Bill Text: IN SB0393 | 2010 | Regular Session | Introduced
Bill Title: Restitution for victims of securities violations.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2010-01-12 - First reading: referred to Committee on Judiciary [SB0393 Detail]
Download: Indiana-2010-SB0393-Introduced.html
Citations Affected: IC 23-19-6-1; IC 23-20.
Synopsis: Restitution for victims of securities violations. Establishes
the securities restitution fund to provide restitution assistance to
victims and certain family members of victims for monetary injuries
from securities violations. Provides that the fund consists of amounts:
(1) from certain funds received for deposit in the securities division
enforcement account; and (2) appropriations from the general
assembly. Requires the securities division to: (1) prescribe forms for
processing applications for restitution assistance; and (2) determine
whether a claim for restitution assistance should be awarded.
Establishes requirements for and limitations on awarding restitution
assistance to victims of securities violations. Requires ten percent of
funds received after June 30, 2010, for deposit in the securities division
enforcement account to be deposited into the securities restitution fund.
Continually appropriates money from the securities restitution fund to
the division for the purposes of: (1) awarding restitution assistance
under this chapter; and (2) paying expenses incurred in administering
this chapter. Transfers $2,000,000 from the securities division
enforcement account to the securities restitution fund on July 1, 2010.
Makes it a Class C felony for a person to make or cause to be made: (1)
in any document filed with the securities commissioner or securities
division; or (2) in any proceeding, investigation, or examination; under
the restitution assistance for victims of a securities violations
provisions any statement that is, at the time and in the light of the
circumstances under which it is made, false or misleading in any
material respect.
Effective: July 1, 2010.
January 12, 2010, read first time and referred to Committee on Judiciary.
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A BILL FOR AN ACT to amend the Indiana Code concerning
business and other associations and to make an appropriation.
(b) The secretary of state:
(1) shall employ a chief deputy, attorneys, a senior investigator, a senior accountant, and other deputies, investigators, accountants, clerks, stenographers, and other employees necessary for the administration of this article; and
(2) shall fix their compensation with the approval of the budget agency.
(c) It is unlawful for the commissioner or an officer, employee, or designee of the commissioner to use for personal benefit or the benefit of others records or other information obtained by or filed with the commissioner that are not public under section 7(b) of this chapter. This article does not authorize the commissioner or an officer, employee, or designee of the commissioner to disclose the record or information, except in accordance with section 2, 7(c), or 8 of this chapter.
(d) This article does not create or diminish a privilege or exemption that exists at common law, by statute or rule, or otherwise.
(e) The commissioner may develop and implement investor education initiatives to inform the public about investing in securities, with particular emphasis on the prevention and detection of securities fraud. In developing and implementing these initiatives, the commissioner may collaborate with public and nonprofit organizations with an interest in investor education. The commissioner may accept a grant or donation from a person that is not affiliated with the securities industry or from a nonprofit organization, regardless of whether the organization is affiliated with the securities industry, to develop and implement investor education initiatives. This subsection does not authorize the commissioner to require participation or monetary contributions of a registrant in an investor education program.
(f) Fees and funds of whatever character accruing from the administration of this article shall be accounted for by the secretary of state and shall be deposited with the treasurer of state to be deposited by the treasurer of the state in either the state general fund or the enforcement account referenced below. Expenses incurred in the administration of this article shall be paid from the state general fund upon appropriation being made for the expenses in the manner provided by law for the making of those appropriations. However, grants and donations under subsection (e), costs of investigations, and civil penalties recovered under sections 3(b) and 4(d) of this chapter shall be deposited by the treasurer of state in a separate account to be known as the securities division enforcement account. Notwithstanding IC 9-23-6-4, IC 23-2-2.5-34, IC 23-2-2.5-43, IC 23-2-5-7, IC 23-19-4-12, IC 25-11-1-15, and this chapter, ten percent (10%) of funds received after June 30, 2010, for deposit in the enforcement account shall instead be deposited in the securities restitution fund established under IC 23-20-1-27. The funds deposited in the enforcement account shall be available, with the approval of the budget agency:
(1) to augment and supplement the funds appropriated for the administration of this article; and
(2) for grants and awards to nonprofit entities for programs and activities that will further investor education and financial literacy in the state.
The funds in the enforcement account do not revert to the state general fund at the end of any state fiscal year.
(g) In connection with the administration and enforcement of this article, the attorney general shall render all necessary assistance to the commissioner upon the commissioner's request, and to that end, the attorney general shall employ legal and other professional services as are necessary to adequately and fully perform the service under the direction of the commissioner as the demands of the securities division shall require. Expenses incurred by the attorney general for the purposes stated in this subsection shall be chargeable against and paid out of funds appropriated to the attorney general for the administration of the attorney general's office. The attorney general may authorize the commissioner and the commissioner's designee to represent the commissioner and the securities division in any proceeding involving enforcement or defense of this article.
(h) Neither the secretary of state, the commissioner, nor an employee of the securities division shall be liable in their individual capacity, except to the state, for an act done or omitted in connection with the performance of their respective duties under this article.
(i) The commissioner shall take, prescribe, and file the oath of office prescribed by law. The commissioner, chief deputy commissioner, and each attorney or investigator designated by the commissioner are police officers of the state and shall have all the powers and duties of police officers in making arrests for violations of this article, or in serving any process, notice, or order connected with the enforcement of this article by whatever officer, authority, or court issued and shall comprise the enforcement department of the division and are considered a criminal justice agency for purposes of IC 5-2-4 and IC 10-13-3.
(j) The provisions of this article delegating and granting power to the secretary of state, the securities division, and the commissioner shall be liberally construed to the end that:
(1) the practice or commission of fraud may be prohibited and prevented;
(2) disclosure of sufficient and reliable information in order to afford reasonable opportunity for the exercise of independent judgment of the persons involved may be assured; and
(3) the qualifications may be prescribed to assure availability of
reliable broker-dealers, investment advisers, and agents engaged
in and in connection with the issuance, barter, sale, purchase,
transfer, or disposition of securities in this state.
It is the intent and purpose of this article to delegate and grant to and
vest in the secretary of state, the securities division, and the
commissioner full and complete power to carry into effect and
accomplish the purpose of this article and to charge them with full and
complete responsibility for its effective administration.
(k) Copies of any statement and documents filed in the office of the
secretary of state and of any records of the secretary of state certified
by the commissioner shall be admissible in any prosecution, action,
suit, or proceeding based upon, arising out of, or under this article to
the same effect as the original of such statement, document, or record
would be if actually produced.
(l) IC 4-21.5 is not applicable to any of the proceedings under this
article.
ARTICLE 20. VICTIMS OF SECURITIES VIOLATIONS
Chapter 1. Restitution for Victims of Securities Violations
Sec. 1. (a) As used in this chapter, "claimant" means a victim filing an application for restitution assistance under this chapter.
(b) The term includes the:
(1) parent;
(2) surviving spouse;
(3) legal dependent; or
(4) personal representative;
of an individual who suffers monetary injury as a result of a securities violation.
Sec. 2. As used in this chapter, "division" refers to the securities division of the office of the secretary of state.
Sec. 3. As used in this chapter, "FINRA" means the Financial Industry Regulatory Authority.
Sec. 4. As used in this chapter, "fund" refers to the securities restitution fund established by section 27 of this chapter.
Sec. 5. As used in this chapter, "out-of-pocket loss" means an amount equal to the amount of restitution ordered under any of the following:
(1) A final court order.
(2) A final arbitration award.
(3) A final administrative order.
Sec. 6. As used in this chapter, "person" includes a sole proprietorship, a partnership, a corporation, an association, a fiduciary, or an individual.
Sec. 7. As used in this chapter, "securities violation" means a violation of the following:
(1) The Securities Act of 1933, as amended, and any regulations related to the Act.
(2) The Securities Exchange Act of 1934, as amended, and any regulations related to the Act.
(3) The Investment Company Act of 1940, as amended, and any regulations related to the Act.
(4) The Investment Advisers Act of 1940, as amended, and any regulations related to the Act.
(5) The Indiana uniform securities act and any rules related to the act.
(6) Other state securities acts and any rules or regulations related to those acts.
(7) Rules or regulations promulgated by:
(A) the National Association of Securities Dealers;
(B) the New York Stock Exchange as adopted by FINRA; or
(C) FINRA.
Sec. 8. As used in this chapter, "victim" means an individual who suffers monetary injury as a result of a securities violation.
Sec. 9. The division shall do the following:
(1) Prescribe forms for processing applications for restitution assistance.
(2) Determine whether a claim for restitution assistance filed under this chapter should be awarded.
Sec. 10. The division may require a claimant to produce a copy of:
(1) a court order;
(2) an arbitration award; or
(3) an administrative order;
that demonstrates that restitution has been awarded to the claimant as described in section 18 of this chapter.
Sec. 11. A claimant's personal information (as defined in IC 9-14-3.5-5) is confidential.
Sec. 12. Except as otherwise provided in this chapter, the following persons are eligible for restitution assistance under this chapter:
(1) A resident of Indiana who is a victim of a securities
violation committed:
(A) in Indiana; or
(B) in a jurisdiction other than Indiana, including a foreign
country, if the jurisdiction in which the securities violation
occurred does not offer assistance to a victim of a securities
violation that is substantially similar to the assistance
offered under this chapter.
(2) A nonresident of Indiana who is a victim of a securities
violation committed in Indiana.
(3) A surviving spouse or dependent child of a victim
described in subdivision (1) or (2).
(4) Any other person legally dependent for principal support
upon a victim described in subdivision (1) or (2).
Sec. 13. (a) A person eligible for restitution assistance under
section 12 of this chapter may file an application for restitution
assistance with the division.
(b) The application must be received by the division not more
than one hundred eighty (180) days after the date of the order or
award described in section 18 of this chapter. The division may
grant an extension of time for good cause shown by the claimant.
However, the division may not accept an application that is
received more than two (2) years after the date of the order or
award described in section 18 of this chapter.
(c) The application must be filed in the office of the division in
person, through the division's web site, or by first class or certified
mail. If requested, the division shall assist a victim in preparing the
application.
(d) The division shall accept all applications filed in compliance
with this chapter. Upon receipt of a complete application, the
division shall promptly begin the processing of an application.
Sec. 14. (a) The division shall review all applications to ensure
that the applications are complete.
(b) If an application is not complete, the application shall be
returned to the applicant with a brief statement of the additional
information required.
(c) The applicant may, not more than thirty (30) days after
receipt of the request for additional information, either supply the
information or appeal to the securities commissioner.
(d) The decision of the securities commissioner is final.
(e) The division shall deny the application if:
(1) the applicant does not furnish additional information; or
(2) additional time is not granted by the securities
commissioner for good cause.
Sec. 15. (a) Subject to subsection (b), the division may not award
restitution assistance if the victim:
(1) sustained the monetary injury as a result of:
(A) participating or assisting in; or
(B) attempting to commit or committing;
a securities violation; or
(2) profited or would have profited from the securities
violation.
(b) If the victim is a dependent child or dependent parent of the
person who commits a securities violation, restitution assistance
may be awarded where justice requires.
Sec. 16. The division may not award restitution assistance under
this chapter to more than one (1) claimant per victim.
Sec. 17. The division may not award restitution assistance to a
claimant eligible under section 12 of this chapter if the victim or
claimant had a net worth of greater than five hundred thousand
dollars ($500,000) at the time of suffering monetary injury from a
securities violation.
Sec. 18. (a) The division may not award restitution assistance
under this chapter unless the securities violation was adjudicated
in a state or federal court, an FINRA arbitration proceeding, or a
regulatory agency administrative proceeding.
(b) The division may not award restitution assistance under this
chapter unless:
(1) a final order or award has been entered ordering
restitution to the victim in a proceeding described in
subsection (a); and
(2) the party ordered to pay restitution has not paid the full
amount.
Sec. 19. The division shall deny an award of restitution
assistance under this chapter if a court or administrative order or
an arbitration award does not contain an award of restitution to
the victim.
Sec. 20. (a) The division may not award restitution assistance
under this chapter to a claimant whose award of restitution under
a court or administration order or an arbitration award is
overturned on appeal.
(b) If:
(1) a claimant is awarded restitution assistance under this
chapter; and
(2) after receiving an award of restitution assistance under
this chapter, the claimant's award of restitution under a court
or administrative order or an arbitration award is overturned
on appeal;
the claimant shall forfeit the restitution assistance received under
this chapter.
Sec. 21. (a) The state is subrogated to the rights of the victim
awarded restitution to the extent of the award.
(b) The subrogation rights are against the person who
committed the securities violation or a person liable for the
pecuniary loss.
Sec. 22. (a) In addition to the subrogation rights under section
21 of this chapter, the state is entitled to a lien in the amount of the
award on a recovery made by or on behalf of the victim.
(b) The state may:
(1) recover the amount under subsection (a) in a separate
action; or
(2) intervene in an action brought by or on behalf of the
victim.
(c) If a claimant brings an action, the claimant may deduct from
the money owed to the state under the lien the state's pro rata
share of the reasonable expenses for the court suit, including
attorney's fees. The amount the claimant deducts under this
subsection for the state's pro rata share of the expenses may not be
more than fifteen percent (15%) of the money owed under the lien.
Sec. 23. If:
(1) an award is made under this chapter; and
(2) a claimant receives a sum required to be deducted under
section 22 of this chapter;
the claimant shall refund to the state the amount of overpayment.
Sec. 24. (a) In determining the amount of restitution assistance
to award under this chapter, the division shall determine whether
a victim contributed to the infliction of the victim's monetary
injury.
(b) If the division finds that the victim contributed to the
infliction of the victim's monetary injury, the division may deny an
award of restitution assistance.
Sec. 25. An award to a claimant under this chapter may not
exceed the lesser of the following:
(1) Fifteen thousand dollars ($15,000).
(2) Twenty-five percent (25%) of the amount of out-of-pocket
loss.
Sec. 26. An award made by the division to a claimant is not
subject to execution, attachment, garnishment, or other process.
Sec. 27. (a) The securities restitution fund is established.
(b) The fund consists of amounts:
(1) from funds received for deposit in the securities division
enforcement account as provided in IC 23-19-6-1(f); and
(2) appropriated from the general assembly.
Sec. 28. The money in the fund is continually appropriated to
the division for purposes of:
(1) awarding restitution assistance under this chapter; and
(2) paying expenses incurred in administering this chapter.
Sec. 29. Money in the fund and income derived from money in
the fund do not revert to the state general fund at the end of a state
fiscal year.
Sec. 30. (a) If the fund would be reduced below two hundred
fifty thousand dollars ($250,000) by payment in full of all awards
that become final in a month, the division shall suspend payment
of the claims that become final during the month and the following
two (2) months.
(b) At the end of the suspension period the division shall pay the
suspended claims. If the fund would be exhausted by payment in
full of the suspended claims, the amount paid to each claimant shall
be prorated.
Sec. 31. The state is not liable for a written determination made
by the division under this chapter except to the extent that money
is available in the fund on the date the award is computed by the
division under this chapter.
Sec. 32. (a) A claimant convicted of forgery, fraud, or deception
in connection with a claim under this chapter forfeits an award
paid to the claimant under this chapter.
(b) The division may file a civil action to recover funds against
a claimant described in subsection (a).
Sec. 33. A person commits a Class C felony if the person
knowingly makes or causes to be made:
(1) in any document filed with or sent to the securities
commissioner or the division; or
(2) in any proceeding, investigation, or examination;
under this chapter any statement that is, at the time and in the light
of the circumstances under which it is made, false or misleading in
any material respect.
Sec. 34. The division may adopt rules under IC 4-22-2 to
implement this chapter.
($2,000,000) shall be transferred from the securities division
enforcement account established under IC 23-19-6-1 to the
securities restitution fund established by IC 23-20-1-27, as added
by this act, on July 1, 2010.
(b) This SECTION expires July 2, 2010.
