SB483: Bill Text

SB483,90,5 (c) Findings of fact and conclusions of law in a record in accordance with ch. 227.

SB483,90,11 (8) Control person liability. A person that controls, directly or indirectly, a person not in compliance with this section may be disciplined by order of the administrator under subs. (1) to (3) 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 ground for discipline under this section.

SB483,90,15 (9) Limit on investigation or proceeding. The administrator may not institute a proceeding under sub. (1), (2), or (3) based solely on material facts actually known by the administrator unless an investigation or the proceeding is instituted within one year after the administrator actually acquires knowledge of the material facts.

SB483,90,17 subchapter V FRAUD AND LIABILITIES

SB483,90,19 551.501 General fraud. It is unlawful for a person, in connection with the offer, sale, or purchase of a security, directly or indirectly, to do any of the following:

SB483,90,20 (1) To employ a device, scheme, or artifice to defraud.

SB483,90,23 (2) To make an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

SB483,90,25 (3) To engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.

SB483,91,6 551.502 Prohibited conduct in providing investment advice. (1) Fraud in providing investment advice. It is unlawful for a person that advises others for compensation, either directly or indirectly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation and as part of a regular business, issues or promulgates analyses or reports relating to securities, to do any of the following:

SB483,91,7 (a) To employ a device, scheme, or artifice to defraud another person.

SB483,91,9 (b) To engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.

SB483,91,19 (2) Rules defining fraud. A rule adopted under this chapter may define an act, practice, or course of business of an investment adviser or an investment adviser representative, other than a supervised person, as defined in section 202 (a) (25) of the Investment Advisers Act of 1940 (15 USC 80b-2 (a) (25)), of a federal covered investment adviser, as fraudulent, deceptive, or manipulative, and prescribe means reasonably designed to prevent investment advisers and investment adviser representatives, other than supervised persons, as defined in section 202 (a) (25) of the Investment Advisers Act of 1940 (15 USC 80b-2 (a) (25)), of a federal covered investment adviser, from engaging in acts, practices, and courses of business defined as fraudulent, deceptive, or manipulative.

SB483,91,22 (3) Rules specifying contents of advisory contract. A rule adopted under this chapter may specify the contents of an investment advisory contract entered into, extended, or renewed by an investment adviser.

SB483,91,25 551.503 Evidentiary burden. (1) Civil. In a civil action or administrative proceeding under this chapter, a person claiming an exemption, exception, preemption, or exclusion has the burden to prove the applicability of the claim.

SB483,92,3 (2) Criminal. In a criminal proceeding under this chapter, a person claiming an exemption, exception, preemption, or exclusion has the burden of going forward with evidence of the claim.

SB483,92,10 551.504 Filing of sales and advertising literature. (1) Filing requirement. Except as otherwise provided in sub. (2), a rule adopted or order issued under this chapter may require the filing of a prospectus, pamphlet, circular, form letter, advertisement, sales literature, or other advertising record relating to a security or investment advice, addressed or intended for distribution to prospective investors, including clients or prospective clients of a person registered or required to be registered as an investment adviser under this chapter.

SB483,92,14 (2) Excluded communications. This section does not apply to sales and advertising literature specified in sub. (1) which relates to a federal covered security, a federal covered investment adviser, or a security or transaction exempted by s. 551.201, 551.202, or 551.203 except as required pursuant to s. 551.201 (7).

SB483,92,20 551.505 Misleading filings. It is unlawful for a person to make or cause to be made, in a record that is used in an action or proceeding or filed under this chapter, a statement that, at the time and in the light of the circumstances under which it is made, is false or misleading in a material respect, or, in connection with the statement, to omit to state a material fact necessary to make the statement made, in the light of the circumstances under which it was made, not false or misleading.

SB483,93,6 551.506 Misrepresentations concerning registration or exemption. The filing of an application for registration, a registration statement, a notice filing under this chapter, the registration of a person, the notice filing by a person, or the registration of a security under this chapter does not constitute a finding by the administrator that a record filed under this chapter is true, complete, and not misleading. The filing or registration or the availability of an exemption, exception, preemption, or exclusion for a security or a transaction does not mean that the administrator has passed upon the merits or qualifications of, or recommended or given approval to, a person, security, or transaction. It is unlawful to make, or cause to be made, to a purchaser, customer, client, or prospective customer or client a representation inconsistent with this section.

SB483,93,15 551.507 Qualified immunity. A broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative is not liable to another broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative for defamation relating to a statement that is contained in a record required by the administrator, or designee of the administrator, the Securities and Exchange Commission, or a self-regulatory organization, unless the person knew, or should have known at the time that the statement was made, that it was false in a material respect or the person acted in reckless disregard of the statement's truth or falsity.

SB483,93,25 551.508 Criminal penalties. (1) Criminal penalties. A person that willfully violates this chapter, or a rule adopted or order issued under this chapter, except s. 551.504 or the notice filing requirements of s. 551.302 or 551.405, or that willfully violates s. 551.505 knowing the statement made to be false or misleading in a material respect, upon conviction, shall be guilty of a Class H felony. An individual convicted of violating a rule or order under this chapter may be fined, but may not be imprisoned, if the individual did not have knowledge of the rule or order. 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.

SB483,94,3 (2) Criminal reference not required. The attorney general or the district attorney of the appropriate county, with or without a reference from the administrator, may institute criminal proceedings under this chapter.

SB483,94,6 (3) No limitation on other criminal enforcement. This chapter does not limit the power of this state to punish a person for conduct that constitutes a crime under other laws of this state.

SB483,94,9 551.509 Civil liability. (1) Securities Litigation Uniform Standards Act. Enforcement of civil liability under this section is subject to the Securities Litigation Uniform Standards Act of 1998.

SB483,94,15 (2) Liability of seller to purchaser. A person is liable to the purchaser if the person sells a security in violation of s. 551.301 or 551.501 and, as to s. 551.501 (2), the purchaser did not know the untruth or omission and the seller cannot sustain the burden of proof that the seller did not know and, in the exercise of reasonable care, could not have known of the untruth or omission. An action under this subsection is governed by the following:

SB483,94,20 (a) The purchaser may maintain an action to recover the consideration paid for the security, less the amount of any income received on the security, and interest at the legal rate under s. 138.04 from the date of the purchase, costs, and reasonable attorney fees determined by the court, upon the tender of the security, or for actual damages as provided in par. (c).

SB483,94,24 (b) The tender referred to in par. (a) may be made any time before entry of judgment. Tender requires only notice in a record of ownership of the security and willingness to exchange the security for the amount specified. A purchaser that no longer owns the security may recover actual damages as provided in par. (c).

SB483,95,4 (c) Actual damages in an action arising under this subsection 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 the purchase, costs, and reasonable attorney fees determined by the court.

SB483,95,10 (3) Liability of purchaser to seller. A person is liable to the seller if the person buys a security in violation of s. 551.501 and, as to s. 551.501 (2), the seller did not know the untruth or omission and the purchaser cannot sustain the burden of proof that the purchaser did not know and, in the exercise of reasonable care, could not have known of the untruth or omission. An action under this subsection is governed by the following:

SB483,95,13 (a) The seller may maintain an action to recover the security, and any income received on the security, costs, and reasonable attorney fees determined by the court, upon the tender of the purchase price, or for actual damages as provided in par. (c).

SB483,95,18 (b) The tender referred to in par. (a) may be made any time before entry of judgment. Tender requires only notice in a record of the present ability to pay the amount tendered and willingness to take delivery of the security for the amount specified. If the purchaser no longer owns the security, the seller may recover actual damages as provided in par. (c).

SB483,95,23 (c) Actual damages in an action arising under this subsection are the difference between the price at which the security was sold and the value the security would have had at the time of the sale in the absence of the purchaser's conduct causing liability, and interest at the legal rate under s. 138.04 from the date of the sale of the security, costs, and reasonable attorney fees determined by the court.

SB483,96,3 (4) Liability of unregistered broker-dealer and agent. A person acting as a broker-dealer or agent that sells or buys a security in violation of s. 551.401 (1), 551.402 (1), or 551.506 is liable to the customer. The customer, if a purchaser, may maintain an action for recovery of actual damages as specified in sub. (2) (a) to (c), or, if a seller, for a remedy as specified in sub. (3) (a) to (c).

SB483,96,10 (5) Liability of unregistered investment adviser and investment adviser representative. A person acting as an investment adviser or investment adviser representative that provides investment advice for compensation in violation of s. 551.403 (1), 551.404 (1), or 551.506 is liable to the client. The client may maintain an action to recover the consideration paid for the advice, interest at the legal rate under s. 138.04 from the date of payment, costs, and reasonable attorney fees determined by the court.

SB483,96,16 (6) Liability for investment advice. A person that receives directly or indirectly any consideration for providing investment advice to another person and that employs a device, scheme, or artifice to defraud the other person or engages in an act, practice, or course of business that operates or would operate as a fraud or deceit on the other person is liable to the other person. An action under this subsection is governed by the following:

SB483,96,21 (a) The person defrauded may maintain an action to recover the consideration paid for the advice and the amount of any actual damages caused by the fraudulent conduct, interest at the legal rate under s. 138.04 from the date of the fraudulent conduct, costs, and reasonable attorney fees determined by the court, less the amount of any income received as a result of the fraudulent conduct.

SB483,96,24 (b) This subsection does not apply to a broker-dealer or its agents if the investment advice provided is solely incidental to transacting business as a broker-dealer and no special compensation is received for the investment advice.

SB483,97,2 (7) Joint and several liability. The following persons are liable jointly and severally with and to the same extent as persons liable under subs. (2) to (6):

SB483,97,6 (a) A person that directly or indirectly controls a person liable under subs. (2) to (6), unless the controlling person sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist.

SB483,97,11 (b) An individual who is a managing partner, executive officer, or director of a person liable under subs. (2) to (6), including an individual having a similar status or performing similar functions, unless the individual sustains the burden of proof that the individual did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist.

SB483,97,16 (c) An individual who is an employee of or associated with a person liable under subs. (2) to (6) and who materially aids the conduct giving rise to the liability, unless the individual sustains the burden of proof that the individual did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist.

SB483,97,21 (d) A person that is a broker-dealer, agent, investment adviser, or investment adviser representative that materially aids the conduct giving rise to the liability under subs. (2) to (6), unless the person sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which liability is alleged to exist.

SB483,97,24 (8) Right of contribution. A person liable under this section has a right of contribution as in cases of contract against any other person liable under this section for the same conduct.

SB483,98,2 (9) Survival of cause of action. A cause of action under this section survives the death of an individual who might have been a plaintiff or defendant.

SB483,98,3 (10) Statute of limitations. A person may not obtain relief:

SB483,98,5 (a) Under sub. (2) for violation of s. 551.301, or under sub. (4) or (5), unless the action is instituted within one year after the violation occurred.

SB483,98,8 (b) Under sub. (2), other than for violation of s. 551.301, or under sub. (3) or (6), unless the action is instituted within the earlier of 2 years after discovery of the facts constituting the violation or 5 years after the violation.

SB483,98,13 (11) No enforcement of violative contract. A person that has made, or has engaged in the performance of, a contract in violation of this chapter or a rule adopted or order issued under this chapter, or that has acquired a purported right under the contract with knowledge of conduct by reason of which its making or performance was in violation of this chapter, may not base an action on the contract.

SB483,98,17 (12) No contractual waiver. A condition, stipulation, or provision binding a person purchasing or selling a security or receiving investment advice to waive compliance with this chapter or a rule adopted or order issued under this chapter is void.

SB483,98,20 (13) Survival of other rights or remedies. The rights and remedies provided by this chapter are in addition to any other rights or remedies that may exist, but this chapter does not create a cause of action not specified in this section or s. 551.411 (5).

SB483,98,22 551.511 Rescission offers. A purchaser, seller, or recipient of investment advice may not maintain an action under s. 551.509 if all of the following apply:

SB483,99,5 (1) The purchaser, seller, or recipient of investment advice receives in a record, before the action is instituted, an offer stating the respect in which liability under s. 551.509 may have arisen and fairly advising the purchaser, seller, or recipient of investment advice of that person's rights in connection with the offer, and any financial or other information necessary to correct all material misrepresentations or omissions in the information that was required by this chapter to be furnished to that person at the time of the purchase, sale, or investment advice, and any of the following:

SB483,99,14 (a) If the basis for relief under this section may have been a violation of s. 551.509 (2), an offer to repurchase the security for cash, payable on delivery of the security, equal to the consideration paid, and interest at the legal rate under s. 138.04 from the date of the purchase, less the amount of any income received on the security, or, if the purchaser no longer owns the security, an offer to pay the purchaser upon acceptance of the offer damages in an 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 the purchase in cash equal to the damages computed in the manner provided in this subsection.

SB483,99,23 (b) If the basis for relief under this section may have been a violation of s. 551.509 (3), an offer to tender the security, on payment by the seller of an amount equal to the purchase price paid, less income received on the security by the purchaser and interest at the legal rate under s. 138.04 from the date of the sale, or, if the purchaser no longer owns the security, an offer to pay the seller upon acceptance of the offer, in cash, damages in the amount of the difference between the price at which the security was purchased and the value the security would have had at the time of the purchase in the absence of the purchaser's conduct that may have caused liability and interest at the legal rate under s. 138.04 from the date of the sale.

SB483,100,3 (c) If the basis for relief under this section may have been a violation of s. 551.509 (4), and if the customer is a purchaser, an offer to pay as specified in par. (a), or, if the customer is a seller, an offer to tender or to pay as specified in par. (b).

SB483,100,6 (d) If the basis for relief under this section may have been a violation of s. 551.509 (5), an offer to reimburse in cash the consideration paid for the advice and interest at the legal rate under s. 138.04 from the date of payment.

SB483,100,11 (e) If the basis for relief under this section may have been a violation of s. 551.509 (6), an offer to reimburse in cash the consideration paid for the advice, the amount of any actual damages that may have been caused by the conduct, and interest at the legal rate under s. 138.04 from the date of the violation causing the loss.

SB483,100,15 (2) The offer under sub. (1) states that it must be accepted by the purchaser, seller, or recipient of investment advice within 30 days after the date of its receipt by the purchaser, seller, or recipient of investment advice or any shorter period, of not less than 3 days, that the administrator, by order, specifies.

SB483,100,17 (3) The offeror has the present ability to pay the amount offered or to tender the security under sub. (1).

SB483,100,20 (4) The offer under sub. (1) is delivered to the purchaser, seller, or recipient of investment advice, or sent in a manner that ensures receipt by the purchaser, seller, or recipient of investment advice.

SB483,100,23 (5) The purchaser, seller, or recipient of investment advice that accepts the offer under sub. (1) in a record within the period specified under sub. (2) is paid in accordance with the terms of the offer.

SB483,101,3 subchapter Vi ADMINISTRATION AND JUDICIAL REVIEW

SB483,101,5 551.601 Administration. (1) Administration. The administrator shall administer this chapter.

SB483,101,12 (2) Unlawful use of records or information. It is unlawful for the administrator or an officer, employee, or designee of the administrator to use for personal benefit or the benefit of others records or other information obtained by or filed with the administrator that are not public under s. 551.607 (2). This chapter does not authorize the administrator or an officer, employee, or designee of the administrator to disclose the record or information, except in accordance with s. 551.602, 551.607 (3), or 551.608.

SB483,101,15 (3) No privilege or exemption created or diminished. This chapter does not create or diminish a privilege or exemption that exists at common law, by statute or rule, or otherwise.

SB483,102,2 (4) Investor education. The administrator may develop and implement investor education initiatives to inform the public about investing in securities, with particular emphasis on the prevention and detection of securities fraud. In developing and implementing these initiatives, the administrator may collaborate with public and nonprofit organizations with an interest in investor education. The administrator may accept a grant or donation from a person that is not affiliated with the securities industry or from a nonprofit organization, regardless of whether the organization is affiliated with the securities industry, to develop and implement investor education initiatives. This subsection does not authorize the administrator to require participation or monetary contributions of a registrant in an investor education program.

SB483,102,7 (5) Securities investor education and training funding. All moneys collected from the administrative assessment under s. 551.604 (4) shall be credited to the appropriation under s. 20.144 (1) (i). Subject to s. 20.144 (1) (i), the division shall use moneys credited to that appropriation for the purposes specified in sub. (4) and s. 20.144 (1) (i).

SB483,102,9 551.602 Investigations and subpoenas. (1) Authority to investigate. The administrator may do any of the following:

SB483,102,14 (a) Conduct public or private investigations within or outside of this state which the administrator considers necessary or appropriate to determine whether a person has violated, is violating, or is about to violate this chapter or a rule adopted or order issued under this chapter, or to aid in the enforcement of this chapter or in the adoption of rules and forms under this chapter.

SB483,102,18 (b) Require or permit a person to testify, file a statement, or produce a record, under oath or otherwise as the administrator determines, as to all the facts and circumstances concerning a matter to be investigated or about which an action or proceeding is to be instituted.

SB483,102,21 (c) Publish a record concerning an action, proceeding, or an investigation under, or a violation of, this chapter or a rule adopted or order issued under this chapter.

SB483,103,2 (2) Administrator powers to investigate. For the purpose of an investigation under this chapter, the administrator or its designated officer may administer oaths and affirmations, subpoena witnesses, seek compulsion of attendance, take evidence, require the filing of statements, and require the production of any records that the administrator considers relevant or material to the investigation.

SB483,103,9 (3) Procedure and remedies for noncompliance. If a person does not appear or refuses to testify, file a statement, produce records, or otherwise does not obey a subpoena as required by the administrator under this chapter, the administrator may apply to, or may refer the matter to the attorney general, district attorney of the appropriate county, or appropriate federal authority who may apply to, the circuit court of of the appropriate county or a court of another state to enforce compliance. The court may do any of the following:

SB483,103,10 (a) Hold the person in contempt.

SB483,103,11 (b) Order the person to appear before the administrator.

SB483,103,13 (c) Order the person to testify about the matter under investigation or in question.

SB483,103,14 (d) Order the production of records.

SB483,103,16 (e) Grant injunctive relief, including restricting or prohibiting the offer or sale of securities or the providing of investment advice.

SB483,103,18 (f) Impose a civil penalty of not less than $5,000 and not greater than $250,000 for each violation.

SB483,103,19 (g) Grant any other necessary or appropriate relief.

SB483,103,23 (4) Application for relief. This section does not preclude a person from applying to the circuit court of the appropriate county or a court of another state for relief from a request to appear, testify, file a statement, produce records, or obey a subpoena.

SB483,104,12 (5) Use immunity procedure. (a) An individual is not excused from attending, testifying, filing a statement, producing a record or other evidence, or obeying a subpoena of the administrator under this chapter or in an action or proceeding instituted by the administrator under this chapter on the ground that the required testimony, statement, record, or other evidence, directly or indirectly, may tend to incriminate the individual or subject the individual to a criminal fine, penalty, or forfeiture. If the individual refuses to testify, file a statement, or produce a record or other evidence on the basis of the individual's privilege against self-incrimination, the administrator may apply to the circuit court of the appropriate county to compel the testimony, the filing of the statement, the production of the record, or the giving of other evidence. The testimony, record, or other evidence compelled under such an order may not be used, directly or indirectly, against the individual in a criminal case, except in a prosecution for perjury or contempt or otherwise failing to comply with the order.

SB483,104,14 (b) The immunity provided under par. (a) is subject to the restrictions under s. 972.085.

SB483,105,6 (6) Assistance to securities regulator of another jurisdiction. At the request of the securities regulator of another state or a foreign jurisdiction, the administrator may provide assistance if the requesting regulator states that it is conducting an investigation to determine whether a person has violated, is violating, or is about to violate a law or rule of the other state or foreign jurisdiction relating to securities matters that the requesting regulator administers or enforces. The administrator may provide the assistance by using the authority to investigate and the powers conferred by this section as the administrator determines is necessary or appropriate. The assistance may be provided without regard to whether the conduct described in the request would also constitute a violation of this chapter or other law of this state if occurring in this state. In deciding whether to provide the assistance, the administrator may consider whether the requesting regulator is permitted and has agreed to provide assistance reciprocally within its state or foreign jurisdiction to the administrator on securities matters when requested; whether compliance with the request would violate or prejudice the public policy of this state; and the availability of resources and employees of the administrator to carry out the request for assistance.

SB483,105,17 551.603 Civil enforcement. (1) Civil action instituted by administrator. If the administrator believes that a person has engaged, is engaging, or is about to engage in an act, practice, or course of business constituting a violation of this chapter or a rule adopted or order issued under this chapter or that a person has, is, or is about to engage in an act, practice, or course of business that materially aids a violation of this chapter or a rule adopted or order issued under this chapter, the administrator may maintain, or may refer the matter to the attorney general or district attorney of the appropriate county who may maintain, an action in the circuit court of the appropriate county to enjoin the act, practice, or course of business and to enforce compliance with this chapter or a rule adopted or order issued under this chapter.

SB483,105,19 (2) Relief available. In an action under this section and on a proper showing, the court may do any of the following:

SB483,105,21 (a) Issue a permanent or temporary injunction, restraining order, or declaratory judgment.

SB483,105,23 (b) Order other appropriate or ancillary relief, which may include any of the following:

SB483,106,3 1. An asset freeze, accounting, writ of attachment, writ of general or specific execution, and appointment of a receiver or conservator, that may be the administrator, for the defendant or the defendant's assets.