Chapter 551

551.305(10) (10) Posteffective amendments. A registration statement may be amended after its effective date. The posteffective amendment becomes effective when the administrator so orders. If a posteffective amendment is made to increase the number of securities specified to be offered or sold, the person filing the amendment shall pay a registration fee as provided in s. 551.614 or as may be supplemented by rule of the administrator. A posteffective amendment relates back to the date of the offering of the additional securities being registered if, within one year after the date of the sale, the amendment is filed and the additional registration fee is paid.

551.305(11) (11) Indentures. The administrator may by rule require that securities be issued under a trust indenture, unless this requirement is waived by the administrator.

551.305 History History: 2007 a. 196; 2013 a. 52.

551.306 551.306 Denial, suspension, and revocation of securities registration.

551.306(1) (1) Stop orders. The administrator may issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of, a registration statement if the administrator finds that the order is in the public interest and that any of the following apply:

551.306(1)(a) (a) The registration statement as of its effective date or before the effective date in the case of an order denying effectiveness, an amendment under s. 551.305 (10) as of its effective date, or a report under s. 551.305 (9), is incomplete in a material respect or contains a statement that, in the light of the circumstances under which it was made, was false or misleading with respect to a material fact.

551.306(1)(b) (b) This chapter or a rule adopted or order issued under this chapter or a condition imposed under this chapter has been willfully violated, in connection with the offering, by the person filing the registration statement; by the issuer, a partner, officer, or director of the issuer or a person having a similar status or performing a similar function; a promoter of the issuer; or a person directly or indirectly controlling or controlled by the issuer; but only if the person filing the registration statement is directly or indirectly controlled by or acting for the issuer; or by an underwriter.

551.306(1)(c) (c) The security registered or sought to be registered is the subject of a permanent or temporary injunction of a court of competent jurisdiction or an administrative stop order or similar order issued under any federal, foreign, or state law other than this chapter applicable to the offering, but the administrator may not institute a proceeding against an effective registration statement under this paragraph more than one year after the date of the order or injunction on which it is based, and the administrator may not issue an order under this paragraph on the basis of an order or injunction issued under the securities act of another state unless the order or injunction was based on conduct that would constitute, as of the date of the order, a ground for a stop order under this section.

551.306(1)(d) (d) The issuer’s enterprise or method of business includes or would include activities that are unlawful where performed.

551.306(1)(e) (e) With respect to a security sought to be registered under s. 551.303, there has been a failure to comply with the undertaking required by s. 551.303 (2) (d).

551.306(1)(f) (f) The applicant or registrant has not paid the filing fee, but the administrator shall void the order if the deficiency is corrected.

551.306(1)(g) (g) The offering will work or tend to work a fraud upon purchasers or would so operate.

551.306(3) (3) Institution of stop order. The administrator may not institute a stop order proceeding against an effective registration statement on the basis of conduct or a transaction known to the administrator when the registration statement became effective unless the proceeding is instituted within 30 days after the registration statement became effective.

551.306(4) (4) Summary process. The administrator may summarily revoke, deny, postpone, or suspend the effectiveness of a registration statement pending final determination of an administrative proceeding. Upon the issuance of the order, the administrator shall promptly notify each person specified in sub. (5) that the order has been issued, the reasons for the revocation, denial, postponement, or suspension, and that within 10 days after the receipt of a request in a record from the person the matter will be scheduled for a hearing. If a hearing is not requested and none is ordered by the administrator, within 30 days after the date of service of the order, the order becomes final. If a hearing is requested or ordered, the administrator, after notice of and opportunity for hearing for each person subject to the order, may modify or vacate the order or extend the order until final determination.

551.306(5) (5) Procedural requirements for stop order. A stop order may not be issued under this chapter without all of the following:

551.306(5)(a) (a) Appropriate notice to the applicant or registrant, the issuer, and the person on whose behalf the securities are to be or have been offered.

551.306(5)(b) (b) An opportunity for hearing.

551.306(5)(c) (c) Findings of fact and conclusions of law in a record in accordance with ch. 227.

551.306(6) (6) Modification or vacation of stop order. The administrator may modify or vacate a stop order issued under this section if the administrator finds that the conditions that caused its issuance have changed or that it is necessary or appropriate in the public interest or for the protection of investors.

551.306 History History: 2007 a. 196.

551.307 551.307 Waiver and modification. The administrator may waive or modify, in whole or in part, any or all of the requirements of ss. 551.302, 551.303, and 551.304 (2) or the requirement of any information or record in a registration statement or in a periodic report filed pursuant to s. 551.305 (9).

551.307 History History: 2007 a. 196.

subch. IV of ch. 551 SUBCHAPTER IV

BROKER-DEALERS, AGENTS,
INVESTMENT ADVISERS, INVESTMENT
ADVISER REPRESENTATIVES, AND
FEDERAL COVERED INVESTMENT ADVISERS

551.401 551.401 Broker-dealer registration requirement and exemptions.

551.401(1) (1) Registration requirement. It is unlawful for a person to transact business in this state as a broker-dealer unless the person is registered under this chapter as a broker-dealer or is exempt from registration as a broker-dealer under sub. (2) or (4) or s. 551.205 (1) (b) 2.

551.401(2) (2) Exemptions from registration. A broker-dealer is exempt from the registration requirement of sub. (1) if its only transactions effected in this state are with the following:

551.401(2)(a) (a) The issuer of the securities involved in the transactions.

551.401(2)(b) (b) A broker-dealer registered as a broker-dealer under this chapter or not required to be registered as a broker-dealer under this chapter.

551.401(2)(c) (c) Institutional investors.

551.401(2)(cm) (cm) Accredited investors as defined in Rule 501 (a) (1), (2), (3), (7) or (8) adopted under the Securities Act of 1933.

551.401(2)(d) (d) A nonaffiliated federal covered investment adviser with investments under management in excess of $100,000,000 acting for the account of others pursuant to discretionary authority in a signed record.

551.401(2)(e) (e) A bona fide preexisting customer whose principal place of residence is not in this state and the person is registered as a broker-dealer under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the state in which the customer maintains a principal place of residence.

551.401(2)(f) (f) A bona fide preexisting customer whose principal place of residence is in this state but was not present in this state when the customer relationship was established, if all of the following apply:

551.401(2)(f)1. 1. The broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities laws of the state in which the customer relationship was established and where the customer had maintained a principal place of residence.

551.401(2)(f)2. 2. Within 45 days after the customer’s first transaction in this state, the person files an application for registration as a broker-dealer in this state and a further transaction is not effected more than 75 days after the date on which the application is filed, or, if earlier, the date on which the administrator notifies the person that the administrator has granted registration or denied the application for registration or has stayed the pendency of the application for good cause; provided the person may effect unsolicited orders to liquidate open positions in existing customer accounts if no commission or other remuneration is paid or given directly or indirectly for effecting such transactions.

551.401(2)(h) (h) Any other person exempted by rule adopted or order issued under this chapter.

551.401(3) (3) Limits on employment or association. It is unlawful for a broker-dealer, or for an issuer engaged in offering, offering to purchase, purchasing, or selling securities in this state, directly or indirectly, to employ or associate with an individual to engage in an activity related to securities transactions in this state if the registration of the individual is denied or suspended or revoked or the individual is barred from employment or association with a broker-dealer, an issuer, an investment adviser, or a federal covered investment adviser by an order of the administrator under this chapter, the Securities and Exchange Commission, or a self-regulatory organization. A broker-dealer or issuer does not violate this subsection if the broker-dealer or issuer did not know, and in the exercise of reasonable care could not have known, of the denial, suspension, revocation, or bar. Upon request from a broker-dealer or issuer and for good cause, an order under this chapter may modify or waive, in whole or in part, the application of the prohibitions of this subsection to the broker-dealer.

551.401(4) (4) Foreign transactions. A rule adopted or order issued under this chapter may permit any of the following:

551.401(4)(a) (a) A broker-dealer that is registered in Canada or other foreign jurisdiction and that does not have a place of business in this state to effect transactions in securities with or for, or attempt to effect the purchase or sale of any securities by, any of the following:

551.401(4)(a)1. 1. An individual from Canada or other foreign jurisdiction who is temporarily present in this state and with whom the broker-dealer had a bona fide customer relationship before the individual entered the United States.

551.401(4)(a)2. 2. An individual from Canada or other foreign jurisdiction who is present in this state and whose transactions are in a self-directed tax advantaged retirement plan of which the individual is the holder or contributor in that foreign jurisdiction.

551.401(4)(a)3. 3. An individual who is present in this state, with whom the broker-dealer customer relationship arose while the individual was temporarily or permanently resident in Canada or the other foreign jurisdiction.

551.401(4)(b) (b) An agent who represents a broker-dealer that is exempt under this subsection to effect transactions in securities or attempt to effect the purchase or sale of securities in this state as permitted for a broker-dealer described in par. (a).

551.401 History History: 2007 a. 196; 2013 a. 52.

551.401 Annotation Violators of s. 551.31 (1) and (3) are subject to strict liability. What constitutes transacting business as an investment advisor in violation of s. 551.31 (3) is discussed. Garretto v. Elite Advisory Services, Inc., 793 F. Supp. 796 (1992).

551.401 Note NOTE: The above annotation refers to ch. 551 as it existed prior to its repeal and recreation by 2007 Wis. Act 196.

551.402 551.402 Agent registration requirement and exemptions.

551.402(1) (1) Registration requirement. It is unlawful for an individual to transact business in this state as an agent unless the individual is registered under this chapter as an agent or is exempt from registration as an agent under sub. (2).

551.402(2) (2) Exemptions from registration. The following individuals are exempt from the registration requirement of sub. (1):

551.402(2)(a) (a) An individual who represents a broker-dealer in effecting transactions in this state limited to those described in section 15 (h) (2) of the Securities Exchange Act of 1934 (15 USC 78o (h) (2)).

551.402(2)(b) (b) An individual who represents a broker-dealer that is exempt under s. 551.205 (1) (b) 2. or 551.401 (2) or (4).

551.402(2)(c) (c) An individual who represents an issuer with respect to an offer or sale of the issuer’s own securities or those of the issuer’s parent or any of the issuer’s subsidiaries, and who is not compensated in connection with the individual’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities.

551.402(2)(d) (d) An individual who represents an issuer and who effects transactions in the issuer’s securities exempted by s. 551.202, other than s. 551.202 (11), (14) or (24).

551.402(2)(e) (e) An individual who represents an issuer that effects transactions solely in federal covered securities of the issuer, but an individual who effects transactions in a federal covered security under section 18 (b) (3) or 18 (b) (4) (D) of the Securities Act of 1933 (15 USC 77r (b) (3) or 77r (b) (4) (D)) is not exempt if the individual is compensated in connection with the agent’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities.

551.402(2)(f) (f) An individual who represents a broker-dealer registered in this state under s. 551.401 (1) or exempt from registration under s. 551.205 (1) (b) 2. or 551.401 (2) in the offer and sale of securities for an account of a nonaffiliated federal covered investment adviser with investments under management in excess of $100,000,000 acting for the account of others pursuant to discretionary authority in a signed record.

551.402(2)(g) (g) An individual who represents an issuer in connection with the purchase of the issuer’s own securities.

551.402(2)(h) (h) An individual who represents an issuer or broker-dealer and who restricts participation to performing clerical or ministerial acts.

551.402(2)(hm) (hm) An individual who represents a broker-dealer and effects transactions in this state exclusively with customers listed under s. 551.401 (2) (a) to (d) and (h).

551.402(2)(i) (i) Any other individual exempted by rule adopted or order issued under this chapter.

551.402(3) (3) Registration effective only while employed or associated. The registration of an agent is effective only while the agent is employed by or associated with a broker-dealer registered under this chapter or an issuer that is offering, selling, or purchasing its securities in this state.

551.402(4) (4) Limit on employment or association. It is unlawful for a broker-dealer, or an issuer engaged in offering, selling, or purchasing securities in this state, to employ or associate with an agent who transacts business in this state on behalf of broker-dealers or issuers unless the agent is registered under sub. (1) for the broker-dealer or issuer or exempt from registration under sub. (2).

551.402(5) (5) Limit on affiliations. Except as permitted under sub. (6), an individual may not act as an agent for more than one broker-dealer or one issuer at a time, unless the broker-dealers or the issuers for which the agent acts are affiliated by direct or indirect common control or are authorized by rule or order under this chapter.

551.402(6) (6) Dual representation. 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 registration for each limited partnership or investment company represented by the agent if all of the following conditions are satisfied:

551.402(6)(a) (a) The limited partnerships have the same general partner or the investment companies have the same investment adviser.

551.402(6)(b) (b) An application to amend the agent’s registration to name each limited partnership or investment company as the agent’s employer is filed with and approved by the administrator before the agent makes any offer or sale in the state on behalf of the additional limited partnership or investment company.

551.402 History History: 2007 a. 196; 2013 a. 52.

551.403 551.403 Investment adviser registration requirement and exemptions.

551.403(1) (1) Registration requirement. It is unlawful for a person to transact business in this state as an investment adviser unless the person is registered under this chapter as an investment adviser or is exempt from registration as an investment adviser under sub. (2).

551.403(2) (2) Exemptions from registration. The following persons are exempt from the registration requirement of sub. (1):

551.403(2)(a) (a) A person whose only clients in this state are:

551.403(2)(a)1. 1. Federal covered investment advisers, investment advisers registered under this chapter, or broker-dealers registered under this chapter.

551.403(2)(a)2. 2. Institutional investors, except any institutional investor described in s. 551.102 (11) (k), (m), or (o).

551.403(2)(a)2m. 2m. Accredited investors as defined in Rule 501 (a) (1) or (3) adopted under the Securities Act of 1933.

551.403(2)(a)3. 3. Bona fide preexisting clients whose principal places of residence are not in this state if the investment adviser is registered or exempt from registration under the securities act of the state in which the clients maintain principal places of residence.

551.403(2)(a)4. 4. Any other client exempted by rule adopted or order issued under this chapter.

551.403(2)(b) (b) A person without a place of business in this state if the person has had, during the preceding 12 months, not more than 5 clients that are resident in this state in addition to those specified under par. (a).

551.403(2)(c) (c) Any other person exempted by rule adopted or order issued under this chapter.

551.403(3) (3) Limits on employment or association. It is unlawful for an investment adviser, directly or indirectly, to employ or associate with an individual to engage in an activity related to investment advice in this state if the registration of the individual is denied or suspended or revoked or the individual is barred from employment or association with an investment adviser, federal covered investment adviser, or broker-dealer by an order under this chapter, the Securities and Exchange Commission, or a self-regulatory organization, unless the investment adviser did not know, and in the exercise of reasonable care could not have known, of the denial, suspension, revocation, or bar. Upon request from the investment adviser and for good cause, the administrator, by order, may waive, in whole or in part, the application of the prohibitions of this subsection to the investment adviser.

551.403(4) (4) Investment adviser representative registration required. It is unlawful for an investment adviser to employ or associate with an individual required to be registered under this chapter as an investment adviser representative who transacts business in this state on behalf of the investment adviser unless the individual is registered under s. 551.404 (1) or is exempt from registration under s. 551.404 (2).

551.403 History History: 2007 a. 196; 2011 a. 32.

551.403 Annotation Violators of s. 551.31 (1) and (3) are subject to strict liability. What constitutes transacting business as an investment advisor in violation of s. 551.31 (3) is discussed. Garretto v. Elite Advisory Services, Inc., 793 F. Supp. 796 (1992).

551.403 Note NOTE: The above annotation refers to ch. 551 as it existed prior to its repeal and recreation by 2007 Wis. Act 196.

551.404 551.404 Investment adviser representative registration requirement and exemptions.

551.404(1) (1) Registration requirement. It is unlawful for an individual to transact business in this state as an investment adviser representative unless the individual is registered under this chapter as an investment adviser representative or is exempt from registration as an investment adviser representative under sub. (2).

551.404(2) (2) Exemptions from registration. The following individuals are exempt from the registration requirement of sub. (1):

551.404(2)(a) (a) An individual who is employed by or associated with an investment adviser that is exempt from registration under s. 551.403 (2) or a federal covered investment adviser that is excluded from the notice filing requirements of s. 551.405.

551.404(2)(am) (am) An individual who is employed by or associated with an investment adviser or a federal covered investment adviser and whose clients in the state are exclusively those clients listed in s. 551.403 (2) (a) 1. to 2m. and 4.

551.404(2)(b) (b) Any other individual exempted by rule adopted or order issued under this chapter.