,"                 
which is roughly equivalent to what they were paying before.  He               
said "What the -- the largest group of securities by far and away -            
by far and away the largest group of securities affected here in               
Alaska are mutual funds.  The mutual funds that are sold here in               
the past would be registered here and would file a registration and            
pay a registration fee."  He stated that currently, they give us a             
notice and pay a notice fee.  That can be done temporarily as that             
ability runs out in 1999, and that is why the act has to be                    
MR. ELDER pointed out that the fiscal note refers to the revenues              
lost and said 99.9 percent of the data the department is providing             
to the committee is from mutual fund filings.  They generate in                
excess of $4 million per year and have been growing at 14 percent.             
Number 0460                                                                    
CHAIRMAN ROKEBERG said, "In the event that a mutual fund share is              
sold in the state, there is a ultimate payback to the state                    
treasury or is it because they register and do business in this                
Number 0471                                                                    
MR. ELDER responded, "Because they register to sell their fund                 
here, they have to -- they pay a fee and that fee, frankly, goes               
toward offsetting the cost to the state for investor protection and            
other things that make markets work well."                                     
CHAIRMAN ROKEBERG asked if it is based on the fact that they want              
to have the right to sell the fund in the state or is based on                 
their volume.  He also asked if there is annual fee.                           
Number 0499                                                                    
MR. ELDER stated that it is the right to sell in this state.  In               
the past, the fee has been based on volume.  He said it doesn't                
have to be based on volume as some states have a flat fee.                     
CHAIRMAN ROKEBERG asked if it is annual volume fee.                            
Number 0519                                                                    
MR. ELDER stated that is set by regulation.  In the past, it has               
been a volume fee.  In other words, the fee was $100 plus 1/10 of              
1 percent of what you want to sell in Alaska up to a maximum of                
$3,000.  He indicated if a person wanted to register $100,000 worth            
of his or her fund, it would cost $200.  He reiterated that a lot              
of states have gone to a flat fee, especially with the notices.                
Mr. Elder noted the Investment Company Institute that represents               
mutual funds supports this legislation.                                        
CHAIRMAN ROKEBERG indicated the legislation would be held.                     
CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Committee             
meeting at 5:15 p.m.                                                           

Document Name Date/Time Subjects