May 7, 2008, Introduced by Senators CLARK-COLEMAN, GLEASON, SCHAUER, JACOBS, THOMAS, SCOTT, SWITALSKI, BASHAM, PRUSI, CHERRY, OLSHOVE, ANDERSON, BRATER, CLARKE, BARCIA, WHITMER and HUNTER and referred to the Committee on Banking and Financial Institutions.
A bill to amend 1964 PA 265, entitled
"Uniform securities act,"
by amending section 401 (MCL 451.801), as amended by 2000 PA 494.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 401. As used in this act, unless the context otherwise
requires:
(a) "Administrator" means the office of financial and
insurance
services of the department of consumer and industry
services
labor and economic growth.
(b) "Affiliate" means a person that directly or indirectly
through 1 or more intermediaries controls, is controlled by, or is
under common control with a specified person.
(c) "Agent" means any individual other than a broker-dealer
who represents a broker-dealer or issuer in effecting or attempting
to effect purchases or sales of securities. "Agent" does not
include an individual who represents an issuer in (1) effecting
transactions in a security exempted by section 402(a)(1), (2), (3),
(4), (5), (9), or (10), (2) effecting transactions exempted by
section 402(b), (3) effecting transactions in a covered security as
defined in section 18(b)(3) or 18(b)(4)(D) of the securities act of
1933,
15 U.S.C. USC 77r, or (4) effecting transactions with
existing employees, partners, officers, or directors of the issuer
or any of its subsidiaries if, in connection with all of these 4
cases, no commission is paid or given directly or indirectly for
soliciting any person in this state. "Agent" does not include an
officer or general partner of an issuer whose securities are
registered under the provisions of this act, who represents the
issuer in effecting transactions in the registered securities, if
no commission is paid or given directly or indirectly for
soliciting any person in this state. "Agent" does not include a
person acting solely as a finder and registered pursuant to this
act or acting as a finder under a transaction exempt pursuant to
section 402(b)(19). "Agent" does not include a person whose
transactions in this state are limited to only those transactions
set forth in section 15(h)(2) of the securities exchange act of
1934,
15 U.S.C. USC 78o. A partner, officer, or director of a
broker-dealer or issuer, or a person occupying a similar status or
performing similar functions, is an agent only if he or she
otherwise comes within this definition. The administrator may by
rule or order exclude other persons from the definition of the word
"agent".
(d) "Broker-dealer" means any person engaged in the business
of effecting transactions in securities for the account of others
or for his or her own account. "Broker-dealer" does not include (1)
an agent, (2) an issuer, (3) a bank, savings institution, or trust
company, (4) a person who has no place of business in this state if
(A) he or she effects transactions in this state exclusively with
or through (i) the issuers of the securities involved in the
transactions, (ii) other broker-dealers, or (iii) banks, savings
institutions, trust companies, insurance companies, investment
companies as defined in the investment company act of 1940, pension
or profit-sharing trusts, or other financial institutions or
institutional buyers, whether acting for themselves or as trustees,
or (B) during any period of 12 consecutive months he or she does
not direct more than 15 offers to sell or buy into this state in
any manner to persons other than those specified in clause (A) of
this subdivision, whether or not the offeror or any of the offerees
is then present in this state, or (5) a person acting solely as a
finder and registered pursuant to this act or acting as a finder
under a transaction exempt pursuant to section 402(b)(19). The
administrator may by rule or order exclude other persons from the
definition of the word "broker-dealer".
(e) "Commission" means any payment in cash, securities, or
goods for offering or selling, promise, or commitment to provide
payment in the future for offering or selling, or any other similar
payment. Commission does not include a real estate commission
commensurate with fees paid in the area for similar services, paid
to licensed real estate brokers solely for real estate services
which have been rendered, or payment by a person to a lawyer or
accountant in connection with advice or recommendations made by a
lawyer or accountant to the client with whom the lawyer or
accountant has an established professional relationship, if
disclosure of the payment and the interest of the lawyer or
accountant in the transaction or in the issuer or any affiliate of
the issuer, is made in writing to the client before the sale.
Officers, directors, and partners of an issuer or purchaser, or
persons occupying a similar status shall not be considered a finder
if their contact was purely incidental and their compensation was
not directly or indirectly tied to or conditioned upon involvement
in securities solicitation or purchase.
(f) "Direct or indirect compensation or remuneration" means
any payment, receipt or use of proceeds of an offering for the
benefit of the promoter, general partners, officers or directors,
or persons occupying similar positions or their affiliates, any
receipt, payment, or use of securities or goods by those persons at
less than the amount public investors paid for the securities or
goods, or any markup charged on sale of property to the entity
raising capital, any advantageous contractual relationships, any
real estate commission, or other similar payments or arrangements
to those persons.
(g) "Federally covered adviser" means a person that is
registered under section 203 of the investment advisers act of
1940, 15 USC 80b-3. The term does not include a person excluded
from the definition of investment adviser under subdivision (l)(1),
(2), (3), (4), (5), (6), (7), (8), (9), or (11).
(h) "Federally covered security" means any security that is a
"covered security" under the securities act of 1933 or rules or
regulations promulgated under that act.
(i) "Finder" means a person who, for consideration,
participates in the offer to sell, sale, or purchase of securities
or commodities by locating, introducing, or referring potential
purchasers or sellers. Finder does not include a person whose
actions are solely incidental to a transaction exempt pursuant to
section 402(b)(19). The administrator may by rule or order exclude
other persons from this definition.
(j) "Fraud", "deceit", and "defraud" are not limited to
common-law deceit.
(k) "Guaranteed" means guaranteed as to payment of principal,
interest, or dividends.
(l) "Investment adviser" means any person who, for
consideration, engages in the business of advising others, either
directly or through publications or writings, as to the value of
securities, or as to the advisability of investing in, purchasing,
or selling securities, who, for consideration and as a part of a
regular business, issues or promulgates analyses or reports
concerning securities, or who acts as a finder in conjunction with
the offer, sale, or purchase of a security. "Investment adviser"
does not include any of the following:
(1) A bank, savings institution, or trust company.
(2) A lawyer, accountant, engineer, geologist, geophysicist,
or teacher whose performance of these services is solely incidental
to the practice of his or her profession.
(3) A broker-dealer or a registered agent acting on behalf of
a broker-dealer whose performance of these services is solely
incidental to the conduct of his or her business as a broker-dealer
and who receives no special compensation for the services.
(4) A publisher, employee, or columnist of a newspaper, news
magazine, or business or financial publication, or an owner,
operator, producer, or employee of a cable, radio, or television
network, station, or production facility if, in either case, the
financial or business news published or disseminated is made
available to the general public and the content does not consist of
rendering advice on the basis of the specific investment situation
of a client.
(5) A person who has no place of business in this state if
either of the following applies:
(A) His or her only clients in this state are other investment
advisers, federally covered advisers, broker-dealers, banks,
savings institutions, trust companies, insurance companies,
investment companies as defined in the investment company act of
1940, pension or profit-sharing trusts the assets of which are
managed by a bank or trust company or other institutional manager,
or other financial institutions or institutional buyers, whether
acting for themselves or as trustees.
(B) During any period of 12 consecutive months he or she does
not have more than 5 clients in this state other than those
specified in subparagraph (A).
(6) A person excluded from the definition of investment
adviser under section 202(a)(11) of the investment advisers act of
1940,
15 U.S.C. USC 80b-2.
(7) Any other persons not within the intent of this
subdivision as the administrator may by rule or order designate.
(8) A trustee whose custody of assets is pursuant to judicial
appointment, or appointment under a trust indenture or agreement,
and who does not hold himself or herself out to the general public
as giving advice to others with respect to securities and who
maintains close contact with the personal financial affairs of his
or her clients as a part of his or her fiduciary responsibilities,
or a person who gives advice only to such a trustee.
(9) A county treasurer acting pursuant to his or her authority
under the local government investment pool act, 1985 PA 121, MCL
129.141 to 129.150.
(10) A person who is a federally covered adviser.
(11) A person who is employed by or associated with an
investment adviser.
(m) "Investment adviser representative" means a partner,
officer, or director, or a person occupying a similar status or
performing similar functions, or other individual except a clerical
or ministerial employee or other employee or associate designated
by the administrator by rule or order as within the intent of this
subsection, who is employed by or associated with either of the
following:
(1) An investment adviser that is registered or required to be
registered under this act and who does any of the following:
(i) Makes any recommendations or otherwise renders advice
regarding securities.
(ii) Manages accounts or portfolios of clients.
(iii) Determines which recommendation or advice regarding
securities should be given.
(iv) Solicits, offers, or negotiates for the sale of or sells
investment advisory services.
(v) Supervises employees who perform any of the activities
described in subparagraph (i), (ii), (iii), or (iv).
(2) A federally covered adviser that is subject to section
203A
of title II of the investment advisers act of 1940, 15 U.S.C.
USC 80b-3a, and is designated by the administrator by rule or
order.
(n) "Investment advisers act of 1940" means the investment
advisers
act of 1940, title II of chapter 686, 54 Stat. 847, 15
U.S.C.
USC 80b-1 to 80b-21.
(o) "Investment company act of 1940" means the investment
company
act of 1940, title I of chapter 686, 54 Stat. 789, 15
U.S.C.
USC 80a-1 to 80a-3 and 80a-4 to 80a-64.
(p) "Issuer" means any person who issues or proposes to issue
any security, except that:
(1) For certificates of deposit, voting-trust certificates or
collateral-trust certificates, or with respect to certificates of
interest or shares in an unincorporated investment trust not having
a board of directors, or persons performing similar functions or of
the fixed, restricted management or unit type, the term "issuer"
means the person or persons performing the acts and assuming the
duties of depositor or manager pursuant to the provisions of the
trust or other agreement or instrument under which the security is
issued.
(2) For certificates of interest or participation in oil, gas,
or mining titles or leases, or in payments out of production under
titles or leases, the term "issuer" means the owner of the oil,
gas, or mining titles or leases or payments out of production or
any fractional part thereof who creates and sells certificates of
interest or participation therein.
(q) "Nonissuer" means not directly or indirectly for the
benefit of the issuer. A sale of securities shall be considered to
be indirectly for the benefit of the issuer if all of the following
conditions are met:
(1) The sale is directly or indirectly made for the benefit of
a director or executive officer of the issuer, or a person
occupying a similar status or performing similar functions, or a
beneficial owner of 10% or more of any class of equity securities
of the issuer.
(2) The sale, together with all sales made in this state by or
for the benefit of the issuer during the 6-month period immediately
before the date of the sale, otherwise than pursuant to a
registration statement or exemption order under this act, exceeds
1% of the outstanding securities of the class of securities being
sold.
(3) The securities are not of a class that has been designated
by the administrator as eligible for trading in this state.
(r) "Notice filing" means the documents filed with the
administrator under section 202a or 308, or both, as applicable.
(s) "Person" means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust where
the interests of the beneficiaries are evidenced by a security, an
unincorporated organization, a government, or a political
subdivision of a government.
(t) "Promoter" means a person who, acting alone or in
conjunction with 1 or more persons, directly or indirectly takes
the initiative in founding and organizing the business or
enterprise of an issuer; or a person who, in connection with the
founding or organizing of the business or enterprise of an issuer,
directly or indirectly receives in consideration of services or
property, 10% or more of the proceeds from the sale of any class of
securities or 10% or more of the equity interest in the issuer
after the offering is complete. However, a person who receives such
an amount of securities or proceeds either solely as underwriting
commissions pursuant to an offering of securities registered under
this act or solely in consideration of property or legal or
accounting services shall not be considered a promoter within the
meaning of this subsection if the person does not otherwise take
part in founding and organizing the enterprise.
(u) "Public utility holding company act of 1935" means the
public
utility holding company act of 1935, title I of chapter 687,
49
Stat. 838 15 USC 79 to 79z-6.
(v) (1) "Sale" or "sell" includes every contract of sale of,
contract to sell, or disposition of a security or interest in a
security for value.
(2) "Offer" or "offer to sell" includes every attempt or offer
to dispose of, or solicitation of an offer to buy, a security or
interest in a security for value.
(3) Any security given or delivered with, or as a bonus on
account of, any purchase of securities or any other thing is
considered to constitute part of the subject of the purchase and to
have been offered and sold for value.
(4) A purported gift of assessable stock is considered to
involve an offer and sale.
(5) Every sale or offer of a warrant or right to purchase or
subscribe to another security of the same or another issuer, as
well as every sale or offer of a security which gives the holder a
present or future right or privilege to convert into another
security of the same or another issuer, is considered to include an
offer of the other security.
(6) The terms defined in this subdivision do not include:
(A) Any stock dividend, whether the corporation distributing
the dividend is the issuer of the stock or not, if nothing of value
is given by stockholders for the dividend other than the surrender
of a right to a cash or property dividend when each stockholder may
elect to take the dividend in cash or property or in stock.
(B) Any 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.
(w) "Securities act of 1933" means the securities act of 1933,
title
I of chapter 38, 48 Stat. 74, 15 U.S.C.
USC 77a to 77r and
77s
to 77aa.
(x) "Securities exchange act of 1934" means the securities
exchange
act of 1934, chapter 404, 48 Stat. 881 15 USC 78a to 78mm.
(y) "Securities investor protection act of 1970" means the
securities
investor protection act of 1970, Public Law 91-598, 84
Stat.
1636 15 USC 78aaa to 78lll.
(z) "Security" means any note; stock; treasury stock; bond;
debenture; evidence of indebtedness; certificate of interest or
participation in any profit-sharing agreement; collateral-trust
certificate; preorganization certificate or subscription;
transferable share; investment contract; variable annuity contract;
voting-trust certificate; certificate of deposit for a security;
certificate of interest or participation in an oil, gas, or mining
title or lease or in payments out of production under such a title
or lease; or, in general, any interest or instrument commonly known
as a "security", or any certificate of interest or participation
in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase, any of the
foregoing. "Security" includes any contractual or quasi contractual
arrangement pursuant to which: (1) a person furnishes capital,
other than services, to an issuer; (2) a portion of that capital is
subjected to the risks of the issuer's enterprise; (3) the
furnishing of that capital is induced by the representations of an
issuer, promoter, or their affiliates which give rise to a
reasonable understanding that a valuable tangible benefit will
accrue to the person furnishing the capital as a result of the
operation of the enterprise; (4) the person furnishing the capital
does not intend to be actively involved in the management of the
enterprise in a meaningful way; and (5) a promoter or its
affiliates anticipate, at the time the capital is furnished, that
financial gain may be realized as a result thereof. "Security" does
not include an insurance or endowment policy or annuity contract
under which an insurance company promises to pay a fixed sum of
money either in a lump sum or periodically for life or some other
specified period or a commodity contract. The administrator may
exclude by rule or by order other transactions or agreements from
the definition of the word "security".
(aa) "Small business investment act of 1958" means the small
business
investment act of 1958, Public Law 85-699, 72 Stat. 689 15
USC 661 to 697g.
(bb) "State" means any state, territory, or possession of the
United States, the District of Columbia, and Puerto Rico.
(cc) "Variable annuity contract" means an insurance or
endowment policy or annuity contract under which an insurance
company promises to pay a variable sum of money, based on
investment experience, either in a lump sum or periodically for
life or some other specified period.