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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
]]]] 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
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