HOUSE BILL NO. 308 "An Act relating to the exemptions under the Alaska Securities Act and to securities issued by Native corporations; and providing for an effective date." 9:59:29 AM REPRESENTATIVE LINDSEY HOLMES, SPONSOR, spoke to the bill. She relayed that many changes in the bill were conforming. The bill did three substantive things: 1) eliminated fee and filing requirements for small or limited offering exemptions from registrations, specifically to 25 or fewer investors or to existing security holders; 2) increased the division's time to review and offer to repay or rescission offer; and 3) clarified that securities issued by the Alaska Native Claims Settlement Corporation, in compliance with federal law, were exempt from registration. While removing the reporting requirements, the bill still required the business issuing the securities to provide required information to investors in compliance with the Securities Act so that they could make an informed investing decision. The bill kept the Act's consumer protection language intact and did not inhibit the Division of Banking and Securities from investigating violations or the investor seeking damages through the court system The bill further sought to clarify that stock issued by Alaska Native Claims Settlement Act (ANCSA) corporations to Alaska Natives born after December 18, 1971 or issued after the original stock offering in compliance with federal law were exempt from registering under AS 45.55.070. Vice-Chair Neuman assumed that the issuance of stock related to corporate law for corporations within the state. Representative Holmes replied in the affirmative, but furthered that it could also be a limited liability. She stressed that it had to be an Alaska entity and Alaska investors. Vice-Chair Neuman wondered why the state required the additional information. Representative Holmes deferred the question to the department for further detail. 10:07:22 AM Co-Chair Stoltze spoke about the issue of the exemption from the record request. He understood that native corporations had a different set of laws, but stressed that there were some large corporations that were favored by the existing law. He wondered if the legislation would disenfranchise the shareholders from the process. He initially felt that the legislation was fairly simple, but felt that there was brevity to the analysis in the fiscal note. Representative Holmes agreed that the Alaska Native Claims Settlement Act (ANCSA) corporations held some issues, but felt that the concerns were unrelated to the legislation. She stressed that the bill was about filing a form with the state, but did not change any practice. The issue was related to where the information was filed, so because there was a requirement to comply with federal law one could only apply within that requirement. She pointed out that there was never a realization that those files should also be filed with the state. The general accounting office noticed that the filing requirement needed to be detailed in state law. Co-Chair Stoltze asked if the requirement was onerous. Representative Holmes replied that the onerous part was less affiliated with ANCSA corporations, but it was redundant. Co-Chair Stoltze pointed to the sponsor statement. He felt that the information was available subject to a public records request and served no interest of the department. He did not want unintentional consequences. Representative Holmes replied that the bill did not change any laws about information to be provided to investors. She agreed that she did not want unintended consequences. 10:12:49 AM KEVIN ANSELM, DIRECTOR, DIVISION OF BANKING AND SECURITIES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, ANCHORAGE (via teleconference), referred committee members to a document titled "HB 308 Alaska Securities Act Exemptions" dated March 31, 2014 (copy on file). She stated that, generally, most securities must either be registered or exempt from registration. The bill did not change those requirements, but eliminated some of the paperwork and fee filing with the division for the small offerings and offerings to existing security holders. She shared that there were three substantive changes: 1) eliminated fee and filing requirements for small or limited offering exemptions from registrations, specifically to 25 or fewer investors or to existing security holders; 2) increased the division's time to review and offer to repay or rescission offer; and 3) clarified that securities issued by the Alaska Native Claims Settlement Corporation, in compliance with federal law, were exempt from registration. The small offering exemptions were noted on page 2, line 21 and page 3, line 30 of the legislation. The small offering exemptions were usually referred to as "friends and family exemptions." Those transactions occurred because someone has a business and invites friends or family to invest in that business, and sales commissions were often involved. The small offering exemptions were driven by the entrepreneur, with no public solicitation or advertising. Most states had small offering exemptions, and the filing was required because filings were more prolific in the original filing act. She noted that there were legends on the securities that explain the limitations on the securities resale; information was required, so investors could make the appropriate decisions based on their own needs; and the more investors there were, the more prescriptive the requirements. She stressed that the only change to the provisions was the filing of the form and fee payment. She noted one other effected exemption in the bill on page 4, line 19. The exemption was for securities issued to existing shareholders, and only applied if there were no commissions paid beyond a standby commission for the new security issuance. Typically, the exemptions were used by an existing business that were advancing. She stressed that the division currently seldom receiving filings for this particular exemption, but those that were filed were usually unnecessary, because there was no commission paid in the transaction. 10:20:47 AM ALLAN JOHNSTON, REGIONAL MANAGER, TEAM NETWORK, INC., ANCHORAGE (via teleconference), spoke about his business and angel investing networks. He felt that it was difficult to navigate the technicalities of the laws related to the legislation. He expressed respect for Ms. Anselm with her work within the municipality to educate the people that were attempting to create some of the programs. The attorney fees in the private sector was unnecessary, so there was friction and expensive that was counterproductive on both sides. He pointed out that Alaska had the third highest median family income in the United States, and fiftieth in local risk capital. Co-Chair Stoltze appreciated the testimony. He stated that any time an ANCSA corporation was mentioned, there was an assurance that the committee would be fully informed. Co-Chair Stoltze CLOSED public testimony. He asked if there were any amendments. Representative Costello addressed the fiscal note from the Department of Commerce, Community and Economic Development. Representative Costello MOVED to REPORT HB 308 out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 308 was REPORTED out of committee with a "do pass" recommendation and with one previously published fiscal impact note: FN1 (CED).