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S1255.......................................by COMMERCE AND HUMAN RESOURCES SECURITIES - BROKER-DEALER - Amends existing law relating to the Uniform Securities Act to provide recordkeeping requirements for broker-dealer agents, investment advisor representatives and persons issuing securities; and to revise provisions relating to audits and inspections. 01/11 Senate intro - 1st rdg - to printing 01/14 Rpt prt - to Com/HuRes
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-ninth Legislature Second Regular Session - 2008IN THE SENATE SENATE BILL NO. 1255 BY COMMERCE AND HUMAN RESOURCES COMMITTEE 1 AN ACT 2 RELATING TO THE UNIFORM SECURITIES ACT; AMENDING SECTION 30-14-411, IDAHO 3 CODE, TO PROVIDE RECORDKEEPING REQUIREMENTS FOR BROKER-DEALER AGENTS, 4 INVESTMENT ADVISER REPRESENTATIVES, AND PERSONS ISSUING SECURITIES, TO 5 REVISE PROVISIONS RELATING TO AUDITS AND INSPECTIONS AND TO PROVIDE COR- 6 RECT REFERENCES; AMENDING SECTION 9-340H, IDAHO CODE, TO PROVIDE CORRECT 7 CODE REFERENCES; AMENDING SECTIONS 30-14-412 AND 30-14-509, IDAHO CODE, TO 8 PROVIDE CORRECT CODE REFERENCES AND TO MAKE TECHNICAL CORRECTIONS; AND 9 AMENDING SECTION 30-14-607, IDAHO CODE, TO PROVIDE CORRECT CODE REFER- 10 ENCES. 11 Be It Enacted by the Legislature of the State of Idaho: 12 SECTION 1. That Section 30-14-411, Idaho Code, be, and the same is hereby 13 amended to read as follows: 14 30-14-411. POSTREGISTRATION REQUIREMENTS. (a) Financial requirements. 15 Subject to section 15(h) of the securities exchange act of 1934 (15 U.S.C. 16 78o(h)) or section 222 of the investment advisers act of 1940 (15 U.S.C. 17 80b-2218a), a rule adopted or an order issued under this chapter may establish 18 minimum financial requirements for broker-dealers registered or required to be 19 registered under this chapter and investment advisers registered or required 20 to be registered under this chapter. 21 (b) Financial reports. Subject to section 15(h) of the securities 22 exchange act of 1934 (15 U.S.C. 78o(h)) or section 222(b) of the investment 23 advisers act of 1940 (15 U.S.C. 80b-2218a), a broker-dealer registered or 24 required to be registered under this chapter and an investment adviser regis- 25 tered or required to be registered under this chapter shall file such finan- 26 cial reports as are required by a rule adopted or an order issued under this 27 chapter. If the information contained in a record filed under this subsection 28 is or becomes inaccurate or incomplete in a material respect, the registrant 29 shall promptly file a correcting amendment. 30 (c) Recordkeeping -- Broker-dealers and investment advisers. Subject to 31 section 15(h) of the securities exchange act of 1934 (15 U.S.C. 78o(h)) or 32 section 222 of the investment advisers act of 1940 (15 U.S.C. 80b-2218a): 33 (1) A broker-dealer registered or required to be registered under this 34 chapter and an investment adviser registered or required to be registered 35 under this chapter shall make and maintain the accounts, correspondence, 36 memoranda, papers, books and other records required by a rule adopted or 37 an order issued under this chapter; 38 (2) Broker-dealer records required to be maintained under subsection 39 (c)(1) of this section may be maintained in any form of data storage 40 acceptable under section 17(a) of the securities exchange act of 1934 (15 41 U.S.C. 78q(a)) if they are readily accessible to the administrator; and 42 (3) Investment adviser records required to be maintained under subsection 43 (c)(1) of this section may be maintained in any form of data storage 2 1 required by a rule adopted or an order issued under this chapter. 2 (d) Recordkeeping -- Broker-dealer agents and investment adviser repre- 3 sentatives. Any records of the type described or referred to in subsection (c) 4 of this section, which pertain to the operation, management or business con- 5 ducted at the place of business of a broker-dealer agent or investment adviser 6 representative registered or required to be registered under this chapter, 7 which such agent or representative makes or maintains in addition to those 8 made or maintained by the broker-dealer or investment adviser in accordance 9 with subsection (c) of this section, shall be maintained at the place of busi- 10 ness of such agent or representative and made available to the administrator 11 as provided for in subsection (f) of this section. 12 (e) Recordkeeping -- Persons issuing or guaranteeing securities. Persons 13 subject to the provisions of this chapter issuing or guaranteeing any securi- 14 ties shall make, maintain and promptly make available to the administrator 15 upon request the records which are described in the rules prescribed or orders 16 issued by the administrator or the United States securities and exchange com- 17 mission. 18 (f) Audits or inspections. The recordsof every person issuing or guaran-19teeing any securities subject to the provisions of this chapter, if such per-20son is registered or required to be registered under this chapter, and of21every broker-dealer, agent, investment adviser or investment adviser represen-22tative registered or required to be registered underrequired to be made and 23 maintained pursuant to this section by every person subject to the provisions 24 of this chapter are subject to such reasonable periodic, special or other 25 audits or inspections by a representative of the administrator, within or 26 without this state, as the administrator considers necessary or appropriate in 27 the public interest and for the protection of investors. An audit or inspec- 28 tionmayshall be made at any time during normal business hours and with or 29 without prior notice. Audits or inspections shall be conducted at any place of 30 business of the person subject to such audit or inspection. All persons reg- 31 istered or required to be registered under this chapter shall produce upon 32 request of the administrator the records required to be made or maintained 33 under this section. The administrator may remove or copy, and may remove for34audit or inspection copies of,all records the administrator reasonably con- 35 siders necessary or appropriate to conduct the audit or inspection. The admin- 36 istrator may assess a reasonable charge for conducting an audit or inspection 37 under this subsection. 38 (eg) Custody and discretionary authority bond or insurance. Subject to 39 section 15(h) of the securities exchange act of 1934 (15 U.S.C. 78o(h)) or 40 section 222 of the investment advisers act of 1940 (15 U.S.C. 80b-2218a), a 41 rule adopted or an order issued under this chapter may require a broker-dealer 42 or investment adviser that has custody of or discretionary authority over 43 funds or securities of a customer or client to obtain insurance or post a bond 44 or other satisfactory form of security in an amount not to exceed twenty-five 45 thousand dollars ($25,000). The administrator may determine the requirements 46 of the insurance, bond or other satisfactory form of security. Insurance or a 47 bond or other satisfactory form of security may not be required of a broker- 48 dealer registered under this chapter whose net capital exceeds, or of an 49 investment adviser registered under this chapter whose minimum financial 50 requirements exceed, the amounts required by rule or order under this chapter. 51 The insurance, bond or other satisfactory form of security must permit an 52 action by a person to enforce any liability on the insurance, bond or other 53 satisfactory form of security if instituted within the time limitations in 54 section 30-14-509(j)(2), Idaho Code. 55 (fh) Requirements for custody. Subject to section 15(h) of the securities 3 1 exchange act of 1934 (15 U.S.C. 78o(h)) or section 222 of the investment 2 advisers act of 1940 (15 U.S.C. 80b-2218a), an agent may not have custody of 3 funds or securities of a customer except under the supervision of a broker- 4 dealer and an investment adviser representative may not have custody of funds 5 or securities of a client except under the supervision of an investment 6 adviser or a federal covered investment adviser. A rule adopted or an order 7 issued under this chapter may prohibit, limit, or impose conditions on a 8 broker-dealer regarding custody of funds or securities of a customer and on an 9 investment adviser regarding custody of securities or funds of a client. 10 (gi) Investment adviser brochure rule. With respect to an investment 11 adviser registered or required to be registered under this chapter, a rule 12 adopted or an order issued under this chapter may require that information or 13 other record be furnished or disseminated to clients or prospective clients in 14 this state as necessary or appropriate in the public interest and for the pro- 15 tection of investors and advisory clients. 16 (hj) Continuing education. A rule adopted or an order issued under this 17 chapter may require an individual registered under section 30-14-402 or 18 30-14-404, Idaho Code, to participate in a continuing education program 19 approved by the securities and exchange commission and administered by a self- 20 regulatory organization or, in the absence of such a program, a rule adopted 21 or an order issued under this chapter may require continuing education for an 22 individual registered under section 30-14-404, Idaho Code. 23 SECTION 2. That Section 9-340H, Idaho Code, be, and the same is hereby 24 amended to read as follows: 25 9-340H. EXEMPTION FROM DISCLOSURE -- RECORDS RELATED TO THE UNIFORM SECU- 26 RITIES ACT. Except as otherwise determined by the director of the department 27 of finance pursuant to section 30-14-607(c), Idaho Code, the following records 28 are exempt from disclosure: 29 (1) A record obtained or created by the director of the department of 30 finance or a representative of the director in connection with an audit or 31 inspection under section 30-14-411(df), Idaho Code, or an investigation under 32 section 30-14-602, Idaho Code; 33 (2) A part of a record filed in connection with a registration statement 34 under section 30-14-301, Idaho Code, and sections 30-14-303 through 30-14-305, 35 Idaho Code, or a record under section 30-14-411(df), Idaho Code, that contains 36 trade secrets or confidential information if the person filing the registra- 37 tion statement or report has asserted a claim of confidentiality or privilege 38 that is authorized by law; 39 (3) A record that is not required to be provided to the director of the 40 department of finance or filed under chapter 14, title 30, Idaho Code, and is 41 provided to the director only on the condition that the record will not be 42 subject to public examination or disclosure; 43 (4) A nonpublic record received from a person specified in section 44 30-14-608(a), Idaho Code; and 45 (5) Any social security number, residential address unless used as a 46 business address, and residential telephone number unless used as a business 47 telephone number, contained in a record that is filed pursuant to chapter 14, 48 title 30, Idaho Code. 49 SECTION 3. That Section 30-14-412, Idaho Code, be, and the same is hereby 50 amended to read as follows: 51 30-14-412. DENIAL, REVOCATION, SUSPENSION, WITHDRAWAL, RESTRICTION, CON- 4 1 DITION OR LIMITATION OF REGISTRATION. (a) Disciplinary conditions -- Appli- 2 cants. If the administrator finds that the order is in the public interest and 3 subsection (d) of this section authorizes the action, an order issued under 4 this chapter may deny an application, or may condition or limit registration 5 of an applicant to be a broker-dealer, agent, investment adviser or investment 6 adviser representative, and, if the applicant is a broker-dealer or investment 7 adviser,ofor a partner, officer, director or person having a similar status 8 or performing similar functions, or a person directly or indirectly in con- 9 trol, of the broker-dealer or investment adviser. 10 (b) Disciplinary conditions -- Registrants. If the administrator finds 11 that the order is in the public interest and subsection (d) of this section 12 authorizes the action, an order issued under this chapter may revoke, suspend, 13 condition or limit the registration of a registrant and, if the registrant is 14 a broker-dealer or investment adviser,ofor a partner, officer, director or 15 person having a similar status or performing similar functions, or a person 16 directly or indirectly in control, of the broker-dealer or investment adviser. 17 Provided however, the administrator may not: 18 (1) Institute a revocation or suspension proceeding under this subsection 19 based on an order issued under a law of another state that is reported to 20 the administrator or a designee of the administrator more than one (1) 21 year after the date of the order on which it is based; or 22 (2) Under subsection (d)(5)(A) or (B) of this section, issue an order on 23 the basis of an order issued under the securities act of another state 24 unless the other order was based on conduct for which subsection (d) of 25 this section would authorize the action had the conduct occurred in this 26 state. 27 (c) Disciplinary penalties -- Registrants. If the administrator finds 28 that the order is in the public interest and subsections (d)(1) through (6), 29 (8), (9), (10), (12) or (13) of this section authorizes the action, an order 30 under this chapter may censure, impose a bar or suspension from association 31 with a broker-dealer or investment adviser registered in this state, or impose 32 a civil penalty in an amount not to exceed five thousand dollars ($5,000) for 33 each violation, on a registrant and, if the registrant is a broker-dealer or 34 investment adviser, a partner, officer, director or person having a similar 35 status or performing similar functions, or a person directly or indirectly in 36 control, of the broker-dealer or investment adviser. 37 (d) Grounds for discipline. A person may be disciplined under subsections 38 (a) through (c) of this section if the person: 39 (1) Has filed an application for registration in this state under this 40 chapter or the predecessor act within the previous ten (10) years, which, 41 as of the effective date of registration or as of any date after filing in 42 the case of an order denying effectiveness, was incomplete in any material 43 respect or contained a statement that, in light of the circumstances under 44 which it was made, was false or misleading with respect to a material 45 fact; 46 (2) Willfully violated or willfully failed to comply with this chapter or 47 the predecessor act or a rule adopted or an order issued under this chap- 48 ter or the predecessor act within the previous ten (10) years; 49 (3) Has been convicted of any felony or within the previous ten (10) 50 years has been convicted of a misdemeanor involving a security, a commod- 51 ity future or option contract, or an aspect of a business involving secu- 52 rities, commodities, investments, franchises, insurance, banking or 53 finance; 54 (4) Is enjoined or restrained by a court of competent jurisdiction in an 55 action instituted by the administrator under this chapter or the predeces- 5 1 sor act, a state, the securities and exchange commission, or the United 2 States from engaging in or continuing an act, practice or course of busi- 3 ness involving an aspect of a business involving securities, commodities, 4 investments, franchises, insurance, banking or finance; 5 (5) Is the subject of an order, issued after notice and opportunity for 6 hearing by: 7 (A) The securities, depository institution, insurance or other 8 financial services regulator of a state or by the securities and 9 exchange commission or other federal agency denying, revoking, bar- 10 ring or suspending registration as a broker-dealer, agent, investment 11 adviser, federal covered investment adviser, or investment adviser 12 representative; 13 (B) The securities regulator of a state or the securities and 14 exchange commission against a broker-dealer, agent, investment 15 adviser, investment adviser representative, or federal covered 16 investment adviser; 17 (C) The securities and exchange commission or a self-regulatory 18 organization suspending or expelling the registrant from membership 19 in the self-regulatory organization; 20 (D) A court adjudicating a United States postal service fraud order; 21 (E) The insurance regulator of a state denying, suspending or revok- 22 ing registration as an insurance agent; or 23 (F) A depository institution regulator suspending or barring the 24 person from the depository institution business; 25 (6) Is the subject of an adjudication or determination, after notice and 26 opportunity for hearing, by the securities and exchange commission, the 27 commodity futures trading commission; the federal trade commission; a fed- 28 eral depository institution regulator, or a depository institution, insur- 29 ance or other financial services regulator of a state that the person 30 willfully violated the securities act of 1933, the securities exchange act 31 of 1934, the investment advisers act of 1940, the investment company act 32 of 1940, or the commodity exchange act, the securities or commodities law 33 of a state, or a federal or state law under which a business involving 34 investments, franchises, insurance, banking or finance is regulated; 35 (7) Is insolvent, either because the person's liabilities exceed the 36 person's assets or because the person cannot meet the person's obligations 37 as they mature, provided however that the administrator may not enter an 38 order against an applicant or registrant under this paragraph (7) without 39 a finding of insolvency as to the applicant or registrant; 40 (8) Refuses to allow or otherwise impedes the administrator from conduct- 41 ing an audit or inspection under section 30-14-411(df), Idaho Code, or 42 refuses access to a registrant's office to conduct an audit or inspection 43 under section 30-14-411(df), Idaho Code; 44 (9) Has failed to reasonably supervise an agent, investment adviser rep- 45 resentative or other individual, if the agent, investment adviser repre- 46 sentative or other individual was subject to the person's supervision and 47 committed a violation of this chapter or the predecessor act or a rule 48 adopted or an order issued under this chapter or the predecessor act 49 within the previous ten (10) years; 50 (10) Has not paid the proper filing fee within thirty (30) days after hav- 51 ing been notified by the administrator of a deficiency, provided however 52 that the administrator shall vacate an order under this paragraph (10) 53 when the deficiency is corrected; 54 (11) After notice and opportunity for a hearing, has been found within the 55 previous ten (10) years: 6 1 (A) By a court of competent jurisdiction to have willfully violated 2 the laws of a foreign jurisdiction under which the business of secu- 3 rities, commodities, investment, franchises, insurance, banking or 4 finance is regulated; 5 (B) To have been the subject of an order of a securities regulator 6 of a foreign jurisdiction denying, revoking or suspending the right 7 to engage in the business of securities as a broker-dealer, agent, 8 investment adviser, investment adviser representative or similar per- 9 son; or 10 (C) To have been suspended or expelled from membership by or partic- 11 ipation in a securities exchange or securities association operating 12 under the securities laws of a foreign jurisdiction; 13 (12) Is the subject of a cease and desist order issued by the securities 14 and exchange commission or issued under the securities, commodities, 15 investment, franchise, banking, finance or insurance laws of a state; 16 (13) Has engaged in dishonest or unethical practices in the securities, 17 commodities, investment, franchise, banking, finance or insurance business 18 within the previous ten (10) years; or 19 (14) Is not qualified on the basis of factors such as training, experience 20 and knowledge of the securities business. Provided however, in the case of 21 an application by an agent for a broker-dealer that is a member of a self- 22 regulatory organization or by an individual for registration as an invest- 23 ment adviser representative, a denial order may not be based on this para- 24 graph (14) if the individual has successfully completed all examinations 25 required by subsection (e) of this section. The administrator may require 26 an applicant for registration under section 30-14-402 or 30-14-404, Idaho 27 Code, who has not been registered in a state within the two (2) years pre- 28 ceding the filing of an application in this state to successfully complete 29 an examination. 30 (e) Examinations. A rule adopted or an order issued under this chapter 31 may require that an examination, including an examination developed or 32 approved by an organization of securities regulators, be successfully com- 33 pleted by a class of individuals or all individuals. An order issued under 34 this chapter may waive, in whole or in part, an examination as to an individ- 35 ual and a rule adopted under this chapter may waive, in whole or in part, an 36 examination as to a class of individuals if the administrator determines that 37 the examination is not necessary or appropriate in the public interest and for 38 the protection of investors. 39 (f) Summary process. The administrator may suspend or deny an application 40 summarily; restrict, condition, limit or suspend a registration; or censure, 41 bar, or impose a civil penalty on a registrant before final determination of 42 an administrative proceeding. Upon the issuance of an order, the administrator 43 shall promptly notify each person subject to the order that the order has been 44 issued, the reasons for the action, and that within fifteen (15) days after 45 the receipt of a request in a record from the person the matter will be sched- 46 uled for a hearing. If a hearing is not requested and none is ordered by the 47 administrator within thirty (30) days after the date of service of the order, 48 the order becomes final by operation of law. If a hearing is requested or 49 ordered, the administrator, after notice of and opportunity for hearing to 50 each person subject to the order, may modify or vacate the order or extend the 51 order until final determination. 52 (g) Procedural requirements. An order issued may not be issued under this 53 section, except under subsection (f) of this section, without: 54 (1) Appropriate notice to the applicant or registrant; 55 (2) Opportunity for hearing; and 7 1 (3) Findings of fact and conclusions of law in a record in accordance 2 with chapter 52, title 67, Idaho Code. 3 (h) Control person liability. A person that controls, directly or indi- 4 rectly, a person not in compliance with this section may be disciplined by 5 order of the administrator under subsections (a) through (c) of this section 6 to the same extent as the noncomplying person, unless the controlling person 7 did not know, and in the exercise of reasonable care could not have known, of 8 the existence of conduct that is a ground for discipline under this section. 9 (i) Limit on investigation or proceeding. The administrator may not 10 institute a proceeding under subsection (a), (b) or (c) of this section based 11 solely on material facts actually known by the administrator unless an inves- 12 tigation or the proceeding is instituted within one (1) year after the admin- 13 istrator actually acquires knowledge of the material facts. 14 SECTION 4. That Section 30-14-509, Idaho Code, be, and the same is hereby 15 amended to read as follows: 16 30-14-509. CIVIL LIABILITY. (a) Securities litigation uniform standards 17 act. Enforcement of civil liability under this section is subject to the secu- 18 rities litigation uniform standards act of 1998, as cited in section 19 30-14-103, Idaho Code. 20 (b) Liability of seller to purchaser. A person is liable to the purchaser 21 if the person sells a security in violation of section 30-14-301, Idaho Code, 22 or, by means of an untrue statement of a material fact or an omission to state 23 a material fact necessary in order to make the statement made, in light of the 24 circumstances under which it is made, not misleading, the purchaser not know- 25 ing the untruth or omission and the seller not sustaining the burden of proof 26 that the seller did not know and, in the exercise of reasonable care, could 27 not have known of the untruth or omission. An action under this subsection is 28 governed by the following: 29 (1) The purchaser may maintain an action to recover the consideration 30 paid for the security, less the amount of any income received on the secu- 31 rity, and interest at the annual rate of interest set forth in section 32 28-22-104(2), Idaho Code, from the date of the purchase, costs, and rea- 33 sonable attorneys's fees determined by the court, upon the tender of the 34 security, or for actual damages as provided in subsection (b)(3) of this 35 section. 36 (2) The tender referred to in subsection (b)(1) of this section may be 37 made any time before entry of judgment. Tender requires only notice in a 38 record of ownership of the security and willingness to exchange the secu- 39 rity for the amount specified. A purchaser that no longer owns the secu- 40 rity may recover actual damages as provided in subsection (b)(3) of this 41 section. 42 (3) Actual damages in an action arising under this subsection are the 43 amounts that would be recoverable upon a tender less the value of the 44 security when the purchaser disposed of it, and interest at the annual 45 rate of interest set forth in section 28-22-104(2), Idaho Code, from the 46 date of the purchase, costs, and reasonable attorneys's fees determined by 47 the court. 48 (c) Liability of purchaser to seller. A person is liable to the seller if 49 the person buys a security by means of an untrue statement of a material fact 50 or omission to state a material fact necessary in order to make the statement 51 made, in light of the circumstances under which it is made, not misleading, 52 the seller not knowing of the untruth or omission, and the purchaser not sus- 53 taining the burden of proof that the purchaser did not know, and in the exer- 8 1 cise of reasonable care, could not have known of the untruth or omission. An 2 action under this subsection is governed by the following: 3 (1) The seller may maintain an action to recover the security, and any 4 income received on the security, costs, and reasonable attorneys's fees 5 determined by the court, upon the tender of the purchase price, or for 6 actual damages as provided in subsection (c)(3) of this section. 7 (2) The tender referred to in subsection (c)(1) of this section may be 8 made any time before entry of judgment. Tender requires only notice in a 9 record of the present ability to pay the amount tendered and willingness 10 to take delivery of the security for the amount specified. If the pur- 11 chaser no longer owns the security, the seller may recover actual damages 12 as provided in subsection (c)(3) of this section. 13 (3) Actual damages in an action arising under this subsection are the 14 difference between the price at which the security was sold and the value 15 the security would have had at the time of the sale in the absence of the 16 purchaser's conduct causing liability, and at the annual rate of interest 17 set forth in section 28-22-104(2), Idaho Code, from the date of the sale 18 of the security, costs, and reasonable attorneys's fees determined by the 19 court. 20 (d) Liability of unregistered broker-dealer and agent. A person acting as 21 a broker-dealer or agent that sells or buys a security in violation of section 22 30-14-401(a), 30-14-402(a) or 30-14-506, Idaho Code, is liable to the cus- 23 tomer. The customer, if a purchaser, may maintain an action for recovery of 24 actual damages as specified in subsections (b)(1) through (3) of this section, 25 or, if a seller, for a remedy as specified in subsections (c)(1) through (3) 26 of this section. 27 (e) Liability of unregistered investment adviser and investment adviser 28 representative. A person acting as an investment adviser or investment adviser 29 representative that provides investment advice for compensation in violation 30 of section 30-14-403(a), 30-14-404(a) or 30-14-506, Idaho Code, is liable to 31 the client. The client may maintain an action to recover the consideration 32 paid for the advice, interest at the annual rate of interest set forth in sec- 33 tion 28-22-104(2), Idaho Code, from the date of payment, costs, and reasonable 34 attorneys's fees determined by the court. 35 (f) Liability for investment advice. A person that receives directly or 36 indirectly any consideration for providing investment advice to another person 37 and that employs a device, scheme or artifice to defraud the other person or 38 engages in an act, practice, or course of business that operates or would 39 operate as a fraud or deceit on the other person, is liable to the other per- 40 son. An action under this subsection is governed by the following: 41 (1) The person defrauded may maintain an action to recover the consider- 42 ation paid for the advice and the amount of any actual damages caused by 43 the fraudulent conduct, interest at the annual rate of interest set forth 44 in section 28-22-104(2), Idaho Code, from the date of the fraudulent con- 45 duct, costs, and reasonable attorneys's fees determined by the court, less 46 the amount of any income received as a result of the fraudulent conduct. 47 (2) This subsection does not apply to a broker-dealer or its agents if 48 the investment advice provided is solely incidental to transacting busi- 49 ness as a broker-dealer and no special compensation is received for the 50 investment advice. 51 (g) Joint and several liability. The following persons are liable jointly 52 and severally with and to the same extent as persons liable under subsections 53 (b) through (f) of this section: 54 (1) A person that directly or indirectly controls a person liable under 55 subsections (b) through (f) of this section, unless the controlling person 9 1 sustains the burden of proof that the person did not know, and in the 2 exercise of reasonable care could not have known, of the existence of con- 3 duct by reason of which the liability is alleged to exist; 4 (2) An individual who is a managing partner, executive officer, or direc- 5 tor of a person liable under subsections (b) through (f) of this section, 6 including an individual having a similar status or performing similar 7 functions, unless the individual sustains the burden of proof that the 8 individual did not know and, in the exercise of reasonable care could not 9 have known, of the existence of conduct by reason of which the liability 10 is alleged to exist; 11 (3) An individual who is an employee of or associated with a person lia- 12 ble under subsections (b) through (f) of this section and who materially 13 aids the conduct giving rise to the liability, unless the individual sus- 14 tains the burden of proof that the individual did not know and, in the 15 exercise of reasonable care could not have known, of the existence of con- 16 duct by reason of which the liability is alleged to exist; and 17 (4) A person that is a broker-dealer, agent, investment adviser, or 18 investment adviser representative that materially aids the conduct giving 19 rise to the liability under subsections (b) through (f) of this section, 20 unless the person sustains the burden of proof that the person did not 21 know and, in the exercise of reasonable care could not have known, of the 22 existence of conduct by reason of which liability is alleged to exist. 23 (h) Right of contribution. A person liable under this section has a right 24 of contribution as in cases of contract against any other person liable under 25 this section for the same conduct. 26 (i) Survival of cause of action. A cause of action under this section 27 survives the death of an individual who might have been a plaintiff or defend- 28 ant. 29 (j) Statute of limitations. A person may not obtain relief: 30 (1) Under subsection (b) of this section for violation of section 31 30-14-301, Idaho Code, or under subsection (d) or (e) of this section, 32 unless the action is instituted within one (1) year after the violation 33 occurred; or 34 (2) Under subsection (b) of this section, other than for violation of 35 section 30-14-301, Idaho Code, or under subsection (c) or (f) of this sec- 36 tion, unless the action is instituted within the earlier of two (2) years 37 after discovery of the facts constituting the violation or five (5) years 38 after the violation. 39 (k) No enforcement of violative contract. A person that has made, or has 40 engaged in the performance of, a contract in violation of this chapter or a 41 rule adopted or an order issued under this chapter, or that has acquired a 42 purported right under the contract with knowledge of conduct by reason of 43 which its making or performance was in violation of this chapter, may not base 44 an action on the contract. 45 (l) No contractual waiver. A condition, stipulation, or provision binding 46 a person purchasing or selling a security or receiving investment advice to 47 waive compliance with this chapter or a rule adopted or an order issued under 48 this chapter is void. 49 (m) Survival of other rights or remedies. The rights and remedies pro- 50 vided by this chapter are in addition to any other rights or remedies that may 51 exist, but this chapter does not create a cause of action not specified in 52 this section or section 30-14-411(eg), Idaho Code. 53 SECTION 5. That Section 30-14-607, Idaho Code, be, and the same is hereby 54 amended to read as follows: 10 1 30-14-607. PUBLIC RECORDS -- CONFIDENTIALITY. (a) Presumption of public 2 records. Except as otherwise provided in subsection (b) of this section, 3 records obtained by the administrator or filed under this chapter, including a 4 record contained in or filed with a registration statement, application, 5 notice filing, or report, are public records and are available for public 6 examination. 7 (b) Nonpublic records. Records as set forth in section 9-340H, Idaho 8 Code, are not public records and are not available for public examination 9 under subsection (a) of this section. 10 (c) Administrator discretion to disclose. If disclosure is for the pur- 11 pose of a civil, administrative, or criminal investigation, action, or pro- 12 ceeding or to a person specified in section 30-14-608(a), Idaho Code, the 13 administrator may disclose a record obtained in connection with an audit or 14 inspection under section 30-14-411(df), Idaho Code, or a record obtained in 15 connection with an investigation under section 30-14-602, Idaho Code.
STATEMENT OF PURPOSE
RS 17360
These amendments are in response to a recent Idaho Supreme Court
decision that concluded the Department of Finance did not have
authority to review the books and records of broker-dealer
agents (stockbrokers). This same language would apply to
investment adviser representatives. The proposed changes provide
the Department of Finance with this authority.
FISCAL NOTE
No fiscal impact.
CONTACT
Name: Marilyn Chastain
Agency: Finance, Dept. of
Phone: 332-8070
STATEMENT OF PURPOSE/FISCAL NOTE S 1255