551.31(1m)
(1m) A person who effects transactions in this state exclusively for the account of or exclusively in offers to sell or sales to persons specified in
s. 551.23 (8) (a) to
(f) is not required to be licensed under this chapter as a broker-dealer or agent. A person who gives a group presentation relating to an issuer or the securities of an issuer at a meeting or seminar sponsored by a broker-dealer licensed under this chapter is not required to be licensed under this chapter as an agent, if the person makes no solicitations, offers or sales of the issuer's securities on an individual basis with any person in this state and if the person does not in any other way transact business in this state as an agent.
551.31(2)(a)(a) It is unlawful for any broker-dealer or issuer to employ an agent to represent it in this state unless the agent is licensed for that broker-dealer or issuer in this state, the agent is excluded from the licensing requirement under
sub. (1m) or the agent is not required under
sub. (7) to obtain a separate license to represent that issuer.
551.31(2)(b)
(b) An agent may not at any time represent in this state more than one broker-dealer or issuer and may not simultaneously represent both a broker-dealer and an issuer, except an agent may represent any of the following:
551.31(2)(b)1.
1. Licensed broker-dealers or issuers of securities registered under this chapter, or both, who are affiliated by direct or indirect common control.
551.31(2)(b)2.
2. More than one broker-dealer or more than one issuer, or both, if an application that complies with
par. (c) is filed with the division and the division, in writing, permits the representation.
551.31(2)(c)
(c) The division shall by rule specify the required contents and form of an application filed under
par. (b) 2.
551.31(2)(d)
(d) When an agent terminates employment with a broker-dealer or issuer, or terminates those activities which make that individual an agent, or transfers employment between licensed broker-dealers, the agent, the broker-dealer or the issuer shall promptly file a notice in accordance with rules adopted by the division.
551.31(3)
(3) It is unlawful for any person to transact business in this state as an investment adviser unless so licensed or licensed as a broker-dealer under this chapter, except that a person whose only clients in this state are persons specified in
s. 551.23 (8) (a) to
(f) may transact business without a license.
551.31(4)
(4) Every license expires one year from its effective date unless renewed, or unless the license is limited or extended for not more than 6 months by rule or order for the purpose of administering the licensing statutes in this chapter. The division by rule or order may prepare an initial schedule for license renewals so that subsequent renewals of licenses effective January 1, 1970, may be staggered by calendar months. For this purpose the division may adjust the license fee proportionately. No license is effective after its expiration, and expiration of a license for which a renewal application has not been filed is deemed an application for withdrawal under
s. 551.34 (6).
551.31(5)
(5) A bank, savings institution or trust company not licensed as a broker-dealer may execute orders for the purchase or sale of securities as agent for the purchaser or seller thereof in accordance with rules adopted by the division.
551.31(6)
(6) It is unlawful for any licensed broker-dealer, agent or investment adviser, or any person directly or indirectly controlling a licensed broker-dealer or investment adviser, to transact business in this state if the licensee is in violation of this chapter, or any rule under this chapter, or any order under this chapter of which the licensee or person has notice, or if the information contained in the licensee's or person's application for license, as of the date of such transactions, is incomplete in any material respect or is false or misleading with respect to any material fact.
551.31(7)
(7) An agent may make offers and sales of securities for more than one issuer that is a limited partnership or for more than one issuer that is an investment company without obtaining a separate license for each limited partnership or investment company represented by the agent if all of the following conditions are satisfied:
551.31(7)(a)
(a) The limited partnerships have the same general partner, or the investment companies have the same investment adviser.
551.31(7)(b)
(b) An application to amend the agent's license to name each additional limited partnership or investment company as the agent's employer is filed with and approved by the division before the agent makes any offers or sales in this state on behalf of the additional limited partnership or investment company.
551.31 Annotation
Violators of (1) and (3) are subject to strict liability; what constitutes transacting business as an investment advisor in violation of (3) discussed. Garretto v. Elite Advisory Services, Inc., 793 F (2d) 796 (1992).
551.32
551.32
Licensing procedure. 551.32(1)(a)(a) A broker-dealer, agent or investment adviser may obtain an initial or renewal license by filing with the division, or an organization which the division by rule designates, an application together with a consent to service of process under
s. 551.65 (1).
551.32(1)(b)
(b) An application under
par. (a) shall contain whatever information the division by rule requires concerning the applicant's form and place of organization, proposed method of doing business and financial condition, the qualifications and experience of the applicant, including, in the case of a broker-dealer or investment adviser, the qualifications and experience of any partner, officer, director or controlling person, any injunction or administrative order or conviction of a misdemeanor involving securities and any conviction of a felony, and any other matters which the division determines are relevant to the application. The division may by rule or order require an applicant for an initial license to publish an announcement of the application in one or more specified newspapers published in this state.
551.32(1)(c)
(c) Licensing under this subchapter is effective 30 days after an application is filed, other than for an application for license as an agent for an issuer of securities exempted under
s. 551.23 (10) or
(19) in which case licensing is effective 10 business days after the application is filed or such earlier time as the division permits, except:
551.32(1)(c)1.
1. Licensing is not effective if an order is in effect, or a proceeding is pending, under
s. 551.34;
551.32(1)(c)2.
2. If the division makes a written request for additional information relevant to the application within 30 days after the application is filed, the licensing is not effective until 30 days after the information is filed in response to that written request or in response to any subsequent written request for information by the division within 30 days after a response to a written request is filed;
551.32(1)(c)3.
3. If an amendment to a pending application is filed, licensing is effective 30 days after the amendment is filed; and
551.32(1)(c)4.
4. The division may by rule or order specify an earlier effective date.
551.32(1)(d)
(d) The division shall cooperate with other securities administrators and regulatory authorities to simplify and coordinate license application and renewal procedures.
551.32(2)
(2) Before action on an application the division may designate an employe to make an examination of the books, records and affairs of the applicant at the applicant's expense.
551.32(3)
(3) A licensed broker-dealer or investment adviser may file an application for licensing of a successor, whether or not the successor is then in existence, for the unexpired portion of the year. There shall be no filing fee.
551.32(4)
(4) The division may by rule prescribe standards of qualification with respect to training, experience and knowledge of the securities business and provide for an examination, which may be written or oral or both, to be taken by any class of or all applicants, as well as persons who represent or will represent an investment adviser, and the division may by order require an examination of a licensed broker-dealer, agent or investment adviser for due cause.
551.32(5)
(5) The division may by rule require a minimum capital for broker-dealers and investment advisers and establish limitations on aggregate indebtedness of broker-dealers in relation to net capital.
551.32(6)
(6) The division may by rule require the furnishing of surety bonds by broker-dealers and investment advisers and all bonds so required shall provide for suit thereon by injured customers or clients, but no bond may be required of any licensee whose net capital exceeds the amount prescribed by rule for this purpose.
551.32(7)
(7) The division may by rule or order impose other conditions or limitations in connection with the issuance of licenses under this chapter as the division deems appropriate in the public interest or for the protection of investors.
551.33
551.33
Post-licensing provisions. 551.33(1)
(1) Every licensed broker-dealer, agent and investment adviser shall make and keep all accounts, correspondence, memoranda, papers, books and other records which the division by rule prescribes. All records required shall be preserved for 3 years unless the division by rule prescribes otherwise for particular types of records. All required records shall be kept within this state or shall, at the request of the division, be made available at any time for examination by the division either in the principal office of the licensee or by production of exact copies thereof in this state.
551.33(2)
(2) Every licensed broker-dealer and investment adviser shall file such reports as the division by rule prescribes.
551.33(3)
(3) If the information contained in any application for license or other document filed with the division or an organization designated under
s. 551.32 (1) (a) is or becomes inaccurate or incomplete in any material respect, the licensee shall promptly file a correcting amendment.
551.33(4)
(4) The division shall make periodic examinations, within or without this state, of the business and records of each licensed broker-dealer and investment adviser, at such times and in such scope as the division determines. The examinations may be made without prior notice to the broker-dealer or investment adviser. The expense reasonably attributable to any such examination shall be paid by the broker-dealer or investment adviser whose business is examined, but the expense so payable shall not exceed an amount which the division by rule prescribes. For the purpose of avoiding unnecessary duplication of examinations, the division, insofar as it is practicable in administering this subsection, may cooperate with securities administrators of other states, the securities and exchange commission, and any national securities exchange or national securities association registered under the securities exchange act of 1934. The division shall not make public the information obtained in the course of examinations, except when the division's duty under this chapter requires the division to take action regarding any broker-dealer or investment adviser or to make the information available to one of the organizations specified in this subsection, or except when called as a witness in any criminal or civil proceeding.
551.33(5)
(5) The division may by rule prohibit unreasonable charges, profits, commissions or other compensation of broker-dealers and investment advisers.
551.33(6)
(6) The division may by rule establish standards for the conduct of business by broker-dealers, agents, investment advisers and clearing corporations as defined in
s. 408.102 (1) (c).
551.33(7)
(7) No licensed broker-dealer shall be subject to
s. 138.05 (1) (a) with respect to any debit balance in a customer account if the debit balance is payable on demand and the only collateral for the balance is securities.
551.34
551.34
Denial, suspension and revocation of licenses. 551.34(1)(1) The division may by order deny an application for, or postpone the effective date of, a license or suspend or revoke any license or may censure the licensee, if the division finds that the order is in the public interest and that the applicant or licensee or, in the case of a broker-dealer or investment adviser, any partner, officer or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer or investment adviser:
551.34(1)(a)
(a) Has filed an application for license which as of its effective date, or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained any statement which was, in light of the circumstances under which it was made, false or misleading with respect to any material fact;
551.34(1)(b)
(b) Has wilfully violated or wilfully failed to comply with any provision of this chapter or a predecessor law or the securities act of 1933, the securities exchange act of 1934, the investment advisers act of 1940, the investment company act of 1940, or any rule under any of such statutes or any order thereunder of which he or she has notice;
551.34(1)(c)
(c) Subject to
ss. 111.321,
111.322 and
111.335, has been convicted, within the past 10 years, of any misdemeanor involving a security or any aspect of the securities business, or any felony;
551.34(1)(d)
(d) Is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities business;
551.34(1)(e)
(e) Is the subject of an order of the division denying an application or suspending or revoking a license as a broker-dealer, agent or investment adviser;
551.34(1)(f)
(f) Is the subject of an order entered within the past 5 years by the securities administrator of any other state or by the securities and exchange commission denying, suspending or revoking the person's registration or license as a broker-dealer, agent or investment adviser, or is the subject of an order of the securities and exchange commission or of a securities exchange or association registered under the securities exchange act of 1934 suspending or expelling such person from a securities exchange or association or forbidding the association or affiliation of the person with a broker-dealer or investment adviser, or is the subject of a U.S. postal service fraud order. The division may not institute a revocation or suspension proceeding under this paragraph more than one year from the date of the order relied on, and the division may not enter an order under this paragraph on the basis of an order under another state law or federal law unless the order was based on facts which would currently constitute a ground for an order under this section;
551.34(1)(g)
(g) Has engaged in dishonest or unethical practices in the securities or investment advisory business or has taken unfair advantage of a customer;
551.34(1)(h)
(h) Is insolvent, in the sense that liabilities exceed assets or that the person cannot meet obligations as they mature, or is in such financial condition that the person cannot continue in business with safety to customers, or the person does not have sufficient financial responsibility to carry out the obligations incident to the person's operations;
551.34(1)(i)
(i) Is not qualified on the basis of such factors as training, experience and knowledge of the securities business;
551.34(1)(j)
(j) Has failed reasonably to supervise agents or, in the case of an investment adviser, employes, to assure their compliance with this chapter, but no person may be deemed to have failed in such supervision if there have been established written procedures, and a system for applying such procedures, which would reasonably be expected to prevent and detect, insofar as practicable, any violations of statutes, rules or orders and if the person has reasonably discharged the duties incumbent upon the person by reason of such procedures and system;
551.34(1)(k)
(k) Has failed to pay the proper filing fee, but the division shall vacate any such order when the deficiency has been corrected;
551.34(1)(L)
(L) Is selling or has sold, or is offering or has offered for sale, in this state securities through any unlicensed agent or for any dealer or issuer with knowledge that the dealer or issuer has not complied with this chapter;
551.34(1)(m)
(m) Has made any material misrepresentation to or withheld or concealed any material fact from the division, or has refused to furnish information reasonably requested by the division; or
551.34(1)(n)
(n) Has not complied with the conditions or limitations of a license issued under this chapter.
551.34(2)
(2) 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.
551.34(3)
(3) 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.
551.34(4)
(4) 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.
551.34(5)
(5) 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 or investment adviser, 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.
551.34(6)
(6) Withdrawal from the status of a licensed broker-dealer, agent or investment adviser becomes effective 30 days after receipt by the division or by an organization designated by rule of the division under
s. 551.32 (1) (a) of an application to withdraw or within such shorter period as the division determines, unless a revocation or suspension proceeding is pending when the application is filed or a proceeding to revoke or suspend or to impose conditions upon the withdrawal is instituted within 30 days after the application is filed. If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the division by order determines. If no proceeding is pending or instituted and withdrawal automatically becomes effective, the division may institute a revocation or suspension proceeding for the grounds specified under
sub. (1) (b),
(g),
(m) or
(n) within one year after withdrawal became effective and enter a revocation or suspension order as of the last date on which the license was in effect.
551.34(7)
(7) No order may be entered under this section except under
sub. (4) or
(5) 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.
FRAUDULENT PRACTICES
551.41
551.41
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:
551.41(1)
(1) To employ any device, scheme or artifice to defraud;
551.41(2)
(2) 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
551.41(3)
(3) To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.
551.41 Annotation
Intent to defraud is not necessary element under (2). State v. Temby, 108 W (2d) 521, 322 NW (2d) 522 (Ct. App. 1982).
551.41 Annotation
Meaning of "sale" discussed. State v. Mattes, 175 W (2d) 572, 499 NW (2d) 711 (Ct. App. 1993).
551.41 Annotation
Section 551.41 does not create private right of action. 551.59 (1) contains civil remedy for violation of 551.41 (2), and limitation period in 551.59 (5) applies. Colonial Bank & Trust Co. v. American Bankshares, 478 F Supp. 1186 (1979).
551.41 Annotation
See note to 895.01, citing Continental Assur. v. American Bankshares Corp. 483 F Supp. 175 (1980).
551.41 Annotation
State was not required to prove that defendant entered into investment contracts with purpose or intent of defrauding investors. Van Duyse v. Israel, 486 F Supp. 1382 (1980).
551.42
551.42
Market manipulation. It is unlawful for any person, directly or indirectly, in this state:
551.42(1)
(1) 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;
551.42(2)
(2) 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
551.42(3)
(3) 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.
551.42 History
History: 1981 c. 53 s.
43.
551.43
551.43
Broker-dealer activities. 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".
551.43 History
History: 1995 a. 27.
551.44
551.44
Advisory activities. 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; or take or have custody of any securities or funds of any client unless the adviser is licensed as a broker-dealer under this chapter. The division may adopt rules defining the terms used in this section.
551.44 History
History: 1981 c. 53;
1995 a. 27.
GENERAL PROVISIONS
