HB 308-ALASKA SECURITIES ACT EXEMPTIONS  4:39:59 PM CHAIR OLSON announced that the next order of business would be 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." 4:40:12 PM REPRESENTATIVE LINDSEY HOLMES, Alaska State Legislature, stated that HB 308 will help smaller businesses start up when they are seeking investment by bringing in small numbers of in-state investors. Currently, these businesses must perform a variety of things to issue their stocks. This bill doesn't include stocks covered under the federal securities exchange, but only ones that are in the state and limited to a small number of investors. The Division of Banking and Securities collects registration forms about companies prior to their stock being issued to small numbers of investors - 25 or fewer - or to reinvestors. These companies are required to either pay a $50 filing fee or a $125 filing fee for expedited processing. Currently the division does not use the information gathered on these businesses. REPRESENTATIVE HOLMES said that this bill leaves in place the requirement that companies must provide investors with information, retains consumer protection language in place, as well as retaining all of the provisions that allow companies to sue for damages. The bill does two other things. First, it would increase the division's time to review an "offer to repay" or rescission offer from 2 to 10 days. Second, it would clarify that securities issued by Alaska Native Claims Settlement Act (ANCSA) corporations, in compliance with applicable federal law, are exempt from registration. Currently, state statutes did not require regional corporations who issued their original stock the transaction to file with the state; however, the statutes were silent on later issuances of stock. The state must address people born after 1971. This bill clearly indicates that later issuances of stock are also exempt from securities registration in the same manner as the original stock. 4:44:11 PM KEVIN ANSELM, Director, Division of Banking & Securities, Anchorage Office, Department of Commerce, Community & Economic Development (DCCED), noted there are three substantive changes contained in HB 308. First, it would eliminate the fee and filing requirements for certain small or limited offering exemptions, including those with 10 or fewer investors, those with 25 or fewer investors, and existing security holders. Second, the bill increases the division's time to review for an offer to repay or rescission offer from 2 to 10 days since those filings are more complicated than a regular security securities registration, and an offer to repay usually means a problem has arisen. Finally, the bill clarifies that securities issued by ANCSA corporations, in compliance with applicable federal law, don't need to be separately registered under state law. 4:46:08 PM MS. ANSELM stated that these are often referred to as "friends and family" exemptions. These transactions typically occur because someone has an idea for a business or buys a business and invites friends or family to invest. Typically, there are no sales persons or sales commissions involved in these types of transactions. These transactions are usually driven by the entrepreneur so there isn't any public solicitation or advertising; thus, the risk to the public is generally small. Most states have these types of exemptions and these are typically self-executing exemptions in other states, which means that no fees and no filing are required, but all of the requirements include consumer protection and enforcement protection provisions. 4:47:02 PM MS. ANSELM explained the next statutory change is to the limited offering exemption. This applies to securities that are offered to existing shareholders. This exemption might be used by an existing business that is moving to the next level. The division seldom receives filings for this exemption, in fact, the division received one in 2013 and five in 2012. Those that are filed are generally not necessary since there isn't any commission paid, which is the only time an exemption needs to be filed under current law. Further, HB 308 eliminates the $50 filing fee or $125 for expedited processing fee. It also eliminates form preparation that will affect an average of 136 filings per year. This will reduce the division's revenue by $6,800 per year. The statutes retain investor protection, the division's oversight and the ability for an investor to seek rescission or monetary damages. Anyone using an exemption has the burden of proving the exemption, either to the division or in a court of law. Finally, the bill clarifies that the ANCSA securities issued after the initial issuance in 1972 do not need to be registered with the state so long as they are in compliance with federal law. 4:48:52 PM REPRESENTATIVE CHENAULT asked for the purpose of the $50 processing fee. MS. ANSELM answered that the division would review the form. REPRESENTATIVE CHENAULT asked for the average length of time to review the form. MS. ANSELM answered that it would vary, depending on the specific filing. Sometimes it can take considerable staff time since people have questions about the filing. The division's staff does spend time with an applicant, she said. In response to a question, Ms. Anselm related the department's processing time for the expedited filing is within two days of receipt. 4:49:55 PM REPRESENTATIVE JOSEPHSON asked whether the form can be used as a means to corroborate information in the instance in which a dispute might arise. In other words, would anything be legally relevant that could help resolve the dispute. MS. ANSELM responded that the only thing would be to establish that the party filed for an exemption, which is currently required under the law. 4:50:51 PM CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on HB 308. REPRESENTATIVE REINBOLD moved to report HB 308 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 308 was reported from the House Labor and Commerce Standing Committee.