SENATE BILL NO. 1277

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S1277.......................................by COMMERCE AND HUMAN RESOURCES
UNIFORM SECURITIES ACT OF 2004 - Repeals and amends existing law to enact
the Uniform Securities Act of 2004; to define terms; to authorize certain
electronic records and signatures; to exempt certain securities and
transactions from specified requirements; to provide for exemptions and
waivers; to provide for denial, suspension, revocation, condition or
limitation of exemptions; to provide a securities registration requirement;
to provide for notice filing; to provide for securities registration by
coordinator qualification; to provide for securities registration filings;
to provide for the denial, suspension and revocation of securities
registration; to provide for waiver and modification requirements; to
provide registration requirements and exemptions for broker-dealers,
investment advisers and investment adviser representatives; to provide a
federal covered investment adviser notice filing requirement; to provide
for registration for broker-dealers, agents, investment advisers and
investment adviser representatives; to provide for the withdrawal of
registration of broker-dealers, agents, investment advisers and investment
adviser representatives; to provide filing fees; to provide
postregistration requirements; to provide for the denial, revocation,
suspension, withdrawal, restriction, condition or limitation of
registration; to define general fraud; to set forth prohibited conduct; to
provide for an evidentiary burden; to provide for the filing of sales and
advertising literature; to provide criminal penalties and civil liability;
to provide rescission offers; to authorize investigations and subpoenas; to
provide civil and administrative enforcement; to authorize rules, forms,
orders and interpretative opinions; to provide that certain records are
public records and certain records are nonpublic records; to provide for
uniformity and cooperation with other agencies; to provide for judicial
review; to provide jurisdiction provisions; and to provide application.
                                                                        
02/04    Senate intro - 1st rdg - to printing
02/05    Rpt prt - to Com/HuRes
02/11    Rpt out - rec d/p - to 2nd rdg
02/12    2nd rdg - to 3rd rdg
02/18    3rd rdg - PASSED - 33-0-2
      AYES -- Andreason, Bailey, Brandt, Bunderson, Burtenshaw, Calabretta,
      Cameron, Compton, Darrington, Davis, Gannon, Goedde, Hill, Ingram,
      Kennedy, Keough, Little, Lodge, Malepeai, Marley, McKenzie,
      McWilliams, Noble, Noh, Pearce, Richardson, Schroeder, Sorensen,
      Stegner, Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- Burkett, Geddes
    Floor Sponsors - Davis & Stennett
    Title apvd - to House
02/19    House intro - 1st rdg - to Bus
02/26    Rpt out - rec d/p - to 2nd rdg
02/27    2nd rdg - to 3rd rdg
03/02    3rd rdg - PASSED - 62-0-8
      AYES -- Andersen, Barrett, Bauer, Bayer, Bedke, Bell, Black, Block,
      Boe, Bolz, Bradford, Cannon, Clark, Collins, Cuddy, Deal, Denney,
      Douglas, Eberle, Edmunson, Ellsworth, Eskridge, Field(18), Garrett,
      Harwood, Henbest, Jaquet, Jones, Kellogg, Kulczyk, Lake, Langford,
      Langhorst, Martinez, McGeachin, McKague, Meyer, Miller, Mitchell,
      Naccarato, Pasley-Stuart, Raybould, Ridinger, Ring, Ringo, Roberts,
      Robison, Rydalch, Sali, Sayler, Schaefer, Shepherd, Shirley, Skippen,
      Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail(Bennett),
      Wills, Wood
      NAYS -- None
      Absent and excused -- Barraclough, Campbell, Crow, Field(23), Gagner,
      Moyle, Nielsen, Mr. Speaker
    Floor Sponsor - Snodgrass
    Title apvd - to Senate
03/03    To enrol
03/04    Rpt enrol - Pres signed
03/05    Sp signed
03/08    To Governor
03/10    Governor signed
         Session Law Chapter 45
         Effective: 09/01/04

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-seventh Legislature                 Second Regular Session - 2004
                                                                        
                                                                        
                                       IN THE SENATE
                                                                        
                                    SENATE BILL NO. 1277
                                                                        
                         BY COMMERCE AND HUMAN RESOURCES COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO THE UNIFORM SECURITIES ACT; REPEALING CHAPTER 14, TITLE 30,  IDAHO
  3        CODE;  AMENDING TITLE 30, IDAHO CODE, BY THE ADDITION OF A NEW CHAPTER 14,
  4        TITLE 30, IDAHO CODE, TO PROVIDE A SHORT TITLE, TO DEFINE TERMS,  TO  PRO-
  5        VIDE  REFERENCES  TO  FEDERAL  STATUTES AND FEDERAL AGENCIES, TO AUTHORIZE
  6        CERTAIN ELECTRONIC RECORDS AND SIGNATURES, TO  EXEMPT  CERTAIN  SECURITIES
  7        FROM SPECIFIED REQUIREMENTS, TO EXEMPT CERTAIN TRANSACTIONS FROM SPECIFIED
  8        REQUIREMENTS,  TO PROVIDE FOR FAIRNESS HEARINGS, TO PROVIDE FOR ADDITIONAL
  9        EXEMPTIONS AND WAIVERS BY RULE OR ORDER, TO PROVIDE FOR THE  DENIAL,  SUS-
 10        PENSION, REVOCATION, CONDITION OR LIMITATION OF EXEMPTIONS, TO SET FORTH A
 11        SECURITIES REGISTRATION REQUIREMENT, TO PROVIDE FOR NOTICE FILING, TO PRO-
 12        VIDE  FOR  SECURITIES REGISTRATION BY COORDINATION, TO PROVIDE FOR SECURI-
 13        TIES REGISTRATION BY QUALIFICATION, TO PROVIDE FOR SECURITIES REGISTRATION
 14        FILINGS, TO PROVIDE FOR THE DENIAL, SUSPENSION AND REVOCATION  OF  SECURI-
 15        TIES REGISTRATION, TO PROVIDE FOR WAIVER AND MODIFICATION OF REQUIREMENTS,
 16        TO  SET  FORTH  A BROKER-DEALER REGISTRATION REQUIREMENT AND EXEMPTIONS TO
 17        THE REQUIREMENT, TO SET FORTH AN AGENT REGISTRATION REQUIREMENT AND EXEMP-
 18        TIONS TO THE REQUIREMENT, TO SET FORTH AN INVESTMENT ADVISER  REGISTRATION
 19        REQUIREMENT  AND EXEMPTIONS TO THE REQUIREMENT, TO SET FORTH AN INVESTMENT
 20        ADVISER REPRESENTATIVE REGISTRATION  REQUIREMENT  AND  EXEMPTIONS  TO  THE
 21        REQUIREMENT, TO SET FORTH A FEDERAL COVERED INVESTMENT ADVISER NOTICE FIL-
 22        ING  REQUIREMENT,  TO PROVIDE FOR REGISTRATION FOR BROKER-DEALERS, AGENTS,
 23        INVESTMENT ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES, TO PROVIDE FOR
 24        SUCCESSION AND CHANGE IN  REGISTRATION  OF  BROKER-DEALERS  OR  INVESTMENT
 25        ADVISERS,  TO  PROVIDE FOR THE TERMINATION OF EMPLOYMENT OR ASSOCIATION OF
 26        AGENTS AND  INVESTMENT  ADVISER  REPRESENTATIVES  AND  TRANSFERS  OF  SUCH
 27        EMPLOYMENT  OR  ASSOCIATION, TO PROVIDE FOR THE WITHDRAWAL OF REGISTRATION
 28        OF BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS AND INVESTMENT ADVISER REP-
 29        RESENTATIVES, TO SET FORTH FILING  FEES,  TO  SET  FORTH  POSTREGISTRATION
 30        REQUIREMENTS,  TO  PROVIDE  FOR  THE DENIAL, REVOCATION, SUSPENSION, WITH-
 31        DRAWAL, RESTRICTION, CONDITION OR LIMITATION OF  REGISTRATION,  TO  DEFINE
 32        GENERAL  FRAUD,  TO  SET  FORTH CONDUCT PROHIBITED IN PROVIDING INVESTMENT
 33        ADVICE, TO PROVIDE FOR AN EVIDENTIARY BURDEN IN CIVIL AND CRIMINAL  CASES,
 34        TO PROVIDE FOR THE FILING OF SALES AND ADVERTISING LITERATURE, TO PROHIBIT
 35        MISLEADING  FILINGS, TO PROHIBIT MISREPRESENTATIONS REGARDING REGISTRATION
 36        OR EXEMPTION, TO PROVIDE FOR QUALIFIED IMMUNITY,  TO  SET  FORTH  CRIMINAL
 37        PENALTIES,  TO  PROVIDE  FOR  CIVIL  LIABILITY,  TO PROVIDE FOR RESCISSION
 38        OFFERS, TO PROVIDE FOR ADMINISTRATION OF THE CHAPTER, TO AUTHORIZE  INVES-
 39        TIGATIONS  AND SUBPOENAS, TO PROVIDE FOR CIVIL AND ADMINISTRATIVE ENFORCE-
 40        MENT, TO AUTHORIZE RULES, FORMS, ORDERS AND  INTERPRETATIVE  OPINIONS,  TO
 41        CREATE  A  PRESUMPTION FOR PUBLIC HEARINGS, TO PROVIDE FOR THE MAINTENANCE
 42        OF ADMINISTRATIVE FILES AND OPINIONS, TO PROVIDE FOR  A  PRESUMPTION  THAT
 43        CERTAIN  RECORDS ARE PUBLIC RECORDS, TO PROVIDE FOR THE CONFIDENTIALITY OF
 44        CERTAIN RECORDS, TO PROVIDE FOR ADMINISTRATOR DISCRETION TO DISCLOSE  CER-
 45        TAIN  RECORDS,  TO PROVIDE FOR UNIFORMITY AND COOPERATION WITH OTHER AGEN-
 46        CIES, TO PROVIDE FOR JUDICIAL REVIEW OF FINAL ORDERS, TO SET FORTH  JURIS-
                                                                        
                                           2
                                                                        
  1        DICTION PROVISIONS, TO PROVIDE FOR SERVICE OF PROCESS, TO PROVIDE FOR SEV-
  2        ERABILITY,  TO  SET  FORTH AN EFFECTIVE DATE, TO PROVIDE FOR REPEAL AND TO
  3        PROVIDE FOR APPLICATION TO EXISTING PROCEEDINGS AND  EXISTING  RIGHTS  AND
  4        DUTIES;  AMENDING CHAPTER 3, TITLE 9, IDAHO CODE, BY THE ADDITION OF A NEW
  5        SECTION 9-340H, IDAHO CODE, TO PROVIDE THAT CERTAIN RECORDS RELATED TO THE
  6        UNIFORM SECURITIES ACT ARE EXEMPT FROM PUBLIC DISCLOSURE; AMENDING SECTION
  7        18-7803, IDAHO CODE, TO PROVIDE CORRECT CODE CITATIONS;  AMENDING  SECTION
  8        39-1452,  IDAHO CODE, TO PROVIDE CORRECT TERMINOLOGY AND TO MAKE A TECHNI-
  9        CAL CORRECTION; AMENDING SECTION 41-1004, IDAHO CODE, TO PROVIDE A CORRECT
 10        CODE CITATION; AMENDING SECTION 41-3821, IDAHO CODE, TO PROVIDE A  CORRECT
 11        CODE CITATION; AND PROVIDING AN EFFECTIVE DATE.
                                                                        
 12    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 13        SECTION  1.  That  Chapter  14,  Title 30, Idaho Code, be, and the same is
 14    hereby repealed.
                                                                        
 15        SECTION 2.  That Title 30, Idaho Code, be, and the same is hereby  amended
 16    by  the addition thereto of a NEW CHAPTER, to be known and designated as Chap-
 17    ter 14, Title 30, Idaho Code, and to read as follows:
                                                                        
 18                                      CHAPTER 14
 19                            UNIFORM SECURITIES ACT (2004)
                                                                        
 20                                       PART 1.
 21                                  GENERAL PROVISIONS
                                                                        
 22        30-14-101.  SHORT TITLE. This chapter shall be known and may be  cited  as
 23    the "Uniform Securities Act (2004)."
                                                                        
 24        30-14-102.  DEFINITIONS.  In  this  chapter,  unless the context otherwise
 25    requires:
 26        (1)  "Administrator" means the director of the Idaho department of finance
 27    or his designee.
 28        (2)  "Agent" means an individual, other than a broker-dealer,  who  repre-
 29    sents  a broker-dealer in effecting or attempting to effect purchases or sales
 30    of securities or who represents an issuer in effecting or attempting to effect
 31    purchases or sales of the issuer's securities. A partner, officer, or director
 32    of a broker-dealer or issuer, or an individual having a similar status or per-
 33    forming similar functions, is an agent only if the individual otherwise  comes
 34    within  the  term.  The term does not include an individual excluded by a rule
 35    adopted or an order issued under this chapter.
 36        (3)  "Bank" means:
 37        (a)  A banking institution organized under the laws of the United States;
 38        (b)  A member bank of the federal reserve system;
 39        (c)  Any other banking institution, whether  incorporated  or  not,  doing
 40        business  under the laws of a state or of the United States, a substantial
 41        portion of the business of which consists of receiving deposits  or  exer-
 42        cising  fiduciary  powers  similar  to  those permitted to be exercised by
 43        national banks under the authority of the comptroller of the currency pur-
 44        suant to section 1 of public law 87-722 (12  U.S.C.  92a),  and  which  is
 45        supervised  and  examined  by a state or federal agency having supervision
 46        over banks, and which is not operated for  the  purpose  of  evading  this
 47        chapter; and
 48        (d)  A  receiver,  conservator, or other liquidating agent of any institu-
                                                                        
                                           3
                                                                        
  1        tion or firm included in subparagraph (a), (b) or (c) of this subsection.
  2        (4)  "Broker-dealer" means a person engaged in the business  of  effecting
  3    transactions  in  securities for the account of others or for the person's own
  4    account. The term does not include:
  5        (a)  An agent;
  6        (b)  An issuer;
  7        (c)  A bank, a trust company organized or chartered under the laws of this
  8        state, or a savings institution if its activities as a  broker-dealer  are
  9        limited  to  those  specified  in  subsections 3(a)(4)(b)(i) through (vi),
 10        (viii) through (x), and  (xi)  if  limited  to  unsolicited  transactions;
 11        3(a)(5)(B);  and  3(a)(5)(C)  of  the  securities exchange act of 1934 (15
 12        U.S.C. 78c(a)(4)  and  (5))  or  a  bank  that  satisfies  the  conditions
 13        described  in subsection 3(a)(4)(E) of the securities exchange act of 1934
 14        (15 U.S.C. 78c(a)(4));
 15        (d)  An international banking institution; or
 16        (e)  A person excluded by a rule adopted or an  order  issued  under  this
 17        chapter.
 18        (5)  "Depository institution" means:
 19        (a)  A bank; or
 20        (b)  A  savings institution, trust company, credit union or similar insti-
 21        tution that is organized or chartered under the laws of a state or of  the
 22        United  States  that is authorized to receive deposits, and that is super-
 23        vised and examined by an official or agency  of  a  state  or  the  United
 24        States if its deposits or share accounts are insured to the maximum amount
 25        authorized  by  statute  by the federal deposit insurance corporation, the
 26        national credit union share insurance fund, or a successor  authorized  by
 27        federal law. The term does not include:
 28             (i)   An insurance company or other organization primarily engaged in
 29             the business of insurance;
 30             (ii)  A morris plan bank; or
 31             (iii) An industrial loan company.
 32        (6)  "Federal  covered investment adviser" means a person registered under
 33    the investment advisers act of 1940, as  cited  in  section  30-14-103,  Idaho
 34    Code.
 35        (7)  "Federal  covered security" means a security that is, or upon comple-
 36    tion of a transaction will be, a covered security under section 18(b)  of  the
 37    securities act of 1933 (15 U.S.C. 77r(b)) or rules or regulations adopted pur-
 38    suant to that provision.
 39        (8)  "Filing"  means  the  receipt  under  this chapter of a record by the
 40    administrator or a designee of the administrator.
 41        (9)  "Fraud," "deceit," and  "defraud"  are  not  limited  to  common  law
 42    deceit.
 43        (10) "Guaranteed"  means guaranteed as to payment of all principal and all
 44    interest.
 45        (11) "Institutional investor" means any of the following,  whether  acting
 46    for itself or for others in a fiduciary capacity:
 47        (a)  A  depository  institution,  a  trust  company organized or chartered
 48        under the laws of this state, or an international banking institution;
 49        (b)  An insurance company;
 50        (c)  A separate account of an insurance company;
 51        (d)  An investment company as defined in the  investment  company  act  of
 52        1940, as cited in section 30-14-103, Idaho Code;
 53        (e)  A broker-dealer registered under the securities exchange act of 1934,
 54        as cited in section 30-14-103, Idaho Code;
 55        (f)  An  employee pension, profit-sharing, or benefit plan if the plan has
                                                                        
                                           4
                                                                        
  1        total assets in excess of ten million dollars ($10,000,000) or its invest-
  2        ment decisions are made by a named fiduciary, as defined in  the  employee
  3        retirement  income  security  act  of 1974, that is a broker-dealer regis-
  4        tered under the securities exchange act of  1934,  an  investment  adviser
  5        registered  or  exempt from registration under the investment advisers act
  6        of 1940, an investment adviser registered under this chapter, a depository
  7        institution, or an insurance company;
  8        (g)  A plan established and maintained by a state, a political subdivision
  9        of a state, or an agency or instrumentality of a state or a political sub-
 10        division of a state for the benefit of its  employees,  if  the  plan  has
 11        total assets in excess of ten million dollars ($10,000,000) or its invest-
 12        ment decisions are made by a duly designated public official or by a named
 13        fiduciary,  as  defined  in the employee retirement income security act of
 14        1974, that is a broker-dealer registered under the securities exchange act
 15        of 1934, an investment adviser  registered  or  exempt  from  registration
 16        under  the  investment  advisers act of 1940, an investment adviser regis-
 17        tered under this chapter, a depository institution, or an  insurance  com-
 18        pany;
 19        (h)  A  trust,  if  it  has  total assets in excess of ten million dollars
 20        ($10,000,000), its trustee is a depository institution, and  its  partici-
 21        pants  are  exclusively  plans of the types identified in paragraph (f) or
 22        (g) of this subsection, regardless of the size of their assets,  except  a
 23        trust  that  includes  as participants self-directed individual retirement
 24        accounts or similar self-directed plans;
 25        (i)  An organization described in section 501(c)(3) of the Internal  Reve-
 26        nue  Code  (26  U.S.C. 501(c)(3)), a corporation, a Massachusetts trust or
 27        similar business trust, a limited liability company, or a partnership, not
 28        formed for the specific purpose of acquiring the securities offered,  with
 29        total assets in excess of ten million dollars ($10,000,000);
 30        (j)  A  small  business  investment company licensed by the small business
 31        administration under section 301(c) of the small business  investment  act
 32        of 1958 (15 U.S.C. 681(c)) with total assets in excess of ten million dol-
 33        lars ($10,000,000);
 34        (k)  A   private  business  development  company  as  defined  in  section
 35        202(a)(22) of the investment advisers act of 1940 (15 U.S.C. 80b-2(a)(22))
 36        with total assets in excess of ten million dollars ($10,000,000);
 37        (l)  A federal covered investment adviser acting for its own account;
 38        (m)  A "qualified institutional buyer"  as  defined  in  rule  144A(a)(1),
 39        other than rule 144A(a)(1)(i)(H), adopted under the securities act of 1933
 40        (17 CFR 230.144A);
 41        (n)  A   "major   U.S.   institutional   investor"   as  defined  in  rule
 42        15a-6(b)(4)(i)  adopted under the securities exchange act of 1934 (17  CFR
 43        240.15a-6);
 44        (o)  Any  other person, other than an individual, of institutional charac-
 45        ter with total assets in excess of ten million dollars  ($10,000,000)  not
 46        organized for the specific purpose of evading this chapter; or
 47        (p)  Any other person specified by a rule adopted or an order issued under
 48        this chapter.
 49        (12) "Insurance company" means a company organized as an insurance company
 50    whose  primary  business is writing insurance or reinsuring risks underwritten
 51    by insurance companies and which is subject to supervision  by  the  insurance
 52    commissioner or a similar official or agency of a state.
 53        (13) "Insured" means insured as to payment of all principal and all inter-
 54    est.
 55        (14) "International  banking institution" means an international financial
                                                                        
                                           5
                                                                        
  1    institution of which the United States is a member and  whose  securities  are
  2    exempt from registration under the securities act of 1933.
  3        (15) "Investment  adviser"  means a person that, for compensation, engages
  4    in the business of advising others, either directly or through publications or
  5    writings, as to the value of securities or the advisability of  investing  in,
  6    purchasing  or selling securities or that, for compensation and as a part of a
  7    regular business, issues or promulgates analyses or reports concerning securi-
  8    ties. The term includes a financial planner or other person that, as an  inte-
  9    gral  component  of  other  financially  related services, provides investment
 10    advice to others for compensation as part of a business or that  holds  itself
 11    out  as  providing investment advice to others for compensation. The term does
 12    not include:
 13        (a)  An investment adviser representative;
 14        (b)  A lawyer,  accountant,  engineer  or  teacher  whose  performance  of
 15        investment  advice  is  solely  incidental to the practice of the person's
 16        profession;
 17        (c)  A broker-dealer or its agents whose performance of investment  advice
 18        is  solely  incidental  to  the conduct of business as a broker-dealer and
 19        that does not receive special compensation for the investment advice;
 20        (d)  A publisher of a bona fide newspaper, news magazine, or  business  or
 21        financial publication of general and regular circulation;
 22        (e)  A federal covered investment adviser;
 23        (f)  A bank, a trust company organized or chartered under the laws of this
 24        state, or a savings institution;
 25        (g)  Any  other  person that is excluded by the investment advisers act of
 26        1940 from the definition of investment adviser;
 27        (h)  Any person who offers accountancy services  to  the  public  and  who
 28        holds  a  valid, unrevoked and unsuspended license under the provisions of
 29        chapter 2, title 54, Idaho Code, designating said person  as  a  certified
 30        public accountant or a licensed public accountant; or
 31        (i)  Any  other person excluded by a rule adopted or an order issued under
 32        this chapter.
 33        (16) "Investment adviser representative" means an individual  employed  by
 34    or associated with an investment adviser or federal covered investment adviser
 35    who  makes  any recommendations or otherwise gives investment advice regarding
 36    securities, manages accounts or portfolios of clients, determines which recom-
 37    mendation or advice regarding securities should be given, provides  investment
 38    advice  or  holds  herself  or  himself  out  as  providing investment advice,
 39    receives compensation to solicit, offer, or negotiate for the sale of  or  for
 40    selling  investment  advice,  or  supervises  employees who perform any of the
 41    foregoing. The term does not include an individual who:
 42        (a)  Performs only clerical or ministerial acts;
 43        (b)  Is an agent whose performance of investment advice  is  solely  inci-
 44        dental  to the individual acting as an agent and who does not receive spe-
 45        cial compensation for investment advisory services;
 46        (c)  Is employed by  or  associated  with  a  federal  covered  investment
 47        adviser,  unless the individual has a "place of business" in this state as
 48        that term is defined by rule adopted under section 203A of the  investment
 49        advisers act of 1940 (15 U.S.C. 80b-3a) and is:
 50             (i)   An  "investment adviser representative" as that term is defined
 51             by rule adopted under section 203A of the investment advisers act  of
 52             1940 (15 U.S.C. 80b-3a); or
 53             (ii)  Not  a  "supervised  person" as that term is defined in section
 54             202(a)(25)  of  the  investment  advisers  act  of  1940  (15  U.S.C.
 55             80b-2(a)(25)); or
                                                                        
                                           6
                                                                        
  1        (d)  Is excluded by a rule adopted or an order issued under this chapter.
  2        (17) "Issuer" means a person that issues or proposes to issue a  security,
  3    subject to the following:
  4        (a)  The  issuer  of a voting trust certificate, collateral trust certifi-
  5        cate, certificate of deposit for a security, or  share  in  an  investment
  6        company  without  a  board  of directors or individuals performing similar
  7        functions is the person performing the acts and  assuming  the  duties  of
  8        depositor  or  manager pursuant to the trust or other agreement or instru-
  9        ment under which the security is issued.
 10        (b)  The issuer of an equipment  trust  certificate  or  similar  security
 11        serving the same purpose is the person by which the property is or will be
 12        used  or to which the property or equipment is or will be leased or condi-
 13        tionally sold or that is otherwise contractually responsible for  assuring
 14        payment of the certificate.
 15        (c)  The issuer of a fractional undivided interest in an oil, gas or other
 16        mineral  lease  or  in  payments out of production under a lease, right or
 17        royalty is the owner of an interest in the lease or  in  payments  out  of
 18        production  under  a lease, right or royalty, whether whole or fractional,
 19        that creates fractional interests for the purpose of sale.
 20        (18) "Nonissuer transaction" or "nonissuer distribution" means a  transac-
 21    tion or distribution not directly or indirectly for the benefit of the issuer.
 22        (19) "Offer to purchase" includes an attempt or offer to obtain, or solic-
 23    itation  of  an offer to sell, a security or interest in a security for value.
 24    The term does not include a tender offer that is subject to section  14(d)  of
 25    the securities exchange act of 1934 (15 U.S.C. 78n(d)).
 26        (20) "Person"  means  an  individual; corporation; business trust; estate;
 27    trust; partnership; limited liability  company;  association;  joint  venture;
 28    government;  governmental subdivision, agency, or instrumentality; public cor-
 29    poration; or any other legal or commercial entity.
 30        (21) "Place of business" of a broker-dealer, an investment adviser,  or  a
 31    federal covered investment adviser means:
 32        (a)  An  office at which the broker-dealer, investment adviser, or federal
 33        covered investment adviser  regularly  provides  brokerage  or  investment
 34        advice  or  solicits, meets with, or otherwise communicates with customers
 35        or clients; or
 36        (b)  Any other location that is held out to the general public as a  loca-
 37        tion  at  which  the broker-dealer, investment adviser, or federal covered
 38        investment adviser provides brokerage or investment  advice  or  solicits,
 39        meets with, or otherwise communicates with customers or clients.
 40        (22) "Predecessor  act" means the act repealed by section 30-14-702, Idaho
 41    Code.
 42        (23) "Price amendment" means the amendment  to  a  registration  statement
 43    filed  under  the securities act of 1933 or, if an amendment is not filed, the
 44    prospectus or prospectus supplement filed under the  securities  act  of  1933
 45    that includes a statement of the offering price, underwriting and selling dis-
 46    counts  or commissions, amount of proceeds, conversion rates, call prices, and
 47    other matters dependent upon the offering price.
 48        (24) "Principal place of business" of a  broker-dealer  or  an  investment
 49    adviser  means the executive office of the broker-dealer or investment adviser
 50    from which the officers, partners or managers of the broker-dealer or  invest-
 51    ment  adviser  direct,  control  and  coordinate the activities of the broker-
 52    dealer or investment adviser.
 53        (25) "Record," except in the phrases "of record," "official  record,"  and
 54    "public  record,"  means information that is inscribed on a tangible medium or
 55    that is stored  in an  electronic  or  other  medium  and  is  retrievable  in
                                                                        
                                           7
                                                                        
  1    perceivable form.
  2        (26) "Sale" includes every contract of sale, contract to sell, or disposi-
  3    tion  of,  a  security  or  interest in a security for value.  "Offer to sell"
  4    includes every attempt or offer to dispose of, or solicitation of an offer  to
  5    purchase,  a  security  or  interest  in a security for value. Both "sale" and
  6    "offer to sell" include:
  7        (a)  A security given or delivered with, or as a bonus on  account  of,  a
  8        purchase of securities or any other thing constituting part of the subject
  9        of the purchase and having been offered and sold for value;
 10        (b)  A gift of assessable stock involving an offer and sale; and
 11        (c)  A  sale  or  offer  of a warrant or right to purchase or subscribe to
 12        another security of the same or another issuer and a sale or  offer  of  a
 13        security  that  gives the holder a present or future right or privilege to
 14        convert the security into another security of the same or another  issuer,
 15        including an offer of the other security.
 16        (27) "Securities  and exchange commission" means the United States securi-
 17    ties and exchange commission.
 18        (28) "Security" means a note;  stock;  treasury  stock;  security  future;
 19    bond; debenture; evidence of indebtedness; certificate of interest or partici-
 20    pation   in   a   profit-sharing   agreement;  collateral  trust  certificate;
 21    preorganization certificate or subscription;  transferable  share;  investment
 22    contract;  voting  trust  certificate;  certificate of deposit for a security;
 23    fractional undivided interest in oil, gas or other mineral rights; put,  call,
 24    straddle,  option or privilege on a security, certificate of deposit, or group
 25    or index of securities, including an interest therein or based  on  the  value
 26    thereof;  put, call, straddle, option, or privilege entered into on a national
 27    securities exchange relating to foreign currency; or, in general, an  interest
 28    or  instrument commonly known as a "security"; or a certificate of interest or
 29    participation in, temporary or interim certificate for, receipt for, guarantee
 30    of, or warrant or right to subscribe to or purchase,  any  of  the  foregoing.
 31    "Security":
 32        (a)  Includes both a certificated and an uncertificated security;
 33        (b)  Does not include an insurance or endowment policy or annuity contract
 34        under  which  an  insurance company promises to pay money either in a lump
 35        sum or periodically for life or other specified period;
 36        (c)  Does not include an interest in  a  contributory  or  noncontributory
 37        pension or welfare plan subject to the employee retirement income security
 38        act of 1974;
 39        (d)  Includes as an "investment contract" an investment in a common enter-
 40        prise  with  the  expectation  of profits to be derived primarily from the
 41        efforts of a person other than the investor. "Common enterprise" means  an
 42        enterprise in which the fortunes of the investor are interwoven with those
 43        of  either  the  person  offering  the investment, a third party, or other
 44        investors; and
 45        (e)  Includes as an  "investment  contract,"  among  other  contracts,  an
 46        interest  in  a limited partnership and a limited liability company and an
 47        investment in a viatical settlement, life settlement or senior  settlement
 48        or similar agreement.
 49        (29) "Self-regulatory  organization"  means a national securities exchange
 50    registered under the securities exchange act of 1934,  a  national  securities
 51    association  of broker-dealers registered under the securities exchange act of
 52    1934, a clearing agency registered under the securities exchange act of  1934,
 53    or  the municipal securities rulemaking board established under the securities
 54    exchange act of 1934.
 55        (30) "Sign" means, with present intent to authenticate or adopt a record:
                                                                        
                                           8
                                                                        
  1        (a)  To execute or adopt a tangible symbol; or
  2        (b)  To attach or logically associate with the record an  electronic  sym-
  3        bol, sound or process.
  4        (31) "State" means a state of the United States, the District of Columbia,
  5    Puerto  Rico,  the  United  States Virgin Islands, or any territory or insular
  6    possession subject to the jurisdiction of the United States.
                                                                        
  7        30-14-103.  REFERENCES TO FEDERAL STATUTES. "Securities act of  1933"  (15
  8    U.S.C.  77a  et  seq.),  "securities  exchange  act of 1934" (15 U.S.C. 78a et
  9    seq.), "public utility holding company act of 1935" (15 U.S.C.  79  et  seq.),
 10    "investment company act of 1940" (15 U.S.C. 80a-1 et seq.), "investment advis-
 11    ers  act of 1940" (15 U.S.C. 80b-1 et seq.), "employee retirement income secu-
 12    rity act of 1974" (29 U.S.C. 1001 et seq.), "national housing act" (12  U.S.C.
 13    1701  et seq.), "commodity exchange act" (7 U.S.C. 1 et seq.), "internal reve-
 14    nue code" (26 U.S.C. 1 et seq.), "securities investor protection act of  1970"
 15    (15  U.S.C.  78aaa  et  seq.), "securities litigation uniform standards act of
 16    1998" (112 Stat. 3227), "small business investment act of 1958" (15 U.S.C. 661
 17    et seq.), and "electronic signatures in global and national commerce act"  (15
 18    U.S.C. 7001 et seq.) mean those statutes and the rules and regulations adopted
 19    under those statutes, as in effect on the date of enactment of this chapter.
                                                                        
 20        30-14-104.  REFERENCES TO FEDERAL AGENCIES. A reference in this chapter to
 21    an  agency or department of the United States is also a reference to a succes-
 22    sor agency or department.
                                                                        
 23        30-14-105.  ELECTRONIC RECORDS AND SIGNATURES. This chapter modifies, lim-
 24    its and supersedes the federal electronic signatures in  global  and  national
 25    commerce  act,  but does not modify, limit or supersede section 101(c) of that
 26    act (15 U.S.C. 7001(c)) or authorize electronic delivery of any of the notices
 27    described in section 103(b) of that act  (15  U.S.C.  7003(b)).  This  chapter
 28    authorizes  the filing of records and signatures, when specified by provisions
 29    of this chapter or by a rule adopted or an order issued under this chapter, in
 30    a manner consistent with section 104(a) of that act (15 U.S.C. 7004(a)).
                                                                        
 31                                       PART 2.
 32                      EXEMPTIONS FROM REGISTRATION OF SECURITIES
                                                                        
 33        30-14-201.  EXEMPT SECURITIES. The following securities  are  exempt  from
 34    the requirements of sections 30-14-301 through 30-14-306, Idaho Code, and sec-
 35    tion 30-14-504, Idaho Code:
 36        (1)  A  security, including a revenue obligation or a separate security as
 37    defined in rule 131 (17 CFR 230.131) adopted under the securities act of 1933,
 38    issued, insured or guaranteed by the United States; by a state; by a political
 39    subdivision of a state; by a public authority, agency, or  instrumentality  of
 40    one  (1) or more states; by a political subdivision of one (1) or more states;
 41    or by a person controlled or supervised by and acting as an instrumentality of
 42    the United States under authority granted by congress;  or  a  certificate  of
 43    deposit for any of the foregoing;
 44        (2)  A security issued, insured or guaranteed by a foreign government with
 45    which  the United States maintains diplomatic relations, or any of its politi-
 46    cal subdivisions,  if the security is recognized as a valid obligation by  the
 47    issuer, insurer or guarantor;
 48        (3)  A  security  issued  by  and representing, or that will represent, an
 49    interest in or a direct obligation of, or be guaranteed by:
 50        (a)  An international banking institution;
                                                                        
                                           9
                                                                        
  1        (b)  A banking institution organized under the laws of the United  States;
  2        a member bank of the federal reserve system; or a depository institution a
  3        substantial  portion  of the business of which consists or will consist of
  4        receiving deposits or share accounts  that  are  insured  to  the  maximum
  5        amount authorized by statute by the federal deposit insurance corporation,
  6        the  national credit union share insurance fund, or a successor authorized
  7        by federal law, or exercising fiduciary powers that are similar  to  those
  8        permitted  for  national  banks  under the authority of the comptroller of
  9        currency pursuant to section 1 of public law 87-722 (12 U.S.C. 92a); or
 10        (c)  Any other depository institution, or any trust company  organized  or
 11        chartered under the laws of this state, unless by rule or order the admin-
 12        istrator proceeds under section 30-14-204, Idaho Code;
 13        (4)  A  security  issued by and representing an interest in, or a debt of,
 14    or insured or guaranteed by, an insurance company authorized to do business in
 15    this state;
 16        (5)  A security issued or guaranteed by a railroad, other common  carrier,
 17    public utility, or public utility holding company that is:
 18        (a)  Regulated in respect to its rates and charges by the United States or
 19        a state;
 20        (b)  Regulated  in respect to the issuance or guarantee of the security by
 21        the United States, a state, Canada, or a Canadian province  or  territory;
 22        or
 23        (c)  A  public utility holding company registered under the public utility
 24        holding company act of 1935 or a subsidiary of such a  registered  holding
 25        company within the meaning of that act;
 26        (6)  A federal covered security specified in section 18(b)(1) of the secu-
 27    rities  act of 1933 (15 U.S.C. 77r(b)(1)) or by a rule adopted under that pro-
 28    vision or a security listed or approved for listing on another securities mar-
 29    ket specified by rule under this chapter; a put or a call option  contract;  a
 30    warrant;  a  subscription  right  on or with respect to such securities; or an
 31    option or similar derivative security on a security or an index of  securities
 32    or foreign currencies issued by a clearing agency registered under the securi-
 33    ties  exchange  act of 1934 and listed or designated for trading on a national
 34    securities exchange, a facility of a national securities exchange, or a facil-
 35    ity of a national  securities  association  registered  under  the  securities
 36    exchange  act  of 1934 or an offer or sale, of the underlying security in con-
 37    nection with the offer, sale, or exercise of an option or other security  that
 38    was  exempt  when  the  option  or other security was written or issued; or an
 39    option or a derivative security designated by the securities and exchange com-
 40    mission under section 9(b) of the securities exchange act of 1934  (15  U.S.C.
 41    78i(b));
 42        (7)  A  security issued by a person organized and operated exclusively for
 43    religious, educational, benevolent, fraternal, charitable, social, athletic or
 44    reformatory purposes, or as a chamber  of  commerce,  and  not  for  pecuniary
 45    profit,  no  part of the net earnings of which inures to the benefit of a pri-
 46    vate stockholder or other person, or a security of a company that is  excluded
 47    from  the definition of an investment company under section 3(c)(10)(b) of the
 48    investment company act of 1940 (15 U.S.C. 80a-3(c)(10)(B)); except  that  with
 49    respect  to  the offer or sale of a note, bond, debenture or other evidence of
 50    indebtedness issued by such a person, a rule may be adopted under this chapter
 51    limiting the availability of this exemption by classifying   securities,  per-
 52    sons  and transactions, imposing different requirements for different classes,
 53    specifying with respect to paragraph (b) of this subsection the scope  of  the
 54    exemption and the grounds for denial or suspension, and requiring an issuer:
 55        (a)  To  file a notice specifying the material terms of the proposed offer
                                                                        
                                           10
                                                                        
  1        or sale and copies of any proposed sales and advertising literature to  be
  2        used and provide that the exemption becomes effective if the administrator
  3        does not disallow the exemption within the period established by the rule;
  4        (b)  To  file a request for exemption authorization for which a rule under
  5        this chapter may specify the scope of the exemption, the requirement of an
  6        offering statement, the filing of sales and  advertising  literature,  the
  7        filing  of consent to service of process complying with section 30-14-611,
  8        Idaho Code, and grounds for denial or suspension of the exemption; or
  9        (c)  To register under section 30-14-304, Idaho Code;
 10        (8)  A member's or owner's interest in, or a retention certificate or like
 11    security given in lieu of a cash patronage dividend issued by,  a  cooperative
 12    organized and operated as a nonprofit membership cooperative under the cooper-
 13    ative  laws of a state, but not a member's or owner's interest, retention cer-
 14    tificate, or like security sold to persons other than bona fide members of the
 15    cooperative;
 16        (9)  An equipment trust certificate with respect to  equipment  leased  or
 17    conditionally  sold to a person, if any security issued by the person would be
 18    exempt under this section or would be a federal covered security under section
 19    18(b)(1) of the securities act of 1933 (15 U.S.C. 77r(b)(1)); and
 20        (10) Any security issued by a domestic or foreign  corporation,   partner-
 21    ship, trust or association engaged in actual mining operations or the explora-
 22    tion  and  development of mining properties in this state, whether or not sold
 23    through a broker-dealer, provided the following conditions are met:
 24        (a)  The term "actual mining operations" within the meaning of  this  sub-
 25        section does not include the development or production of gas or oil;
 26        (b)  The  total  amount  of the securities to be offered and sold does not
 27        exceed five hundred thousand dollars ($500,000) in any twelve  (12)  month
 28        period;
 29        (c)  All  sales  brochures,  pamphlets,  advertisements and literature are
 30        filed with the director prior to being used;
 31        (d)  At least eighty percent (80%) of the gross amount paid  by  the  pur-
 32        chasers  of  the  securities  is  used  in actual mining operations or for
 33        actual exploration and development expenses, including legal,  accounting,
 34        engineering and geological expenses; and
 35        (e)  The  issuer  shall file a report in a form prescribed by the director
 36        and at such times that the director by rule may  provide,  not  to  exceed
 37        once  every  three  (3)  months, stating the number of shares or amount of
 38        other securities sold, the number  of  purchasers,  the  amount  of  money
 39        obtained  by the issuer from the sales, and the manner in which the moneys
 40        have been expended.
                                                                        
 41        30-14-202.  EXEMPT TRANSACTIONS. The  following  transactions  are  exempt
 42    from the requirements of sections 30-14-301 through 30-14-306, Idaho Code, and
 43    section 30-14-504, Idaho Code:
 44        (1)  An  isolated  nonissuer  transaction,  whether  or not effected by or
 45    through a broker-dealer;
 46        (2)  A nonissuer transaction by or through a broker-dealer registered,  or
 47    exempt  from  registration  under  this chapter, and a resale transaction by a
 48    sponsor of a unit investment trust registered under the investment company act
 49    of 1940, in a security of a class that has been outstanding in  the  hands  of
 50    the public for at least ninety (90) days, if, at the date of the transaction:
 51        (a)  The  issuer of the security is engaged in business, the issuer is not
 52        in the organizational stage or in  bankruptcy  or  receivership,  and  the
 53        issuer is not a blank check, blind pool, or shell company that has no spe-
 54        cific  business plan or purpose or has indicated that its primary business
                                                                        
                                           11
                                                                        
  1        plan is to engage in a merger or combination of the business with,  or  an
  2        acquisition of, an unidentified person;
  3        (b)  The  security  is  sold  at a price reasonably related to its current
  4        market price;
  5        (c)  The security does not constitute the  whole  or  part  of  an  unsold
  6        allotment  to, or a subscription or participation by, the broker-dealer as
  7        an underwriter of the security or a redistribution;
  8        (d)  A nationally recognized securities manual or its  electronic  equiva-
  9        lent  designated by any rule adopted or an order issued under this chapter
 10        or a record filed with the securities and exchange commission that is pub-
 11        licly available contains:
 12             (i)   A description of the business and operations of the issuer;
 13             (ii)  The names of the issuer's executive officers and the  names  of
 14             the issuer's directors, if any;
 15             (iii) An  audited  balance  sheet  of  the issuer as of a date within
 16             eighteen (18) months before the date of the transaction  or,  in  the
 17             case  of a reorganization or merger when the parties to the reorgani-
 18             zation or merger each had an audited balance sheet, a pro forma  bal-
 19             ance sheet for the combined organization; and
 20             (iv)  An  audited  income  statement for each of the issuer's two (2)
 21             immediately previous fiscal years or for the period of  existence  of
 22             the issuer, whichever is shorter, or, in the case of a reorganization
 23             or merger when each party to the reorganization or merger had audited
 24             income statements, a pro forma income statement; and
 25        (e)  Any one (1) of the following requirements is met:
 26             (i)   The  issuer  of  the  security has a class of equity securities
 27             listed on a national securities exchange registered under  section  6
 28             of  the  securities exchange act of 1934 or designated for trading on
 29             the national association of securities  dealers  automated  quotation
 30             system;
 31             (ii)  The  issuer  of  the security is a unit investment trust regis-
 32             tered under the investment company act of 1940;
 33             (iii) The issuer of the security,  including  its  predecessors,  has
 34             been engaged in continuous business for at least three (3) years; or
 35             (iv)  The  issuer  of  the  security has total assets of at least two
 36             million dollars ($2,000,000) based on an audited balance sheet as  of
 37             a date within eighteen (18) months before the date of the transaction
 38             or, in the case of a reorganization or merger when the parties to the
 39             reorganization  or  merger  each had such an audited balance sheet, a
 40             pro forma balance sheet for the combined organization;
 41        (3)  A nonissuer transaction by or through a broker-dealer  registered  or
 42    exempt  from registration under this chapter in a security of a foreign issuer
 43    that is a margin security defined in regulations or rules adopted by the board
 44    of governors of the federal reserve system;
 45        (4)  A nonissuer transaction by or through a broker-dealer  registered  or
 46    exempt  from registration under this chapter in an outstanding security if the
 47    guarantor  of the security files reports with the securities and exchange com-
 48    mission under the reporting requirements of section 13 or 15(d) of the securi-
 49    ties exchange act of 1934 (15 U.S.C. 78m or 78o(d));
 50        (5)  A nonissuer transaction by or through a broker-dealer  registered  or
 51    exempt from registration under this chapter in a security that:
 52        (a)  Is  rated  at  the time of the transaction by a nationally recognized
 53        statistical rating organization in one (1) of its four (4) highest  rating
 54        categories; or
 55        (b)  Has a fixed maturity or a fixed interest or dividend, if:
                                                                        
                                           12
                                                                        
  1             (i)   A  default  has  not occurred during the current fiscal year or
  2             within the three (3) previous fiscal years of the issuer or any  pre-
  3             decessor,  in the payment of principal, interest, or dividends on the
  4             security; and
  5             (ii)  The issuer is engaged in business, is not in the organizational
  6             stage or in bankruptcy or receivership, and is not and has  not  been
  7             within  the previous twelve (12) months a blank check, blind pool, or
  8             shell company that has no specific business plan or  purpose  or  has
  9             indicated  that its primary business plan is to engage in a merger or
 10             combination of the business with, or an acquisition of, an  unidenti-
 11             fied person;
 12        (6)  A  nonissuer  transaction by or through a broker-dealer registered or
 13    exempt from registration under this chapter effecting an unsolicited order  or
 14    offer to purchase;
 15        (7)  A  nonissuer  transaction executed by a bona fide pledgee without the
 16    purpose of evading this chapter;
 17        (8)  A nonissuer transaction by a federal covered investment adviser  with
 18    investments  under  management  in  excess  of  one  hundred  million  dollars
 19    ($100,000,000)  acting  in the exercise of discretionary authority in a signed
 20    record for the account of others;
 21        (9)  A transaction in a security, whether or not the security or  transac-
 22    tion  is otherwise exempt, in exchange for one (1) or more bona fide outstand-
 23    ing securities, claims, or property interests, or partly in such exchange  and
 24    partly  for  cash, if the terms and conditions of the issuance and exchange or
 25    the delivery and exchange and the fairness of the terms  and  conditions  have
 26    been  approved  by  the  administrator  after a hearing as provided in section
 27    30-14-202A, Idaho Code, or otherwise;
 28        (10) A transaction between the issuer or other person on whose behalf  the
 29    offering is made and an underwriter, or among underwriters;
 30        (11) A transaction in a note, bond, debenture or other evidence of indebt-
 31    edness secured by a mortgage or other security agreement if:
 32        (a)  The  note,  bond,  debenture  or  other  evidence  of indebtedness is
 33        offered and sold with the mortgage or other security agreement as a unit;
 34        (b)  A general solicitation or general advertisement of the transaction is
 35        not made; and
 36        (c)  A commission or other remuneration is not paid or given, directly  or
 37        indirectly,  to  a  person  not registered under this chapter as a broker-
 38        dealer or as an agent;
 39        (12) A transaction by an executor, administrator of  an  estate,  sheriff,
 40    marshal, receiver, trustee in bankruptcy, guardian or conservator;
 41        (13) A sale or offer to sell to:
 42        (a)  An institutional investor;
 43        (b)  A federal covered investment adviser; or
 44        (c)  Any  other person exempted by a rule adopted or an order issued under
 45        this chapter;
 46        (14) A sale or an offer to sell securities of an issuer, if  the  transac-
 47    tion is part of a single issue in which:
 48        (a)  Not  more  than  ten (10) purchasers are present in this state during
 49        any twelve (12) consecutive months, other than those designated in subsec-
 50        tion (13) of this section;
 51        (b)  A general solicitation or general advertising is not made in  connec-
 52        tion with the offer to sell or sale of the securities;
 53        (c)  A  commission or other remuneration is not paid or given, directly or
 54        indirectly, to a person other than a broker-dealer registered  under  this
 55        chapter  or  an  agent registered under this chapter for soliciting a pro-
                                                                        
                                           13
                                                                        
  1        spective purchaser in this state; and
  2        (d)  The issuer reasonably believes that all the purchasers in this state,
  3        other than those designated in subsection (13) of this section,  are  pur-
  4        chasing for investment;
  5        (15) A  transaction  under  an  offer  to existing security holders of the
  6    issuer, including persons that at the date of the transaction are  holders  of
  7    convertible securities, options or warrants, if a commission or other remuner-
  8    ation,  other  than  a  standby  commission, is not paid or given, directly or
  9    indirectly, for soliciting a security holder in this state;
 10        (16) An offer to sell, but not a sale, of a security not exempt from  reg-
 11    istration under the securities act of 1933 if:
 12        (a)  A  registration  or  offering statement or similar record as required
 13        under the securities act of 1933 has been filed, but is not effective,  or
 14        the offer is made in compliance with rule 165 adopted under the securities
 15        act of 1933 (17 CFR 230.165); and
 16        (b)  A  stop  order  of  which  the  offeror  is aware has not been issued
 17        against the offeror by the administrator or the  securities  and  exchange
 18        commission, and an audit, inspection or proceeding that is public and that
 19        may culminate in a stop order is not known by the offeror to be pending;
 20        (17) An offer to sell, but not a sale, of a security exempt from registra-
 21    tion under the securities act of 1933 if:
 22        (a)  A  registration  statement  has been filed under this chapter, but is
 23        not effective;
 24        (b)  A solicitation of interest is provided in a  record  to  offerees  in
 25        compliance  with  a  rule adopted by the administrator under this chapter;
 26        and
 27        (c)  A stop order of which the offeror is aware has not been issued by the
 28        administrator under this chapter and an audit,  inspection  or  proceeding
 29        that may culminate in a stop order is not known by the offeror to be pend-
 30        ing;
 31        (18) A  transaction  involving  the  distribution  of the securities of an
 32    issuer to the security holders of another person in connection with a  merger,
 33    consolidation, exchange of securities, sale of assets, or other reorganization
 34    to  which the issuer, or its parent or subsidiary and the other person, or its
 35    parent or subsidiary, are parties;
 36        (19) A rescission offer, sale or purchase under section  30-14-510,  Idaho
 37    Code;
 38        (20) An  offer  or  sale  of a security to a person not a resident of this
 39    state and not present in this state if the offer or sale does not constitute a
 40    violation of the laws of the  state  or  foreign  jurisdiction  in  which  the
 41    offeree  or purchaser is present and is not part of an unlawful plan or scheme
 42    to evade this chapter;
 43        (21) Employees' stock purchase, savings, option, profit-sharing,  pension,
 44    or  similar employees' benefit plan, including any securities, plan interests,
 45    and guarantees issued under a compensatory benefit plan or  compensation  con-
 46    tract,  contained  in  a  record,  established by the issuer, its parents, its
 47    majority-owned  subsidiaries,  or  the  majority-owned  subsidiaries  of   the
 48    issuer's  parent  for the participation of their employees including offers or
 49    sales of such securities to:
 50        (a)  Directors; general partners; trustees, if the issuer  is  a  business
 51        trust; officers; consultants; and advisers;
 52        (b)  Family members who acquire such securities from those persons through
 53        gifts or domestic relations orders;
 54        (c)  Former  employees,  directors,  general partners, trustees, officers,
 55        consultants and advisers if those individuals were employed by or  provid-
                                                                        
                                           14
                                                                        
  1        ing services to the issuer when the securities were offered; and
  2        (d)  Insurance agents who are exclusive insurance agents of the issuer, or
  3        the  issuer's  subsidiaries or parents, or who derive more than fifty per-
  4        cent (50%) of their annual income from those organizations;
  5        (22) A transaction involving:
  6        (a)  A stock dividend or equivalent equity distribution, whether the  cor-
  7        poration  or  other  business  organization  distributing  the dividend or
  8        equivalent equity distribution is the issuer or not, if nothing  of  value
  9        is  given  by  stockholders  or  other  equity holders for the dividend or
 10        equivalent equity distribution other than the surrender of a  right  to  a
 11        cash  or  property dividend if each stockholder or other equity holder may
 12        elect to take the dividend or  equivalent  equity  distribution  in  cash,
 13        property or stock;
 14        (b)  An  act  incident  to a judicially approved reorganization in which a
 15        security is issued in exchange for one (1) or more outstanding securities,
 16        claims, or property interests, or partly in such exchange and  partly  for
 17        cash; or
 18        (c)  The  solicitation  of tenders of securities by an offeror in a tender
 19        offer in compliance with rule 162 adopted under the securities act of 1933
 20        (17 CFR 230.162); or
 21        (23) A nonissuer transaction in an outstanding security by  or  through  a
 22    broker-dealer  registered  or  exempt from registration under this chapter, if
 23    the issuer is a reporting issuer in a foreign jurisdiction designated by  this
 24    subsection  or  by  a  rule adopted or an order issued under this chapter; has
 25    been subject to continuous reporting requirements in the foreign  jurisdiction
 26    for  not  less  than one hundred eighty (180) days before the transaction; and
 27    the security is listed on the foreign jurisdiction's securities exchange  that
 28    has been designated by this subsection or by a rule adopted or an order issued
 29    under  this  chapter, or is a security of the same issuer that is of senior or
 30    substantially equal rank to the listed security or is a warrant  or  right  to
 31    purchase  or  subscribe  to any of the foregoing. For purposes of this subsec-
 32    tion, Canada, together with its provinces and  territories,  is  a  designated
 33    foreign  jurisdiction  and  the  Toronto stock exchange, inc., is a designated
 34    securities exchange. After an administrative hearing in compliance with  chap-
 35    ter  52,  title 67, Idaho Code, the administrator, by rule adopted or an order
 36    issued under this chapter, may revoke the designation of a securities exchange
 37    under this subsection, if the administrator finds that revocation is necessary
 38    or appropriate in the public interest and for the protection of investors.
                                                                        
 39        30-14-202A.  FAIRNESS HEARING. (a)  The administrator is expressly  autho-
 40    rized  to hold a hearing and consider the fairness of the terms and conditions
 41    of a transaction described in section 30-14-202(9), Idaho Code.  This  section
 42    30-14-202A,  Idaho  Code, is intended to provide for a fairness hearing before
 43    the administrator with respect to  transactions  which,  if  approved  by  the
 44    administrator,  will  be exempt from the registration requirements of the fed-
 45    eral securities laws under section 3(a)(10) of the securities act of 1933,  or
 46    any section comparable thereto which may subsequently be enacted.
 47        (b)  An  application  for approval shall describe the proposed transaction
 48    and shall be in such form, contain such information and be accompanied by such
 49    documents as the administrator shall reasonably require by rule or  otherwise.
 50    The  applicant  shall  pay  to the administrator a filing fee of three hundred
 51    dollars ($300) and shall file with the administrator an undertaking to  defray
 52    the costs of a hearing officer and a stenographer for the hearing.
 53        (c)  An  application  for  approval shall be set for hearing within thirty
 54    (30) days after the filing of an application. The applicant shall give  notice
                                                                        
                                           15
                                                                        
  1    of  the hearing to all persons to whom securities are to be issued in the pro-
  2    posed transaction, and all such persons shall have the right to appear at  the
  3    hearing.
  4        (d)  Within ten (10) days after the hearing, the administrator shall issue
  5    an order either granting or denying approval of the terms of conditions of the
  6    proposed  plan.  The order shall grant approval if the proposed transaction is
  7    fair, equitable and free from fraud. The order shall deny approval if the pro-
  8    posed transaction is unfair, inequitable or not free from fraud.
                                                                        
  9        30-14-203.  ADDITIONAL EXEMPTIONS AND WAIVERS. (1) A rule  adopted  or  an
 10    order issued under this chapter may exempt a security, transaction or offer.
 11        (2)  A  rule  adopted under this chapter may exempt a class of securities,
 12    transactions or offers from  any  or  all  of  the  requirements  of  sections
 13    30-14-301 through 30-14-306, Idaho Code, and section 30-14-504, Idaho Code.
 14        (3)  An  order  issued  under this chapter may waive, in whole or in part,
 15    any or all of  the  conditions  for  an  exemption  or  offer  under  sections
 16    30-14-201 and 30-14-202, Idaho Code.
                                                                        
 17        30-14-204.  DENIAL,  SUSPENSION,  REVOCATION,  CONDITION  OR LIMITATION OF
 18    EXEMPTIONS. (a) Enforcement related powers. Except with respect to  a  federal
 19    covered  security  or  a  transaction involving a federal covered security, an
 20    order under this chapter may deny, suspend application of,  condition,  limit,
 21    or  revoke  an  exemption  created  under section 30-14-201(3)(c), (7) or (8),
 22    Idaho Code, or section 30-14-202, Idaho Code, or an exemption or  waiver  cre-
 23    ated  pursuant  to  section  30-14-203, Idaho Code, with respect to a specific
 24    security, transaction or offer. An order under this section may be issued only
 25    pursuant to the procedures set forth in  section  30-14-306(d)  or  30-14-604,
 26    Idaho Code, and only prospectively.
 27        (b)  Knowledge  of  order  required.  A  person  does  not violate section
 28    30-14-301, 30-14-303 through 30-14-306, 30-14-504 or 30-14-510, Idaho Code, by
 29    an offer to sell, offer to purchase, sale,  or  purchase  effected  after  the
 30    entry of an order issued under this section if the person did not know, and in
 31    the exercise of reasonable care could not have known, of the order.
                                                                        
 32                                       PART 3.
 33                        REGISTRATION OF SECURITIES AND NOTICE
 34                         FILING OF FEDERAL COVERED SECURITIES
                                                                        
 35        30-14-301.  SECURITIES REGISTRATION REQUIREMENT. It is unlawful for a per-
 36    son to offer or sell a security in this state unless:
 37        (a)  The security is a federal covered security;
 38        (b)  The  security,  transaction  or  offer  is exempted from registration
 39    under sections 30-14-201 through 30-14-203, Idaho Code; or
 40        (c)  The security is registered under this chapter.
                                                                        
 41        30-14-302.  NOTICE FILING. (a) Required filing of records. With respect to
 42    a federal covered security, as defined in section 18(b)(2) of  the  securities
 43    act of 1933 (15 U.S.C. 77r(b)(2)), that is not otherwise exempt under sections
 44    30-14-201  through  30-14-203,  Idaho  Code, a rule adopted or an order issued
 45    under this chapter may require the filing of  any  or  all  of  the  following
 46    records:
 47        (1)  Before the initial offer of a federal covered security in this state,
 48        all  records  that are part of a federal registration statement filed with
 49        the securities and exchange commission under the securities  act  of  1933
 50        and  a  consent  to  service  of  process complying with section 30-14-611
                                                                        
                                           16
                                                                        
  1        signed by the issuer and the payment of a fee  of  three  hundred  dollars
  2        ($300) for mutual funds and one hundred dollars ($100) for unit investment
  3        trusts;
  4        (2)  After  the  initial  offer  of  the  federal covered security in this
  5        state, all records that are part of an amendment to a federal registration
  6        statement filed with the securities  and  exchange  commission  under  the
  7        securities act of 1933; and
  8        (3)  To  the  extent necessary or appropriate to compute fees, a report of
  9        the value of the federal covered securities sold  or  offered  to  persons
 10        present in this state, if the sales data are not included in records filed
 11        with the securities and exchange commission; and
 12        (4)  Each  series  or portfolio of an investment company offering shall be
 13        required to make a separate notice filing.  Separate  notice  filings  for
 14        classes  of  an investment company are not required so long as classes are
 15        used solely as a method of distinguishing payment plans within a series or
 16        portfolio.
 17        (b)  Notice filing effectiveness and renewal. A notice filing  under  sub-
 18    section  (a)  of  this section is effective for one (1) year commencing on the
 19    later of the notice filing or the effectiveness of the offering filed with the
 20    securities and exchange commission. On or before expiration,  the  issuer  may
 21    renew  a  notice  filing by filing a copy of those records filed by the issuer
 22    with the securities and exchange commission that are required by rule or order
 23    under this chapter to be filed and by paying a renewal fee  of  three  hundred
 24    dollars  ($300)    for  mutual  funds  and one hundred dollars ($100) for unit
 25    investment trusts. A previously filed consent to service of process  complying
 26    with  section  30-14-611,  Idaho  Code,  may be incorporated by reference in a
 27    renewal. A renewed notice filing becomes effective upon the expiration of  the
 28    filing being renewed.
 29        (c)  Notice   filings   for   federal  covered  securities  under  section
 30    18(b)(4)(d). With respect to a security that is  a  federal  covered  security
 31    under   section   18(b)(4)(d)  of  the  securities  act  of  1933  (15  U.S.C.
 32    77r(b)(4)(d)), a rule or order under this chapter may require a notice  filing
 33    by or on behalf of an issuer to include a copy of form D, including the appen-
 34    dix,  as  promulgated by the securities and exchange commission, and a consent
 35    to service of process complying with section 30-14-611, Idaho Code, signed  by
 36    the  issuer  not later than fifteen (15) days after the first sale of the fed-
 37    eral covered security in this state and the payment of a fee of fifty  dollars
 38    ($50.00); and the payment of a fee of fifty dollars ($50.00) for any late fil-
 39    ing.
 40        (d)  Stop  orders. Except with respect to a federal security under section
 41    18(b)(1) of the securities act of 1933 (15 U.S.C. 77r(b)(1)), if the  adminis-
 42    trator  finds  that there is a failure to comply with a notice or fee require-
 43    ment of this section, the administrator may issue a stop order suspending  the
 44    offer  and sale of a federal covered security in this state. If the deficiency
 45    is corrected, the stop order is void as of the time of  its  issuance  and  no
 46    penalty may be imposed by the administrator.
                                                                        
 47        30-14-303.  SECURITIES REGISTRATION BY COORDINATION. (a) Registration per-
 48    mitted. A security for which a registration statement has been filed under the
 49    securities  act of 1933 in connection with the same offering may be registered
 50    by coordination under this section.
 51        (b)  Required records. A registration statement and  accompanying  records
 52    under  this section must contain or be accompanied by the following records in
 53    addition to the information specified in section 30-14-305, Idaho Code, and  a
 54    consent to service of process complying with section 30-14-611, Idaho Code:
                                                                        
                                           17
                                                                        
  1        (1)  A  copy  of  the latest form of prospectus filed under the securities
  2        act of 1933;
  3        (2)  A copy of the articles of incorporation and bylaws or their  substan-
  4        tial  equivalents  currently  in  effect;  a copy of any agreement with or
  5        among underwriters; a copy of any indenture or other instrument  governing
  6        the  issuance  of  the  security to be registered; and a specimen, copy or
  7        description of the security that is required by any  rule  adopted  or  an
  8        order issued under this chapter;
  9        (3)  Copies  of  any  other  information or any other records filed by the
 10        issuer under the securities act of 1933 requested  by  the  administrator;
 11        and
 12        (4)  An  undertaking  to forward each amendment to the federal prospectus,
 13        other than an amendment that delays the effective date of the registration
 14        statement, promptly after it is filed with  the  securities  and  exchange
 15        commission.
 16        (c)  Conditions  for  effectiveness of registration statement. A registra-
 17    tion statement under this section becomes  effective  simultaneously  with  or
 18    subsequent to the federal registration statement when all the following condi-
 19    tions are satisfied:
 20        (1)  A  stop  order  issued  pursuant to subsection (d) of this section or
 21        section 30-14-306, Idaho Code, or issued by the  securities  and  exchange
 22        commission,  is  not in effect and a proceeding is not pending against the
 23        issuer under section 30-14-306, Idaho Code, and the administrator has  not
 24        given  written  notice  of deficiencies that are unresolved and that would
 25        constitute grounds for a stop order under section 30-14-306,  Idaho  Code;
 26        and
 27        (2)  The  registration statement has been on file for at least twenty (20)
 28        days or a shorter period provided by a rule adopted  or  an  order  issued
 29        under this chapter.
 30        (d)  Notice  of  federal  registration statement effectiveness. The regis-
 31    trant shall promptly notify the administrator in a record of the date when the
 32    federal registration statement becomes effective and the content of any  price
 33    amendment  and shall promptly file a record containing the price amendment. If
 34    the notice is not timely received, the administrator may issue a  stop  order,
 35    without  prior  notice  or hearing, retroactively denying effectiveness to the
 36    registration statement or suspending its effectiveness until  compliance  with
 37    this  section.  The  administrator  shall promptly notify the registrant of an
 38    order by telegram, telephone or electronic means and  shall  promptly  confirm
 39    this  notice  by  a  record.  If the registrant subsequently complies with the
 40    notice requirements of this section, the stop order is void as of the date  of
 41    its issuance.
 42        (e)  Effectiveness  of registration statement. If the federal registration
 43    statement becomes effective before each of the conditions in this  section  is
 44    satisfied  or  is  waived  by the administrator, the registration statement is
 45    automatically effective under this chapter when all the conditions are  satis-
 46    fied  or waived. If the registrant notifies the administrator of the date when
 47    the federal registration statement is expected to become effective, the admin-
 48    istrator shall promptly notify the registrant by telegram, telephone or  elec-
 49    tronic  means  and  shall promptly confirm this notice by a record, indicating
 50    whether all the conditions are satisfied or waived and whether the administra-
 51    tor intends the institution of a proceeding  under  section  30-14-306,  Idaho
 52    Code.  The  notice  by  the administrator does not preclude the institution of
 53    such a proceeding.
                                                                        
 54        30-14-304.  SECURITIES REGISTRATION  BY  QUALIFICATION.  (a)  Registration
                                                                        
                                           18
                                                                        
  1    permitted. A security may be registered by qualification under this section.
  2        (b)  Required  records.  A  registration statement under this section must
  3    contain the information or records specified in section 30-14-305, Idaho Code,
  4    a consent to service of process complying with section 30-14-611, Idaho  Code,
  5    and, if required by rule adopted under this chapter, the following information
  6    or records unless waived by the administrator for good cause shown:
  7        (1)  With  respect to the issuer and any significant subsidiary, its name,
  8        address, and form of organization; the state or foreign  jurisdiction  and
  9        date  of its organization; the general character and location of its busi-
 10        ness; a description of its physical properties and equipment; and a state-
 11        ment of the general competitive conditions in the industry or business  in
 12        which it is or will be engaged;
 13        (2)  With  respect  to  each director and officer of the issuer, and other
 14        person having a  similar  status  or  performing  similar  functions,  the
 15        person's name, address, and principal occupation for the previous five (5)
 16        years; the amount of securities of the issuer held by the person as of the
 17        thirtieth  day before the filing of the registration statement; the amount
 18        of the securities covered by the registration statement to which the  per-
 19        son  has  indicated  an  intention  to subscribe; and a description of any
 20        material interest of the person  in  any  material  transaction  with  the
 21        issuer  or a significant subsidiary effected within the previous three (3)
 22        years or proposed to be effected;
 23        (3)  With respect to persons covered by paragraph (2) of this  subsection,
 24        the  aggregate  sum  of  the remuneration paid to those persons during the
 25        previous twelve (12) months and estimated  to  be  paid  during  the  next
 26        twelve  (12) months, directly or indirectly, by the issuer, and all prede-
 27        cessors, parents, subsidiaries and affiliates of the issuer;
 28        (4)  With respect to a person owning of record or owning beneficially,  if
 29        known, ten percent (10%) or more of the outstanding shares of any class of
 30        equity  security of the issuer, the information specified in paragraph (2)
 31        of this subsection other than the person's occupation;
 32        (5)  With respect to a promoter, if the issuer was  organized  within  the
 33        previous  three  (3)  years, the information or records specified in para-
 34        graph (2) of this subsection, any amount paid to the promoter within  that
 35        period  or  intended to be paid to the promoter, and the consideration for
 36        the payment;
 37        (6)  With respect to a person on whose behalf any part of the offering  is
 38        to be made in a nonissuer distribution, the person's name and address; the
 39        amount  of  securities  of the issuer held by the person as of the date of
 40        the filing of the registration statement; a description  of  any  material
 41        interest  of the person in any material transaction with the issuer or any
 42        significant subsidiary effected within the previous  three  (3)  years  or
 43        proposed  to  be  effected;  and a statement of the reasons for making the
 44        offering;
 45        (7)  The capitalization and long-term debt, on  both  a  current  and  pro
 46        forma  basis,  of  the  issuer and any significant subsidiary, including a
 47        description of each security outstanding or being registered or  otherwise
 48        offered,  and a statement of the amount and kind of consideration, whether
 49        in the form of cash, physical assets, services, patents, goodwill, or any-
 50        thing else of value, for which the issuer or any subsidiary has issued its
 51        securities within the previous two (2) years or is obligated to issue  its
 52        securities;
 53        (8)  The  kind and amount of securities to be offered; the proposed offer-
 54        ing price or the method by which it is to be computed;  any  variation  at
 55        which  a  proportion of the offering is to be made to a person or class of
                                                                        
                                           19
                                                                        
  1        persons other than the underwriters, with a specification of the person or
  2        class; the basis on which the offering is to be made if otherwise than for
  3        cash; the estimated aggregate underwriting and selling discounts  or  com-
  4        missions  and  finders'  fees, including separately cash, securities, con-
  5        tracts, or anything else of value to accrue to the underwriters or finders
  6        in connection with the offering or, if the selling  discounts  or  commis-
  7        sions  are  variable,  the basis of determining them and their maximum and
  8        minimum amounts; the estimated amounts of other selling expenses,  includ-
  9        ing  legal,  engineering,  and accounting charges; the name and address of
 10        each underwriter and each recipient of a  finder's  fee;  a  copy  of  any
 11        underwriting or selling group agreement under which the distribution is to
 12        be  made  or  the proposed form of any such agreement whose terms have not
 13        yet been determined; and a description of the plan of distribution of  any
 14        securities that are to be offered otherwise than through an underwriter;
 15        (9)  The estimated monetary proceeds to be received by the issuer from the
 16        offering;  the  purposes  for  which  the  proceeds  are to be used by the
 17        issuer; the estimated amount to be used for each  purpose;  the  order  or
 18        priority  in  which the proceeds will be used for the purposes stated; the
 19        amounts of any funds to be raised from other sources to achieve  the  pur-
 20        poses  stated; the sources of the funds; and, if a part of the proceeds is
 21        to be used to acquire property, including goodwill, otherwise than in  the
 22        ordinary  course  of business, the names and addresses of the vendors, the
 23        purchase price, the names of any persons that have received commissions in
 24        connection with the acquisition, and the amounts of  the  commissions  and
 25        other  expenses  in connection with the acquisition, including the cost of
 26        borrowing money to finance the acquisition;
 27        (10) A description of any stock options or  other  security  options  out-
 28        standing, or to be created in connection with the offering, and the amount
 29        of those options held or to be held by each person required to be named in
 30        paragraph  (2),  (4), (5), (6) or (8) of this subsection and by any person
 31        that holds or will hold ten percent (10%) or  more  in  the  aggregate  of
 32        those options;
 33        (11)  The  dates  of,  parties  to, and general effect concisely stated of
 34        each managerial or other material contract made or to  be  made  otherwise
 35        than  in  the  ordinary  course of business to be performed in whole or in
 36        part at or after the filing of the registration statement or that was made
 37        within the previous two (2) years, and a copy of the contract;
 38        (12)  A description of any pending litigation,  action  or  proceeding  to
 39        which  the  issuer  is a party and that materially affects its business or
 40        assets, and any litigation, action or proceeding known to be  contemplated
 41        by governmental authorities;
 42        (13)  A  copy  of  any prospectus, pamphlet, circular, form letter, adver-
 43        tisement or other sales literature intended as of the effective date to be
 44        used in connection with the offering and any solicitation of interest used
 45        in compliance with section 30-14-202(17)(b), Idaho Code;
 46        (14)  A specimen or copy of the  security  being  registered,  unless  the
 47        security  is uncertificated; a copy of the issuer's articles of incorpora-
 48        tion and bylaws or their substantial equivalents, in effect; and a copy of
 49        any indenture or other instrument covering the security to be registered;
 50        (15)  A signed or conformed copy of an opinion of counsel  concerning  the
 51        legality  of the security being registered, with an English translation if
 52        it is in a language other than English, which states whether the  security
 53        when  sold will be validly issued, fully paid, and nonassessable and, if a
 54        debt security, a binding obligation of the issuer;
 55        (16)  A signed or conformed copy of a consent of any accountant, engineer,
                                                                        
                                           20
                                                                        
  1        appraiser or other person whose profession gives authority for a statement
  2        made by the person, if the person is named as having prepared or certified
  3        a report or valuation, other than an  official  record,  that  is  public,
  4        which is used in connection with the registration statement;
  5        (17)  A  balance  sheet  of the issuer as of a date within four (4) months
  6        before the filing of the registration statement; a statement of income and
  7        a statement of cash flows for each of the three (3) fiscal years preceding
  8        the date of the balance sheet and for any period between the close of  the
  9        immediately previous fiscal year and the date of the balance sheet, or for
 10        the  period  of  the issuer's and any predecessor's existence if less than
 11        three (3) years; and, if any part of the proceeds of the offering is to be
 12        applied to the purchase of a business, the financial statements that would
 13        be required if that business were the registrant; and
 14        (18)  Any additional information or records required by a rule adopted  or
 15        an order issued under this chapter.
 16        (c)  Conditions  for  effectiveness of registration statement. A registra-
 17    tion statement under this section becomes effective thirty (30) days,  or  any
 18    shorter  period provided by a rule adopted or an order issued under this chap-
 19    ter, after the date the registration statement or  the  last  amendment  other
 20    than a price amendment is filed, if:
 21        (1)  A  stop  order is not in effect and a proceeding is not pending under
 22        section 30-14-306, Idaho Code;
 23        (2)  The administrator has not issued an order  under  section  30-14-306,
 24        Idaho Code, delaying effectiveness; and
 25        (3)  The  applicant  or registrant has not requested that effectiveness be
 26        delayed.
 27        (d)  Delay of effectiveness of registration statement.  The  administrator
 28    may  delay effectiveness once for not more than ninety (90) days if the admin-
 29    istrator determines the registration statement is not complete in all material
 30    respects and promptly notifies the applicant or registrant of that  determina-
 31    tion.  The  administrator may also delay effectiveness for a further period of
 32    not more than thirty (30) days if the administrator determines that the  delay
 33    is necessary or appropriate.
 34        (e)  Prospectus  distribution  may be required. A rule adopted or an order
 35    issued under this chapter may require as a  condition  of  registration  under
 36    this  section that a prospectus containing a specified part of the information
 37    or record specified in subsection (b) of this section be sent or given to each
 38    person to which an offer is made, before or concurrently,  with  the  earliest
 39    of:
 40        (1)  The  first  offer  made  in  a record to the person otherwise than by
 41        means of a public advertisement, by or for the account of  the  issuer  or
 42        another  person on whose behalf the offering is being made or by an under-
 43        writer or broker-dealer that is offering part of an  unsold  allotment  or
 44        subscription taken by the person as a participant in the distribution;
 45        (2)  The confirmation of a sale made by or for the account of the person;
 46        (3)  Payment pursuant to such a sale; or
 47        (4)  Delivery of the security pursuant to such a sale.
                                                                        
 48        30-14-305.  SECURITIES REGISTRATION FILINGS. (a) Who may file. A registra-
 49    tion statement may be filed by the issuer, a person on whose behalf the offer-
 50    ing is to be made, or a broker-dealer registered under this chapter.
 51        (b)  Filing fee. A person filing a registration statement shall pay a fil-
 52    ing  fee of three hundred dollars ($300). If a registration statement is with-
 53    drawn before the effective date or a pre-effective stop order is issued  under
 54    section 30-14-306, Idaho Code, the administrator shall retain the fee.
                                                                        
                                           21
                                                                        
  1        (c)  Status  of  offering.  A  registration  statement filed under section
  2    30-14-303 or 30-14-304, Idaho Code, must specify:
  3        (1)  The amount of securities to be offered in this state;
  4        (2)  The states in which a registration statement  or  similar  record  in
  5        connection with the offering has been or is to be filed; and
  6        (3)  Any  adverse  order, judgment or decree issued in connection with the
  7        offering by a state securities regulator, the securities and exchange com-
  8        mission, or a court.
  9        (d)  Incorporation by reference. A record filed under this chapter or  the
 10    predecessor  act  within five (5) years preceding the filing of a registration
 11    statement may be incorporated by reference in the  registration  statement  to
 12    the extent that the record is currently accurate.
 13        (e)  Nonissuer  distribution.  In  the  case  of a nonissuer distribution,
 14    information or a record may not be required under subsection (i) of this  sec-
 15    tion or section 30-14-304, Idaho Code, unless it is known to the person filing
 16    the  registration  statement or to the person on whose behalf the distribution
 17    is to be made or unless it can be furnished by those persons without unreason-
 18    able effort or expense.
 19        (f)  Escrow and impoundment. A rule adopted or an order issued under  this
 20    chapter  may  require  as  a  condition of registration that a security issued
 21    within the previous five (5) years or to be issued to a promoter for a consid-
 22    eration substantially less than the public  offering price or to a person  for
 23    a  consideration other than cash be deposited in escrow; and that the proceeds
 24    from the sale of the registered security in this state be impounded until  the
 25    issuer  receives  a  specified  amount from the sale of the security either in
 26    this state or elsewhere. The conditions of any escrow or impoundment  required
 27    under  this subsection may be established by a rule adopted or an order issued
 28    under this chapter, provided however that the administrator may not  reject  a
 29    depository institution solely because of its location in another state.
 30        (g)  Form  of  subscription.  A rule adopted or an order issued under this
 31    chapter may require as a condition of registration that a security  registered
 32    under  this  chapter  be sold only on a specified form of subscription or sale
 33    contract and that a signed or conformed copy of each contract be  filed  under
 34    this  chapter  or preserved for a period specified by the rule or order, which
 35    may not be longer than five (5) years.
 36        (h)  Effective period. Except while a stop order is in effect  under  sec-
 37    tion  30-14-306, Idaho Code, a registration statement is effective for one (1)
 38    year after its effective date, or for any longer period designated in an order
 39    under this chapter during which the security is being offered  or  distributed
 40    in a nonexempted transaction by or for the account of the issuer or other per-
 41    son on whose behalf the offering is being made or by an underwriter or broker-
 42    dealer  that  is  still  offering  part of an unsold allotment or subscription
 43    taken as a participant in the distribution. A registration  statement  remains
 44    effective for each additional year by filing a renewal as prescribed by a rule
 45    adopted or an order issued under this chapter. For the purposes of a nonissuer
 46    transaction,  all  outstanding  securities of the same class identified in the
 47    registration statement as a security registered under this chapter are consid-
 48    ered to be registered while the registration statement is  effective.  If  any
 49    securities of the same class are outstanding, a registration statement may not
 50    be  withdrawn  until  one  (1)  year  after its effective date. A registration
 51    statement may be withdrawn only with the approval of the administrator.
 52        (i)  Periodic reports. While a registration statement is effective, a rule
 53    adopted or an order issued under this chapter  may  require  the  person  that
 54    filed  the  registration  statement to file reports, not more often than quar-
 55    terly, to keep the information or other record in the  registration  statement
                                                                        
                                           22
                                                                        
  1    reasonably current and to disclose the progress of the offering.
  2        (j)  Posteffective  amendments.  A registration statement shall be amended
  3    after its effective date if there are material changes in information or docu-
  4    ments in the  registration  statement.  The  posteffective  amendment  becomes
  5    effective when the administrator so orders.
                                                                        
  6        30-14-306.  DENIAL, SUSPENSION, AND REVOCATION OF SECURITIES REGISTRATION.
  7    (a)  Stop  orders. The administrator may issue a stop order denying effective-
  8    ness to, or suspending or revoking the effectiveness of, a registration state-
  9    ment if the administrator finds that the order is in the public  interest  and
 10    that:
 11        (1)  Any  of the following is incomplete in a material respect or contains
 12        a statement that, in the light of the circumstances  under  which  it  was
 13        made, was false or misleading with respect to a material fact:
 14             (A)  The  registration  statement as of its effective date, or before
 15             the effective date in the case of an order denying effectiveness;
 16             (B)  A posteffective  amendment  under  section  30-14-305(j),  Idaho
 17             Code, as of its effective date; or
 18             (C)  A periodic report under section 30-14-305(i), Idaho Code;
 19        (2)  This chapter or a rule adopted or an order issued under this chapter,
 20        or  a condition imposed under this chapter, has been willfully violated in
 21        connection with the offering,  by:  the  person  filing  the  registration
 22        statement;  the  issuer, a partner, officer or director of the issuer or a
 23        person having a similar status or performing a similar  function;  a  pro-
 24        moter  of  the  issuer;  or a person directly or indirectly controlling or
 25        controlled by the issuer; but only if the person filing  the  registration
 26        statement  is  directly  or  indirectly  controlled  by  or acting for the
 27        issuer; or by an underwriter;
 28        (3)  The security registered or sought to be registered is the subject  of
 29        a  permanent  or temporary injunction of a court of competent jurisdiction
 30        or an administrative stop order or similar order issued under any federal,
 31        foreign or state law other than this chapter applicable to  the  offering,
 32        provided  however the administrator may not institute a proceeding against
 33        an effective registration statement under this paragraph more than one (1)
 34        year after the date of the order or injunction on which it is  based,  and
 35        the administrator may not issue an order under this paragraph on the basis
 36        of an order or injunction issued under the securities act of another state
 37        unless the order or injunction was based on conduct that would constitute,
 38        as of the date of the order, a ground for a stop order under this section;
 39        (4)  The  issuer's  enterprise  or  method  of  business includes or would
 40        include activities that are unlawful where performed;
 41        (5)  With respect to a security sought  to  be  registered  under  section
 42        30-14-303,  Idaho Code, there has been a failure to comply with the under-
 43        taking required by section 30-14-303(b)(4), Idaho Code;
 44        (6)  The applicant or registrant has not paid  the  filing  fee,  provided
 45        however  the  administrator shall void the order if the deficiency is cor-
 46        rected; or
 47        (7)  The offering:
 48             (A)  Will work or tend to work a fraud upon purchasers  or  would  so
 49             operate;
 50             (B)  Has  been  or  would be made with unreasonable amounts of under-
 51             writers' and sellers' discounts, commissions or  other  compensation,
 52             or  promoters'  profits or participations, or unreasonable amounts or
 53             kinds of options; or
 54             (C)  Is being made on terms that are unfair, unjust or inequitable.
                                                                        
                                           23
                                                                        
  1        (b)  Enforcement. To the extent practicable, the administrator by  a  rule
  2    adopted  or  an  order  issued under this chapter shall publish standards that
  3    provide notice of conduct that violates subsection (a)(7) of this section.
  4        (c)  Institution of stop order. The administrator may not institute a stop
  5    order proceeding against an effective registration statement on the  basis  of
  6    conduct  or  a  transaction  known  to the administrator when the registration
  7    statement became effective unless the proceeding is instituted  within  thirty
  8    (30) days after the registration statement became effective.
  9        (d)  Summary  process. The administrator may summarily revoke, deny, post-
 10    pone or suspend the effectiveness of a registration  statement  pending  final
 11    determination of an administrative proceeding. Upon the issuance of the order,
 12    the  administrator  shall  promptly notify each person specified in subsection
 13    (e) of this section that the order has been issued, the reasons for the  revo-
 14    cation,  denial, postponement or suspension, and that within fifteen (15) days
 15    after the receipt of a request in a record from the person the matter will  be
 16    scheduled  for a hearing. If a hearing is not requested and none is ordered by
 17    the administrator, within thirty (30) days after the date of  service  of  the
 18    order,  the  order  becomes  final.  If a hearing is requested or ordered, the
 19    administrator, after notice of and an opportunity for a hearing  for each per-
 20    son subject to the order, may modify or vacate the order or extend  the  order
 21    until final determination.
 22        (e)  Procedural  requirements  for  stop  order.  A  stop order may not be
 23    issued under this section without:
 24        (1)  Appropriate notice to the applicant or registrant,  the  issuer,  and
 25        the person on whose behalf the securities are to be or have been offered;
 26        (2)  An opportunity for a hearing; and
 27        (3)  Findings  of  fact  and  conclusions of law in a record in accordance
 28        with chapter 52, title 67, Idaho Code.
 29        (f)  Modification or vacation of stop order. The administrator may  modify
 30    or  vacate  a  stop order issued under this section if the administrator finds
 31    that the conditions that caused its issuance have changed or that it is neces-
 32    sary or appropriate in the public interest or for the protection of investors.
                                                                        
 33        30-14-307.  WAIVER AND MODIFICATION. The administrator may waive  or  mod-
 34    ify,  in  whole  or  in  part,  any  or  all  of  the requirements of sections
 35    30-14-302, 30-14-303 and 30-14-304(b), Idaho Code, or the requirement  of  any
 36    information  or  record  in  a  registration statement or in a periodic report
 37    filed pursuant to section 30-14-305(i), Idaho Code.
                                                                        
 38                                       PART 4.
 39               BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS, INVESTMENT
 40           ADVISER REPRESENTATIVES, AND FEDERAL COVERED INVESTMENT ADVISERS
                                                                        
 41        30-14-401.  BROKER-DEALER REGISTRATION  REQUIREMENT  AND  EXEMPTIONS.  (a)
 42    Registration  requirement. It is unlawful for a person to transact business in
 43    this state as a broker-dealer unless the person is registered under this chap-
 44    ter as a broker-dealer or is exempt from registration as a broker-dealer under
 45    subsection (b) or (d) of this section.
 46        (b)  Exemptions from registration. The following persons are  exempt  from
 47    the registration requirement of subsection (a) of this section:
 48        (1)  A broker-dealer without a place of business in this state if its only
 49        transactions effected in this state are with:
 50             (A)  The issuer of the securities involved in the transactions;
 51             (B)  A broker-dealer registered as a broker-dealer under this chapter
 52             or  not required to be registered as a broker-dealer under this chap-
                                                                        
                                           24
                                                                        
  1             ter;
  2             (C)  An institutional investor;
  3             (D)  A nonaffiliated federal covered investment adviser with  invest-
  4             ments  under  management  in  excess  of  one hundred million dollars
  5             ($100,000,000) acting for the account of others pursuant  to  discre-
  6             tionary authority in a signed record;
  7             (E)  A  bona fide preexisting customer whose principal place of resi-
  8             dence is not in this state and the person is registered as a  broker-
  9             dealer  under  the securities exchange act of 1934 or is not required
 10             to be registered under the securities exchange act  of  1934  and  is
 11             registered  under  the  securities act of the state in which the cus-
 12             tomer maintains a principal place of residence;
 13             (F)  A bona fide preexisting customer whose principal place of  resi-
 14             dence is in this state but who was not present in this state when the
 15             customer relationship was established, if:
 16                  (i)   The  broker-dealer  is  registered  under  the  securities
 17                  exchange  act  of 1934 or is not required to be registered under
 18                  the securities exchange act of 1934 and is registered under  the
 19                  securities  laws of the state in which the customer relationship
 20                  was established and where the customer had maintained a  princi-
 21                  pal place of residence; and
 22                  (ii)  Within  forty-five  (45)  days  after the customer's first
 23                  transaction in this state, the person files an  application  for
 24                  registration  as  a  broker-dealer  in  this state and a further
 25                  transaction is not effected more  than  seventy-five  (75)  days
 26                  after the date on which the application is filed or, if earlier,
 27                  the date on which the administrator notifies the person that the
 28                  administrator has denied the application for registration or has
 29                  stayed the pendency of the application for good cause;
 30             (G)  Not  more than three (3) customers in this state during the pre-
 31             vious twelve (12) months, in addition to those customers specified in
 32             subsections (b)(1)(A) through (b)(1)(F) and subsection  (b)(1)(H)  of
 33             this section, if the broker-dealer is registered under the securities
 34             exchange act of 1934 or not required to be registered under the secu-
 35             rities  exchange  act  of 1934 and is registered under the securities
 36             act of the state in which the broker-dealer has its  principal  place
 37             of business; and
 38             (H)  Any  other  person exempted by a rule adopted or an order issued
 39             under this chapter; and
 40        (2)  A person that deals solely in United States government securities and
 41        is supervised as a dealer in government securities by the board of  gover-
 42        nors  of  the federal reserve system, the comptroller of the currency, the
 43        federal deposit insurance corporation, or the office  of  thrift  supervi-
 44        sion.
 45        (c)  Limits  on  employment  or  association. It is unlawful for a broker-
 46    dealer, or for an issuer engaged in offering, offering to  purchase,  purchas-
 47    ing, or selling securities in this state, directly or indirectly, to employ or
 48    associate  with  an  individual to engage in an activity related to securities
 49    transactions in this state if the registration of the individual is  suspended
 50    or  revoked  or the individual is barred from employment or association with a
 51    broker-dealer, an issuer, an investment adviser, or a federal covered  invest-
 52    ment  adviser  by an order of the securities regulator of a state, the securi-
 53    ties and exchange commission, or a  self-regulatory  organization.  A  broker-
 54    dealer  or  issuer  does  not  violate this subsection if the broker-dealer or
 55    issuer did not know, and in the exercise of reasonable  care  could  not  have
                                                                        
                                           25
                                                                        
  1    known, of the suspension, revocation or bar. Upon request from a broker-dealer
  2    or issuer and for good cause, an order under this chapter may modify or waive,
  3    in whole or in part, the application of the prohibitions of this subsection to
  4    the broker-dealer.
  5        (d)  Foreign  transactions.  A  rule adopted or an order issued under this
  6    chapter may permit:
  7        (1)  A broker-dealer that is registered in Canada or other foreign  juris-
  8        diction and that does not have a place of business in this state to effect
  9        transactions  in securities with or for, or attempt to effect the purchase
 10        or sale of any securities by:
 11             (A)  An individual from Canada or other foreign jurisdiction  who  is
 12             temporarily present in this state and with whom the broker-dealer had
 13             a  bona  fide customer relationship before the individual entered the
 14             United States;
 15             (B)  An individual from Canada or other foreign jurisdiction  who  is
 16             present   in this state and whose transactions are in a self-directed
 17             tax advantaged retirement plan of which the individual is the  holder
 18             or contributor in that foreign jurisdiction; or
 19             (C)  An  individual  who  is  present  in  this  state, with whom the
 20             broker-dealer customer relationship arose while  the  individual  was
 21             temporarily  or  permanently  resident in Canada or the other foreign
 22             jurisdiction; and
 23        (2)  An agent who represents a broker-dealer that  is  exempt  under  this
 24        subsection  to  effect transactions in securities or attempt to effect the
 25        purchase or sale of securities in this state as permitted  for  a  broker-
 26        dealer described in subsection (b)(1) of this subsection.
                                                                        
 27        30-14-402.  AGENT  REGISTRATION  REQUIREMENT AND EXEMPTIONS. (a) Registra-
 28    tion requirement. It is unlawful for an individual  to  transact  business  in
 29    this  state as an agent unless the individual is registered under this chapter
 30    as an agent or is exempt from registration as an agent under subsection (b) of
 31    this section.
 32        (b)  Exemptions from registration. The following  individuals  are  exempt
 33    from the registration requirement of subsection (a) of this section:
 34        (1)  An  individual  who  represents a broker-dealer in effecting transac-
 35        tions in this state limited to those described in section 15(h)(2) of  the
 36        securities exchange act of 1934 (15 U.S.C. 78(o)(2));
 37        (2)  An  individual  who  represents  a broker-dealer that is exempt under
 38        section 30-14-401(b) or (d), Idaho Code;
 39        (3)  An individual who represents an issuer with respect to  an  offer  or
 40        sale of the issuer's own securities or those of the issuer's parent or any
 41        of  the  issuer's  subsidiaries,  and who is not compensated in connection
 42        with the individual's participation by the payment of commissions or other
 43        remuneration based, directly or indirectly, on transactions in those secu-
 44        rities;
 45        (4)  An individual who represents an issuer and who  effects  transactions
 46        in  the  issuer's  securities  exempted  by section 30-14-202, Idaho Code,
 47        other than sections 30-14-202(11) and 30-14-202(14), Idaho Code;
 48        (5)  An individual who represents  an  issuer  that  effects  transactions
 49        solely  in federal covered securities of the issuer, provided however that
 50        an individual who effects transactions in a federal covered security under
 51        section 18(b)(3) or 18(b)(4)(d) of the securities act of 1933  (15  U.S.C.
 52        77r(b)(3)  or 77r(b)(4)(D)) is not exempt if the individual is compensated
 53        in connection with the agent's participation by the payment of commissions
 54        or other remuneration based, directly or indirectly,  on  transactions  in
                                                                        
                                           26
                                                                        
  1        those securities;
  2        (6)  An individual who represents a broker-dealer registered in this state
  3        under  section 30-14-401(a), Idaho Code, or exempt from registration under
  4        section 30-14-401(b), Idaho Code, in the offer and sale of securities  for
  5        an  account  of  a  nonaffiliated  federal covered investment adviser with
  6        investments under management in excess  of  one  hundred  million  dollars
  7        ($100,000,000)  acting for the account of others pursuant to discretionary
  8        authority in a signed record;
  9        (7)  An individual who represents an issuer in connection  with  the  pur-
 10        chase of the issuer's own securities;
 11        (8)  An  individual  who represents an issuer and who restricts participa-
 12        tion to performing clerical or ministerial acts; or
 13        (9)  Any other individual exempted by a rule adopted or  an  order  issued
 14        under this chapter.
 15        (c)  Registration  effective only while employed or associated. The regis-
 16    tration of an agent is effective only while the agent is employed by or  asso-
 17    ciated with a broker-dealer registered under this chapter or an issuer that is
 18    offering, selling or purchasing its securities in this state.
 19        (d)  Limit  on  employment  or  association.  It is unlawful for a broker-
 20    dealer, or an issuer engaged in offering, selling or purchasing securities  in
 21    this  state,  to  employ  or associate with an agent who transacts business in
 22    this state on behalf of broker-dealers or issuers unless the agent  is  regis-
 23    tered  under  subsection  (a)  of  this section or is exempt from registration
 24    under subsection (b) of this section.
 25        (e)  Limit on affiliations. Unless prohibited by  a  rule  adopted  or  an
 26    order  issued  under  this chapter, an individual may act as an agent for more
 27    than one (1) broker-dealer or one (1) issuer at a time.
                                                                        
 28        30-14-403.  INVESTMENT ADVISER REGISTRATION  REQUIREMENT  AND  EXEMPTIONS.
 29    (a) Registration requirement. It is unlawful for a person to transact business
 30    in  this  state as an investment adviser unless the person is registered under
 31    this chapter as an investment adviser or is exempt  from  registration  as  an
 32    investment adviser under subsection (b) of this section.
 33        (b)  Exemptions  from  registration. The following persons are exempt from
 34    the registration requirement of subsection (a) of this section:
 35        (1)  A person without a place of business in this state that is registered
 36        under the securities act of the state in which the person has its  princi-
 37        pal place of business if its only clients in this state are:
 38             (A)  Federal  covered investment advisers, investment advisers regis-
 39             tered under this chapter, or  broker-dealers  registered  under  this
 40             chapter;
 41             (B)  Institutional investors;
 42             (C)  Bona  fide  preexisting  clients whose principal places of resi-
 43             dence are not in this state if the investment adviser  is  registered
 44             under  the  securities act of the state in which the clients maintain
 45             principal places of residence; or
 46             (D)  Any other client exempted by a rule adopted or an  order  issued
 47             under this chapter;
 48        (2)  A  person without a place of business in this state if the person has
 49        had, during the preceding twelve (12) months, not more than five (5)  cli-
 50        ents  that are resident in this state in addition to those specified under
 51        subsection (b)(1) of this section;
 52        (3)  A federal covered investment adviser; or
 53        (4)  Any other person exempted by a rule adopted or an order issued  under
 54        this chapter.
                                                                        
                                           27
                                                                        
  1        (c)  Limits on employment or association. It is unlawful for an investment
  2    adviser,  directly or indirectly, to employ or associate with an individual to
  3    engage in an activity related to investment advice in this state if the regis-
  4    tration of the individual is suspended or revoked or the individual is  barred
  5    from  employment  or  association  with an investment adviser, federal covered
  6    investment adviser, or broker-dealer by an order under this chapter, the secu-
  7    rities and exchange commission, or a self-regulatory organization, unless  the
  8    investment  adviser did not know, and in the exercise of reasonable care could
  9    not have known, of the suspension, revocation or bar. Upon  request  from  the
 10    investment adviser and for good cause, the administrator, by order, may waive,
 11    in whole or in part, the application of the prohibitions of this subsection to
 12    the investment adviser.
 13        (d)  Investment adviser representative registration required. It is unlaw-
 14    ful  for  an  investment  adviser  to  employ  or associate with an individual
 15    required to be registered under this chapter as an investment  adviser  repre-
 16    sentative  who  transacts  business  in this state on behalf of the investment
 17    adviser unless the individual is registered under section 30-14-404(a),  Idaho
 18    Code, or is exempt from registration under section 30-14-404(b), Idaho Code.
                                                                        
 19        30-14-404.  INVESTMENT ADVISER REPRESENTATIVE REGISTRATION REQUIREMENT AND
 20    EXEMPTIONS.  (a) Registration requirement. It is unlawful for an individual to
 21    transact business in this state as an investment adviser representative unless
 22    the individual is registered under this chapter as an investment adviser  rep-
 23    resentative  or is exempt from registration as an investment adviser represen-
 24    tative under subsection (b) of this section.
 25        (b)  Exemptions from registration. The following  individuals  are  exempt
 26    from the registration requirement of subsection (a) of this section:
 27        (1)  An  individual  who  is  employed by or associated with an investment
 28        adviser that is exempt from registration under section 30-14-403(b), Idaho
 29        Code, unless the individual has a place of business in this  state  or  is
 30        not an investment adviser representative as defined by this chapter; and
 31        (2)  Any  other  individual  exempted by a rule adopted or an order issued
 32        under this chapter.
 33        (c)  Registration effective only while employed or associated. The  regis-
 34    tration  of  an  investment  adviser representative is not effective while the
 35    investment adviser representative is not employed by  or  associated  with  an
 36    investment  adviser registered under this chapter or a federal covered invest-
 37    ment adviser that has made or is required to make a notice filing  under  sec-
 38    tion 30-14-405, Idaho Code.
 39        (d)  Limit  on  affiliations.  An  individual  may transact business as an
 40    investment adviser representative for more than one (1) investment adviser  or
 41    federal  covered  investment  adviser unless a rule adopted or an order issued
 42    under this chapter prohibits or limits an individual from acting as an invest-
 43    ment adviser representative for more than one (1) investment adviser  or  fed-
 44    eral covered investment adviser.
 45        (e)  Limits on employment or association. It is unlawful for an individual
 46    acting  as  an  investment  adviser representative, directly or indirectly, to
 47    conduct business in this state on behalf of an investment adviser or a federal
 48    covered investment adviser if the registration of the individual as an invest-
 49    ment adviser representative is suspended  or  revoked  or  the  individual  is
 50    barred  or  enjoined from employment or association with an investment adviser
 51    or a federal covered investment adviser by an order under  this  chapter,  the
 52    securities  and  exchange  commission, or a self-regulatory organization, or a
 53    court of competent jurisdiction. Upon request from a federal  covered  invest-
 54    ment  adviser  and  for  good  cause,  the administrator, by order issued, may
                                                                        
                                           28
                                                                        
  1    waive, in whole or in part, the application of the requirements of  this  sub-
  2    section to the federal covered investment adviser.
  3        (f)  Referral fees. An investment adviser registered under this chapter, a
  4    federal  covered  investment  adviser  that  has  filed a notice under section
  5    30-14-405, Idaho Code, or a broker-dealer registered under  this  chapter,  is
  6    not  required  to  employ  or  associate  with  an individual as an investment
  7    adviser representative if the only compensation paid to the individual  for  a
  8    referral  of investment advisory clients is paid to an investment adviser reg-
  9    istered under this chapter, a federal covered investment adviser who has filed
 10    a notice under  section 30-14-405, Idaho Code, or a  broker-dealer  registered
 11    under  this  chapter with which the individual is employed or associated as an
 12    investment adviser representative.
                                                                        
 13        30-14-405.  FEDERAL COVERED INVESTMENT ADVISER NOTICE FILING  REQUIREMENT.
 14    (a)  Notice  filing  requirement.  Except  with  respect  to a federal covered
 15    investment adviser described in subsection (b) of this section, it is unlawful
 16    for a federal covered investment adviser to transact business in this state as
 17    a federal covered investment adviser unless  the  federal  covered  investment
 18    adviser complies with subsection (c) of this section.
 19        (b)  Notice filing requirement not required. The following federal covered
 20    investment  advisers  are  not  required to comply with subsection (c) of this
 21    section:
 22        (1)  A federal covered investment adviser without a place of  business  in
 23        this state if its only clients in this state are:
 24             (A)  Federal  covered investment advisers, investment advisers regis-
 25             tered under this chapter, and broker-dealers  registered  under  this
 26             chapter;
 27             (B)  Institutional investors;
 28             (C)  Bona  fide  preexisting  clients whose principal places of resi-
 29             dence are not in this state; or
 30             (D)  Other clients specified by a rule adopted  or  an  order  issued
 31             under this chapter;
 32        (2)  A  federal  covered investment adviser without a place of business in
 33        this state if the person has had, during the preceding twelve (12) months,
 34        not more than five (5) clients that are resident in this state in addition
 35        to those specified under subsection (b)(1) of this section; and
 36        (3)  Any other person excluded by a rule adopted or an order issued  under
 37        this chapter.
 38        (c)  Notice filing procedure. A person acting as a federal covered invest-
 39    ment  adviser, not excluded under subsection (b) of this section, shall file a
 40    notice, a consent to service of  process  complying  with  section  30-14-611,
 41    Idaho  Code,  and  such  records  as  have  been filed with the securities and
 42    exchange commission under the investment advisers act of 1940  required  by  a
 43    rule  adopted or an order issued under this chapter and pay the fees specified
 44    in section 30-14-410(e), Idaho Code.
 45        (d)  Effectiveness of filing. The notice under subsection (c) of this sec-
 46    tion becomes effective upon its filing and expires on December thirty-first of
 47    each year unless renewed.
                                                                        
 48        30-14-406.  REGISTRATION BY BROKER-DEALER, AGENT, INVESTMENT ADVISER,  AND
 49    INVESTMENT ADVISER REPRESENTATIVE. (a) Application for initial registration. A
 50    person  shall  register  as  a  broker-dealer,  agent,  investment adviser, or
 51    investment adviser representative by filing an application and  a  consent  to
 52    service  of  process  complying with section 30-14-611, Idaho Code, and paying
 53    the fee specified in section 30-14-410, Idaho Code, and  any  reasonable  fees
                                                                        
                                           29
                                                                        
  1    charged  by  the  designee of the administrator for processing the filing. The
  2    application must contain:
  3        (1)  The information or record required for the filing of a uniform appli-
  4        cation; and
  5        (2)  Upon request by the  administrator,  any  other  financial  or  other
  6        information or record that the administrator determines is appropriate.
  7        (b)  Amendment.  If  the information or record contained in an application
  8    filed under subsection (a) of this section is or becomes inaccurate or  incom-
  9    plete  in  a material respect, the registrant shall promptly file a correcting
 10    amendment.
 11        (c)  Effectiveness of registration. If an order is not  in  effect  and  a
 12    proceeding  is  not  pending under section 30-14-412, Idaho Code, registration
 13    becomes effective at noon on the forty-fifth day after a completed application
 14    is filed, unless the registration is denied. A rule adopted or an order issued
 15    under this chapter may set an earlier effective date or may defer  the  effec-
 16    tive  date until noon on the forty-fifth day after the filing of any amendment
 17    completing the application.
 18        (d)  Registration renewal. A registration is effective until  midnight  on
 19    December  thirty-first  of the year for which the application for registration
 20    is filed. Unless an order is in effect under section 30-14-412, Idaho Code,  a
 21    registration  may be automatically renewed each year by filing such records as
 22    are required by a rule adopted or an order issued under this chapter, by  pay-
 23    ing  the  fee  specified in section 30-14-410, Idaho Code, and by paying costs
 24    charged by the designee of the administrator for processing the filings.
 25        (e)  Additional conditions or waivers. A rule adopted or an  order  issued
 26    under this chapter may impose such other conditions, not inconsistent with the
 27    national securities markets improvement act of 1996 (110 Stat. 3416). An order
 28    issued  under  this  chapter may waive, in whole or in part, specific require-
 29    ments in connection with registration as are in the public  interest  and  for
 30    the protection of investors.
                                                                        
 31        30-14-407.  SUCCESSION  AND  CHANGE  IN  REGISTRATION  OF BROKER-DEALER OR
 32    INVESTMENT ADVISER. (a) Succession. A broker-dealer or investment adviser  may
 33    succeed  to  the  current  registration of another broker-dealer or investment
 34    adviser or a notice filing of a federal covered investment adviser, and a fed-
 35    eral covered investment adviser may succeed to the current registration of  an
 36    investment  adviser  or  notice  filing  of another federal covered investment
 37    adviser, by filing as a successor an application for registration pursuant  to
 38    section  30-14-401  or  30-14-403, Idaho Code, or a notice pursuant to section
 39    30-14-405, Idaho Code, for the unexpired portion of the  current  registration
 40    or notice filing.
 41        (b)  Organizational  change.  A  broker-dealer  or investment adviser that
 42    changes its form of organization or state of incorporation or organization may
 43    continue its registration by filing an amendment to its  registration  if  the
 44    change  does  not involve a material change in its financial condition or man-
 45    agement. The amendment becomes effective when filed or on a date designated by
 46    the registrant in its filing. The new organization is a successor to the orig-
 47    inal registrant for the purposes of this  chapter.  If  there  is  a  material
 48    change  in  financial condition or management, the broker-dealer or investment
 49    adviser shall file a new application for registration.  A  predecessor  regis-
 50    tered  under  this chapter shall stop conducting its securities business other
 51    than winding down transactions and shall file for withdrawal of  broker-dealer
 52    or  investment  adviser  registration within forty-five (45) days after filing
 53    its amendment to effect succession.
 54        (c)  Name change. A broker-dealer or investment adviser that  changes  its
                                                                        
                                           30
                                                                        
  1    name may continue its registration by filing an amendment to its registration.
  2    The amendment becomes effective when filed or on a date designated by the reg-
  3    istrant.
  4        (d)  Change  of control. A change of control of a broker-dealer or invest-
  5    ment adviser may be made in accordance with a rule adopted or an order  issued
  6    under this chapter.
                                                                        
  7        30-14-408.  TERMINATION  OF EMPLOYMENT OR ASSOCIATION OF AGENT AND INVEST-
  8    MENT ADVISER REPRESENTATIVE AND TRANSFER OF  EMPLOYMENT  OR  ASSOCIATION.  (a)
  9    Notice  of  termination.  If an agent registered under this chapter terminates
 10    employment by or association with a broker-dealer or issuer, or if an  invest-
 11    ment  adviser representative registered under this chapter  terminates employ-
 12    ment by or association with an investment adviser or federal  covered  invest-
 13    ment  adviser, or if either registrant terminates activities that require reg-
 14    istration as an agent or investment adviser representative, the broker-dealer,
 15    issuer, investment  adviser,  or  federal  covered  investment  adviser  shall
 16    promptly  file  a  notice  of  termination.  If the registrant learns that the
 17    broker-dealer, issuer,  investment  adviser,  or  federal  covered  investment
 18    adviser has not filed the notice, the registrant may do so.
 19        (b)  Transfer  of  employment or association. If an agent registered under
 20    this chapter terminates employment by or association with a broker-dealer reg-
 21    istered under this chapter  and  begins  employment  by  or  association  with
 22    another  broker-dealer  registered  under  this  chapter;  or if an investment
 23    adviser representative registered under this chapter terminates employment  by
 24    or  association  with an investment adviser registered under this chapter or a
 25    federal covered investment adviser that  has  filed  a  notice  under  section
 26    30-14-405,  Idaho  Code,  and begins employment by or association with another
 27    investment adviser registered under this chapter or a federal covered  invest-
 28    ment adviser that has filed a notice under section 30-14-405, Idaho Code; then
 29    upon  the  filing  by  or on behalf of the registrant, within thirty (30) days
 30    after the termination, of an application for registration that  complies  with
 31    the requirement of section 30-14-406(a), Idaho Code, and payment of the filing
 32    fee  required  under  section  30-14-410,  Idaho Code, the registration of the
 33    agent or investment adviser representative is:
 34        (1)  Immediately effective as of the date of the completed filing, if  the
 35        agent's  central registration depository record or successor record or the
 36        investment adviser representative's investment adviser registration depos-
 37        itory record or successor record does not contain a new or amended  disci-
 38        plinary disclosure within the previous twelve (12) months; or
 39        (2)  Temporarily  effective as of the date of the completed filing, if the
 40        agent's central registration depository record or successor record or  the
 41        investment adviser representative's investment adviser registration depos-
 42        itory  record  or  successor record contains a new or amended disciplinary
 43        disclosure within the preceding twelve (12) months.
 44        (c)  Withdrawal of temporary registration. The administrator may  withdraw
 45    a temporary registration if there are or were grounds for discipline as speci-
 46    fied  in  section  30-14-412, Idaho Code, and the administrator does so within
 47    thirty (30) days after the filing of the  application.  If  the  administrator
 48    does  not  withdraw  the  temporary  registration  within  the thirty (30) day
 49    period, registration becomes automatically effective on the  thirty-first  day
 50    after filing.
 51        (d)  Power  to  prevent  registration.  The  administrator may prevent the
 52    effectiveness of a transfer of an agent or investment  adviser  representative
 53    under  subsection  (b)(1)  or (2) of this section based on the public interest
 54    and the protection of investors.
                                                                        
                                           31
                                                                        
  1        (e)  Termination of registration or application for registration.  If  the
  2    administrator determines that a registrant or applicant for registration is no
  3    longer in existence or has ceased to act as a broker-dealer, agent, investment
  4    adviser  or investment adviser representative, or is the subject of an adjudi-
  5    cation of incapacity or is subject to the control of a committee,  conservator
  6    or  guardian,  or  cannot  reasonably  be  located, a rule adopted or an order
  7    issued under this chapter may require the registration be canceled  or  termi-
  8    nated or the application denied. The administrator may reinstate a canceled or
  9    terminated  registration,  with or without hearing, and may make the registra-
 10    tion retroactive.
                                                                        
 11        30-14-409.  WITHDRAWAL OF REGISTRATION OF BROKER-DEALER, AGENT, INVESTMENT
 12    ADVISER AND INVESTMENT ADVISER REPRESENTATIVE. Withdrawal of registration by a
 13    broker-dealer, agent, investment adviser or investment adviser  representative
 14    becomes effective sixty (60) days after the filing of the application to with-
 15    draw  or  within  any shorter period as provided by a rule adopted or an order
 16    issued under this chapter unless a  revocation  or  suspension  proceeding  is
 17    pending  when the application is filed. If a proceeding is pending, withdrawal
 18    becomes effective when and upon such conditions as required by a rule  adopted
 19    or an order issued under this chapter. The administrator may institute a revo-
 20    cation  or  suspension  proceeding under section 30-14-412, Idaho Code, within
 21    one (1) year after the withdrawal became effective automatically and  issue  a
 22    revocation  or  suspension order as of the last date on which registration was
 23    effective if a proceeding is not pending.
                                                                        
 24        30-14-410.  FILING FEES. (a) Broker-dealers. A person shall pay a  fee  of
 25    two  hundred dollars ($200) when initially filing an application for registra-
 26    tion as a broker-dealer and a fee of two hundred dollars ($200) when filing  a
 27    renewal  of registration as a broker-dealer. If the filing results in a denial
 28    or withdrawal, the administrator shall retain the fee.
 29        (b)  Agents. The fee for an individual is fifty dollars ($50.00) when fil-
 30    ing an application for registration as  an  agent,  a  fee  of  fifty  dollars
 31    ($50.00) when filing a renewal of registration as an agent, and a fee of fifty
 32    dollars  ($50.00) when filing for a change of registration as an agent. If the
 33    filing results in a denial or withdrawal, the administrator shall  retain  the
 34    fee.
 35        (c)  Investment  advisers.  A  person shall pay a fee of one hundred fifty
 36    dollars ($150) when filing an application for registration  as  an  investment
 37    adviser and a fee of one hundred fifty dollars ($150) when filing a renewal of
 38    registration  as  an  investment adviser. If the filing results in a denial or
 39    withdrawal, the administrator shall retain the fee.
 40        (d)  Investment adviser representatives. The  fee  for  an  individual  is
 41    thirty  dollars  ($30.00)  when  filing  an application for registration as an
 42    investment adviser representative, a fee of thirty dollars ($30.00) when  fil-
 43    ing  a  renewal of registration as an investment adviser representative, and a
 44    fee of thirty dollars ($30.00) when filing a  change  of  registration  as  an
 45    investment  adviser representative. If the filing results in a denial or with-
 46    drawal, the administrator shall retain the fee.
 47        (e)  Federal covered investment advisers.  A  federal  covered  investment
 48    adviser  required  to file a notice under section 30-14-405, Idaho Code, shall
 49    pay an initial fee of thirty dollars ($30.00) and  an  annual  notice  fee  of
 50    thirty dollars ($30.00).
 51        (f)  Payment.  A  person required to pay a filing or notice fee under this
 52    section may transmit the fee through or to a designee as a rule or order  pro-
 53    vides under this chapter.
                                                                        
                                           32
                                                                        
  1        (g)  Dual  agent/investment  adviser representative. An investment adviser
  2    representative who is registered as an agent under  section  30-14-402,  Idaho
  3    Code,  and  who represents a person that is both registered as a broker-dealer
  4    under section 30-14-401, Idaho Code, and registered as an  investment  adviser
  5    under  section 30-14-403, Idaho Code, or required as a federal covered invest-
  6    ment adviser to make a notice filing under section 30-14-405, Idaho  Code,  is
  7    not  required to pay an initial or annual registration fee for registration as
  8    an investment adviser representative.
                                                                        
  9        30-14-411.  POSTREGISTRATION  REQUIREMENTS.  (a)  Financial  requirements.
 10    Subject to section 15(h) of the securities exchange act  of  1934  (15  U.S.C.
 11    78o(h))  or  section  222  of  the  investment advisers act of 1940 (15 U.S.C.
 12    80b-22), a rule adopted or an order issued under this  chapter  may  establish
 13    minimum financial requirements for broker-dealers registered or required to be
 14    registered  under  this chapter and investment advisers registered or required
 15    to be registered under this chapter.
 16        (b)  Financial  reports.  Subject  to  section  15(h)  of  the  securities
 17    exchange act of 1934 (15 U.S.C. 78o(h)) or section 222(b)  of  the  investment
 18    advisers  act  of  1940  (15  U.S.C.  80b-22),  a  broker-dealer registered or
 19    required to be registered under this chapter and an investment adviser  regis-
 20    tered  or  required to be registered under this chapter shall file such finan-
 21    cial reports as are required by a rule adopted or an order issued  under  this
 22    chapter.  If the information contained in a record filed under this subsection
 23    is or becomes inaccurate or incomplete in a material respect,  the  registrant
 24    shall promptly file a correcting amendment.
 25        (c)  Recordkeeping.  Subject  to  section 15(h) of the securities exchange
 26    act of 1934 (15 U.S.C. 78o(h)) or section 222 of the investment  advisers  act
 27    of 1940 (15 U.S.C. 80b-22):
 28        (1)  A  broker-dealer  registered  or required to be registered under this
 29        chapter and an investment adviser registered or required to be  registered
 30        under  this  chapter shall make and maintain the accounts, correspondence,
 31        memoranda, papers, books and other records required by a rule  adopted  or
 32        an order issued under this chapter;
 33        (2)  Broker-dealer  records  required  to  be  maintained under subsection
 34        (c)(1) of this section may be maintained  in  any  form  of  data  storage
 35        acceptable  under section 17(a) of the securities exchange act of 1934 (15
 36        U.S.C. 78q(a)) if they are readily accessible to the administrator; and
 37        (3)  Investment adviser records required to be maintained under subsection
 38        (c)(1) of this section may be maintained  in  any  form  of  data  storage
 39        required by a rule adopted or an order issued under this chapter.
 40        (d)  Audits or inspections. The records of every person issuing or guaran-
 41    teeing  any securities subject to the provisions of this chapter, if such per-
 42    son is registered or required to be registered  under  this  chapter,  and  of
 43    every broker-dealer, agent, investment adviser or investment adviser represen-
 44    tative  registered or required to be registered under this chapter are subject
 45    to such reasonable periodic, special or other audits or inspections by a  rep-
 46    resentative  of the administrator, within or without this state, as the admin-
 47    istrator considers necessary or appropriate in the public interest and for the
 48    protection of investors. An audit or inspection may be made at  any  time  and
 49    without  prior notice. The administrator may copy, and may remove for audit or
 50    inspection copies of, all records the administrator reasonably considers  nec-
 51    essary  or  appropriate  to conduct the audit or inspection. The administrator
 52    may assess a reasonable charge for conducting an  audit  or  inspection  under
 53    this subsection.
 54        (e)  Custody  and  discretionary  authority  bond or insurance. Subject to
                                                                        
                                           33
                                                                        
  1    section 15(h) of the securities exchange act of 1934  (15  U.S.C.  78o(h))  or
  2    section  222 of the investment advisers act of 1940 (15 U.S.C. 80b-22), a rule
  3    adopted or an order issued under this chapter may require a  broker-dealer  or
  4    investment  adviser  that has custody of or discretionary authority over funds
  5    or securities of a customer or client to obtain insurance or post  a  bond  or
  6    other  satisfactory  form  of  security in an amount not to exceed twenty-five
  7    thousand dollars ($25,000). The administrator may determine  the  requirements
  8    of  the insurance, bond or other satisfactory form of security. Insurance or a
  9    bond or other satisfactory form of security may not be required of  a  broker-
 10    dealer  registered  under  this  chapter  whose  net capital exceeds, or of an
 11    investment  adviser registered under  this  chapter  whose  minimum  financial
 12    requirements exceed, the amounts required by rule or order under this chapter.
 13    The  insurance,  bond  or  other  satisfactory form of security must permit an
 14    action by a person to enforce any liability on the insurance,  bond  or  other
 15    satisfactory  form  of  security  if instituted within the time limitations in
 16    section 30-14-509(j)(2), Idaho Code.
 17        (f)  Requirements for custody. Subject to section 15(h) of the  securities
 18    exchange  act  of  1934  (15  U.S.C.  78o(h)) or section 222 of the investment
 19    advisers act of 1940 (15 U.S.C. 80b-22), an agent  may  not  have  custody  of
 20    funds  or  securities  of a customer except under the supervision of a broker-
 21    dealer and an investment adviser representative may not have custody of  funds
 22    or  securities  of  a  client  except  under  the supervision of an investment
 23    adviser or a federal covered investment adviser. A rule adopted  or  an  order
 24    issued  under  this  chapter  may  prohibit,  limit, or impose conditions on a
 25    broker-dealer regarding custody of funds or securities of a customer and on an
 26    investment adviser regarding custody of securities or funds of a client.
 27        (g)  Investment adviser brochure  rule.  With  respect  to  an  investment
 28    adviser  registered  or  required  to be registered under this chapter, a rule
 29    adopted or an order issued under this chapter may require that information  or
 30    other record be furnished or disseminated to clients or prospective clients in
 31    this state as necessary or appropriate in the public interest and for the pro-
 32    tection of investors and advisory clients.
 33        (h)  Continuing  education.  A  rule adopted or an order issued under this
 34    chapter may require  an  individual  registered  under  section  30-14-402  or
 35    30-14-404,  Idaho  Code,  to  participate  in  a  continuing education program
 36    approved by the securities and exchange commission and administered by a self-
 37    regulatory organization or, in the absence of such a program, a  rule  adopted
 38    or  an order issued under this chapter may require continuing education for an
 39    individual registered under section 30-14-404, Idaho Code.
                                                                        
 40        30-14-412.  DENIAL, REVOCATION, SUSPENSION, WITHDRAWAL, RESTRICTION,  CON-
 41    DITION  OR  LIMITATION  OF REGISTRATION. (a) Disciplinary conditions -- Appli-
 42    cants. If the administrator finds that the order is in the public interest and
 43    subsection (d) of this section authorizes the action, an  order  issued  under
 44    this  chapter  may deny an application, or may condition or limit registration
 45    of an applicant to be a broker-dealer, agent, investment adviser or investment
 46    adviser representative, and, if the applicant is a broker-dealer or investment
 47    adviser, of a partner, officer, director or person having a similar status  or
 48    performing  similar  functions, or a person directly or indirectly in control,
 49    of the broker-dealer or investment adviser.
 50        (b)  Disciplinary conditions -- Registrants. If  the  administrator  finds
 51    that  the  order  is in the public interest and subsection (d) of this section
 52    authorizes the action, an order issued under this chapter may revoke, suspend,
 53    condition or limit the registration of a registrant and, if the registrant  is
 54    a broker-dealer or investment adviser, of a partner, officer, director or per-
                                                                        
                                           34
                                                                        
  1    son  having  a  similar  status  or  performing similar functions, or a person
  2    directly or indirectly in control, of the broker-dealer or investment adviser.
  3    Provided however, the administrator may not:
  4        (1)  Institute a revocation or suspension proceeding under this subsection
  5        based on an order issued under a law of another state that is reported  to
  6        the  administrator  or  a  designee of the administrator more than one (1)
  7        year after the date of the order on which it is based; or
  8        (2)  Under subsection (d)(5)(A) or (B) of this section, issue an order  on
  9        the  basis  of  an  order issued under the securities act of another state
 10        unless the other order was based on conduct for which  subsection  (d)  of
 11        this  section  would authorize the action had the conduct occurred in this
 12        state.
 13        (c)  Disciplinary penalties -- Registrants.  If  the  administrator  finds
 14    that  the  order is in the public interest and subsections (d)(1) through (6),
 15    (8), (9), (10), (12) or (13) of this section authorizes the action,  an  order
 16    under  this  chapter  may censure, impose a bar or suspension from association
 17    with a broker-dealer or investment adviser registered in this state, or impose
 18    a civil penalty in an amount not to exceed five thousand dollars ($5,000)  for
 19    each  violation,  on a registrant and, if the registrant is a broker-dealer or
 20    investment adviser, a partner, officer, director or person  having  a  similar
 21    status  or performing similar functions, or a person directly or indirectly in
 22    control, of the broker-dealer or investment adviser.
 23        (d)  Grounds for discipline. A person may be disciplined under subsections
 24    (a) through (c) of this section if the person:
 25        (1)  Has filed an application for registration in this  state  under  this
 26        chapter  or the predecessor act within the previous ten (10) years, which,
 27        as of the effective date of registration or as of any date after filing in
 28        the case of an order denying effectiveness, was incomplete in any material
 29        respect or contained a statement that, in light of the circumstances under
 30        which it was made, was false or misleading  with  respect  to  a  material
 31        fact;
 32        (2)  Willfully violated or willfully failed to comply with this chapter or
 33        the  predecessor act or a rule adopted or an order issued under this chap-
 34        ter or the predecessor act within the previous ten (10) years;
 35        (3)  Has been convicted of any felony or  within  the  previous  ten  (10)
 36        years  has been convicted of a misdemeanor involving a security, a commod-
 37        ity future or option contract, or an aspect of a business involving  secu-
 38        rities,   commodities,  investments,  franchises,  insurance,  banking  or
 39        finance;
 40        (4)  Is enjoined or restrained by a court of competent jurisdiction in  an
 41        action instituted by the administrator under this chapter or the predeces-
 42        sor  act,  a  state, the securities and exchange commission, or the United
 43        States from engaging in or continuing an act, practice or course of  busi-
 44        ness  involving an aspect of a business involving securities, commodities,
 45        investments, franchises, insurance, banking or finance;
 46        (5)  Is the subject of an order, issued after notice and  opportunity  for
 47        hearing by:
 48             (A)  The  securities,  depository  institution,  insurance  or  other
 49             financial  services  regulator  of  a  state or by the securities and
 50             exchange commission or other federal agency denying,  revoking,  bar-
 51             ring or suspending registration as a broker-dealer, agent, investment
 52             adviser,  federal  covered  investment adviser, or investment adviser
 53             representative;
 54             (B)  The securities regulator  of  a  state  or  the  securities  and
 55             exchange   commission  against  a  broker-dealer,  agent,  investment
                                                                        
                                           35
                                                                        
  1             adviser,  investment  adviser  representative,  or  federal   covered
  2             investment adviser;
  3             (C)  The  securities  and  exchange  commission  or a self-regulatory
  4             organization suspending or expelling the registrant  from  membership
  5             in the self-regulatory organization;
  6             (D)  A court adjudicating a United States postal service fraud order;
  7             (E)  The insurance regulator of a state denying, suspending or revok-
  8             ing registration as an insurance agent; or
  9             (F)  A  depository  institution  regulator  suspending or barring the
 10             person from the depository institution business;
 11        (6)  Is the subject of an adjudication or determination, after notice  and
 12        opportunity  for  hearing,  by the securities and exchange commission, the
 13        commodity futures trading commission; the federal trade commission; a fed-
 14        eral depository institution regulator, or a depository institution, insur-
 15        ance or other financial services regulator of  a  state  that  the  person
 16        willfully violated the securities act of 1933, the securities exchange act
 17        of  1934,  the investment advisers act of 1940, the investment company act
 18        of 1940, or the commodity exchange act, the securities or commodities  law
 19        of  a  state,  or  a federal or state law under which a business involving
 20        investments, franchises, insurance, banking or finance is regulated;
 21        (7)  Is insolvent, either because  the  person's  liabilities  exceed  the
 22        person's assets or because the person cannot meet the person's obligations
 23        as  they  mature, provided however that the administrator may not enter an
 24        order against an applicant or registrant under this paragraph (7)  without
 25        a finding of insolvency as to the applicant or registrant;
 26        (8)  Refuses to allow or otherwise impedes the administrator from conduct-
 27        ing  an  audit  or  inspection  under section 30-14-411(d), Idaho Code, or
 28        refuses access to a registrant's office to conduct an audit or  inspection
 29        under section 30-14-411(d), Idaho Code;
 30        (9)  Has  failed to reasonably supervise an agent, investment adviser rep-
 31        resentative or other individual, if the agent, investment  adviser  repre-
 32        sentative  or other individual was subject to the person's supervision and
 33        committed a violation of this chapter or the predecessor  act  or  a  rule
 34        adopted  or  an  order  issued  under  this chapter or the predecessor act
 35        within the previous ten (10) years;
 36        (10) Has not paid the proper filing fee within thirty (30) days after hav-
 37        ing been notified by the administrator of a deficiency,  provided  however
 38        that  the  administrator  shall  vacate an order under this paragraph (10)
 39        when the deficiency is corrected;
 40        (11) After notice and opportunity for a hearing, has been found within the
 41        previous ten (10) years:
 42             (A)  By a court of competent jurisdiction to have willfully  violated
 43             the  laws of a foreign jurisdiction under which the business of secu-
 44             rities, commodities, investment, franchises,  insurance,  banking  or
 45             finance is regulated;
 46             (B)  To  have  been the subject of an order of a securities regulator
 47             of a foreign jurisdiction denying, revoking or suspending  the  right
 48             to  engage  in  the business of securities as a broker-dealer, agent,
 49             investment adviser, investment adviser representative or similar per-
 50             son; or
 51             (C)  To have been suspended or expelled from membership by or partic-
 52             ipation in a securities exchange or securities association  operating
 53             under the securities laws of a foreign jurisdiction;
 54        (12) Is  the  subject of a cease and desist order issued by the securities
 55        and exchange commission  or  issued  under  the  securities,  commodities,
                                                                        
                                           36
                                                                        
  1        investment, franchise, banking, finance or insurance laws of a state;
  2        (13) Has  engaged  in  dishonest or unethical practices in the securities,
  3        commodities, investment, franchise, banking, finance or insurance business
  4        within the previous ten (10) years; or
  5        (14) Is not qualified on the basis of factors such as training, experience
  6        and knowledge of the securities business. Provided however, in the case of
  7        an application by an agent for a broker-dealer that is a member of a self-
  8        regulatory organization or by an individual for registration as an invest-
  9        ment adviser representative, a denial order may not be based on this para-
 10        graph (14) if the individual has successfully completed  all  examinations
 11        required  by subsection (e) of this section. The administrator may require
 12        an applicant for registration under section 30-14-402 or 30-14-404,  Idaho
 13        Code, who has not been registered in a state within the two (2) years pre-
 14        ceding the filing of an application in this state to successfully complete
 15        an examination.
 16        (e)  Examinations.  A  rule  adopted or an order issued under this chapter
 17    may require  that  an  examination,  including  an  examination  developed  or
 18    approved  by  an  organization  of securities regulators, be successfully com-
 19    pleted by a class of individuals or all individuals.  An  order  issued  under
 20    this  chapter may waive, in whole or in part, an examination as to an individ-
 21    ual and a rule adopted under this chapter may waive, in whole or in  part,  an
 22    examination  as to a class of individuals if the administrator determines that
 23    the examination is not necessary or appropriate in the public interest and for
 24    the protection of investors.
 25        (f)  Summary process. The administrator may suspend or deny an application
 26    summarily; restrict, condition, limit or suspend a registration;  or  censure,
 27    bar,  or  impose a civil penalty on a registrant before final determination of
 28    an administrative proceeding. Upon the issuance of an order, the administrator
 29    shall promptly notify each person subject to the order that the order has been
 30    issued, the reasons for the action, and that within fifteen  (15)  days  after
 31    the receipt of a request in a record from the person the matter will be sched-
 32    uled  for  a hearing. If a hearing is not requested and none is ordered by the
 33    administrator within thirty (30) days after the date of service of the  order,
 34    the  order  becomes  final  by  operation of law. If a hearing is requested or
 35    ordered, the administrator, after notice of and  opportunity  for  hearing  to
 36    each person subject to the order, may modify or vacate the order or extend the
 37    order until final determination.
 38        (g)  Procedural requirements. An order issued may not be issued under this
 39    section, except under subsection (f) of this section, without:
 40        (1)  Appropriate notice to the applicant or registrant;
 41        (2)  Opportunity for hearing; and
 42        (3)  Findings  of  fact  and  conclusions of law in a record in accordance
 43        with chapter 52, title 67, Idaho Code.
 44        (h)  Control person liability. A person that controls, directly  or  indi-
 45    rectly,  a  person  not  in compliance with this section may be disciplined by
 46    order of the administrator under subsections (a) through (c) of  this  section
 47    to  the  same extent as the noncomplying person, unless the controlling person
 48    did not know, and in the exercise of reasonable care could not have known,  of
 49    the existence of conduct that is a ground for discipline under this section.
 50        (i)  Limit  on  investigation  or  proceeding.  The  administrator may not
 51    institute a proceeding under subsection (a), (b) or (c) of this section  based
 52    solely  on material facts actually known by the administrator unless an inves-
 53    tigation or the proceeding is instituted within one (1) year after the  admin-
 54    istrator actually acquires knowledge of the material facts.
                                                                        
                                           37
                                                                        
  1                                       PART 5.
  2                                FRAUD AND LIABILITIES
                                                                        
  3        30-14-501.  GENERAL FRAUD. It is unlawful for a person, in connection with
  4    the offer, sale, or purchase of a security, directly or indirectly:
  5        (1)  To employ a device, scheme, or artifice to defraud;
  6        (2)  To  make an untrue statement of a material fact or to omit to state a
  7    material fact necessary in order to make the statements made, in light of  the
  8    circumstances under which they were made, not misleading; or
  9        (3)  To engage in an act, practice, or course of business that operates or
 10    would operate as a fraud or deceit upon another person.
                                                                        
 11        30-14-502.  PROHIBITED  CONDUCT  IN PROVIDING INVESTMENT ADVICE. (a) Fraud
 12    in providing investment advice. It is  unlawful  for  a  person  that  advises
 13    others for compensation, either directly or indirectly or through publications
 14    or  writings,  as  to the value of securities or the advisability of investing
 15    in, purchasing or selling securities or that, for compensation and as part  of
 16    a  regular  business,  issues  or  promulgates analyses or reports relating to
 17    securities:
 18        (1)  To employ a device, scheme, or artifice to defraud another person; or
 19        (2)  To engage in an act, practice, or course of business that operates or
 20        would operate as a fraud or deceit upon another person.
 21        (b)  Rules defining fraud. A rule adopted under this chapter may define an
 22    act, practice, or course of business of an investment adviser or an investment
 23    adviser representative, as fraudulent, deceptive  or  manipulative,  and  pre-
 24    scribe means reasonably designed to prevent investment advisers and investment
 25    adviser  representatives,  from  engaging  in  acts, practices, and courses of
 26    business defined as fraudulent, deceptive or manipulative.
 27        (c)  Rules specifying contents of advisory contract. A rule adopted or  an
 28    order  issued  under  this  chapter  may specify the contents of an investment
 29    advisory contract entered into, extended or renewed by an investment adviser.
                                                                        
 30        30-14-503.  EVIDENTIARY BURDEN. (a) Civil. In a civil action  or  adminis-
 31    trative  proceeding under this chapter, a person claiming an exemption, excep-
 32    tion, preemption or exclusion has the burden to prove the applicability of the
 33    claim.
 34        (b)  Criminal. In a criminal  proceeding  under  this  chapter,  a  person
 35    claiming  an  exemption,  exception, preemption or exclusion has the burden of
 36    going forward with evidence of the claim.
                                                                        
 37        30-14-504.  FILING  OF  SALES  AND  ADVERTISING  LITERATURE.  (a)   Filing
 38    requirement. Except as otherwise provided in subsection (b) of this section, a
 39    rule adopted or an order issued under this chapter may require the filing of a
 40    prospectus,  pamphlet,  circular, form letter, advertisement, sales literature
 41    or other advertising record relating  to  a  security  or  investment  advice,
 42    addressed  or  intended  for  distribution to prospective investors, including
 43    clients or prospective clients of a person registered or required to be regis-
 44    tered as an investment adviser under this chapter.
 45        (b)  Excluded communications. This section does not  apply  to  sales  and
 46    advertising  literature  specified  in  subsection  (a)  of this section which
 47    relates to a federal covered security, a federal covered  investment  adviser,
 48    or  a  security  or  transaction  exempted  by section 30-14-201, 30-14-202 or
 49    30-14-203, Idaho Code, except as required pursuant  to  section  30-14-201(7),
 50    Idaho Code.
                                                                        
                                           38
                                                                        
  1        30-14-505.  MISLEADING  FILINGS.  It  is  unlawful for a person to make or
  2    cause to be made, in a record that is used in an action or proceeding or filed
  3    under this chapter, a statement that, at the time and in the light of the cir-
  4    cumstances under which it is made,  is  false  or  misleading  in  a  material
  5    respect,  or,  in  connection  with the statement, to omit to state a material
  6    fact necessary to make the statement made, in the light of  the  circumstances
  7    under which it was made, not false or misleading.
                                                                        
  8        30-14-506.  MISREPRESENTATIONS  CONCERNING  REGISTRATION OR EXEMPTION. The
  9    filing of an application for registration, a registration statement, a  notice
 10    filing  under this chapter, the registration of a person, the notice filing by
 11    a person, or the registration of a security under this chapter does  not  con-
 12    stitute  a finding by the administrator that a record filed under this chapter
 13    is true, complete, and not misleading.  The  filing  or  registration  or  the
 14    availability  of  an exemption, exception, preemption or exclusion for a secu-
 15    rity or a transaction does not mean that the administrator has passed upon the
 16    merits or qualifications of, or recommended or given approval  to,  a  person,
 17    security  or  transaction.  It  is unlawful to make, or cause to be made, to a
 18    purchaser, customer, client, or prospective customer or client  a  representa-
 19    tion inconsistent with this section.
                                                                        
 20        30-14-507.  QUALIFIED   IMMUNITY.   A   broker-dealer,  agent,  investment
 21    adviser, federal covered investment adviser, or investment adviser representa-
 22    tive is not liable to another broker-dealer, agent, investment  adviser,  fed-
 23    eral covered investment adviser, or investment adviser representative for def-
 24    amation  relating to a statement that is contained in a record required by the
 25    administrator, or designee of the administrator, the securities  and  exchange
 26    commission  or  a  self-regulatory  organization,  unless  the person knew, or
 27    should have known at the time that the statement was made, that it  was  false
 28    in  a  material  respect  or  the  person  acted  in reckless disregard of the
 29    statement's truth or falsity.
                                                                        
 30        30-14-508.  CRIMINAL PENALTIES. (a)  Criminal  penalties.  A  person  that
 31    willfully  violates  this  chapter, or a rule adopted or an order issued under
 32    this chapter, except section 30-14-504,  Idaho  Code,  or  the  notice  filing
 33    requirements  of section 30-14-302 or 30-14-405, Idaho Code, or that willfully
 34    violates section 30-14-505, Idaho Code, knowing the statement made to be false
 35    or misleading in a material respect, shall be guilty of a felony and upon con-
 36    viction, shall be fined not  more  than  ten  thousand  dollars  ($10,000)  or
 37    imprisoned  not  more than five (5) years, or both. An individual convicted of
 38    violating a rule or order under this chapter may be  fined,  but  may  not  be
 39    imprisoned, if the individual did not have knowledge of the rule or order.
 40        (b)  A  person  that willfully violates section 30-14-501 or 30-14-502(a),
 41    Idaho Code, and in connection with  that  violation,  the  violator  knowingly
 42    accepts any money representing:
 43        (1)  Equity in a person's home;
 44        (2)  A  withdrawal  from  any  individual  retirement  account  or similar
 45        retirement account; or
 46        (3)  A withdrawal from any qualified retirement plan  as  defined  in  the
 47        Internal Revenue Code,
 48    shall  upon conviction be punished by imprisonment for not less than three (3)
 49    years  or more than fifteen (15) years if, at the time the crime  was  commit-
 50    ted, the property, money or thing unlawfully obtained or sought to be obtained
 51    was worth ten thousand dollars ($10,000) or more.
 52        (c)  If,  in  the commission of an offense described in subsection (a)  or
                                                                        
                                           39
                                                                        
  1    (b) of this section, the victim is an elder or dependent adult, and the viola-
  2    tor has knowledge that the victim is an elder or dependent adult, the  defend-
  3    ant shall receive an additional term of imprisonment as follows:
  4        (1)  Three (3) years if the victim is under seventy (70) years of age.
  5        (2)  Five (5) years if the victim is seventy (70) years of age or older.
  6        (d)  As  used  in this section, "elder" means any person who is sixty-five
  7    (65) years of age or older.
  8        (e)  As used in this section, "dependent adult" means any  person  who  is
  9    between  the ages of eighteen (18) and sixty-four (64) years, who has physical
 10    or mental limitations which restrict the person's ability to carry out  normal
 11    activities  or  to protect the person's rights, including, but not limited to,
 12    persons who have physical or developmental disabilities or whose  physical  or
 13    mental abilities have diminished because of age.
 14        (f)  No  indictment or information may be returned under this chapter more
 15    than five (5) years after the alleged violation.
 16        (g)  Criminal reference not required. The attorney general or  the  proper
 17    prosecuting  attorney  with or without a reference from the administrator, may
 18    institute criminal proceedings under this chapter.
 19        (h)  No limitation on other criminal enforcement. This  chapter  does  not
 20    limit  the power of this state to punish a person for conduct that constitutes
 21    a crime under other laws of this state.
                                                                        
 22        30-14-509.  CIVIL LIABILITY. (a) Securities litigation  uniform  standards
 23    act. Enforcement of civil liability under this section is subject to the secu-
 24    rities  litigation  uniform  standards  act  of  1998,  as  cited  in  section
 25    30-14-103, Idaho Code.
 26        (b)  Liability of seller to purchaser. A person is liable to the purchaser
 27    if  the person sells a security in violation of section 30-14-301, Idaho Code,
 28    or, by means of an untrue statement of a material fact or an omission to state
 29    a material fact necessary in order to make the statement made, in light of the
 30    circumstances under which it is made, not misleading, the purchaser not  know-
 31    ing  the untruth or omission and the seller not sustaining the burden of proof
 32    that the seller did not know and, in the exercise of  reasonable  care,  could
 33    not  have known of the untruth or omission. An action under this subsection is
 34    governed by the following:
 35        (1)  The purchaser may maintain an action  to  recover  the  consideration
 36        paid for the security, less the amount of any income received on the secu-
 37        rity,  and  interest  at  the annual rate of interest set forth in section
 38        28-22-104(2), Idaho Code, from the date of the purchase, costs,  and  rea-
 39        sonable  attorneys'  fees  determined by the court, upon the tender of the
 40        security, or for actual damages as provided in subsection (b)(3)  of  this
 41        section.
 42        (2)  The  tender  referred  to in subsection (b)(1) of this section may be
 43        made any time before entry of judgment. Tender requires only notice  in  a
 44        record  of ownership of the security and willingness to exchange the secu-
 45        rity for the amount specified. A purchaser that no longer owns  the  secu-
 46        rity  may  recover actual damages as provided in subsection (b)(3) of this
 47        section.
 48        (3)  Actual damages in an action arising under  this  subsection  are  the
 49        amount that would be recoverable upon a tender less the value of the secu-
 50        rity when the purchaser disposed of it, and interest at the annual rate of
 51        interest  set  forth in section 28-22-104(2), Idaho Code, from the date of
 52        the purchase, costs, and reasonable  attorneys'  fees  determined  by  the
 53        court.
 54        (c)  Liability of purchaser to seller. A person is liable to the seller if
                                                                        
                                           40
                                                                        
  1    the  person buys a security by means of an untrue statement of a material fact
  2    or omission to state a material fact necessary in order to make the  statement
  3    made,  in  light of the circumstances  under which it is made, not misleading,
  4    the seller not knowing of the untruth or omission, and the purchaser not  sus-
  5    taining  the burden of proof that the purchaser did not know, and in the exer-
  6    cise of reasonable care, could not have known of the untruth or  omission.  An
  7    action under this subsection is governed by the following:
  8        (1)  The  seller  may  maintain an action to recover the security, and any
  9        income received on the security, costs,  and  reasonable  attorneys'  fees
 10        determined  by  the  court,  upon the tender of the purchase price, or for
 11        actual damages as provided in subsection (c)(3) of this section.
 12        (2)  The tender referred to in subsection (c)(1) of this  section  may  be
 13        made  any  time before entry of judgment. Tender requires only notice in a
 14        record of the present ability to pay the amount tendered  and  willingness
 15        to  take  delivery  of  the security for the amount specified. If the pur-
 16        chaser no longer owns the security, the seller may recover actual  damages
 17        as provided in subsection (c)(3) of this section.
 18        (3)  Actual  damages  in  an  action arising under this subsection are the
 19        difference between the price at which the security was sold and the  value
 20        the  security would have had at the time of the sale in the absence of the
 21        purchaser's conduct causing liability, and at the annual rate of  interest
 22        set  forth  in section 28-22-104(2), Idaho Code, from the date of the sale
 23        of the security, costs, and reasonable attorneys' fees determined  by  the
 24        court.
 25        (d)  Liability of unregistered broker-dealer and agent. A person acting as
 26    a broker-dealer or agent that sells or buys a security in violation of section
 27    30-14-401(a),  30-14-402(a)  or  30-14-506,  Idaho Code, is liable to the cus-
 28    tomer. The customer, if a purchaser, may maintain an action  for  recovery  of
 29    actual damages as specified in subsections (b)(1) through (3) of this section,
 30    or,  if a seller, for a remedy as specified in subsections (c)(1)  through (3)
 31    of this section.
 32        (e)  Liability of unregistered investment adviser and  investment  adviser
 33    representative. A person acting as an investment adviser or investment adviser
 34    representative  that  provides investment advice for compensation in violation
 35    of section 30-14-403(a), 30-14-404(a) or 30-14-506, Idaho Code, is  liable  to
 36    the  client.  The  client  may maintain an action to recover the consideration
 37    paid for the advice, interest at the annual rate of interest set forth in sec-
 38    tion 28-22-104(2), Idaho Code, from the date of payment, costs, and reasonable
 39    attorneys' fees determined by the court.
 40        (f)  Liability for investment advice. A person that receives  directly  or
 41    indirectly any consideration for providing investment advice to another person
 42    and  that  employs a device, scheme or artifice to defraud the other person or
 43    engages in an act, practice, or course of  business  that  operates  or  would
 44    operate  as a fraud or deceit on the other person, is liable to the other per-
 45    son. An action under this subsection is governed by the following:
 46        (1)  The person defrauded may maintain an action to recover the  consider-
 47        ation  paid  for the advice and the amount of any actual damages caused by
 48        the fraudulent conduct, interest at the annual rate of interest set  forth
 49        in  section 28-22-104(2), Idaho Code, from the date of the fraudulent con-
 50        duct, costs, and reasonable attorneys' fees determined by the court,  less
 51        the amount of any income received as a result of the fraudulent conduct.
 52        (2)  This  subsection  does  not apply to a broker-dealer or its agents if
 53        the investment advice provided is solely incidental to  transacting  busi-
 54        ness  as  a  broker-dealer and no special compensation is received for the
 55        investment advice.
                                                                        
                                           41
                                                                        
  1        (g)  Joint and several liability. The following persons are liable jointly
  2    and severally with and to the same extent as persons liable under  subsections
  3    (b) through (f) of this section:
  4        (1)  A  person  that directly or indirectly controls a person liable under
  5        subsections (b) through (f) of this section, unless the controlling person
  6        sustains the burden of proof that the person did  not  know,  and  in  the
  7        exercise of reasonable care could not have known, of the existence of con-
  8        duct by reason of which the liability is alleged to exist;
  9        (2)  An individual who is a managing partner, executive officer, or direc-
 10        tor  of a person liable under subsections (b) through (f) of this section,
 11        including an individual having a  similar  status  or  performing  similar
 12        functions,  unless  the  individual  sustains the burden of proof that the
 13        individual did not know and, in the exercise of reasonable care could  not
 14        have  known,  of the existence of conduct by reason of which the liability
 15        is alleged to exist;
 16        (3)  An individual who is an employee of or associated with a person  lia-
 17        ble  under subsections (b)  through (f) of this section and who materially
 18        aids the conduct giving rise to the liability, unless the individual  sus-
 19        tains  the  burden  of  proof that the individual did not know and, in the
 20        exercise of reasonable care could not have known, of the existence of con-
 21        duct by reason of which the liability is alleged to exist; and
 22        (4)  A person that is  a  broker-dealer,  agent,  investment  adviser,  or
 23        investment  adviser representative that materially aids the conduct giving
 24        rise to the liability under subsections (b) through (f) of  this  section,
 25        unless  the  person  sustains  the burden of proof that the person did not
 26        know and, in the exercise of reasonable care could not have known, of  the
 27        existence of conduct by reason of which liability is alleged to exist.
 28        (h)  Right of contribution. A person liable under this section has a right
 29    of  contribution as in cases of contract against any other person liable under
 30    this section for the same conduct.
 31        (i)  Survival of cause of action. A cause of  action  under  this  section
 32    survives the death of an individual who might have been a plaintiff or defend-
 33    ant.
 34        (j)  Statute of limitations. A person may not obtain relief:
 35        (1)  Under  subsection  (b)  of  this  section  for  violation  of section
 36        30-14-301, Idaho Code, or under subsection (d) or  (e)  of  this  section,
 37        unless  the  action  is instituted within one (1) year after the violation
 38        occurred; or
 39        (2)  Under subsection (b) of this section, other  than  for  violation  of
 40        section 30-14-301, Idaho Code, or under subsection (c) or (f) of this sec-
 41        tion,  unless the action is instituted within the earlier of two (2) years
 42        after discovery of the facts constituting the violation or five (5)  years
 43        after the violation.
 44        (k)  No  enforcement of violative contract. A person that has made, or has
 45    engaged in the performance of, a contract in violation of this  chapter  or  a
 46    rule  adopted  or  an  order issued under this chapter, or that has acquired a
 47    purported right under the contract with knowledge  of  conduct  by  reason  of
 48    which its making or performance was in violation of this chapter, may not base
 49    an action on the contract.
 50        (l)  No contractual waiver. A condition, stipulation, or provision binding
 51    a  person  purchasing  or selling a security or receiving investment advice to
 52    waive compliance with this chapter or a rule adopted or an order issued  under
 53    this chapter is void.
 54        (m)  Survival  of  other  rights or remedies. The rights and remedies pro-
 55    vided by this chapter are in addition to any other rights or remedies that may
                                                                        
                                           42
                                                                        
  1    exist, but this chapter does not create a cause of  action  not  specified  in
  2    this section or section 30-14-411(e), Idaho Code.
                                                                        
  3        30-14-510.  RESCISSION  OFFERS.  A  purchaser,  seller,  or  recipient  of
  4    investment  advice  may  not maintain an action under section 30-14-509, Idaho
  5    Code, if:
  6        (a)  The purchaser, seller, or recipient of investment advice receives  in
  7    a record, before the action is instituted:
  8        (1)  An  offer  stating  the  respect  in  which  liability  under section
  9        30-14-509, Idaho Code, may have arisen and fairly advising the  purchaser,
 10        seller,  or recipient of investment advice of that person's rights in con-
 11        nection with the offer, and any financial or other  information  necessary
 12        to correct all material misrepresentations or omissions in the information
 13        that  was  required  by this chapter to be furnished to that person at the
 14        time of the purchase, sale, or investment advice;
 15        (2)  If the basis for relief under this section may have been a  violation
 16        of  section  30-14-509(b), Idaho Code, an offer to repurchase the security
 17        for cash, payable on delivery of the security, equal to the  consideration
 18        paid,  and  interest  at  the annual rate of interest set forth in section
 19        28-22-104(2), Idaho Code, from the date of the purchase, less  the  amount
 20        of  any  income  received  on the security, or, if the purchaser no longer
 21        owns the security, an offer to pay the purchaser upon  acceptance  of  the
 22        offer  damages  in an amount that would be recoverable upon a tender, less
 23        the value of the security when the purchaser disposed of it, and  interest
 24        at  the  annual rate of interest set forth in  section 28-22-104(2), Idaho
 25        Code, from the date of the purchase in cash equal to the damages  computed
 26        in the manner provided in this subsection;
 27        (3)  If  the basis for relief under this section may have been a violation
 28        of section 30-14-509(c), Idaho Code, an offer to tender the  security,  on
 29        payment  by the seller of an amount equal to the purchase price paid, less
 30        income received on the security by  the  purchaser  and  interest  at  the
 31        annual  rate  of  interest  set forth in section 28-22-104(2), Idaho Code,
 32        from the date of the sale; or if the purchaser no longer  owns  the  secu-
 33        rity,  an  offer  to pay the seller upon acceptance of the offer, in cash,
 34        damages in the amount of the difference between the  price  at  which  the
 35        security  was  purchased  and the value the security would have had at the
 36        time of the purchase in the absence of the purchaser's  conduct  that  may
 37        have  caused  liability  and  interest  at the annual rate of interest set
 38        forth in section 28-22-104(2), Idaho Code, from the date of the sale;
 39        (4)  If the basis for relief under this section may have been a  violation
 40        of  section  30-14-509(d), Idaho Code; and if the customer is a purchaser,
 41        an offer to pay as specified in subsection (b) of this section; or, if the
 42        customer is a seller, an offer to tender or to pay as specified in subsec-
 43        tion (c) of this section;
 44        (5)  If the basis for relief under this section may have been a  violation
 45        of  section  30-14-509(e),  Idaho  Code, an offer to reimburse in cash the
 46        consideration paid for the advice and  interest  at  the  annual  rate  of
 47        interest  set  forth in section 28-22-104(2), Idaho Code, from the date of
 48        payment; or
 49        (6)  If the basis for relief under this section may have been a  violation
 50        of  section  30-14-509(f),  Idaho  Code, an offer to reimburse in cash the
 51        consideration paid for the advice, the amount of any actual  damages  that
 52        may  have  been  caused by the conduct, and interest at the annual rate of
 53        interest set forth in section 28-22-104(2), Idaho Code, from the  date  of
 54        the violation causing the loss;
                                                                        
                                           43
                                                                        
  1        (b)  The offer under subsection (a)(1) of this section states that it must
  2    be accepted by the purchaser, seller, or recipient of investment advice within
  3    thirty  (30)  days  after the date of its receipt by the purchaser, seller, or
  4    recipient of investment advice or any  shorter period, of not less than  three
  5    (3) days, that the administrator, by order, specifies;
  6        (c)  The  offeror  has the present ability to pay the amount offered or to
  7    tender the security under subsection (a)(1) of this section;
  8        (d)  The offer under subsection (a)(1) of this section is delivered to the
  9    purchaser, seller, or recipient of investment advice, or sent in a manner that
 10    ensures receipt by the purchaser, seller, or recipient of  investment  advice;
 11    and
 12        (e)  The purchaser, seller, or recipient of investment advice that accepts
 13    the  offer  under  subsection  (a)(1)  of  this section in a record within the
 14    period specified under subsection (a)(2) of this section is paid in accordance
 15    with the terms of the offer.
                                                                        
 16                                       PART 6.
 17                          ADMINISTRATION AND JUDICIAL REVIEW
                                                                        
 18        30-14-601.  ADMINISTRATION. (a) Administration. The administration of  the
 19    provisions  of this chapter shall be under the general supervision and control
 20    of the administrator.
 21        (b)  Unlawful use of records or information. It is unlawful for the admin-
 22    istrator or an officer, employee, or designee of the administrator to use  for
 23    personal  benefit  or  the  benefit  of  others  records  or other information
 24    obtained by or filed with the administrator that are not public under  section
 25    30-14-607(b), Idaho Code. This chapter does not authorize the administrator or
 26    an  officer, employee, or designee of the administrator to disclose the record
 27    or information, except in accordance with section 30-14-602,  30-14-607(c)  or
 28    30-14-608, Idaho Code.
 29        (c)  No  privilege  or  exemption created or diminished. This chapter does
 30    not create or diminish a privilege or exemption that exists at common law,  by
 31    statute or rule, or otherwise.
 32        (d)  Investor  education.  The  administrator  may  develop  and implement
 33    investor education initiatives to inform the public about investing in securi-
 34    ties, with particular emphasis on the prevention and detection  of  securities
 35    fraud. In developing and implementing these initiatives, the administrator may
 36    collaborate with public and nonprofit organizations with an interest in inves-
 37    tor  education. The administrator may accept a grant or donation from a person
 38    that is not affiliated with the securities industry or from a nonprofit  orga-
 39    nization,  regardless of whether the organization is affiliated with the secu-
 40    rities industry, to develop and implement investor education initiatives. This
 41    subsection does not authorize the administrator to  require  participation  or
 42    monetary contributions of a registrant in an investor education program.
 43        (e)  The  securities  investor education and training fund. The securities
 44    investor education and training fund is hereby created to  provide  funds  for
 45    the  purposes specified in subsection (d) of this section. All moneys received
 46    by the state by reason of civil penalties and administrative  fines  collected
 47    pursuant  to this chapter shall be deposited in the securities investor educa-
 48    tion and training  fund  up  to  but  not  exceeding  fifty  thousand  dollars
 49    ($50,000)  per year. The administrator may use funds in this account in a man-
 50    ner consistent with the duties of the department of finance under  this  chap-
 51    ter.
                                                                        
 52        30-14-602.  INVESTIGATIONS  AND  SUBPOENAS.  (a) Authority to investigate.
                                                                        
                                           44
                                                                        
  1    The administrator may:
  2        (1)  Conduct public or private investigations within or  outside  of  this
  3        state which the administrator considers necessary or appropriate to deter-
  4        mine  whether  a person has violated, is violating, or is about to violate
  5        this chapter or a rule adopted or an order issued under this  chapter,  or
  6        to  aid in the enforcement of this chapter or in the adoption of rules and
  7        forms under this chapter;
  8        (2)  Require or permit a person to testify, file a statement, or produce a
  9        record, under oath or otherwise as the administrator determines, as to all
 10        the facts and circumstances concerning a  matter  to  be  investigated  or
 11        about which an action or proceeding is to be instituted; and
 12        (3)  Publish  a  record concerning an action, proceeding, or an investiga-
 13        tion under, or a violation of, this chapter or a rule adopted or an  order
 14        issued  under this chapter if the administrator determines it is necessary
 15        or appropriate in the public interest and for the protection of investors.
 16        (b)  Administrator powers to investigate. For the purpose of an investiga-
 17    tion or proceeding under this chapter, the  administrator  or  its  designated
 18    officer  may  administer oaths and affirmations, subpoena witnesses, seek com-
 19    pulsion of attendance, take evidence, require the filing  of  statements,  and
 20    require  the  production of any records that the administrator considers rele-
 21    vant or material to the investigation or proceeding.
 22        (c)  Procedure and remedies for noncompliance. If a person does not appear
 23    or refuses to testify, file a statement, produce records,  or  otherwise  does
 24    not  obey  a subpoena as required by the administrator under this chapter, the
 25    administrator may apply to any court of competent jurisdiction or a  court  of
 26    another state for an order to enforce compliance. The court may:
 27        (1)  Hold the person in contempt;
 28        (2)  Order the person to appear before the administrator;
 29        (3)  Order  the  person to testify about the matter under investigation or
 30        in question;
 31        (4)  Order the production of records;
 32        (5)  Grant injunctive relief, including  restricting  or  prohibiting  the
 33        offer or sale of securities or the providing of investment advice;
 34        (6)  Impose  a  civil penalty of not less than five hundred dollars ($500)
 35        and not greater than five thousand dollars ($5,000)  for  each  violation;
 36        and
 37        (7)  Grant any other necessary or appropriate relief.
 38        (d)  Application  for relief. This section does not preclude a person from
 39    applying to any court of competent jurisdiction or a court  of  another  state
 40    for  relief  from  a  request  to  appear,  testify, file a statement, produce
 41    records, or obey a subpoena.
 42        (e)  Use immunity procedure. An individual is not excused from  attending,
 43    testifying, filing a statement, producing a record or other evidence, or obey-
 44    ing a subpoena of the administrator under this chapter or in an action or pro-
 45    ceeding  instituted by the administrator under this chapter on the ground that
 46    the required testimony, statement, record,  or  other  evidence,  directly  or
 47    indirectly,  may  tend to incriminate the individual or subject the individual
 48    to a criminal fine, penalty, or forfeiture. If the individual refuses to  tes-
 49    tify,  file a statement, or produce a record or other evidence on the basis of
 50    the individual's privilege against self-incrimination, the  administrator  may
 51    apply to any court of competent jurisdiction to compel the testimony, the fil-
 52    ing  of  the  statement,  the production of the record, or the giving of other
 53    evidence. The testimony, record, or other evidence  compelled  under  such  an
 54    order  may  not  be  used, directly or indirectly, against the individual in a
 55    criminal case, except in a prosecution for perjury or  contempt  or  otherwise
                                                                        
                                           45
                                                                        
  1    failing to comply with the order.
  2        (f)  Assistance  to  securities  regulator of another jurisdiction. At the
  3    request  of a law enforcement or other governmental or  regulatory  agency  or
  4    self-regulatory  organization, the administrator may provide assistance if the
  5    requesting entity states that it is conducting an investigation  to  determine
  6    whether  a  person has violated, is violating, or is about to violate a law or
  7    rule of the other state or foreign jurisdiction relating to securities matters
  8    that the requesting regulator administers or enforces. The  administrator  may
  9    provide  the  assistance  by using the authority to investigate and the powers
 10    conferred by this section as the  administrator  determines  is  necessary  or
 11    appropriate. The assistance may be provided without regard to whether the con-
 12    duct  described in the request would also constitute a violation of this chap-
 13    ter or other law of this state if occurring in this state. In deciding whether
 14    to provide the assistance, the administrator may consider whether the request-
 15    ing regulator is permitted and has agreed to provide  assistance  reciprocally
 16    within  its  state,  federal  or  foreign jurisdiction to the administrator on
 17    securities matters when requested; whether compliance with the  request  would
 18    violate  or prejudice the public policy of this state; and the availability of
 19    resources and employees of the administrator to  carry  out  the  request  for
 20    assistance.
                                                                        
 21        30-14-603.  CIVIL  ENFORCEMENT. (a) Civil action instituted by administra-
 22    tor. If the administrator believes that a person has engaged, is engaging,  or
 23    is  about  to engage in an act, practice, or course of business constituting a
 24    violation of this chapter or a rule adopted or  an  order  issued  under  this
 25    chapter  or  that a person has, is, or is about to engage in an act, practice,
 26    or course of business that materially aids a violation of this  chapter  or  a
 27    rule  adopted  or  an  order  issued under this chapter, the administrator may
 28    maintain an action in any court of competent jurisdiction to enjoin  the  act,
 29    practice, or course of business and to enforce compliance with this chapter or
 30    a rule adopted or an order issued under this chapter.
 31        (b)  Relief  available.  In  an  action under this section and on a proper
 32    showing, the court may:
 33        (1)  Issue a permanent or  temporary  injunction,  restraining  order,  or
 34        declaratory judgment;
 35        (2)  Order other appropriate or ancillary relief, which may include:
 36             (A)  An asset freeze, accounting, writ of attachment, writ of general
 37             or  specific execution, and appointment of a receiver or conservator,
 38             that may be the administrator, for the defendant or  the  defendant's
 39             assets;
 40             (B)  Ordering  the  administrator  to  take  charge  and control of a
 41             defendant's property, including investment accounts and accounts in a
 42             depository institution, rents, and profits; to collect debts; and  to
 43             acquire and dispose of property;
 44             (C)  Imposing  a  civil  penalty  not  to exceed ten thousand dollars
 45             ($10,000) for each violation; an order of rescission, restitution, or
 46             disgorgement directed to a person that has engaged in an  act,  prac-
 47             tice,  or course of business constituting a violation of this chapter
 48             or the predecessor act or a rule adopted or  an  order  issued  under
 49             this chapter or the predecessor act; and
 50             (D)  Ordering  the  payment of prejudgment and postjudgment interest;
 51             or
 52        (3)  Order such other relief as the court considers appropriate.
 53        (c)  No bond required. The administrator shall not be required to  post  a
 54    bond in an action or proceeding under this chapter.
                                                                        
                                           46
                                                                        
  1        30-14-604.  ADMINISTRATIVE  ENFORCEMENT.  (a)  Issuance  of  an  order  or
  2    notice.  If  the administrator determines that a person has engaged, is engag-
  3    ing, or is about to engage in an act, practice, or course of business  consti-
  4    tuting  a violation of this chapter or a rule adopted or an order issued under
  5    this chapter or that a person has materially aided, is materially  aiding,  or
  6    is  about to materially aid an act, practice, or course of business constitut-
  7    ing a violation of this chapter or a rule adopted or  an  order  issued  under
  8    this chapter, the administrator may:
  9        (1)  Issue an order directing the person to cease and desist from engaging
 10        in the act, practice, or course of business or to take other action neces-
 11        sary or appropriate to comply with this chapter;
 12        (2)  Issue  an  order  denying,  suspending, revoking, or conditioning the
 13        exemptions for a broker-dealer under section  30-14-401(b)(1)(D)  or  (F),
 14        Idaho  Code,  or  an  investment adviser under section 30-14-403(b)(1)(C),
 15        Idaho Code; or
 16        (3)  Issue an order under section 30-14-204, Idaho Code.
 17        (b)  Summary process. An order under subsection (a)  of  this  section  is
 18    effective on the date of issuance. Upon issuance of the order, the administra-
 19    tor  shall  promptly serve each person subject to the order with a copy of the
 20    order and a notice that the order has been entered. The order must  include  a
 21    statement  whether the administrator will seek a civil penalty or costs of the
 22    investigation, a statement of the reasons for  the  order,  and  notice  that,
 23    within  fifteen (15) days after receipt of a request in a record from the per-
 24    son, the matter will be scheduled for a hearing. If a person  subject  to  the
 25    order  does  not  request  a  hearing and none is ordered by the administrator
 26    within thirty (30) days after the date of service of  the  order,  the  order,
 27    which  may  include  a  civil penalty or costs of the investigation if a civil
 28    penalty or costs were sought in the statement accompanying the order,  becomes
 29    final  as  to  that  person  by operation of law. If a hearing is requested or
 30    ordered, the administrator, after notice of and  opportunity  for  hearing  to
 31    each  person subject to the order, may modify or vacate the order or extend it
 32    until final determination.
 33        (c)  Procedure for final order. If a hearing is requested or ordered  pur-
 34    suant  to  subsection  (b) of this section, a hearing must be held pursuant to
 35    chapter 52, title 67, Idaho Code. A final order may not be issued  unless  the
 36    administrator makes findings of fact and conclusions of law in a record pursu-
 37    ant  to  chapter  52,  title  67,  Idaho Code. The final order may make final,
 38    vacate, or modify the order issued under subsection (a) of this section.
 39        (d)  Civil penalty. In a final order under subsection (c) of this section,
 40    the administrator may impose a civil penalty not to exceed five thousand  dol-
 41    lars ($5,000) for each violation.
 42        (e)  Costs. In a final order, the administrator may charge the actual cost
 43    of  an  investigation  or proceeding for a violation of this chapter or a rule
 44    adopted or an order issued under this chapter.
 45        (f)  Filing of certified final order with court -- Effect of filing. If  a
 46    petition  for judicial review of a final order is not filed in accordance with
 47    section 30-14-609, Idaho Code, the administrator may file a certified copy  of
 48    the final order with the clerk of a court of competent jurisdiction. The order
 49    so  filed  has the same effect as a judgment of the court and may be recorded,
 50    enforced, or satisfied in the same manner as a judgment of the court.
 51        (g)  Enforcement by court -- Further civil penalty. If a person  does  not
 52    comply  with  an  order  under  this section, the administrator may petition a
 53    court of competent jurisdiction to  enforce  the  order.  The  court  may  not
 54    require the administrator to post a bond in an action or proceeding under this
 55    section.  If  the court finds, after service and opportunity for hearing, that
                                                                        
                                           47
                                                                        
  1    the person was not in compliance with the order, the  court  may  adjudge  the
  2    person  in  civil  contempt of the order. The court may impose a further civil
  3    penalty against the person for contempt in an amount not less than  five  hun-
  4    dred  dollars  ($500) but not greater than five thousand dollars  ($5,000) for
  5    each violation and may grant any other relief the court determines is just and
  6    proper in the circumstances.
                                                                        
  7        30-14-605.  RULES, FORMS, ORDERS, INTERPRETATIVE OPINIONS,  AND  HEARINGS.
  8    (a) Issuance and adoption of forms, orders, and rules. The administrator may:
  9        (1)  Issue  forms  and orders and, after notice and comment, may adopt and
 10        amend rules necessary or appropriate to carry out  this  chapter  and  may
 11        repeal rules, including rules and forms governing registration statements,
 12        applications, notice filings, reports, and other records;
 13        (2)  By  rule, define terms, whether or not used in this chapter but those
 14        definitions may not be inconsistent with this chapter; and
 15        (3)  By rule, classify securities, persons,  and  transactions  and  adopt
 16        different requirements for different classes.
 17        (b)  Findings  and cooperation. Under this chapter, a rule or form may not
 18    be adopted or amended, or an order issued or amended, unless the administrator
 19    finds that the rule, form, order, or amendment is necessary or appropriate  in
 20    the  public interest or for the protection of investors and is consistent with
 21    the purposes intended by this chapter. In adopting,  amending,  and  repealing
 22    rules  and  forms,  section 30-14-608, Idaho Code, applies in order to achieve
 23    uniformity among the states and coordination with federal laws in the form and
 24    content of registration statements, applications, reports, and other  records,
 25    including the adoption of uniform rules, forms, and procedures.
 26        (c)  Financial  statements.  Subject  to  section  15(h) of the securities
 27    exchange act and section 222 of the  investment  advisers  act  of  1940,  the
 28    administrator  may require that a financial statement filed under this chapter
 29    be prepared in accordance with generally accepted accounting principles in the
 30    United States and comply with other requirements specified by rule adopted  or
 31    an  order  issued  under this chapter. A rule adopted or an order issued under
 32    this chapter may establish:
 33        (1)  Subject to section 15(h) of the securities exchange act  and  section
 34        222 of the investment advisors act of 1940, the form and content of finan-
 35        cial statements required under this chapter;
 36        (2)  Whether unconsolidated financial statements must be filed; and
 37        (3)  Whether  required financial statements must be audited by an indepen-
 38        dent certified public accountant.
 39        (d)  Interpretative opinions. The administrator may provide interpretative
 40    opinions or issue determinations that the administrator will not  institute  a
 41    proceeding  or  an  action  under  this chapter against a specified person for
 42    engaging in a specified act, practice, or course of business if the determina-
 43    tion is consistent with this chapter. A rule adopted or an order issued  under
 44    this  chapter may establish a reasonable charge for interpretative opinions or
 45    determinations that the administrator will not institute an action or  a  pro-
 46    ceeding under this chapter.
 47        (e)  Effect of compliance. A penalty under this chapter may not be imposed
 48    for,  and  liability does not arise from conduct that is engaged in or omitted
 49    in good faith believing it conforms to a rule, form, or order of the  adminis-
 50    trator under this chapter.
 51        (f)  Presumption  for public hearings. A hearing in an administrative pro-
 52    ceeding under this chapter must be conducted in public unless the  administra-
 53    tor  for  good  cause consistent with this chapter determines that the hearing
 54    will not be so conducted.
                                                                        
                                           48
                                                                        
  1        30-14-606.  ADMINISTRATIVE FILES AND OPINIONS. (a) Public register of fil-
  2    ings. The administrator shall maintain, or designate a person to  maintain,  a
  3    register  of  applications for registration of securities; registration state-
  4    ments;  notice  filings;  applications  for  registration  of  broker-dealers,
  5    agents, investment advisers, and investment  adviser  representatives;  notice
  6    filings by federal covered investment advisers that are or have been effective
  7    under this chapter or the predecessor act; notices of claims of exemption from
  8    registration  or  notice  filing  requirements  contained  in a record; orders
  9    issued under this chapter or the predecessor act; and interpretative  opinions
 10    or no action determinations issued under this chapter.
 11        (b)  Public  availability.  The administrator shall make all rules, forms,
 12    interpretative opinions, and orders available to the public.
 13        (c)  Copies of public records. The administrator shall furnish a copy of a
 14    record that is a public record or a certification that the public record  does
 15    not  exist to a person that so requests. A rule adopted under this chapter may
 16    establish a reasonable charge for furnishing the record  or  certification.  A
 17    copy  of  the  record  certified  or  a  certificate by the administrator of a
 18    record's nonexistence is prima facie evidence of a record or its nonexistence.
                                                                        
 19        30-14-607.  PUBLIC RECORDS -- CONFIDENTIALITY. (a) Presumption  of  public
 20    records.  Except  as  otherwise  provided  in  subsection (b) of this section,
 21    records obtained by the administrator or filed under this chapter, including a
 22    record contained in or  filed  with  a  registration  statement,  application,
 23    notice  filing,  or  report,  are  public records and are available for public
 24    examination.
 25        (b)  Nonpublic records. Records as set  forth  in  section  9-340H,  Idaho
 26    Code,  are  not  public  records  and are not available for public examination
 27    under subsection (a) of this section.
 28        (c)  Administrator discretion to disclose. If disclosure is for  the  pur-
 29    pose  of  a  civil, administrative, or criminal investigation, action, or pro-
 30    ceeding or to a person specified in  section  30-14-608(a),  Idaho  Code,  the
 31    administrator  may  disclose  a record obtained in connection with an audit or
 32    inspection under section 30-14-411(d), Idaho Code, or  a  record  obtained  in
 33    connection with an investigation under section 30-14-602, Idaho Code.
                                                                        
 34        30-14-608.  UNIFORMITY  AND COOPERATION WITH OTHER AGENCIES. (a) Objective
 35    of uniformity. The administrator shall, in its discretion, cooperate,  coordi-
 36    nate,  consult,  and,  subject to section 30-14-607, Idaho Code, share records
 37    and information with the securities regulator  of  another  state,  Canada,  a
 38    Canadian  province  or  territory,  a foreign jurisdiction, the securities and
 39    exchange commission, the United States department of  justice,  the  commodity
 40    futures  trading  commission,  the  federal  trade  commission, the securities
 41    investor protection corporation, a self-regulatory organization, a national or
 42    international organization of securities regulators, a federal or state  bank-
 43    ing  or  insurance regulator, and a governmental law enforcement or regulatory
 44    agency to effectuate greater uniformity in securities matters among  the  fed-
 45    eral  government,  self-regulatory  organizations, states, and foreign govern-
 46    ments.
 47        (b)  Policies to consider. In cooperating, coordinating,  consulting,  and
 48    sharing  records  and  information  under  this section and in acting by rule,
 49    order,  or  waiver  under  this  chapter,  the  administrator  shall,  in  the
 50    administrator's discretion, take into consideration in carrying out the public
 51    interest the following general policies:
 52        (1)  Maximizing effectiveness of regulation for the protection  of  inves-
 53        tors;
                                                                        
                                           49
                                                                        
  1        (2)  Maximizing uniformity in federal and state regulatory standards; and
  2        (3)  Minimizing  burdens  on  the  business  of capital formation, without
  3        adversely affecting essentials of investor protection.
  4        (c)  Subjects for cooperation. The  cooperation,  coordination,  consulta-
  5    tion,  and  sharing  of  records  and  information  authorized by this section
  6    include:
  7        (1)  Establishing or employing one (1) or  more  designees  as  a  central
  8        depository  for registration and notice filings under this chapter and for
  9        records required or allowed to be maintained under this chapter;
 10        (2)  Developing and maintaining uniform forms;
 11        (3)  Conducting a joint examination or investigation;
 12        (4)  Holding a joint administrative hearing;
 13        (5)  Instituting and prosecuting a joint civil or administrative  proceed-
 14        ing;
 15        (6)  Sharing and exchanging personnel;
 16        (7)  Coordinating  registrations  under section 30-14-301, Idaho Code, and
 17        sections 30-14-401 through 30-14-404, Idaho  Code,  and  exemptions  under
 18        section 30-14-203, Idaho Code;
 19        (8)  Sharing  and  exchanging records, subject to section 30-14-607, Idaho
 20        Code;
 21        (9)  Formulating rules,  statements  of  policy,  guidelines,  forms,  and
 22        interpretative opinions and releases;
 23        (10) Formulating common systems and procedures;
 24        (11) Notifying  the public of proposed rules, forms, statements of policy,
 25        and guidelines;
 26        (12) Attending conferences and other meetings among securities regulators,
 27        which may include representatives of governmental and private sector orga-
 28        nizations involved in capital formation, deemed necessary  or  appropriate
 29        to promote or achieve uniformity; and
 30        (13) Developing  and maintaining a uniform exemption from registration for
 31        small issuers, and taking other steps to  reduce  the  burden  of  raising
 32        investment capital by small businesses.
                                                                        
 33        30-14-609.  JUDICIAL  REVIEW.  Judicial  review  of  orders. A final order
 34    issued by the administrator under this chapter is subject to  judicial  review
 35    in accordance with chapter 52, title 67, Idaho Code.
                                                                        
 36        30-14-610.  JURISDICTION.   (a)   Sales   and  offers  to  sell.  Sections
 37    30-14-301, 30-14-302, 30-14-401(a), 30-14-402(a), 30-14-403(a),  30-14-404(a),
 38    30-14-501,  30-14-506,  30-14-509 and 30-14-510, Idaho Code, do not apply to a
 39    person that sells or offers to sell a security unless the offer to sell or the
 40    sale is made in this state or the offer to purchase or the  purchase  is  made
 41    and accepted in this state.
 42        (b)  Purchases    and   offers   to   purchase.   Sections   30-14-401(a),
 43    30-14-402(a), 30-14-403(a), 30-14-404(a), 30-14-501, 30-14-506, 30-14-509  and
 44    30-14-510,  Idaho  Code,  do not apply to a person that purchases or offers to
 45    purchase a security unless the offer to purchase or the purchase  is  made  in
 46    this  state  or  the  offer  to  sell or the sale is made and accepted in this
 47    state.
 48        (c)  Offers in this state. For the purpose of this section,  an  offer  to
 49    sell  or  to  purchase a security is made in this state, whether or not either
 50    party is then present in this state, if the offer:
 51        (1)  Originates from within this state; or
 52        (2)  Is directed by the offeror to a place in this state and  received  at
 53        the place to which it is directed.
                                                                        
                                           50
                                                                        
  1        (d)  Acceptances  in this state. For the purpose of this section, an offer
  2    to purchase or to sell is accepted in this state, whether or not either  party
  3    is then present in this state, if the acceptance:
  4        (1)  Is  communicated to the offeror in this state and the offeree reason-
  5        ably believes the offeror to be present in this state and  the  acceptance
  6        is received at the place in this state to which it is directed; and
  7        (2)  Has  not  previously been communicated to the offeror, orally or in a
  8        record, outside this state.
  9        (e)  Publications, radio, television,  or  electronic  communications.  An
 10    offer to sell or to purchase is not made in this state when a publisher circu-
 11    lates  or  there  is circulated on the publisher's behalf in this state a bona
 12    fide newspaper or other publication of general, regular, and paid  circulation
 13    that  is  not  published in this state, or that is published in this state but
 14    has had more than two-thirds (2/3) of its circulation outside this state  dur-
 15    ing  the  previous twelve (12) months or when a radio or television program or
 16    other electronic communication originating outside this state is  received  in
 17    this  state.  A radio or television program, or other electronic communication
 18    is considered as having originated in this state if either the broadcast  stu-
 19    dio  or  the  originating  source  of  transmission  is located in this state,
 20    unless:
 21        (1)  The program or communication is syndicated and distributed from  out-
 22        side this state for redistribution to the general public in this state;
 23        (2)  The  program  or communication is supplied by a radio, television, or
 24        other electronic network with the electronic signal originating from  out-
 25        side this state for redistribution to the general public in this state;
 26        (3)  The  program  or  communication  is  an electronic communication that
 27        originates outside this state and is captured for  redistribution  to  the
 28        general public in this state by a community antenna or cable, radio, cable
 29        television, or other electronic system; or
 30        (4)  The  program or communication consists of an electronic communication
 31        that originates in this state, but which is not intended for  distribution
 32        to the general public in this state.
 33        (f)  Investment  advice  and  misrepresentations.  Sections  30-14-403(a),
 34    30-14-404(a),  30-14-405(a),  30-14-502,  30-14-505 and 30-14-506, Idaho Code,
 35    apply to a person if the person engages in an  act,  practice,  or  course  of
 36    business  instrumental  in  effecting prohibited or actionable conduct in this
 37    state, whether or not either party is then present in this state.
                                                                        
 38        30-14-611.  SERVICE OF PROCESS. (a) Signed consent to service of  process.
 39    From September 1, 2004, through June 30, 2005, all persons applying for regis-
 40    tration  or  making a notice filing shall submit to the administrator a signed
 41    consent to service of process. A  consent  appointing  the  administrator  the
 42    person's  agent  for  service of process in a noncriminal action or proceeding
 43    against the person, or the person's successor or personal representative under
 44    this chapter or a rule adopted or an order issued under this chapter after the
 45    consent is filed, has the same force and validity as if the service were  made
 46    personally  on  the person filing the consent. From July 1, 2005, and thereaf-
 47    ter, registrants shall be required to submit a consent to service  of  process
 48    only if there has been a material change.
 49        (b)  Conduct  constituting  appointment of agent for service. If a person,
 50    including a nonresident of this state, engages in an act, practice, or  course
 51    of business prohibited or made actionable by this chapter or a rule adopted or
 52    an  order  issued under this chapter and the person has not filed a consent to
 53    service of process under subsection (a) of this section, the act, practice, or
 54    course of business constitutes the appointment of  the  administrator  as  the
                                                                        
                                           51
                                                                        
  1    person's  agent  for  service of process in a noncriminal action or proceeding
  2    against the person or the person's successor or personal representative.
  3        (c)  Procedure for service of process. Service under subsection (a) or (b)
  4    of this section may be made by providing a copy of the process to  the  office
  5    of the administrator, but it is not effective unless:
  6        (1)  The  plaintiff, which may be the administrator, promptly sends notice
  7        of the service and a copy of the process, return receipt requested, to the
  8        defendant or respondent at the address set forth in the consent to service
  9        of process or, if a consent to service of process has not been  filed,  at
 10        the  last  known  address, or takes other reasonable steps to give notice;
 11        and
 12        (2)  The plaintiff files an affidavit of compliance with  this  subsection
 13        in the action or proceeding on or before the return day of the process, if
 14        any, or within the time that the court, or the administrator in a proceed-
 15        ing before the administrator, allows.
 16        (d)  Service in administrative proceedings or civil actions by administra-
 17    tor.  Service pursuant to subsection (c) of this section may be used in a pro-
 18    ceeding before the administrator or by the administrator in a civil action  in
 19    which the administrator is the moving party.
 20        (e)  Opportunity  to  defend. If process is served under subsection (c) of
 21    this section, the court, or the  administrator  in  a  proceeding  before  the
 22    administrator,  shall  order  continuances  as are necessary or appropriate to
 23    afford the defendant or respondent reasonable opportunity to defend.
                                                                        
 24        30-14-612.  SEVERABILITY CLAUSE. If any provision of this chapter  or  its
 25    application to any person or circumstance is held invalid, the invalidity does
 26    not  affect  other  provisions  or  applications of this act that can be given
 27    effect without the invalid provision or application, and to this end the  pro-
 28    visions of this act are severable.
                                                                        
 29                                       PART 7.
 30                                      TRANSITION
                                                                        
 31        30-14-701.  EFFECTIVE DATE. This act takes effect on September 1, 2004.
                                                                        
 32        30-14-702.  REPEALS.  The following chapter is repealed: The Idaho securi-
 33    ties act, chapter 14, title 30, Idaho Code.
                                                                        
 34        30-14-703.  APPLICATION OF CHAPTER TO  EXISTING  PROCEEDING  AND  EXISTING
 35    RIGHTS AND DUTIES. (a) Applicability of predecessor act to pending proceedings
 36    and  existing  rights.  The predecessor act exclusively governs all actions or
 37    proceedings that are pending on the effective date  of  this  act  or  may  be
 38    instituted on the basis of conduct occurring before the effective date of this
 39    act,  but  a civil action may not be maintained to enforce any liability under
 40    the predecessor act unless instituted within any  period  of  limitation  that
 41    applied  when  the  cause of action accrued or within five (5) years after the
 42    effective date of this act, whichever is earlier.
 43        (b)  Continued effectiveness under predecessor act. All  effective  regis-
 44    trations  under the predecessor act, all administrative orders relating to the
 45    registrations, rules, statements of policy, interpretative opinions,  declara-
 46    tory  rulings,  no action determinations, and conditions imposed on the regis-
 47    trations under the predecessor act remain in  effect  while  they  would  have
 48    remained  in  effect  if this act had not been enacted. They are considered to
 49    have been filed, issued, or imposed under this act, but are  exclusively  gov-
 50    erned by the predecessor act.
                                                                        
                                           52
                                                                        
  1        (c)  Applicability  of predecessor act to offers or sales. The predecessor
  2    act exclusively applies to an offer or sale made within one (1) year after the
  3    effective date of this act pursuant to an offering made in good  faith  before
  4    the  effective  date  of this act on the basis of an exemption available under
  5    the predecessor act.
                                                                        
  6        SECTION 3.  That Chapter 3, Title 9, Idaho  Code,  be,  and  the  same  is
  7    hereby  amended by the addition thereto of a NEW SECTION, to be known and des-
  8    ignated as Section 9-340H, Idaho Code, and to read as follows:
                                                                        
  9        9-340H.  EXEMPTION FROM DISCLOSURE -- RECORDS RELATED TO THE UNIFORM SECU-
 10    RITIES ACT. Except as otherwise determined by the director of  the  department
 11    of finance pursuant to section 30-14-607(c), Idaho Code, the following records
 12    are exempt from disclosure:
 13        (1)  A  record  obtained  or  created by the director of the department of
 14    finance or a representative of the director in connection  with  an  audit  or
 15    inspection  under  section 30-14-411(d), Idaho Code, or an investigation under
 16    section 30-14-602, Idaho Code;
 17        (2)  A part of a record filed in connection with a registration  statement
 18    under section 30-14-301, Idaho Code, and sections 30-14-303 through 30-14-305,
 19    Idaho  Code, or a record under section 30-14-411(d), Idaho Code, that contains
 20    trade secrets or confidential information if the person filing  the  registra-
 21    tion  statement or report has asserted a claim of confidentiality or privilege
 22    that is authorized by law;
 23        (3)  A record that is not required to be provided to the director  of  the
 24    department  of finance or filed under chapter 14, title 30, Idaho Code, and is
 25    provided to the director only on the condition that the  record  will  not  be
 26    subject to public examination or disclosure;
 27        (4)  A  nonpublic  record  received  from  a  person  specified in section
 28    30-14-608(a), Idaho Code; and
 29        (5)  Any social security number, residential  address  unless  used  as  a
 30    business  address,  and residential telephone number unless used as a business
 31    telephone number, contained in a record that is filed pursuant to chapter  14,
 32    title 30, Idaho Code.
                                                                        
 33        SECTION  4.  That  Section 18-7803, Idaho Code, be, and the same is hereby
 34    amended to read as follows:
                                                                        
 35        18-7803.  DEFINITIONS. As used in this chapter, (a)  "Racketeering"  means
 36    any  act which is chargeable or indictable under the following sections of the
 37    Idaho Code or which are equivalent acts chargeable or indictable as equivalent
 38    crimes under the laws of any other jurisdiction:
 39        (1)  Homicide (section 18-4001, Idaho Code);
 40        (2)  Robbery, burglary, theft, forgery, counterfeiting, and related crimes
 41        (sections 18-1401, 18-1405, 18-2403, 18-2407, 18-3123,  18-3124,  18-3125,
 42        18-3601,  18-3602,  18-3603,  18-3605, 18-3606, 18-3607, 18-3609, 18-3610,
 43        18-3614, 18-3615, 18-3618, 18-4630, 18-6501 and 49-518, Idaho Code);
 44        (3)  Kidnapping (section 18-4501, Idaho Code);
 45        (4)  Prostitution (sections 18-5601, 18-5602, 18-5603,  18-5604,  18-5605,
 46        18-5606, 18-5608 and 18-5609, Idaho Code);
 47        (5)  Arson  (sections  18-801,  18-802,  18-803,  18-804 and 18-805, Idaho
 48        Code);
 49        (6)  Assault (sections 18-908 and 18-4015, Idaho Code);
 50        (7)  Lotteries and gambling (sections 18-3801, 18-3802, 18-3809,  18-4902,
 51        18-4903, 18-4904, 18-4905, 18-4906 and 18-4908, Idaho Code);
                                                                        
                                           53
                                                                        
  1        (8)  Indecency   and   obscenity   (sections  18-1515,  18-1518,  18-4103,
  2        18-4103A, 18-4104, 18-4105, 18-4105A and 18-4107, Idaho Code);
  3        (9)  Poisoning (sections 18-4014 and 18-5501, Idaho Code);
  4        (10) Fraudulent practices, false  pretenses,  insurance  fraud,  financial
  5        transaction  card  crimes  and fraud generally (sections 18-2403, 18-2706,
  6        18-3002, 18-3101, 18-3124, 18-3125, 18-3126, 18-6713, 41-293,  41-294  and
  7        41-1306, Idaho Code);
  8        (11) Alcoholic beverages (sections 23-602, 23-606, 23-610, 23-703, 23-905,
  9        23-914, 23-928, 23-934 and 23-938, Idaho Code);
 10        (12) Cigarette taxes (sections 63-2505 and 63-2512(b), Idaho Code);
 11        (13) Securities  (sections  30-1403,  30-1403A, 30-1404, 30-1405, 30-1406,
 12        30-1438 30-14-401, 30-14-402, 30-14-403, 30-14-404, 30-14-501,  30-14-502,
 13        30-14-505 and 30-1439 30-14-506, Idaho Code);
 14        (14) Horseracing (section 54-2512, Idaho Code);
 15        (15) Interest  and  usurious  practices (sections 28-45-401 and 28-45-402,
 16        Idaho Code);
 17        (16) Corporations (sections 18-1901, 18-1902, 18-1903,  18-1904,  18-1905,
 18        18-1906 and 30-1510, Idaho Code);
 19        (17) Perjury (sections 18-5401 and 18-5410, Idaho Code);
 20        (18) Bribery  and  corrupt  influence (sections 18-1352 and 18-1353, Idaho
 21        Code);
 22        (19) Controlled substances (sections 37-2732(a), (b), (c),  (e)  and  (f),
 23        37-2732B, 37-2734 and 37-2734B, Idaho Code);
 24        (20) Motor  vehicles  (sections  49-228,  49-231, 49-232 and 49-518, Idaho
 25        Code);
 26        (21) Terrorism (section 18-8103, Idaho Code).
 27        (b)  "Person" means any individual or entity capable of holding a legal or
 28    beneficial interest in property;
 29        (c)  "Enterprise" means any sole proprietorship, partnership, corporation,
 30    business, labor union, association or other legal entity or any group of indi-
 31    viduals associated in fact although not a legal entity, and  includes  illicit
 32    as well as licit entities; and
 33        (d)  "Pattern of racketeering activity" means engaging in at least two (2)
 34    incidents  of  racketeering  conduct  that  have  the same or similar intents,
 35    results, accomplices, victims or  methods  of  commission,  or  otherwise  are
 36    interrelated by distinguishing characteristics and are not isolated incidents,
 37    provided  at least one (1) of such incidents occurred after the effective date
 38    of this act and that the last of such incidents occurred within five (5) years
 39    after a prior incident of racketeering conduct.
                                                                        
 40        SECTION 5.  That Section 39-1452, Idaho Code, be, and the same  is  hereby
 41    amended to read as follows:
                                                                        
 42        39-1452.  EXEMPTION  FROM  TAXATION  --  SECURITIES  LAW. The authority is
 43    hereby declared to be performing a public function for the benefit of the peo-
 44    ple of the state for the improvement of their health and living conditions and
 45    to be a public instrumentality of the state. Accordingly, the income or  other
 46    revenues of the authority, and all properties at any time owned by the author-
 47    ity,  and  any bonds, notes, or other obligations issued under this act, their
 48    transfer and income therefrom, including any profit made on the sale  thereof,
 49    shall  be  exempt  at all times from all taxation in the state of Idaho. Also,
 50    bonds issued  by  the  authority  shall  be  exempt  from  the  Idaho  uniform
 51    Ssecurities Aact, chapter 14, title 30, Idaho Code, or any amendments thereto.
                                                                        
 52        SECTION  6.  That  Section 41-1004, Idaho Code, be, and the same is hereby
                                                                        
                                           54
                                                                        
  1    amended to read as follows:
                                                                        
  2        41-1004.  LICENSE REQUIRED. (1) A person shall not sell, solicit or  nego-
  3    tiate insurance in this state for any class or classes of insurance unless the
  4    person is licensed as a producer for that line of authority in accordance with
  5    this chapter.
  6        (2)  A person shall not, for a fee, engage in the business of offering any
  7    advice,  counsel,  opinion or service with respect to the benefits, advantages
  8    or disadvantages under any policy of insurance that could be issued  in  Idaho
  9    unless that person is:
 10        (a)  A  licensed  insurance producer offering advice concerning a class of
 11        insurance as to which the producer is licensed  to  transact  business  in
 12        this state;
 13        (b)  An attorney rendering services in the performance of the duties of an
 14        attorney;
 15        (c)  A  certified  public accountant rendering services in the performance
 16        of the duties of a certified public accountant, as authorized by law;
 17        (d)  An actuary rendering actuarial services if such actuary is  a  member
 18        of  an  organization  determined by the director as establishing standards
 19        for the actuarial profession;
 20        (e)  A person providing services to producers or authorized insurers only;
 21        (f)  A person rendering services as an expert pursuant to the Idaho  rules
 22        of evidence; or
 23        (g)  An   investment   adviser,   investment   adviser  representative  or
 24        federally-covered  investment  adviser  as  defined  in  section   30-1402
 25        30-14-102, Idaho Code.
                                                                        
 26        SECTION  7.  That  Section 41-3821, Idaho Code, be, and the same is hereby
 27    amended to read as follows:
                                                                        
 28        41-3821.  MUTUAL INSURANCE HOLDING COMPANIES.
 29        (1)  (a) A domestic mutual insurer, upon approval  of  the  director,  may
 30        reorganize    by  forming an insurance holding company system, "the mutual
 31        insurance holding company," based upon a mutual plan  and  continuing  the
 32        corporate  existence  of  the reorganizing insurer as a stock insurer. The
 33        director, after a public hearing as provided  in  section  41-3805,  Idaho
 34        Code,  if  satisfied  that the interests of the policyholders are properly
 35        protected and that the plan of reorganization is fair and equitable to the
 36        policyholders, may approve the proposed plan  of  reorganization  and  may
 37        require as a condition of approval such modifications of the proposed plan
 38        of  reorganization  as  the director finds necessary for the protection of
 39        the policyholders' interests. The director may retain consultants as  pro-
 40        vided in section 41-3805(4), Idaho Code. A reorganization pursuant to this
 41        subsection  is  subject  to  sections 41-3802 and 41-3803, Idaho Code. The
 42        director shall retain jurisdiction over a mutual insurance holding company
 43        organized pursuant to this section to assure that  policyholder  interests
 44        are protected.
 45        (b)  All  of  the  initial  shares of the capital stock of the reorganized
 46        insurer shall be issued to the mutual insurance holding company. The  mem-
 47        bership  interests  of  the policyholders of the reorganized insurer shall
 48        become membership interests in the mutual insurance holding company. Poli-
 49        cyholders of the reorganized insurer shall be members of the mutual insur-
 50        ance holding company in accordance with the articles of incorporation  and
 51        bylaws of the mutual insurance holding company. The mutual insurance hold-
 52        ing  company shall at all times own a majority of the voting shares of the
                                                                        
                                           55
                                                                        
  1        capital stock of the reorganized insurer.
  2        (2)  (a) A domestic mutual insurer, upon the approval of the director, may
  3        reorganize by merging  its  policyholders'  membership  interests  into  a
  4        mutual insurance holding company formed pursuant to subsection (1) of this
  5        section and continuing the corporate existence of the reorganizing insurer
  6        as a stock insurer subsidiary of the mutual insurance holding company. The
  7        director,  after  a  public  hearing as provided in section 41-3805, Idaho
  8        Code, if satisfied that the interests of the  policyholders  are  properly
  9        protected  and that the merger is fair and equitable to the policyholders,
 10        may approve the proposed merger and may require as a condition of approval
 11        such modifications of the proposed merger as the director finds  necessary
 12        for  the  protection  of  the  policyholders'  interests. The director may
 13        retain consultants as provided in section 41-3805(4), Idaho Code. A merger
 14        pursuant to this subsection is subject to sections  41-3802  and  41-3803,
 15        Idaho  Code. The director shall retain jurisdiction over the mutual insur-
 16        ance holding company organized pursuant to this  section  to  assure  that
 17        policyholder interests are protected.
 18        (b)  All  of  the  initial  shares of the capital stock of the reorganized
 19        insurer shall be issued to the mutual insurance holding company. The  mem-
 20        bership  interests  of the policyholders of the reorganized insurance com-
 21        pany shall become membership interests in  the  mutual  insurance  holding
 22        company.  Policyholders of the reorganized insurer shall be members of the
 23        mutual insurance holding company in accordance with the articles of incor-
 24        poration and bylaws of the mutual insurance holding  company.  The  mutual
 25        insurance  holding company shall at all times own a majority of the voting
 26        shares of the capital stock of the reorganized insurer. A merger of  poli-
 27        cyholders'  membership  interests in a mutual insurer into a mutual insur-
 28        ance holding company shall be deemed to be a merger of insurance companies
 29        pursuant to section 41-2857, Idaho Code, and section 41-2857, Idaho  Code,
 30        is also applicable.
 31        (c)  A  foreign  mutual  insurer, which if a domestic corporation would be
 32        organized  under chapter 3, title 41, Idaho Code, may reorganize upon  the
 33        approval  of  the  director and in compliance with the requirements of any
 34        law or rule which is applicable to the foreign mutual insurer  by  merging
 35        its  policyholders'  membership  interests into a mutual insurance holding
 36        company formed pursuant to subsection (1) of this section  and  continuing
 37        the  corporate  existence  of the reorganizing foreign mutual insurer as a
 38        foreign stock insurer subsidiary of the mutual insurance holding  company.
 39        The director, after a public hearing as provided in section 41-3805, Idaho
 40        Code, may approve the proposed merger. The director may retain consultants
 41        as  provided  in section 41-3805(4), Idaho Code. A merger pursuant to this
 42        paragraph is subject to sections 41-3802  and  41-3803,  Idaho  Code.  The
 43        reorganizing  foreign  mutual insurer may remain a foreign company or for-
 44        eign corporation after the merger, and may be admitted to do  business  in
 45        this state. A foreign mutual insurer which is a party to the merger may at
 46        the same time redomesticate in this state by complying with the applicable
 47        requirements  of  this  state and its state of domicile. The provisions of
 48        subsection (2)(b) shall apply to a merger authorized under this paragraph.
 49        (3)  A mutual insurance holding company resulting from the  reorganization
 50    of  a domestic mutual insurer organized under chapter 1, title 30, Idaho Code,
 51    shall be incorporated pursuant to  chapter  1,  title  30,  Idaho  Code.  This
 52    requirement shall supersede any conflicting provisions of chapter 1, title 30,
 53    Idaho  Code. The articles of incorporation and any amendments to such articles
 54    of the mutual insurance holding company shall be subject to  approval  of  the
 55    director in the same manner as those of an insurance company.
                                                                        
                                           56
                                                                        
  1        (4)  A mutual insurance holding company is deemed to be an insurer subject
  2    to chapter 33, title 41, Idaho Code, and shall automatically be a party to any
  3    proceeding  under chapter 33, title 41, Idaho Code, involving an insurer which
  4    as a result of a reorganization pursuant to subsection (1) or (2) of this sec-
  5    tion is a subsidiary of the mutual insurance holding company. In any  proceed-
  6    ing under chapter 33, title 41, Idaho Code, involving the reorganized insurer,
  7    the  assets of the mutual insurance holding company are deemed to be assets of
  8    the estate of the reorganized insurer for purposes of satisfying the claims of
  9    the reorganized insurer's policyholders. A mutual  insurance  holding  company
 10    shall  not  dissolve  or  liquidate without the approval of the director or as
 11    ordered by the district court pursuant to chapter 33, title 41, Idaho Code.
 12        (5)  (a) Section 41-2855, Idaho Code, is not applicable to  a  reorganiza-
 13        tion or merger pursuant to this section.
 14        (b)  Section  41-2855,  Idaho  Code, is applicable to demutualization of a
 15        mutual insurance holding company which resulted from the reorganization of
 16        a domestic mutual insurer organized under chapter 3, title 41, Idaho Code,
 17        as if it were a mutual life insurer.
 18        (6)  A membership interest in a domestic mutual insurance holding  company
 19    shall   not   constitute   a   security  as  defined  in  section  30-1402(12)
 20    30-14-102(28), Idaho Code.
 21        (7)  The majority of the voting shares of the capital stock of the reorga-
 22    nized insurer, which is required by this section to be at all times owned by a
 23    mutual  insurance  holding  company,  shall  not  be  conveyed,   transferred,
 24    assigned,  pledged,  subject  to  a  security interest or lien, encumbered, or
 25    otherwise hypothecated or alienated by the mutual insurance holding company or
 26    intermediate holding company. Any conveyance,  transfer,  assignment,  pledge,
 27    security interest, lien, encumbrance, or hypothecation or alienation of, in or
 28    on  the  majority  of  the  voting  shares of the reorganized insurer which is
 29    required by this section to be at all times owned by a mutual insurance  hold-
 30    ing  company,  is  in  violation of this section and  shall be void in inverse
 31    chronological order of the date  of  such  conveyance,  transfer,  assignment,
 32    pledge,  security interest, lien, encumbrance, or hypothecation or alienation,
 33    as to the shares necessary to constitute a majority of such voting shares. The
 34    majority of the voting shares of the capital stock of the reorganized  insurer
 35    which  is required by this section to be at all times owned by a mutual insur-
 36    ance holding company shall not be subject to execution and levy as provided in
 37    title 11, Idaho Code. The shares of the capital stock of the surviving or  new
 38    company  resulting  from  a merger or consolidation of two (2) or more reorga-
 39    nized insurers or two (2) or more intermediate holding  companies  which  were
 40    subsidiaries  of  the same mutual insurance holding company are subject to the
 41    same requirements, restrictions, and limitations as provided in  this  section
 42    to  which  the  shares of the merging or consolidating reorganized insurers or
 43    intermediate holding companies were subject  by  this  section  prior  to  the
 44    merger or consolidation.
 45        As  used  in  this  section, "majority of the voting shares of the capital
 46    stock of the reorganized insurer" means shares of the  capital  stock  of  the
 47    reorganized  insurer  which  carry  the  right to cast a majority of the votes
 48    entitled to be cast by all of the outstanding shares of the capital  stock  of
 49    the reorganized insurer for the election of directors and on all other matters
 50    submitted to a vote of the shareholders of the reorganized insurer. The owner-
 51    ship  of  a  majority of the voting shares of the capital stock of the reorga-
 52    nized insurer which are required by this section to be at all times owned by a
 53    parent mutual insurance holding company includes  indirect  ownership  through
 54    one  (1)  or  more  intermediate  holding  companies  in a corporate structure
 55    approved by the director. However, indirect ownership through one (1) or  more
                                                                        
                                           57
                                                                        
  1    intermediate  holding companies shall not result in the mutual insurance hold-
  2    ing company owning less than the equivalent of a majority of the voting shares
  3    of the capital stock of the  reorganized  insurer.  The  director  shall  have
  4    jurisdiction  over  an  intermediate  holding  company  as if it were a mutual
  5    insurance holding company.
  6        As used in this section, "intermediate holding company"  means  a  holding
  7    company which is a subsidiary of a mutual insurance holding company, and which
  8    either  directly  or through a subsidiary intermediate holding company has one
  9    (1) or more subsidiary reorganized insurers of which a majority of the  voting
 10    shares of the capital stock would otherwise have been required by this section
 11    to be at all times owned by the mutual insurance holding company.
 12        (8)  It  is  the  intent of the legislature that the formation of a mutual
 13    insurance holding company should not increase the  Idaho  tax  burden  of  the
 14    mutual  insurance holding company system and that a stock insurance subsidiary
 15    shall continue to be subject to Idaho insurance premium taxation  in  lieu  of
 16    all  other  taxes  except  real  property taxes as provided in section 41-405,
 17    Idaho Code. Subject to approval by the director as required under Idaho law, a
 18    stock insurance subsidiary may issue dividends or distributions to the  mutual
 19    insurance  holding company or any intermediate holding company, and such divi-
 20    dends or distributions shall be excluded from the Idaho taxable income of  the
 21    recipients;  provided  however,  that  such  exclusion  shall not apply to the
 22    extent that, in the year preceding the year in which the dividends or  distri-
 23    butions  were  made,  the subsidiary insurer's liability for Idaho premium tax
 24    was less than the amount of Idaho income tax for which the insurer would  have
 25    been liable in such year had the insurer been subject to Idaho income taxation
 26    rather than premium taxation.
                                                                        
 27        SECTION  8.  This  act shall be in full force and effect on and after Sep-
 28    tember 1, 2004.

Statement of Purpose / Fiscal Impact


                     STATEMENT  OF  PURPOSE
                           RS 13517C2
This bill substantially revises and modernizes the laws
governing the regulation of the offer and sale of securities. 
The bill closely tracks the Uniform Securities Act recently
adopted by the National Conference of Commissioners on Uniform
State laws.
    
In its main provisions, the bill:
   
(1)Authorizes the Department of Finance to seek court orders
requiring violators to disgorge illicit profits, pay
restitution and pay into the Securities Investor Education and
Training Fund, which the bill establishes;
(2)Increases criminal penalties in cases of fraud against
elderly and vulnerable adults, and in instances where the
funds taken are retirement or home equity funds;
(3)Requires banks with on-premise brokerage firms to comply
with federal rules
(4)Modernizes, simplifies and broadens exemptions from
securities registration with the state; and
(5)Promotes consistency with other states and the Securities
and Exchange Commission in the definition of "security".
    
    
    
    
    
                          FISCAL  IMPACT
The bill increases some registration and filing fees to make
Idaho's fees more consistent  with the amounts charged by
other states.  This will result in a modest increase to
Department revenues to the extent registration filings
continue at current levels.
    
    
    
    
    
    
CONTACT   
Name:     Marilyn Chastain
Agency:   Department of Finance
Phone:    332-8070
    
Statement of Purpose/Fiscal Impact                S 1277