The enumeration of the causes stated in sub. (1)
shall not be exclusive and the division may deny an application or suspend or revoke any license or censure any licensee for any cause whether similar to or different from these causes when necessary or appropriate in the public interest or for the protection of investors.
The division may not institute a suspension or revocation proceeding on the basis of a fact or transaction known to the division when the license was issued unless the proceeding is instituted within 180 days following issuance of the license.
If the public interest or the protection of investors so requires, the division may by order summarily deny or suspend a license or postpone the effective date of a license. Upon the entry of the order, the division shall serve upon all named parties a copy of the order and notify the parties of their right to request a hearing.
If the division finds that any licensee or applicant is no longer in existence or has ceased to do business as a broker-dealer, agent, investment adviser or investment adviser representative, or is subject to an adjudication of mental incompetence or to the control of a committee, conservator or guardian, or cannot be located after reasonable search, the division may on order issued summarily revoke the license or deny the application.
No order may be entered under this section except under sub. (4)
without appropriate prior notice to the applicant or licensee, as well as the employer or prospective employer if the applicant or licensee is an agent. In cases of denial orders written findings of fact and conclusions of law are required only if requested by the applicant.
See also ss. DFI-Sec 4.06
, Wis. adm. code.
Sales and purchases.
It is unlawful for any person, in connection with the offer, sale or purchase of any security in this state, directly or indirectly:
To employ any device, scheme or artifice to defraud;
To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or
To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.
Whether a representation is material under sub. (2) is determined based on the objective standard of whether the omitted or misrepresented fact would have made a difference to a reasonable investor's decision to invest. State v. Johnson, 2002 WI App 224, 257 Wis. 2d 736
, 652 N.W.2d 642
Lack of reliance is a defense to all claims based on a misrepresentation theory. The application of s. 551.59 (1) (b) does not restrict the defense to claims under s. 551.41 (2). Carney v. Mantuano, 204 Wis. 2d 527
, 554 N.W.2d 854
(Ct. App. 1996), 95-2529
Section 551.41 does not create a private right of action. Section 551.59 (1) contains a civil remedy for a violation of s. 551.41 (2), and the limitation period in s. 551.59 (5) applies. Colonial Bank & Trust Co. v. American Bankshares, 478 F. Supp. 1186
Actions under ss.551.41 and 551.59 survive the death of the wrongdoer. Continental Assurance Co. v. American Bankshares Corp. 483 F. Supp. 175
Proof that the defendant entered into investment contracts with a purpose or intent to defraud investors is not required for a violation of sub. (3). The state need only prove that the accused willfully engaged in conduct that operates or would operate as a fraud or deceit upon a person. The nature of the act is dispositive, not the actor's state of mind. Van Duyse v. Israel, 486 F. Supp. 1382
It is unlawful for any person, directly or indirectly, in this state:
To effect any transaction in a security which involves no change in the beneficial ownership thereof, or to enter any order or orders for the purchase or sale of any security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale or purchase of the security, have been or will be entered by or for the same or affiliated persons, for the purpose of creating a false or misleading appearance of active trading in the security or a false or misleading appearance with respect to the market for the security;
To effect, alone or with one or more other persons, a series of transactions in any security creating actual or apparent active trading in the security or raising or depressing the price of the security, for the purpose of inducing the purchase or sale of the security by others; or
To induce the purchase or sale of any security by the circulation or dissemination of information to the effect that the price of the security will or is likely to rise or fall because of market operations of any one or more persons conducted for the purpose of raising or depressing the price of the security, if he or she is selling or offering to sell or purchasing or offering to purchase the security or is receiving a consideration, directly or indirectly, from any such person.
History: 1981 c. 53
It is unlawful for a broker-dealer to effect in this state any transaction in, or to induce the purchase or sale of, any security by means of any manipulative, deceptive or other fraudulent device or contrivance, including any fictitious quotation. The division may by rule define the terms "manipulative, deceptive or other fraudulent device or contrivance".
History: 1995 a. 27
See also ss. DFI-Sec 4.05
, Wis. adm. code.
It is unlawful for any person who receives any consideration from another person primarily for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise, in this state, to employ any device, scheme or artifice to defraud the other person; or engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon the other person. The division may adopt rules defining the terms used in this section.
This chapter shall be administered by the division.
It is unlawful for the division or any officers or employees of the division to use for personal benefit any information which is filed with or obtained by the division or an organization designated under s. 551.32 (1) (a)
and which is not generally available to the public. Nothing in this chapter authorizes the division or any officers or employees of the division to disclose any confidential information except among themselves or to other securities administrators or regulatory authorities or when necessary or appropriate in a proceeding or investigation under this chapter. No provision of this chapter either creates or derogates from any privilege which exists at common law or otherwise when documentary or other evidence is sought under a subpoena directed to the division or any officers or employees of the division.
See also DFI-Sec and ch. DFI-Sec 7
, Wis. adm. code.
Fees and expenses. 551.52(1)(a)(a)
There shall be a filing fee of $750 for every registration statement filed under s. 551.25
, and for every notice filing under s. 551.29 (1) (a)
. If a registration statement is denied or withdrawn before the effective date or a pre-effective stop order is entered under s. 551.28
, or a notice filing is withdrawn, the filing fee shall be retained.
An indefinite amount of securities shall be registered for offer and sale in this state under a registration statement relating to redeemable securities issued by an open-end management company or a face amount certificate company, as defined in the Investment Company Act of 1940, and the applicant shall pay the fee under par. (a)
. The registrant also shall, within 60 days after the end of each fiscal year during which its registration statement is effective and within 60 days after the registration is terminated, file a report on a form prescribed by rule of the division. The form shall require the registrant to do one of the following:
Elect not to include the information under subd.1. b.
and instead pay a fee of $1,500.
Report the amount of securities sold to persons in this state during the preceding fiscal year or, if the registration is terminated, during the portion of the preceding fiscal year during which the registration was effective, and pay a fee of 0.05% of the dollar amount of the securities sold to persons in this state, but not less than $150 nor more than $1,500.
An indefinite amount of securities is eligible for offer and sale in this state resulting from a notice filing under s. 551.29 (1) (a)
for the initial offer of a federal covered security under section 18 (b) (2) of the Securities Act of 1933, if the filing party has notified the division of the issuer's fiscal year, and the filing party pays the fee under par. (a)
. The filing party shall also, within 90 days after the end of each fiscal year following the filing under s. 551.29 (1) (a)
, and within 90 days after sales in this state have terminated, file a report to allow the division to determine that the amount of the fee paid is correct. The report shall be on a form prescribed by rule of the division and shall require the filing party to do one of the following:
Elect not to include the information under subd. 2. b.
and instead pay a fee of $1,500.
Report the amount of securities sold to persons in this state during the preceding fiscal year or, if sales have terminated, during the portion of the preceding fiscal year during which sales were made, and pay a fee of 0.05% of the dollar amount of the securities sold to persons in this state, but not less than $150 nor more than $1,500.
Every applicant for an initial or renewal license under s. 551.32
shall pay a filing fee of $200 in the case of a broker-dealer or investment adviser and $30 in the case of an agent representing a broker-dealer or issuer or an investment adviser representative. Every federal covered adviser in this state that is required to make a notice filing under s. 551.32 (1m)
shall pay an initial or renewal notice filing fee of $200. A broker-dealer, investment adviser, or federal covered adviser maintaining a branch office within this state shall pay an additional filing fee of $30 for each branch office. When an application is denied, or an application or a notice filing is withdrawn, the filing fee shall be retained.
The expenses reasonably attributable to the examination of any matter arising under this chapter shall be charged to the applicant, registrant or licensee involved, but the expenses so charged shall not exceed such maximum amounts as the division by rule prescribes.
The division may by rule require the payment of prescribed fees for delinquent or materially deficient filings of information or documents required under this chapter to be filed with the division or an organization designated under s. 551.32 (1) (a)
All fees and expenses collected under this section shall be paid into the state treasury.
See also s. DFI-Sec 7.01
, Wis. adm. code.
It is unlawful for any person, in connection with the offer, sale or purchase of any security in this state, to publish, circulate or use any advertising:
That contains an untrue statement of a material fact or omits 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; or
That has not been filed with the division not later than the date of publication or circulation, except for advertising relating to a federal covered security or except as the division may otherwise provide by rule or order.
The division may by rule or order prohibit the publication, circulation or use of any advertising deemed false or misleading.
It is unlawful for any person to make or cause to be made, in any document filed with the division or filed under s. 551.32 (1) (a)
with an organization designated by the division or in any proceeding under this chapter, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect or, in connection with such statement, to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.
History: 1981 c. 53
; 1995 a. 27
Neither the fact that a notice filing, registration statement or an application for a license has been filed nor the fact that a security is effectively registered or a person is licensed constitutes a finding by the division that any document filed under this chapter is true, complete and not misleading. Neither any such fact nor the fact that an exemption or exception is available for a security or a transaction means that the division has passed in any way upon the merits or qualifications of, or recommended or given approval to, any person, security or transaction. It is unlawful to make, or cause to be made, to any prospective purchaser, customer or client any representation inconsistent with the foregoing.
History: 1995 a. 27
; 1997 a. 316
Investigations and subpoenas. 551.56(1)(a)
Make such public or private investigations within or without this state as are necessary to determine whether any person has violated or is about to violate this chapter or any rule or order under this chapter, or to aid in the enforcement of this chapter or in the prescribing of rules and forms under this chapter;
Require or permit any person to file a statement in writing, under oath or otherwise as the division determines, as to all the facts and circumstances concerning the matter being investigated;
Publish information concerning any violation of this chapter or any rule or order under this chapter or concerning securities, or practices in the sale of securities, which appear or tend to be unfair, inequitable or fraudulent; and
Hold hearings, upon reasonable notice, and issue orders on the basis thereof, in respect of any matter arising out of the administration of this chapter.
For the purpose of any investigation, hearing or proceeding under this chapter, the division or any officer designated by the division may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence and require the production of any books, papers, correspondence, memoranda, agreements or other documents or records which the division deems relevant or material to the inquiry. Failure to obey a subpoena or give evidence may be dealt with in accordance with s. 885.12
No person is excused from attending and testifying or from producing any document or record before the division, or in obedience to the subpoena of the division or any officer designated by the division, or in any proceeding instituted by the division, on the ground that the testimony or evidence required of the person may tend to incriminate him or her or subject the person to a penalty or forfeiture; but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of his or her testimony or evidence, after claiming his or her privilege against self-incrimination, except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
Whenever it appears to the division that any person has engaged or is about to engage in any act or practice constituting a violation of this chapter or any rule or order hereunder, the division may bring an action in the name of the state in the circuit court of the appropriate county to enjoin the acts or practices and to enforce compliance with this chapter or any rule or order hereunder, or the division may refer the matter to the attorney general or the district attorney of the appropriate county. Upon a proper showing, the court may grant a permanent or temporary injunction or restraining order, or may appoint a receiver for the defendant or the defendant's assets, or may order rescission of any sales or purchases of securities determined to be unlawful under this chapter or any rule or order hereunder. The court may not require the division to post a bond.
History: 1971 c. 84
; 1981 c. 53
; 1995 a. 27
Criminal penalties. 551.58(1)(1)
Any person who willfully violates any provision of this chapter except s. 551.54
, or any rule under this chapter, or any order of which the person has notice, or who violates s. 551.54
knowing or having reasonable cause to believe that the statement made was false or misleading in any material respect, is guilty of a Class H felony. Each of the acts specified shall constitute a separate offense and a prosecution or conviction for any one of such offenses shall not bar prosecution or conviction for any other offense.
The division may refer such evidence as is available concerning violations of this chapter or of any rule or order under this chapter to the attorney general or the district attorney of the appropriate county, who may, with or without any reference, institute the appropriate criminal proceedings under this chapter. If referred to a district attorney, the district attorney shall, within 90 days, file with the division a statement concerning any action taken or, if no action has been taken, the reasons therefor.
Nothing in this chapter limits the power of the state to punish any person for any conduct which constitutes a crime under any other statute.
That sub. (1) does not require a person to know his or her actions are unlawful does not render the statute unconstitutional. Mueller v. Sullivan, 141 F.3d 1232
Civil liabilities. 551.59(1)(a)(a)
Any person who offers or sells a security in violation of s. 551.21
or any rule relating thereto, or any condition imposed under s. 551.26
or any order under this chapter of which the person has notice is liable to the person purchasing the security from him or her. The person purchasing the security may sue either at law or in equity to recover the consideration paid for the security, together with interest at the legal rate under s. 138.04
from the date of payment, and reasonable attorney fees, less the amount of any income received on the security, upon the tender of the security, or for damages if the person no longer owns the security. Damages are the amount that would be recoverable upon a tender less the value of the security when the purchaser disposed of it and interest at the legal rate under s. 138.04
from the date of disposition. Tender shall require only notice of willingness to exchange the security for the amount specified. Any notice may be given by service as in civil actions or by certified mail addressed to the last-known address of the person liable.
A person who offers or sells a security in violation of s. 551.41 (2)
is not liable under par. (a)
if the purchaser knew of the untrue statement of a material fact or omission of a statement of a material fact or the person sustains the burden of proof to establish that he or she did not know and in the exercise of reasonable care could not have known of the untrue statement or omission.