Bill Text: MI HB5273 | 2013-2014 | 97th Legislature | Engrossed
Bill Title: Trade; securities; Michigan investment markets for transactions in Michigan securities; authorize and regulate. Amends title & secs. 202, 401 & 501 of 2008 PA 551 (MCL 451.2202 et seq.) & adds art. 4A.
Spectrum: Strong Partisan Bill (Republican 19-1)
Status: (Passed) 2014-10-22 - Assigned Pa 355'14 With Immediate Effect [HB5273 Detail]
Download: Michigan-2013-HB5273-Engrossed.html
HB-5273, As Passed House, May 22, 2014
SUBSTITUTE FOR
HOUSE BILL NO. 5273
A bill to amend 2008 PA 551, entitled
"Uniform securities act (2002),"
by amending the title and sections 202, 401, and 501 (MCL 451.2202,
451.2401, and 451.2501), section 202 as amended by 2013 PA 264, and
by adding article 4A.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An act to enact the uniform securities act (2002) relating to
the issuance, offer, sale, or purchase of securities; to prohibit
fraudulent practices in relation to securities; to establish civil
and criminal sanctions for violations of the act and civil
sanctions for violation of the rules promulgated pursuant to the
act; to require the registration of broker-dealers, agents,
investment advisers, and securities; to regulate Michigan
investment markets; to make uniform the law with reference to
securities; and to repeal acts and parts of acts.
Sec. 202. (1) The following transactions are exempt from the
requirements of sections 301 to 306 and 504:
(a) An isolated nonissuer transaction, whether effected by or
through a broker-dealer or not.
(b) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act, and a resale
transaction by a sponsor of a unit investment trust registered
under the investment company act of 1940, in a security of a class
that has been outstanding in the hands of the public for at least
90 days, if all of the following are met at the date of the
transaction:
(i) The issuer of the security is engaged in business, the
issuer is not in the organizational stage or in bankruptcy or
receivership, and the issuer is not a blank check, blind pool, or
shell company that has no specific business plan or purpose or has
indicated that its primary business plan is to engage in a merger
or combination of the business with, or an acquisition of, an
unidentified person.
(ii) The security is sold at a price reasonably related to its
current market price.
(iii) The security does not constitute the whole or part of an
unsold allotment to, or a subscription or participation by, the
broker-dealer as an underwriter of the security or a
redistribution.
(iv) A nationally recognized securities manual or its
electronic equivalent designated by rule or order under this act or
a record filed with the securities and exchange commission that is
publicly available contains all of the following:
(A) A description of the business and operations of the
issuer.
(B) The names of the issuer's executive officers and the names
of the issuer's directors, if any.
(C) An audited balance sheet of the issuer as of a date within
18 months before the date of the transaction or, in the case of a
reorganization or merger, and when the parties to the
reorganization or merger each had an audited balance sheet, a pro
forma balance sheet for the combined entity.
(D) An audited income statement for each of the issuer's 2
immediately previous fiscal years or for the period of existence of
the issuer, whichever is shorter, or, in the case of a
reorganization or merger when each party to the reorganization or
merger had audited income statements, a pro forma income statement.
(v) Any of the following requirements are met:
(A) The issuer of the security has a class of equity
securities listed on a national securities exchange registered
under section 6 of the securities exchange act of 1934, 15 USC 78f,
or designated for trading on the national association of securities
dealers automated quotation system.
(B) The issuer of the security is a unit investment trust
registered under the investment company act of 1940.
(C) The issuer of the security, including its predecessors,
has been engaged in continuous business for at least 3 years.
(D) The issuer of the security has total assets of at least
$2,000,000.00 based on an audited balance sheet as of a date within
18 months before the date of the transaction or, in the case of a
reorganization or merger when the parties to the reorganization or
merger each had an audited balance sheet as of a date within 18
months before the date of the transaction, a pro forma balance
sheet for the combined entity.
(c) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act in a security
of a foreign issuer that is a margin security defined in
regulations or rules adopted by the board of governors of the
federal reserve system.
(d) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act in an
outstanding security if the guarantor of the security files reports
with the securities and exchange commission under the reporting
requirements of section 13 or 15(d) of the securities exchange act
of 1934, 15 USC 78m or 78o.
(e) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act in a security
that meets 1 or more of the following:
(i) Is rated at the time of the transaction by a nationally
recognized statistical rating organization in 1 of its 4 highest
rating categories.
(ii) Has a fixed maturity or a fixed interest or dividend, if
both of the following are met:
(A) A default has not occurred during the current fiscal year
or within the 3 previous fiscal years or during the existence of
the issuer and any predecessor if less than 3 fiscal years, in the
payment of principal, interest, or dividends on the security.
(B) The issuer is engaged in business, is not in the
organizational stage or in bankruptcy or receivership, and is not
and has not been within the previous 12 months a blank check, blind
pool, or shell company that has no specific business plan or
purpose or has indicated that its primary business plan is to
engage in a merger or combination of the business with, or an
acquisition of, an unidentified person.
(f) A nonissuer transaction by or through a broker-dealer
registered or exempt from registration under this act effecting an
unsolicited order or offer to purchase.
(g) A nonissuer transaction executed by a bona fide pledgee
without any purpose of evading this act.
(h) A nonissuer transaction by a federal covered investment
adviser with investments under management in excess of
$100,000,000.00 acting in the exercise of discretionary authority
in a signed record for the account of others.
(i) A transaction in a security, whether or not the security
or transaction is otherwise exempt, in exchange for 1 or more bona
fide outstanding securities, claims, or property interests, or
partly in exchange and partly for cash, if the terms and conditions
of the issuance and exchange or the delivery and exchange and the
fairness of the terms and conditions have been approved by the
administrator at a hearing.
(j) A transaction between the issuer or other person on whose
behalf the offering is made and an underwriter, or among
underwriters.
(k) A transaction in a note, bond, debenture, or other
evidence of indebtedness secured by a mortgage or other security
agreement if all of the following are met:
(i) The note, bond, debenture, or other evidence of
indebtedness is offered and sold with the mortgage or other
security agreement as a unit.
(ii) A general solicitation or general advertisement of the
transaction is not made.
(iii) A commission or other remuneration is not paid or given,
directly or indirectly, to a person not registered under this act
as a broker-dealer or as an agent.
(l) A transaction by an executor, administrator of an estate,
sheriff, marshal, receiver, trustee in bankruptcy, guardian, or
conservator.
(m) A sale or offer to sell to any of the following:
(i) An institutional investor.
(ii) A federal covered investment adviser.
(iii) Any other person exempted by rule or order under this act.
(n) A sale or an offer to sell securities by or on behalf of
an issuer, if the transaction is part of a single issue in which
all of the following are met:
(i) There are not more than 50 purchasers in this state during
any 12 consecutive months, other than those designated in
subdivision (m).
(ii) There is no general solicitation or general advertising
used in connection with the offer to sell or sale of the
securities.
(iii) A commission or other remuneration is not paid or given,
directly or indirectly, to a person other than a broker-dealer
registered under this act or an agent registered under this act for
soliciting a prospective purchaser in this state.
(iv) The issuer reasonably believes that all the purchasers in
this state other than those designated in subdivision (m) are
purchasing for investment.
(o) A transaction under an offer to existing security holders
of the issuer, including persons that at the date of the
transaction are holders of convertible securities, options, or
warrants, if a commission or other remuneration, other than a
standby commission, is not paid or given, directly or indirectly,
for soliciting a security holder in this state.
(p) An offer to sell, but not a sale, of a security not exempt
from registration under the securities act of 1933 if both of the
following are met:
(i) A registration or offering statement or similar record as
required under the securities act of 1933 has been filed, but is
not effective, or the offer is made in compliance with rule 165
adopted under the securities act of 1933, 17 CFR 230.165.
(ii) A stop order of which the offeror is aware has not been
issued against the offeror by the administrator or the securities
and exchange commission, and an audit, inspection, or proceeding
that is public and may culminate in a stop order is not known by
the offeror to be pending.
(q) An offer to sell, but not a sale, of a security exempt
from registration under the securities act of 1933 if all of the
following are met:
(i) A registration statement has been filed under this act, but
is not effective.
(ii) A solicitation of interest is provided in a record to
offerees in compliance with a rule adopted by the administrator
under this act.
(iii) A stop order of which the offeror is aware has not been
issued by the administrator under this act, and an audit,
inspection, or proceeding that may culminate in a stop order is not
known by the offeror to be pending.
(r) A transaction involving the distribution of the securities
of an issuer to the security holders of another person in
connection with a merger, consolidation, exchange of securities,
sale of assets, or other reorganization to which the issuer, or its
parent or subsidiary, and the other person, or its parent or
subsidiary, are parties.
(s) A rescission offer, sale, or purchase under section 510.
(t) An offer or sale of a security to a person not resident in
this state and not present in this state if the offer or sale does
not constitute a violation of the laws of the state or foreign
jurisdiction in which the offeree or purchaser is present and is
not part of an unlawful plan or scheme to evade this act.
(u) An offer or sale of a security pursuant to an employee's
stock purchase, savings, option, profit-sharing, pension, or
similar employees' benefit plan, including any securities, plan
interests, and guarantees issued under a compensatory benefit plan
or compensation contract, contained in a record, established by the
issuer, its parents, its majority-owned subsidiaries, or the
majority-owned subsidiaries of the issuer's parent for the
participation of their employees including any of the following:
(i) Offers or sales of those securities to directors; general
partners; trustees, if the issuer is a business trust; officers; or
consultants and advisors.
(ii) Family members who acquire those securities from those
persons through gifts or domestic relations orders.
(iii) Former employees, directors, general partners, trustees,
officers, consultants, and advisors if those individuals were
employed by or providing services to the issuer when the securities
were offered.
(iv) Insurance agents who are exclusive insurance agents of the
issuer, its subsidiaries or parents, or who derive more than 50% of
their annual income from those organizations.
(v) A transaction involving any of the following:
(i) A stock dividend or equivalent equity distribution, whether
the corporation or other business organization distributing the
dividend or equivalent equity distribution is the issuer or not, if
nothing of value is given by stockholders or other equity holders
for the dividend or equivalent equity distribution other than the
surrender of a right to a cash or property dividend if each
stockholder or other equity holder may elect to take the dividend
or equivalent equity distribution in cash, property, or stock.
(ii) An act incident to a judicially approved reorganization in
which a security is issued in exchange for 1 or more outstanding
securities, claims, or property interests, or partly in exchange
and partly for cash.
(iii) The solicitation of tenders of securities by an offeror in
a tender offer in compliance with rule 162 adopted under the
securities act of 1933, 17 CFR 230.162.
(w) Subject to subsection (2), a nonissuer transaction in an
outstanding security by or through a broker-dealer registered or
exempt from registration under this act, if both of the following
are met:
(i) The issuer is a reporting issuer in a foreign jurisdiction
designated in subsection (2)(a), or by rule or order of the
administrator, and has been subject to continuous reporting
requirements in the foreign jurisdiction for not less than 180 days
before the transaction.
(ii) The security is listed on the foreign jurisdiction's
securities exchange that has been designated in subsection (2)(a),
or by rule or order under this act, or is a security of the same
issuer that is of senior or substantially equal rank to the listed
security or is a warrant or right to purchase or subscribe to any
of the foregoing.
(x) Any offer or sale of a security by an issuer under section
202a.
(y) Any offer or sale of a security that meets the
requirements for the federal exemption for a regulation A offering
under section 3(b) of the securities act of 1933, 15 USC 77c(b),
and SEC rule 251, 17 CFR 230.251, if the offer or sale meets all of
the following requirements:
(i) The issuer has filed SEC form 1A with the securities and
exchange commission with respect to the regulation A offering, in a
manner acceptable to the securities and exchange commission, and in
that filing the issuer has satisfied all of the requirements of 17
CFR 230.251 to 230.263 inclusively, including the filing of the
regulation A offering circular required under 17 CFR 230.253.
(ii) At least 10 days before commencing an offering of
securities in reliance on this exemption or the use of any publicly
available website in connection with an offering of securities in
reliance on this exemption, the issuer files a notice with the
administrator, in writing or in electronic form as specified by the
administrator, that contains all of the following:
(A) A notice of claim of exemption from registration,
specifying that the issuer intends to conduct an offering in
reliance on a regulation A exemption, accompanied by a
nonrefundable filing fee of $100.00 for filing the exemption
notice. The fees paid to the administrator under this sub-
subparagraph shall be used to pay the costs incurred in
administering and enforcing this act.
(B) A copy of the completed SEC form 1A and all of the
accompanying documents filed with the securities and exchange
commission, including the final regulation A offering circular to
be provided to prospective purchasers in connection with the
offering. Before filing SEC form 1A with the administrator, the
issuer may advertise its intent to make a regulation A offering
within the state and to solicit interest from prospective
purchasers under 17 CFR 230.254.
(iii) The sum of all cash and other consideration to be received
for all sales of the security in reliance on this exemption does
not exceed the amount set forth in subsection (b) of 17 CFR
230.251, less the aggregate amount received for all sales of
securities by the issuer within the 12 months before the first
offer or sale made in reliance on this exemption.
(iv) The issuer does not accept more than $10,000.00 from any
single purchaser unless the purchaser is an accredited investor as
defined by rule 501 of SEC regulation D, 17 CFR 230.501. The issuer
may rely on confirmation that the purchaser is an accredited
investor from a licensed broker-dealer or another third party in
making a determination that the purchaser is an accredited
investor. Every fifth year, the administrator shall cumulatively
adjust the $10,000.00 limitation amount described in this
subparagraph to reflect the change in the consumer price index for
all urban consumers published by the federal bureau of labor
statistics, rounding the dollar limitation to the nearest $100.00.
(z) Any secondary offer, sale, purchase, or trade of
securities facilitated by a Michigan investment market, if the
Michigan investment market effects that transaction in accordance
with article 4A and has made available to any secondary purchaser,
within a reasonable period before effecting the transaction,
general management and financial information concerning the issuer
of the securities, including the issuer's financial documents for
the preceding calendar or fiscal year and interim financial
information as of the end of the issuer's most recent calendar or
fiscal quarter.
(2) For purposes of subsection (1)(w), both of the following
apply:
(a) Canada, together with its provinces and territories, is a
designated foreign jurisdiction and the Toronto stock exchange,
inc., is a designated securities exchange.
(b) After an administrative hearing in compliance with
applicable state law, the administrator, by rule or order under
this act, may revoke the designation of a securities exchange under
subsection (1)(w) or this subsection if the administrator finds
that revocation is necessary or appropriate in the public interest
and for the protection of investors.
(3) An issuer that sells securities in this state in reliance
on this exemption described in subsection (1)(y) may advertise the
offering in any manner, including advertising on website platforms
that may be owned and controlled by nonissuer third parties, if no
commissions are paid to either employees of the issuer for the sale
of the securities or to third parties that facilitate the sale of
the securities, unless those third parties are licensed broker-
dealers authorized to conduct transactions described in subsection
(1)(y).
Sec. 401. (1) A person shall not transact business in this
state as a broker-dealer unless the person is registered under this
act as a broker-dealer or is exempt from registration as a broker-
dealer under subsection (2) or (4).
(2) The following persons are exempt from the registration
requirement of subsection (1):
(a) A broker-dealer if the broker-dealer does not have a place
of business in this state and if the broker-dealer's only
transactions effected in this state are with any of the following:
(i) The issuer of the securities involved in the transactions.
(ii) A broker-dealer registered as a broker-dealer under this
act or not required to be registered as a broker-dealer under this
act.
(iii) An institutional investor.
(iv) A nonaffiliated federal covered investment adviser with
investments under management in excess of $100,000,000.00 acting
for the account of others pursuant to discretionary authority in a
signed record.
(v) A bona fide preexisting customer whose principal place of
residence is not in this state and the broker-dealer is registered
as a broker-dealer under the securities exchange act of 1934 or not
required to be registered under the securities exchange act of 1934
and is registered under the securities act of the state in which
the customer maintains a principal place of residence.
(vi) A bona fide preexisting customer whose principal place of
residence is in this state but who was not present in this state
when the customer relationship was established, if both of the
following are met:
(A) The broker-dealer is registered under the securities
exchange act of 1934 or not required to be registered under the
securities exchange act of 1934 and is registered under the
securities laws of the state in which the customer relationship was
established and where the customer had maintained a principal place
of residence.
(B) Within 45 days after the customer's first transaction in
this state, the person files an application for registration as a
broker-dealer in this state and a further transaction is not
effected more than 75 days after the date on which the application
is filed, or, if earlier, the date on which the administrator
notifies the person that the administrator has denied the
application for registration or has stayed the pendency of the
application for good cause.
(vii) Not more than 3 customers in this state during the
previous 12 months, in addition to those specified in subparagraphs
(i) to (vi) and under subparagraph (viii), if the broker-dealer is
registered under the securities exchange act of 1934 or not
required to be registered under the securities exchange act of 1934
and is registered under the securities act of the state in which
the broker-dealer has its principal place of business.
(viii) Any other person exempted by rule or order under this
act.
(b) A person that deals solely in United States government
securities and is supervised as a dealer in government securities
by the board of governors of the federal reserve system, the
comptroller of the currency, the federal deposit insurance
corporation, or the office of thrift supervision.
(c) A person licensed or registered as a mortgage broker,
mortgage lender, or mortgage servicer under the mortgage brokers,
lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to
445.1684, in the offer or sale of mortgage loans as defined in
section 1a of the mortgage brokers, lenders, and servicers
licensing act, 1987 PA 173, MCL 445.1651a.
(d) A person that is registered as a Michigan investment
market under article 4A and that deals in securities solely in its
capacity as a Michigan investment market.
(3) A broker-dealer, or an issuer engaged in offering,
offering to purchase, purchasing, or selling securities in this
state, shall not directly or indirectly employ or associate with an
individual to engage in an activity related to securities
transactions in this state if the registration of the individual is
suspended or revoked or the individual is barred from employment or
association with a broker-dealer, an issuer, an investment adviser,
or a federal covered investment adviser by an order of the
administrator under this act, the securities and exchange
commission, a securities regulator of another state, or a self-
regulatory organization. A broker-dealer or issuer does not violate
this subsection if the broker-dealer or issuer did not know and in
the exercise of reasonable care could not have known of the
suspension, revocation, or bar. If requested by a broker-dealer or
issuer and if good cause is shown, an order under this act may
modify or waive, in whole or in part, the application of the
prohibitions of this subsection.
(4) A rule or order under this act may permit any of the
following:
(a) A broker-dealer that is registered in Canada or other
foreign jurisdiction and that does not have a place of business in
this state to effect transactions in securities with or for, or
attempt to effect the purchase or sale of any securities by, any of
the following:
(i) An individual from Canada or other foreign jurisdiction who
is temporarily present in this state and with whom the broker-
dealer had a bona fide customer relationship before the individual
entered the United States.
(ii) An individual from Canada or other foreign jurisdiction
who is present in this state and whose transactions are in a self-
directed tax advantaged retirement plan of which the individual is
the holder or contributor in that foreign jurisdiction.
(iii) An individual who is present in this state, with whom the
broker-dealer customer relationship arose while the individual was
temporarily or permanently resident in Canada or the other foreign
jurisdiction.
(b) An agent who represents a broker-dealer that is exempt
under this subsection to effect transactions in securities or
attempt to effect the purchase or sale of any securities in this
state
as permitted for a broker-dealer described in subsection
(4)(a).subdivision (a).
ARTICLE 4A
MICHIGAN INVESTMENT MARKETS
Sec. 451. As used in this article:
(a) "Intrastate offering exemption" means the exemption
described in section 202a or any other exemption from federal
securities regulation under section 3(a)(11) of the securities act
of 1933, 15 USC 77c(a)(11), and SEC rule 147, 17 CFR 230.147.
(b) "Michigan investment market" means a person that is a
broker-dealer, is exempt from federal registration under section
15(a)(1) of the securities exchange act of 1934, 15 USC 78o, and
provides a market or exchange at which transactions in securities
that are sold or offered for sale in this state under an intrastate
offering exemption take place. As used in this subdivision, "market
or exchange" includes an online market or exchange or any other
market or exchange operated through a web portal.
(c) "Online" means functioning on or over the internet.
(d) "Personal identifying information" means any information
used to locate or accurately categorize an individual, household,
or business.
(e) "Resident of this state" means 1 of the following, as
applicable:
(i) If a person is an individual, his or her principal
residence is located in this state.
(ii) If a person is a business that is a general partnership or
other form of organization that is not incorporated or organized
under the laws of this state, that person's principal office is
located in this state.
(iii) If the person is a business that is a corporation, limited
liability company, limited partnership, trust, or other form of
legal entity that is incorporated or organized under state law,
that person is incorporated or organized under the laws of this
state.
(f) "Service" means to include securities issued by a person
in or on a market or exchange for sale or to assist in facilitating
securities transactions in or on a market or exchange.
(g) "Web portal" means an online entity through which persons
are able to effect transactions in securities.
Sec. 453. A person shall not transact business in this state
as a Michigan investment market unless the person is registered
under this article as a Michigan investment market.
Sec. 455. (1) A person shall register as a Michigan investment
market by filing a written application, filing a consent to service
of process that complies with section 611, and paying the fee
specified in section 457. Subject to section 461, if a person
complies with this article and demonstrates by clear and convincing
evidence that the person meets the requirements for registration
under this article, the administrator shall register that person as
a Michigan investment market. If a person fails to provide clear
and convincing evidence that the person meets the requirements for
registration, the registration of the person shall remain at the
discretion of the administrator.
(2) An application for registration as a Michigan investment
market must contain all of the following:
(a) The names, mailing addresses, and telephone numbers of all
individuals who serve as executive officers of the Michigan
investment market or who are direct or indirect owners of at least
a 10% ownership interest in the Michigan investment market.
(b) The uniform resource locator (URL), if applicable, used
primarily by the Michigan investment market to effect transactions
online.
(c) Any other information requested by the administrator as
necessary to make a determination regarding registration of the
Michigan investment market under section 461.
(3) If the information contained in an application that is
filed under subsection (1) is or becomes inaccurate or incomplete
in any material respect, the registrant shall promptly file a
correcting amendment.
(4) A registration is effective until 12 midnight on December
31 of the year for which the application for registration is filed.
Sec. 457. (1) A person shall pay a fee of $500.00 when
initially filing an application for registration as a Michigan
investment market and a fee of $250.00 when filing a renewal of
registration as a Michigan investment market.
(2) If an initial or renewal registration application is
denied or withdrawn, the administrator shall retain all of the
filing fee for that application.
Sec. 459. (1) A Michigan investment market that is registered
or is required to register under this article must make a written
or electronic record of each transaction conducted between users
through the Michigan investment market, maintain that record for at
least 7 years after the date of the transaction, and provide a
written or electronic copy of the record for a particular
transaction to each purchaser involved in that transaction.
(2) In addition to the records described in subsection (1), a
Michigan investment market that is registered or is required to
register under this article shall make and maintain the accounts,
correspondence, memoranda, papers, books, and other records
required by rule or order of the administrator and shall maintain
those records in a form of data storage established by the
administrator by rule or order.
(3) The records of a Michigan investment market that is
registered or is required to register under this article are
subject to reasonable periodic, special, or other examinations or
inspections by a representative of the administrator, in or outside
of this state, as the administrator considers necessary or
appropriate in the public interest and for the protection of
investors. An examination or inspection may be made at any time and
without prior notice. The administrator may reasonably request
paper or electronic copies and remove for examination or inspection
copies of all records the administrator reasonably considers
necessary or appropriate to conduct the examination or inspection.
The administrator may assess a reasonable charge for conducting an
examination or inspection under this subsection.
(4) In January of each year, the Michigan investment market
must file a report with the administrator that includes a record of
each transaction the Michigan investment marker effected in the
preceding calendar year.
Sec. 461. (1) When the administrator receives an application
for registration as a Michigan investment market, the administrator
shall publish notice of the filing on a website managed by the
administrator, where interested persons are provided an opportunity
to submit written information concerning the application. Within 60
days after the date of publication of the notice, or within any
longer period to which the administrator and applicant agree, the
administrator shall do 1 of the following:
(a) If the administrator finds that the requirements of this
article and rules promulgated under this article are satisfied,
issue an order granting registration.
(b) If subdivision (a) is not met, issue an order denying
registration, or granting a conditional or limited registration.
(2) In considering an application for registration for
purposes of subsection (1), the administrator shall consider all of
the following:
(a) Whether the Michigan investment market has the capacity to
facilitate the transactions contemplated in this article and
complies with the provisions of this article, the rules and orders
of the administrator under this article, and the rules established
by the Michigan investment market.
(b) Whether the rules established by the Michigan investment
market provide for the equitable allocation of reasonable dues,
fees, and other charges among its issuers and other persons using
its facilities.
(c) Whether the structure established by the Michigan
investment market is designed to protect against fraud and
manipulative behavior; is, in general, designed to protect
investors and the public interest by not attempting to regulate or
administer actions, practices, or persons that are not placed under
the purview of the Michigan investment market by this article; and
ensures that the operations of the Michigan investment market do
not foster unfair discrimination between users, issuers, or other
persons that interact with the Michigan investment market.
(d) Whether the rules established by the Michigan investment
market provide for appropriate discipline of users and persons
associated with its users for a violation of the provisions of this
article, the rules and orders of the administrator under this
article, or the rules established by the Michigan investment
market.
(e) Whether the rules established by the Michigan investment
market impose any burden on competition or obstruction to a liquid
intrastate securities market that is not necessary or appropriate
to further the purposes of this article.
(3) If the administrator finds that the order is in the public
interest and subsection (4) authorizes the action, the
administrator may issue an order to revoke, suspend, condition, or
limit the registration of a registrant or censure, impose a bar, or
impose a civil fine in an amount that does not exceed $500.00 for a
single violation of this act or rules promulgated under this act,
or $1,000.00 for multiple violations, on a registrant or other
person.
(4) The administrator may impose a sanction described in
subsection (3) if any of the following apply to the Michigan
investment market or other person that is the subject of the
administrator's order:
(a) The person filed an application for registration in this
state under this act within the previous 5 years, that, as of the
effective date of registration or as of any date after filing in
the case of an order denying effectiveness, was incomplete in any
material respect or contained a statement that, in light of the
circumstances under which it was made, was false or misleading with
respect to a material fact.
(b) The person willfully violated or willfully failed to
comply with this act, or a rule or order issued by the
administrator under this act, within the previous 10 years.
(c) The person was convicted of any felony or within the
previous 10 years was convicted of a misdemeanor involving a
security, a commodity futures or option contract, or an aspect of a
business involving securities, commodities, investments,
franchises, insurance, banking, or finance.
(d) The person is enjoined or restrained by a court of
competent jurisdiction in an action instituted by the administrator
under this act, a state, the securities and exchange commission, or
the United States from engaging in or continuing an act, practice,
or course of business involving an aspect of a business involving
securities, commodities, investments, franchises, insurance,
banking, or finance.
(e) The person is the subject of an order, issued after notice
and opportunity for hearing by any of the following:
(i) The securities or other financial services regulator of a
state, or the securities and exchange commission or other federal
agency denying, revoking, barring, or suspending registration as a
broker-dealer, agent, investment adviser, federal covered
investment adviser, or investment adviser representative.
(ii) The securities regulator of a state or the securities and
exchange commission against a broker-dealer, agent, investment
adviser, investment adviser representative, or federal covered
investment adviser.
(iii) The securities and exchange commission or a self-
regulatory organization suspending or expelling the registrant from
membership in a self-regulatory organization.
(iv) A court adjudicating a United States postal service fraud.
(v) The insurance regulator of a state denying, suspending, or
revoking the license or registration of an insurance agent.
(vi) A depository institution or financial services regulator
suspending or barring the person from the depository institution or
other financial services business.
(f) The person is the subject of an adjudication or
determination, after notice and opportunity for hearing, by the
securities and exchange commission, the commodity futures trading
commission, the federal trade commission, a federal depository
institution regulator, or a depository institution, insurance, or
other financial services regulator of a state that the person
willfully violated the securities act of 1933, the securities
exchange act of 1934, the investment advisers act of 1940, the
investment company act of 1940, or the commodity exchange act, the
securities or commodities law of a state, or a federal or state law
under which a business involving investments, franchises,
insurance, banking, or finance is regulated.
(g) The person is insolvent, either because the person's
liabilities exceed the person's assets or because the person cannot
meet the person's obligations as they mature. The administrator
shall not enter an order against an applicant or registrant under
this subdivision without a finding of insolvency as to the
applicant or registrant.
(h) The person refuses to allow or otherwise impedes the
administrator from conducting an examination or inspection under
section 459(3) or refuses access to a registrant's office to
conduct an examination or inspection under section 459(3).
(i) The person has failed to reasonably supervise an employee
or other individual if he or she was subject to the person's
supervision and committed a violation of this act, or a rule or
order of the administrator under this act, within the previous 5
years.
(j) The person has not paid a proper filing fee within 30 days
after having been notified by the administrator of a deficiency.
The administrator shall vacate an order under this subdivision if
the deficiency is corrected.
(k) After notice and opportunity for a hearing, 1 or more of
the following have occurred within the previous 10 years:
(i) A court of competent jurisdiction has found the person to
have willfully violated the laws of a foreign jurisdiction under
which the business of securities, commodities, investment,
franchises, insurance, banking, or finance is regulated.
(ii) The person was found to have been the subject of an order
of a securities regulator of a foreign jurisdiction denying,
revoking, or suspending the right to engage in the business of
securities as a broker-dealer, agent, investment adviser,
investment adviser representative, or similar person.
(iii) The person was found to have been suspended or expelled
from membership by or participation in a self-regulatory
organization operating under the securities laws of a foreign
jurisdiction.
(l) The person is the subject of a cease and desist order
issued by the securities and exchange commission or issued under
the securities, commodities, investment, franchise, banking,
finance, or insurance laws of a state.
(m) The person has engaged in dishonest or unethical practices
in the securities, commodities, investment, franchise, banking,
finance, or insurance business within the previous 10 years.
(n) The person is not qualified on the basis of factors such
as training, experience, and knowledge of the securities business,
as indicated by evidence presented at a hearing conducted for the
purpose of reviewing the applicant's qualifications for
registration.
(5) The administrator may suspend or deny an application
summarily, may restrict, condition, limit, or suspend a
registration, or censure, bar, or may impose a civil fine on a
registrant, pending final determination of an administrative
proceeding. When an order under this subsection is issued, the
administrator shall promptly notify each person that is subject to
the order that the order has been issued, the reasons for the
action, and that, within 15 days after the receipt of a request in
a record from the person, the matter will be scheduled for a
hearing. If a hearing is not requested by a person that is subject
to the order or is not ordered by the administrator within 30 days
after the date of service of the order, the order is final. If a
hearing is requested or ordered, the administrator, after notice of
and opportunity for hearing to each person subject to the order,
may modify or vacate the order or extend the order until final
determination.
(6) Except under subsection (5), the administrator shall not
issue an order under this section unless the administrator has met
all of the following:
(a) Given appropriate notice to the applicant or registrant.
(b) Provided an opportunity for hearing to the applicant or
registrant.
(c) Made findings of fact and conclusions of law on the record
pursuant to the administrative procedures act of 1969, 1969 PA 306,
MCL 24.201 to 24.328.
(7) The administrator by order may discipline a person that
controls, directly or indirectly, a person that is not in
compliance with this section to the same extent as the noncomplying
person, unless the controlling person did not know, and in the
exercise of reasonable care could not have known, of the existence
of conduct that is a basis for discipline under this section.
(8) The administrator shall not institute a proceeding under
subsection (3) solely based on material facts actually known by the
administrator unless an investigation or the proceeding is
instituted within 1 year after the administrator first became aware
of the material facts.
Sec. 463. (1) A Michigan investment market may not service a
business if the business has already utilized the services of a
portal, market, or exchange that facilitates a secondary market for
intrastate securities, rather than facilitates securities
transactions for original purchasers of the business's intrastate
securities of those purchasers' own securities. The business may
not be or request to be serviced on 2 or more of those portals,
markets, or exchanges at any given time.
(2) A Michigan investment market shall only service a business
if that business meets, and the Michigan investment market verifies
that the business meets, all of the following at the time the
business conducts any offers, sales, or reselling of its intrastate
securities:
(a) Is a resident of this state.
(b) Is doing business in this state at the time the business
conducts any offers, sales, or reselling of its intrastate
securities. For purposes of this subdivision, a business is
considered to be doing business in this state if all of the
following are met:
(i) If the business had gross revenues of more than $5,000.00
from the sale of products or services or other conduct of its
business for its most recent 12-month fiscal period, it derived at
least 80% of its gross revenues, and those of its subsidiaries on a
consolidated basis, from the operation of a business or of real
property located in or from the rendering of services in this state
during 1 of the following time periods:
(A) In its most recent fiscal year, if the first offer of any
part of the issue is made during the first 6 months of the issuer's
current fiscal year.
(B) In the first 6 months of its current fiscal year, or
during the 12-month fiscal period ending with that 6-month period,
if the first offer of any part of the business's intrastate
offering is made during the last 6 months of the business's current
fiscal year.
(ii) At the end of its most recent semiannual fiscal period
before the first offer of any part of the issue, the business had
at least 80% of its assets and those of its subsidiaries on a
consolidated basis located in this state.
(iii) The business intends to use and uses at least 80% of the
net proceeds to the business from the sale or resale of intrastate
securities in connection with the operation of a business or of
real property in, the purchase of real property located in, or the
rendering of services in this state.
(iv) The principal office of the business is located within
this state.
(c) Is not insolvent. As used in this subdivision, "insolvent"
means any of the following:
(i) The liabilities of the business exceed its assets.
(ii) The business is unable to pay its debts as they mature.
(iii) The business has filed for bankruptcy or made an
assignment for the benefit of creditors.
(d) Is not subject to a current or pending disciplinary court
order or injunctions.
(e) Is not a defendant in a pending court proceeding.
(f) Complies with the laws of this state applicable to the
conduct of its business.
Sec. 465. (1) A Michigan investment market shall not do any of
the following:
(a) Sell or otherwise distribute to any third party personal
identifying information of an individual without his or her written
consent.
(b) In confirming whether an individual is a resident of this
state or meets any other requirement of relevant state or federal
law, require an individual to provide any personal information
except for 1 or more of the following:
(i) The address of his or her primary residence.
(ii) The number of a valid operator's license, chauffeur's
license, or official personal identification card issued by this
state.
(iii) A current Michigan voter registration.
(iv) An operator's or chauffeur's license, military
identification card, Michigan identification card, passport, or
other government-issued identification document that includes a
photograph of the individual.
(c) Charge a fee for a securities transaction conducted
through the Michigan investment market that exceeds 5% of the value
of the transaction, as determined by the value passed from 1 user
of the Michigan investment market to another in exchange for that
security.
(d) Deal in securities options, or include securities from
more than 1 class in an offering, without obtaining written
acknowledgment from each person involved in that transaction of the
nature of the securities transacted.
(2) A Michigan investment market must provide a process for
taking disciplinary action against its users that includes
discipline either in place of or in addition to excluding a user
from conducting transactions through the Michigan investment
market.
(3) A Michigan investment market must provide disclaimers and
restrictive legends that conspicuously state that its transactions
are limited to residents of this state under section 3(a)(11) of
the securities act of 1933, 15 USC 77c, and must limit access to
information about specific investment opportunities to individuals
who confirm they are residents of this state, such as by providing
a record or document described in section 202a(1)(b)(i)(A) to (D).
Sec. 467. (1) An individual's participation in a Michigan
investment market in this state is considered a representation that
he or she is a resident of this state. If it is subsequently shown
that an individual was not a resident of this state at the time of
his or her participation in a Michigan investment market, any
transaction conducted by that individual while he or she was not a
resident is void.
(2) A person that is not a resident of this state shall not
secondarily purchase an intrastate security within 9 months of the
completion of the offering through which the security was sold
originally. For purposes of this section, each of the following is
prima facie evidence that an individual is a resident of this
state:
(a) A valid operator's license, chauffeur's license, or
official personal identification card issued by this state.
(b) A current Michigan voter registration.
(c) A signed affidavit as described in section 7cc(2) of the
general property tax act, 1893 PA 206, MCL 211.7cc, that indicates
that the individual owns and occupies property in this state as his
House Bill No. 5273 (H-4) as amended May 21, 2014
or her principal residence.
Sec. 469. (1) [The department shall promulgate rules that require a
Michigan investment market, and any person that operates or controls a Michigan investment market, to comply with the uniting and strengthening America by providing appropriate tools required to intercept and obstruct terrorism (USA PATRIOT ACT) act of 2001, public law 107-56, and the bank secrecy act, 12 USC 1951 to 1959 and 31 USC 5311 to 5332.] The department may promulgate any [ADditional] rules that the
administrator considers necessary to administer this article if
those rules are consistent with the provisions of this act.
(2) Nothing in this article exempts any person to which this
article is subject from complying with any applicable state or
federal statute, rule, or regulation that applies to that person or
the conduct of that person's business.
Sec. 501. It is unlawful for a person, in connection with the
offer, sale, or purchase of a security or the organization or
operation of a Michigan investment market under article 4A, to
directly or indirectly do any of the following:
(a) Employ a device, scheme, or artifice to defraud.
(b) Make an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made,
not misleading.
(c) Engage in an act, practice, or course of business that
operates or would operate as a fraud or deceit on another person.
Enacting section 1. It is the intent of the legislature by
enacting this amendatory act to regulate a class of intrastate
broker-dealers that is exempt under section 15(a)(1) of the
securities exchange act of 1934, 15 USC 78o, and that will
facilitate intrastate securities transactions among persons of this
state.
