Bill Text: IN HB1179 | 2013 | Regular Session | Engrossed
Bill Title: Securities matters.
Spectrum: Bipartisan Bill
Status: (Passed) 2013-05-13 - Public Law 146 [HB1179 Detail]
Download: Indiana-2013-HB1179-Engrossed.html
Citations Affected: IC 23-19.
Synopsis: Securities matters. Requires that certain financial
statements that are submitted with a registration statement for
securities that: (1) are registered by qualification; and (2) are to be
offered in Indiana with a maximum aggregate offering price in excess
of $1,000,000; be audited in accordance with generally accepted
accounting principles by an independent certified public accountant.
Makes it unlawful for a person to violate an agreement that is: (1)
entered into between the securities division and the person; and (2)
ordered by the securities commissioner under the Indiana Uniform
Securities Act. Provides that a violation of an agreement does not
subject the person to liability to a purchaser or seller.
Effective: July 1, 2013.
(SENATE SPONSORS _ SMITH J, STOOPS)
January 10, 2013, read first time and referred to Committee on Financial Institutions.
January 31, 2013, amended, reported _ Do Pass.
February 4, 2013, read second time, ordered engrossed. Engrossed.
February 5, 2013, read third time, passed. Yeas 99, nays 0.
February 25, 2013, read first time and referred to Committee on Financial Institutions.
March 14, 2013, reported favorably _ Do Pass.
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in
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A BILL FOR AN ACT to amend the Indiana Code concerning
business and other associations.
(b) A registration statement under this section must contain the information or records specified in section 5 of this chapter, a consent to service of process complying with IC 23-19-6-11, and, if required by rule adopted under this article, the following information or records:
(1) With respect to the issuer and any significant subsidiary, its name, address, and form of organization; the state or foreign jurisdiction and date of its organization; the general character and location of its business; a description of its physical properties and equipment; and a statement of the general competitive conditions in the industry or business in which it is or will be engaged.
(2) With respect to each director and officer of the issuer, and other person having a similar status or performing similar
functions, the person's name, address, and principal occupation
for the previous five (5) years; the amount of securities of the
issuer held by the person as of the thirtieth day before the filing
of the registration statement; the amount of the securities covered
by the registration statement to which the person has indicated an
intention to subscribe; and a description of any material interest
of the person in any material transaction with the issuer or a
significant subsidiary effected within the previous three (3) years
or proposed to be effected.
(3) With respect to persons covered by subdivision (2), the
aggregate sum of the remuneration paid to those persons during
the previous twelve (12) months and estimated to be paid during
the next twelve (12) months, directly or indirectly, by the issuer,
and all predecessors, parents, subsidiaries, and affiliates of the
issuer.
(4) With respect to a person owning of record or owning
beneficially, if known, ten percent (10%) or more of the
outstanding shares of any class of equity security of the issuer, the
information specified in subdivision (2) other than the person's
occupation.
(5) With respect to a promoter, if the issuer was organized within
the previous three (3) years, the information or records specified
in subdivision (2), any amount paid to the promoter within that
period or intended to be paid to the promoter, and the
consideration for the payment.
(6) With respect to a person on whose behalf any part of the
offering is to be made in a nonissuer distribution, the person's
name and address; the amount of securities of the issuer held by
the person as of the date of the filing of the registration statement;
a description of any material interest of the person in any material
transaction with the issuer or any significant subsidiary effected
within the previous three (3) years or proposed to be effected; and
a statement of the reasons for making the offering.
(7) The capitalization and long term debt, on both a current and
pro forma basis, of the issuer and any significant subsidiary,
including a description of each security outstanding or being
registered or otherwise offered, and a statement of the amount and
kind of consideration, whether in the form of cash, physical
assets, services, patents, goodwill, or anything else of value, for
which the issuer or any subsidiary has issued its securities within
the previous two (2) years or is obligated to issue its securities.
(8) The kind and amount of securities to be offered; the proposed
offering price or the method by which it is to be computed; any
variation at which a proportion of the offering is to be made to a
person or class of persons other than the underwriters, with a
specification of the person or class; the basis on which the
offering is to be made if otherwise than for cash; the estimated
aggregate underwriting and selling discounts or commissions and
finders' fees, including separately cash, securities, contracts, or
anything else of value to accrue to the underwriters or finders in
connection with the offering or, if the selling discounts or
commissions are variable, the basis of determining them and their
maximum and minimum amounts; the estimated amounts of other
selling expenses, including legal, engineering, and accounting
charges; the name and address of each underwriter and each
recipient of a finder's fee; a copy of any underwriting or selling
group agreement under which the distribution is to be made or the
proposed form of any such agreement whose terms have not yet
been determined; and a description of the plan of distribution of
any securities that are to be offered otherwise than through an
underwriter.
(9) The estimated monetary proceeds to be received by the issuer
from the offering; the purposes for which the proceeds are to be
used by the issuer; the estimated amount to be used for each
purpose; the order or priority in which the proceeds will be used
for the purposes stated; the amounts of any funds to be raised
from other sources to achieve the purposes stated; the sources of
the funds; and, if a part of the proceeds is to be used to acquire
property, including goodwill, otherwise than in the ordinary
course of business, the names and addresses of the vendors, the
purchase price, the names of any persons that have received
commissions in connection with the acquisition, and the amounts
of the commissions and other expenses in connection with the
acquisition, including the cost of borrowing money to finance the
acquisition.
(10) A description of any stock options or other security options
outstanding, or to be created in connection with the offering, and
the amount of those options held or to be held by each person
required to be named in subdivision (2), (4), (5), (6), or (8) and by
any person that holds or will hold ten percent (10%) or more in
the aggregate of those options.
(11) The dates of, parties to, and general effect concisely stated of
each managerial or other material contract made or to be made
otherwise than in the ordinary course of business to be performed
in whole or in part at or after the filing of the registration
statement or that was made within the previous two (2) years, and
a copy of the contract.
(12) A description of any pending litigation, action, or proceeding
to which the issuer is a party and that materially affects its
business or assets, and any litigation, action, or proceeding known
to be contemplated by governmental authorities.
(13) A copy of any prospectus, pamphlet, circular, form letter,
advertisement, or other sales literature intended as of the effective
date to be used in connection with the offering and any
solicitation of interest used in compliance with
IC 23-19-2-2(17)(B).
(14) A specimen or copy of the security being registered, unless
the security is uncertificated; a copy of the issuer's articles of
incorporation and bylaws or their substantial equivalents, in
effect; and a copy of any indenture or other instrument covering
the security to be registered.
(15) A signed or conformed copy of an opinion of counsel
concerning the legality of the security being registered, with an
English translation if it is in a language other than English, which
states whether the security when sold will be validly issued, fully
paid, and nonassessable and, if a debt security, a binding
obligation of the issuer.
(16) A signed or conformed copy of a consent of any accountant,
engineer, appraiser, or other person whose profession gives
authority for a statement made by the person, if the person is
named as having prepared or certified a report or valuation, other
than an official record that is public, which is used in connection
with the registration statement.
(17) A balance sheet of the issuer as of a date within four (4)
months before the filing of the registration statement; a statement
of income and a statement of cash flows for each of the three (3)
fiscal years preceding the date of the balance sheet and for any
period between the close of the immediately previous fiscal year
and the date of the balance sheet, or for the period of the issuer's
and any predecessor's existence if less than three (3) years; and,
if any part of the proceeds of the offering is to be applied to the
purchase of a business, the financial statements that would be
required if that business were the registrant. If the maximum
aggregate offering price at which the securities registered
under this section are to be offered in Indiana is in excess of
one million dollars ($1,000,000), the balance sheet, statement
of income, statement of cash flows, and any other financial
statement required under this subdivision must be audited in
accordance with generally accepted accounting principles by
an independent certified public accountant.
(18) Any additional information or records required by rule
adopted or order issued under this article.
(c) A registration statement under this section becomes effective
thirty (30) days, or any shorter period provided by rule adopted or order
issued under this article, after the date the registration statement or the
last amendment other than a price amendment is filed, if:
(1) a stop order is not in effect and a proceeding is not pending
under section 6 of this chapter;
(2) the commissioner has not issued an order under section 6 of
this chapter delaying effectiveness; and
(3) the applicant or registrant has not requested that effectiveness
be delayed.
(d) The commissioner may delay effectiveness once for not more
than ninety (90) days if the commissioner determines the registration
statement is not complete in all material respects and promptly notifies
the applicant or registrant of that determination. The commissioner
may also delay effectiveness for a further period of not more than thirty
(30) days if the commissioner determines that the delay is necessary or
appropriate.
(e) A rule adopted or order issued under this article may require as
a condition of registration under this section that a prospectus
containing a specified part of the information or record specified in
subsection (b) be sent or given to each person to which an offer is
made, before or concurrently with the earliest of:
(1) the first offer made in a record to the person otherwise than by
means of a public advertisement, by or for the account of the
issuer or another person on whose behalf the offering is being
made or by an underwriter or broker-dealer that is offering part of
an unsold allotment or subscription taken by the person as a
participant in the distribution;
(2) the confirmation of a sale made by or for the account of the
person;
(3) payment under such a sale; or
(4) delivery of the security under such a sale.
in violation of this article, including a violation of IC 23-19-4-12(d)(9)
or IC 23-19-4-12(d)(13). It is a defense if the person selling the security
sustains the burden of proof that either the person did not know, and in
the exercise of reasonable care could not have known, of the violation
or the purchaser knowingly participated in the violation. An action
under this subsection is governed by the following:
(1) The purchaser may maintain an action to recover the
consideration paid for the security, less the amount of any income
received on the security, and interest at the greater of eight
percent (8%) per annum or the rate provided for in the security
from the date of the purchase, costs, and reasonable attorney's
fees determined by the court or arbitrator, upon the tender of the
security, or for actual damages as provided in subdivision (3).
(2) The tender referred to in subdivision (1) may be made any
time before entry of judgment. Tender requires only notice in a
record of ownership of the security and willingness to exchange
the security for the amount specified. A purchaser that no longer
owns the security may recover actual damages as provided in
subdivision (3).
(3) Actual damages in an action arising under this subsection are
the amount that would be recoverable upon a tender less the value
of the security when the purchaser disposed of it, and interest at
the greater of eight percent (8%) per annum or the rate provided
for in the security from the date of the purchase, costs, and
reasonable attorneys' fees determined by the court or arbitrator.
(b) Except as provided in section 11 of this chapter, a person is
liable to the seller if the person buys a security in violation of this
article, including a violation of IC 23-19-4-12(d)(9) or
IC 23-19-4-12(d)(13). It is a defense if the person purchasing the
security sustains the burden of proof that either the person did not
know, and in the exercise of reasonable care could not have known, of
the conduct constituting the violation or the seller knowingly
participated in the violation. An action under this subsection is
governed by the following:
(1) The seller may maintain an action to recover the security, and
any income received on the security, costs, and reasonable
attorney's fees determined by the court or arbitrator, upon the
tender of the purchase price, or for actual damages as provided in
subdivision (3).
(2) The tender referred to in subdivision (1) may be made any
time before entry of judgment. Tender requires only notice in a
record of the present ability to pay the amount tendered and
willingness to take delivery of the security for the amount
specified. If the purchaser no longer owns the security, the seller
may recover actual damages as provided in subdivision (3).
(3) Actual damages in an action arising under this subsection are
the difference between the price at which the security was sold
and the value the security would have had at the time of the sale
in the absence of the purchaser's conduct causing liability, and
interest at the greater of eight percent (8%) per annum or the rate
provided for in the security from the date of the sale of the
security, costs, and reasonable attorney's fees determined by the
court or arbitrator.
(c) A person acting as an investment adviser or investment adviser
representative that provides investment advice for compensation in
violation of this article is liable to the client. An action under this
subsection shall be governed by the following:
(1) For a violation of section 1 or 2 of this chapter, the client may
maintain an action to recover the consideration paid for the advice
and the amount of any actual damages caused by the fraudulent
conduct, interest at the greater of eight percent (8%) per annum
or the rate provided for in the security from the date of the
fraudulent conduct, costs, and reasonable attorney's fees
determined by the court less the amount of any income received
as a result of the fraudulent conduct.
(2) For a violation of any other section of this article, the client
may maintain an action to recover the consideration paid for the
advice, interest at the greater of eight percent (8%) per annum or
the rate provided for in the security from the date of payment,
costs, and reasonable attorney's fees determined by the court or
arbitrator.
(3) This subsection does not apply to a broker-dealer or its agents
if the investment advice provided is solely incidental to
transacting business as a broker-dealer and no special
compensation is received for the investment advice.
(d) The following persons are liable jointly and severally with and
to the same extent as persons liable under subsections (a) through (c):
(1) A person that directly or indirectly controls a person liable
under subsections (a) and (b), unless the controlling person
sustains the burden of proof that the controlling person did not
know, and in the exercise of reasonable care could not have
known, of the existence of the conduct by reason of which the
liability is alleged to exist.
(2) An individual who is a managing partner, executive officer, or
director of a person liable under subsections (a) through (c),
including an individual having a similar status or performing
similar functions, unless the individual sustains the burden of
proof that the individual did not know, and in the exercise of
reasonable care could not have known, of the existence of conduct
by reason of which the liability is alleged to exist.
(3) An individual who is an employee of or associated with a
person liable under subsections (a) through (c) and who
materially aids the conduct giving rise to the liability, unless the
individual sustains the burden of proof that the individual did not
know, and in the exercise of reasonable care could not have
known, of the existence of conduct by reason of which the
liability is alleged to exist.
(4) A person that is a broker-dealer, agent, investment adviser, or
investment adviser representative that materially aids the conduct
giving rise to the liability under subsections (a) through (c),
unless the person sustains the burden of proof that the person did
not know, and in the exercise of reasonable care could not have
known, of the existence of conduct by reason of which liability is
alleged to exist.
(e) A person liable under this section has a right of contribution as
in cases of contract against any other person liable under this section
for the same conduct.
(f) A cause of action under this section survives the death of an
individual who might have been a plaintiff or defendant.
(g) Action under this section shall be commenced within three (3)
years after discovery by the person bringing the action of a violation of
this article, and not afterwards.
(h) A person that has made, or has engaged in the performance of,
a contract in violation of this article or a rule adopted or order issued
under this article, or that has acquired a purported right under the
contract with knowledge of conduct by reason of which its making or
performance was in violation of this article, may not base an action on
the contract.
(i) A condition, stipulation, or provision binding a person
purchasing or selling a security or receiving investment advice to waive
compliance with this article or a rule adopted or order issued under this
article is void.
(j) The rights and remedies provided by this article are in addition
to any other rights or remedies that may exist.
1, 2013]: Sec. 11. (a) It is unlawful for a person to violate any
agreement that is:
(1) entered into between the securities division and the
person; and
(2) ordered by the commissioner under this article.
(b) A person is not liable under section 9(a) or 9(b) of this
chapter for a violation of this section.
