_Hlk168665024SECTION 85. DFI-Sec 4.06 (1) (d) to (u) are amended to read: _Hlk168998754DFI-Sec 4.06 (1) (d) Executing a transaction on behalf of a customer without authority to do so, except that use by a broker-dealer of a negative response letter in conformity with rule 2510(d)(2) of the financial industry regulatory authority 3260(D)(2) of the Financial Industry Regulatory Authority is not a violation of this rule;. (e) Executing a transaction for the account of a customer upon instructions from a 3rd party without first having obtained written 3rd party authorization from the customer;.
(f) Exercising any discretionary power in effecting a transaction for a customer's account without first obtaining written discretionary authority from the customer, unless the discretionary power relates solely to the time or price for the execution of orders pursuant to rule 2510(d)(1) 3260(d) of the financial industry regulatory authority; Financial Industry Regulatory Authority.
(g) Extending, arranging for, or participating in arranging for credit to a customer in violation of the securities exchange act Securities Exchange Act of 1934 or the regulations of the federal reserve board;.
(h) Executing any transaction in a margin account without obtaining from its customer a written margin agreement not later than 15 calendar days after the initial transaction in the account;.
(i) Failing to segregate customers' free securities or securities in safe-keeping;.
(j) Hypothecating a customer's securities without having a lien thereon unless written consent of the customer is first obtained, except as permitted by rules of the U.S. securities and exchange commission; Securities and Exchange Commission.
(k) Charging its customer an unreasonable commission or service charge in any transaction executed as agent for the customer;.
(L) Entering into a transaction for its own account with a customer with an unreasonable mark-up or mark-down;.
(m) Entering into a transaction for its own account with a customer in which a commission is charged;.
(n) Entering into a transaction with or for a customer at a price not reasonably related to the current market price;.
(o) Executing orders for the a customer's purchase by a customer of securities not registered under s. 551.303 or 551.304, Stats., unless the securities are exempted under s. 551.201, Stats., or the transaction is exempted under s. 551.202, Stats. ; . (p) Representing itself as a financial or investment planner, consultant, or adviser, when the representation does not accurately describe the nature of the services offered, the qualifications of the person offering the services, and the method of compensation for the services;.
(q) Violating any rule of any securities exchange, self-regulatory organization, or national securities association of which it is a member with respect to any customer, transaction, or business in this state;.
(r) Failing to furnish to a customer purchasing securities in an offering, not later than the date of confirmation of the transaction, either a final prospectus or a preliminary prospectus and an additional document, which together include all information set forth in the final prospectus;.
(s) Introducing customer transactions on a “fully disclosed" basis to another broker-dealer that is not registered under ch. 551, Stats., unless the customer is a person described in s. 551.401 (2), Stats., or s. DFI-Sec 4.10;. (u) Failing to accurately describe or disclose in advertising or other materials used in connection with the promotion or transaction of securities business in this state, the identity of the broker-dealer or the issuer. For purposes of this paragraph, “other materials" includes, but is not limited to, business cards, business stationery and display signs.
_Hlk198288460SECTION 86. DFI-Sec 4.06 (2) (intro.), and (b) to (g) are amended to read: DFI-Sec 4.06 (2) (intro.) The following practices are deemed “dishonest or unethical business practices" or “taking unfair advantage of a customer" by an agent under s. 551.412 (4) (m), Stats., without limiting those terms to the practices specified in this subsection: (b) Acting Misappropriating money or securities, or acting as a custodian for money, securities, or an executed stock power of a customer; .
(c) Effecting any securities transaction not recorded on the regular books or records of the broker-dealer which the agent represents, unless the transaction is disclosed to, and authorized in writing by, the broker-dealer prior to execution of the transaction;.
(d) Effecting transactions in securities for an account operating under a fictitious name, unless disclosed to, and permitted in writing by, the broker-dealer or issuer which the agent represents;.
(e) Sharing directly or indirectly in profits or losses in the account of any customer without first obtaining written authorization of the customer and the broker-dealer which the agent represents;.
(f) Dividing or otherwise splitting commissions, profits, or other compensation receivable in connection with the purchase or sale of securities in this state with any person not also registered as an agent for the same broker-dealer, or for a broker-dealer under direct or indirect common control; and.
(g) Failing to accurately describe or disclose in advertising or other materials used in connection with the promotion or transaction of securities business in this state, the identity of an agent's employing broker-dealer or issuer or the nature of the agent's securities services offered. For purposes of this paragraph, “other materials" include, but are not limited to, business cards, business stationery and display signs.
DFI-Sec 4.06 (3) In addition to the conduct specified in subs. (1) and (2), engaging in other unlawful conduct including forgery, embezzlement, nondisclosure, incomplete disclosure or misstatement of material facts, or manipulative or deceptive practices, may also be grounds for denial, suspension, or revocation, of registration.
DFI-Sec 4.09 (3) The division may deny an application or suspend or revoke the registration of a broker-dealer or agent, if the applicant or registrant is not of good business repute or conducts business in violation of such rules and regulations prescribed by the division to protect investors, customers, or prospective customers.
_Hlk198288924SECTION 89. DFI-Sec 4.10 (1) (intro.) is amended to read: DFI-Sec 4.10 (1) (intro.) For purposes of ss. 551.401 (2) (h) and 551.402 (2) (i), Stats., a broker-dealer or agent is exempt from the registration requirement if the broker-dealer's or agent's only transactions effected in this state are with any of the following: SECTION 90. DFI-Sec 4.11 is created to read:
DFI-Sec 4.11 Registration exemption for certain merger and acquisition brokers.
(1) Definitions. In this section:
(a) "Business combination related shell company" means a shell company that is formed by an entity that is not a shell company for one of the following purposes:
1. Solely for the purpose of changing the corporate domicile of that entity solely within the United States.
2. Solely for the purpose of completing a business combination transaction, as that term is defined in 17 CFR 230.165 (f), among one or more entities other than the company itself, none of which is a shell company. (b) "Control" means the power to direct the management or policies of a company, directly or indirectly, whether through ownership of securities, by contract, or otherwise, subject to sub. (2) (b).
(c) "Eligible privately held company" means a privately held company that meets all of the following conditions:
1. The company does not have any class of securities registered, or required to be registered, with the Securities and Exchange Commission under 15 U.S.C. 78l, or with respect to which the company files, or is required to file, periodic information, documents, and reports under 15 U.S.C. 78o (d). 2. In the fiscal year ending immediately before the fiscal year in which the services of the merger and acquisition broker are initially engaged, with respect to the securities transaction, the company meets either or both of the following conditions as determined in accordance with the historical financial accounting records of the company:
a. The earnings of the company before interest, taxes, depreciation, and amortization are less than $25,000,000.
b. The gross revenues of the company are less than $250,000,000.
(d) "Merger and acquisition broker", subject to sub. (3), means a broker, and any person associated with a broker, engaged in the business of effecting securities transactions solely in connection with the transfer of ownership of an eligible privately held company, regardless of whether the broker acts on behalf of a seller or buyer, through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the eligible privately held company.
(e) "Shell company" means a company that at the time of a transaction with an eligible privately held company has no or nominal operations and has one of the following:
1. No or nominal assets.
2. Assets consisting solely of cash and cash equivalents.
3. Assets consisting of any amount of cash and cash equivalents and nominal other assets.
(b) In determining whether an entity has control of a company there is a presumption of control if, upon completion of a transaction the buyer, or group of buyers, has contributed 25 percent or more of the capital or has the right to do one of the following:
1. Vote 25 percent or more of a class of voting securities.
2. Sell or direct the sale of 25 percent or more of a class of voting securities.
3. In the case of a partnership or limited liability company, receive upon dissolution 25 percent or more of the capital.
(3) Conditions for a merger and acquisition broker. To be considered a merger and acquisition broker, the individual must reasonably believe all of the following:
(a) Upon consummation of the transaction, any person acquiring securities or assets of the eligible privately held company, acting alone or in concert with others will, directly or indirectly, do all of the following:
1. Control and be active in the management of the eligible privately held company or the business conducted with the assets of the eligible privately held company.
2. Be active in the management of the eligible privately held company or the business conducted with the assets of the eligible privately held company and, with the assets of the eligible privately held company, engage in activities including one or more of the following:
a. Electing executive officers.
b. Approving the annual budget.
c. Serving as an executive or other executive manager.
d. Carrying out other activities which the Division may, by rule or order, determine to be in the public interest.
(b) If any person is offered securities in exchange for securities or assets of the eligible privately held company, the person will, prior to becoming legally bound to consummate the transaction, receive or have reasonable access to the most recent fiscal year-end financial statements of the issuer of the securities as customarily prepared by the management of the issuer in the normal course of operations and, if the financial statements of the issuer are audited, reviewed, or compiled, any related statement by the independent accountant, a balance sheet dated not more than 120 days before the date of the offer, and information pertaining to the management, business, results of operations for the period covered by the foregoing financial statements, and material loss contingencies of the issuer.
(4) Exclusions. The exemption under sub. (2) does not apply if a merger and acquisition broker does any of the following:
(a) Receives, holds, transmits, or has custody of the funds or securities to be exchanged by the parties to the transaction, either directly or indirectly, in connection with the transfer of ownership of an eligible privately held company.
(b) Engages on behalf of an issuer in a public offering of any class of securities that is registered, or is required to be registered, with the Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934, 15 U.S.C. 78l or with respect to which the issuer files, or is required to file, periodic information, documents, and reports under the Securities Exchange Act of 1934 Section 15 subsection (d), 15 U.S.C. 78o (d). (c) Engages on behalf of any party in a transaction involving a shell company, other than a business combination related shell company.
(d) Directly provides financing related to the transfer of ownership of an eligible privately held company or, indirectly, through any of its affiliates.
(e) Assists any party obtain financing from an unaffiliated third party without doing all of the following:
1. Complying with all other applicable laws in connection with such assistance, including, if applicable, Regulation T, as shown by 12 C.F.R. 220 et seq. 2. Disclosing in writing to every party the amount of compensation the merger and acquisition broker will receive for such assistance.
(f) Represents both the buyer and the seller in the same transaction without providing to, or obtaining from, all parties to the transaction:
1. Clear written disclosure of all the parties that the broker represents.
2. Written consent from both parties to the joint representation.
(g) Facilitates a transaction, with a group of buyers formed with the assistance of the merger and acquisition broker, to acquire the eligible privately held company.
(h) Engages in a transaction involving the transfer of ownership of an eligible privately held company to a passive buyer or group of buyers.
(i) Binds a party to a transfer of ownership of an eligible privately held company.
(5) Disqualifications. A merger and acquisition broker is not exempt from registration under sub. (1) if the broker, and any officer, director, member, manager, partner, or employee of the broker, does any of the following or if any of the following apply:
(a) Has been barred by the commission, any state, or any self-regulatory organization from association with another broker or dealer.
(b) Is suspended from association with a broker or dealer.
(6) Construction. Nothing in this section limits the division from exempting any person from any provision of this chapter or any regulation promulgated under this chapter.
(7) Inflation adjustment. (a) General provisions. On the first day of the 60th month beginning after the effective date of this rule [revisor inserts date], and every 5 years thereafter, the dollar amounts in sub. (1) (c) 2. shall be increased by the division as follows:
1. Determine the annual employment cost index, or any successor index, as determined by the federal Bureau of Labor Statistics, for private sector civilians for the 12-month period ending on December 31, 2020.
2. Rebase that index to 100 by dividing the index value of subd. 1 by the December 2020 index value.
3. Divide the annual employment cost index, or any successor index, as determined by the federal Bureau of Labor Statistics, for private sector civilians for the 12-month period ending on December 31 of the year before the year in which the adjustment is being made, by index described in subd. 1.
4. Multiply the dollar amounts described in par. (a) (intro.) by the quotient obtained under subd. 3.
(b) Rounding. Each amount that is revised under this subsection shall be rounded to the nearest multiple of $100,000 if the revised amount is not a multiple of $100,000 or, if the revised amount is a multiple of $50,000, such an amount shall be increased to the next higher multiple of $100,000. Every 5 years, as described in par. (a), the division shall adjust the changes in dollar amounts required under this subsection and incorporate the changes into the income tax forms and instructions.
SECTION 91. DFI-Sec 5.01 (1) (intro.) and (a), (2) (f) 2. 3. are amended to read:
