A copy of the full text of the proposed rule revisions and fiscal estimate may be obtained from:
Randall E. Schumann (608) 266-3414
Legal Counsel for the Division of Securities
Department of Financial Institutions
345 West Washington Avenue, 4th Floor
P. O. Box 1768
Madison, WI 53701
Additionally, the full text of the proposed rule revisions is available on-line at the DFI Website:
www.wdfi.org/ securities&franchising.
Analysis Prepared by Dept. of Financial Institutions— Securities
Statutory authority
Sections
551.605 (1) (a),
(b) and
(c),
(2),
(3) and
(4),
551.102 (2),
(4) (e),
(11) (p),
(15) (h),
(16) (d) and
(28) (h),
551.105,
551.201(1) (b),
(3) (c),
(6), and
(7) (intro.),
(a), and
(b),
551.202 (6),
(13) (c),
(14) (b) and
(23),
551.203,
551.302 (intro.),
(1) (a),
(b) and
(c),
(3) and
(5),
551.304 (2) (intro.) and
(r),
(3) and
(5),
551.305 (2),
(7),
(9),
(10) and
(11),
551.306 (1) (b),
551.401 (2) (h), and
(4) (intro.),
551.402 (2) (i) and
(5),
551.403 (2) (c),
551.404 (2) (b) and
(4),
551.405 (2) (a) 4. and
(c),
(3),
(4) (b) and
(c),
551.406 (1),
(3) (b),
(4) and
(5),
551.407 (4),
551.408 (5),
551.409,
551.411(1),
(2),
(3) (a) and
(c),
(5),
(6),
(7) and
(8),
551.411 (4) (b) and
(5),
551.502 (2) and
(3),
551.504 (1),
551.606 (3),
551.608 (2) (intro.),
551.611 (1),
551.614 (1) (b) 1. and
2., and
(4), Wis. Stats.
For the Franchise Law-related changes under Chapter
553, Wis. Stats:
Statutes interpreted
Securities Law-related:
Sections
551.605 (1) (a),
(b) and
(c),
(2),
(3) and
(4),
551.102 (2),
(4) (e),
(11) (p),
(15) (h),
(16) (d) and
(28) (h),
551.105,
551.201 (1) (b),
(3) (c),
(6), and
(7) (intro.),
(a), and
(b),
551.202 (6),
(13) (c),
(14) (b) and
(23),
551.203,
551.302 (intro.),
(1) (a),
(b) and
(c),
(3) and
(5),
551.304 (2) (intro.) and
(r),
(3) and
(5),
551.305 (2),
(7),
(9),
(10) and
(11),
551.306 (1) (b),
551.401 (2) (h), and
(4) (intro.),
551.402 (2) (i) and
(5),
551.403 (2) (c),
551.404 (2) (b) and
(4),
551.405 (2) (a) 4. and
(c),
(3),
(4) (b) and
(c),
551.406 (1),
(3) (b),
(4) and
(5),
551.407 (4),
551.408 (5),
551.409,
551.411 (1),
(2),
(3) (a) and
(c),
(5),
(6),
(7) and
(8),
551.411 (4) (b) and
(5),
551.502 (2) and
(3),
551.504 (1),
551.606 (3),
551.608 (2) (intro.),
551.611 (1),
551.614 (1) (b) 1. and
2., and
(4), Wis. Stats.
Franchise Law-related:
Summary of rule
Because the repeal and recreation of the Wisconsin Securities Law in
2007 Wisconsin Act 196 (signed by the Governor on March 27, 2008) -- which involved the adoption of the 2002 Uniform Securities Act (“2002 USAct") as developed by the National Conference of Commissioners on Uniform State Laws -- resulted in changes to all aspects of Wisconsin securities regulation (definitions, securities registration procedures and registration exemptions, securities licensing, enforcement powers and procedures, as well as general administrative powers), the corresponding administrative rule chapters and provisions relating to those aspects/categories of law changes need to be updated and made consistent. Such rule revisions are necessary to facilitate compliance by securities issuers and securities professionals of the Securities Law changes for the benefit of Wisconsin public investors. Also, because the effectiveness date for
2007 Wisconsin Act 196 is January 1, 2009, the proposed rule-making process is being conducted now to enable the rules to be finalized concurrent with the effectiveness of the legislation.
Separately, because the adoption by the Federal Trade Commission of its FTC Franchise Rule (“the FTC Franchise Rule," which became effective for use on a voluntary basis for franchisors on July 1, 2007, and becomes effective on a mandatory basis July 1, 2008) supersedes and preempts several existing Wisconsin franchise rules establishing requirements for disclosure documents used in connection with the offer and sale of franchises to persons in Wisconsin, the Wisconsin franchise rules so impacted need to be revised to be consistent with the FTC Rule. As a related matter, remedial franchise-related legislation was enacted in
2007 Wisconsin Act 150 (effective April 5, 2008) which made a necessary statutory change to make Wisconsin's timing deadline within which franchisors must provide a franchise disclosure document to a prospective purchaser, consistent with the recent FTC Franchise Rule change on that subject.
Additionally, the Wisconsin Franchise Law disclosure document-related rules impacted by the changes to the FTC Franchise Rule need to be revised and updated as necessary to be made consistent and thereby facilitate compliance by franchisors seeking to offer and sell franchises to persons in Wisconsin. For purposes of providing regulatory consistency among the 15 state jurisdictions (including Wisconsin) that regulate offers/sales of franchises, the Franchise and Business Opportunity Project Group of the North American Securities Administrators Association (“NASAA") developed revised 2008 Franchise Registration and Disclosure Guidelines (“Franchise Guidelines") that were adopted by the NASAA membership in April 2008, that state jurisdictions which register franchise offerings can adopt as the required format for franchise disclosure documents. Those Franchise Guidelines were developed to be, and are, consistent with the FTC Franchise Rule which allows franchise law states to impose additional disclosure requirements that are consistent with the FTC Franchise Rule. In that regard, the Franchise Guidelines adopt the FTC form of franchise disclosure document with the addition of a state cover page, and include new instructions for franchisors to file registrations with state administrators, as well as revised application forms. The proposed Wisconsin Franchise Rule revisions will include, via incorporation by reference, the above-described NASAA Franchise Guidelines and forms.
A summary of the subject matter and nature of the more significant of the rule revisions follows:
1. In the definitional Chapter of the Securities rules, rules DFI-Sec 1.02 (6) (a) and (b), which define the term “investment contract" to include both the “modified
Howey" and “risk capital" tests, are being repealed because both are expressly included [as subsections (d) 1 and 2] in the statutory definition of “security" in new s.
551.102 (28), Wis. Stats.
2. The additional categories of “institutional investor" contained in the registration exemption rule of DFI-Sec 2.02 (4) under current s.
551.23 (8), Wis. Stats., are moved to the Definitions Chapter of the rules because under the new statute, “institutional investor" is now a defined term contained in definitional section s.
551.102 (11), Wis. Stats., par. (b) of which provides separate authority to, by rule, further specify other persons as “institutional investors."
3. The registration exemption treatment for both domestic (Wisconsin) as well as non-Wisconsin not-for-profit-issuers that is currently scattered in several different places in both the statutes and rules, is consolidated in 4 distinct subsections of a single exempt security rule adopted under the statutory authority of new s.
551.201 (7), Wis. Stats.
4. Because the federal Regulation D, Rule 505 securities registration exemption contained in current s.
551.23 (19), Wis. Stats., was not retained in the new law, but rather was to be adopted by rule, that federal Rule 505 exemption is made an exempt transaction rule under the discretionary exemption rule-making authority of s.
551.203, Wis. Stats.
5. Designating by rule for purposes of the “manual" registration exemption in new statute section 551.202 (2) (d), Wis. Stats., certain nationally recognized securities manuals.
6. Among the broker-dealer-related rule revisions, the temporary agent licensing rule in DFI-Sec 4.085 is repealed because that procedure is included in new statute 551.408 (2), Wis. Stats.
7. The extensive series of bank agency transactions rules in current s. DFI-Sec 4.10 are repealed as being superseded by the language of the exclusion from the definition of broker-dealer in s.
551.102 (4) (c) of the new law [based on federal Graham-Leach-Bliley legislation] relating to permitted securities-related activities of banks.
8. The extensive series of rules in DFI-Sec 4.11 dealing with brokered certificates of deposit (i.e. sales to persons in Wisconsin by broker-dealers of federally insured certificates of deposit in specified financial institutions) are also repealed.
9. Included among the investment adviser-related rule revisions are additional “dishonest or unethical practices" under existing rule DFI-Sec 5.06 based on current NASAA Model Rules (such as guaranteeing results, offering “free" reports or analyses that really are not free, or disclosing clients' identity or financial information) which, under new s.
551.412 (4) (m), Stats., can be a basis for denial, suspension or revocation of an investment adviser registration. Also added are currently proposed NASAA Model Rules on subject areas that include principal trading by an adviser, making misrepresentations or omissions of material facts in soliciting advisory customers, and effectuating certain prohibited agency cross-transactions.
10. Revisions to existing advisory rules would raise (up to $1200 from the current $500) the dollar threshold of permitted prepayment of adviser fees six months or more in advance to thereby harmonize with a pending SEC proposal on that subject.
11. The examination waiver provided for investment advisers and investment adviser representatives in current DFI-Sec 5.01(4) (a) based upon passage of the Series 7 and Series 63 examination is repealed to make Wisconsin uniform with other state jurisdictions -- virtually none of which recognize such exams as a basis for waiver of the investment adviser examination requirement.
12. The “temporary hardship exemption" from compliance with the electronic-filing-with-the IARD requirement currently contained in DFI-Sec 5.01(8) is being repealed because in the seven years since the SEC and states (including Wisconsin) have adopted that exemption,, the Division's information is that it has never been used or relied on at the federal or state level.
13. Added to the Administrative Procedure Chapter are 2 separate rules relating to ability of parties to conduct discovery and to utilize information acquired subsequent to issuance of a summary order.
14. Revisions to the Franchise Law rules include (i) changing the rule defining “timely" in DFI-Sec 31.01 (8) [with respect to providing required disclosures] from the previous 10 business day requirement to the new 14 calendar day requirement under the new FTC Franchise Rule and as established in amended s.
553.27 (4), Wis. Stats., in
2007 Wisconsin Act 150; and (ii) amendments to the franchise registration and registration amendment filing procedures in DFI-Sec 32.06 and 32.07 to reference the new FTC Franchise Rule and its Disclosure Document requirement, as well as the recently developed and adopted conforming NASAA 2008 Franchise Registration Disclosure Guidelines.
Each Section that contains a substantive adoption, amendment or repeal of a rule is followed by a separate Analysis which discusses the nature of the revision as well as the reason for it.
A copy of the entirety of the proposed rule revisions to be considered may be obtained upon request to the Division of Securities, Department of Financial Institutions, 345 West Washington Avenue, 4th Floor, P.O. Box 1768, Madison, Wisconsin 53701. Additionally, the full text of the proposed rule revisions is available on-line at the DFI Website:
www.wdfi.org/securities&franchising.
Initial Regulatory Flexibility Analysis
Types of small businesses that could be affected
Broker-dealer and investment adviser registrants under the new Wisconsin Uniform Securities Law with fewer than 25 full-time employees who meet the other criteria of sec. 227.114 (l) (a), Wis. Stats. The proposed revisions to both the procedural and substantive securities broker-dealer and investment adviser registration rules, as well as the Rule of Conduct and Dishonest or Unethical Practices provisions are applicable equally to all broker-dealers and investment advisers because the requirements involved are for the protection and benefit of Wisconsin customers of those firms. All Wisconsin customers of securities broker-dealers and investment advisers are entitled to the public investor protection benefits of such rule requirements, irrespective of the size of the firm providing the securities services.
All of the small-business capital formation registration exemptions under the current Wisconsin Securities Law rules are retained in the rules as revised.
Reporting, bookkeeping and other procedures required for compliance with the rules.
No new or additional reporting, bookkeeping, or other procedures are contained in this rulemaking package.
Fiscal Estimate
Summary
No one-time revenue fluctuations.
State fiscal effect
None
Local fiscal effect
None
Long-range fiscal implications
None
Notice of Hearing
Public Service Commission
NOTICE IS GIVEN that pursuant to s.
227.16 (1), Stats., the Commission will hold a public hearing on proposed rule changes to repeal and recreate Chapter
PSC 116, relating to a fuel cost rate adjustment process for electric utility service.
Hearing Information
August 4, 2008 Amnicon Falls Hearing Room
Monday Public Service Commission Bldg.
9:30 a.m. 610 North Whitney Way
Madison, Wisconsin,
This building is accessible to people in wheelchairs through the Whitney Way (lobby) entrance. Handicapped parking is available on the south side of the building.
The Commission does not discriminate on the basis of disability in the provision of programs, services, or employment. Any person with a disability who needs accommodations to participate in this proceeding or who needs to get this document in a different format should contact James Wagner or Michael Ritsema, as indicated below.
Contact Person
Questions regarding this matter should be directed to James Wagner, Docket Coordinator, (608) 267-9768,
James.Wagner@psc.stat.wi.us; or Michael Ritsema, (608) 267-9296,
Michael.Ritsema@psc.state.wi.us. Media questions should be directed to Tim Le Monds, Director of Governmental and Public Affairs at (608) 266-9600. Hearing or speech-impaired individuals may also use the Commission's TTY number; if calling from Wisconsin use (800) 251-8345, if calling from outside Wisconsin use (608) 267-1479.
Copy of Proposed Rule
A copy of this entire notice, including the text of the proposed rule, may be accessed from the electronic regulatory filing portion of the Commission's website (psc.wi.gov).
Submission of Written Comments
Any person may submit written comments on these proposed rules. The hearing record will remain open for written comments from the public until Wednesday, August 6, 2008. All written comments must include a reference on the filing to docket 1-AC-224. File by one mode only.
Industry:
File comments using the Electronic Regulatory Filing system. This may be accessed from the Commission's website psc.wi.gov.
Members of the Public:
If filing electronically: Use the Public Comments system or the Electronic Regulatory Filing system. Both of these may be accessed from the Commission's website psc.wi.gov.
If filing by mail, courier, or hand delivery: Address your comments as shown below.
If filing by fax: Send fax comments to (608) 266-3957. Fax filing cover sheet must state “Official Filing," the docket number 1-AC-224, and the number of pages (limited to 25 pages for fax comments).
Address comments to:
Sandra J. Paske
Secretary to the Commission
Public Service Commission
P.O. Box 7854
Madison, WI 53707-7854
FAX (608) 266-3957
The deadlines for receiving comments are:
Comments Due: Wednesday, August 6, 2008 - Noon
FAX Due: Tuesday, August 5, 2008 - Noon
At the hearing or in written comments, persons are encouraged to address the following:
1. Please quantify the risk associated with the current chapter PSC 116 and the risk associated with the proposed chapter PSC 116.
2. Please describe how the proposed rule achieves or undermines the four goals of these rules as set by the Commission:
•
Insulate electric utilities from the high-risk created by volatile fuel costs.
