SF 4264

Introduction - 94th Legislature (2025 - 2026)

Posted on 03/10/2026 09:40 a.m.

A bill for an act
relating to financial institutions; modifying various provisions governing securities
broker-dealers and broker-dealers' agents; providing penalties; authorizing
administrative rulemaking; amending Minnesota Statutes 2024, sections 80A.50;
80A.69; 80C.12, subdivision 1; Minnesota Statutes 2025 Supplement, section
80A.66; proposing coding for new law in Minnesota Statutes, chapter 80A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 80A.50, is amended to read:

80A.50 SECTION 302; FEDERAL COVERED SECURITIES; SMALL
CORPORATE OFFERING REGISTRATION.

(a) Federal covered securities.

(1) Required filing of records. With respect to a federal covered security, as defined
in Section 18(b)(2) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(2)), that is not
otherwise exempt under sections 80A.45 through 80A.47, a rule adopted or order issued
under this chapter may require the filing of any or all of the following records:

(A) before the initial offer of a federal covered security in this state, all records that are
part of a federal registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 and a consent to service of process complying with section
80A.88 signed by the issuer;

(B) after the initial offer of the federal covered security in this state, all records that are
part of an amendment to a federal registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933; and

(C) to the extent necessary or appropriate to compute fees, a report of the value of the
federal covered securities sold or offered to persons present in this state, if the sales data
are not included in records filed with the Securities and Exchange Commission.

(2) Notice filing effectiveness and renewal. A notice filing under subsection (a) is
effective for one year commencing on the later of the notice filing or the effectiveness of
the offering filed with the Securities and Exchange Commission. On or before expiration,
the issuer may renew a notice filing by filing a copy of those records filed by the issuer with
the Securities and Exchange Commission that are required by rule or order under this chapter
to be filed. A previously filed consent to service of process complying with section 80A.88
may be incorporated by reference in a renewal. A renewed notice filing becomes effective
upon the expiration of the filing being renewed.

(3) Notice filings for federal covered securities under section 18(b)(4)(D). With
respect to a security that is a federal covered security under Section 18(b)(4)(D) of the
Securities Act of 1933 (15 U.S.C. Section 77r(b)(4)(D)), a rule under this chapter may
require a notice filing by or on behalf of an issuer to include a copy of Form D, including
the Appendix, as promulgated by the Securities and Exchange Commission, and a consent
to service of process complying with section 80A.88 signed by the issuer not later than 15
days after the first sale of the federal covered security in this state.

(4) Stop orders. Except with respect to a federal security under Section 18(b)(1) of the
Securities Act of 1933 (15 U.S.C. Section 77r(b)(1)), if the administrator finds that there is
a failure to comply with a notice or fee requirement of this section, the administrator may
issue a stop order suspending the offer and sale of a federal covered security in this state.
If the deficiency is corrected, the stop order is void as of the time of its issuance and no
penalty may be imposed by the administrator.

(b) Small corporation offering registration.

(1) Registration required. A security meeting the conditions set forth in this section
may be registered as set forth in this section.

(2) Availability. Registration under this section is available only to the issuer of securities
and not to an affiliate of the issuer or to any other person for resale of the issuer's securities.
The issuer must be organized under the laws of one of the states or possessions of the United
States. The securities offered must be exempt from registration under the Securities Act of
1933 pursuant to Rule 504 of Regulation D (15 U.S.C. Section 77c).

(3) Disqualification. Registration under this section is not available to any of the
following issuers:

(A) an issuer subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934;

(B) an investment company;

(C) a development stage company that either has no specific business plan or purpose
or has indicated that its business plan is to engage in a merger or acquisition with an
unidentified company or companies or other entity or person;

(D) an issuer if the issuer or any of its predecessors, officers, directors, governors,
partners, ten percent stock or equity holders, promoters, or any selling agents of the securities
to be offered, or any officer, director, governor, or partner of the selling agent:

(i) has filed a registration statement that is the subject of a currently effective registration
stop order entered under a federal or state securities law within five years before the filing
of the small corporate offering registration application;

(ii) has been convicted within five years before the filing of the small corporate offering
registration application of a felony or misdemeanor in connection with the offer, purchase,
or sale of a security or a felony involving fraud or deceit, including, but not limited to,
forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to
defraud;

(iii) is currently subject to a state administrative enforcement order or judgment entered
by a state securities administrator or the Securities and Exchange Commission within five
years before the filing of the small corporate offering registration application, or is subject
to a federal or state administrative enforcement order or judgment in which fraud or deceit,
including, but not limited to, making untrue statements of material facts or omitting to state
material facts, was found and the order or judgment was entered within five years before
the filing of the small corporate offering registration application;

(iv) is currently subject to an order, judgment, or decree of a court of competent
jurisdiction temporarily restraining or enjoining, or is subject to an order, judgment, or
decree of a court of competent jurisdiction permanently restraining or enjoining the party
from engaging in or continuing any conduct or practice in connection with the purchase or
sale of any security or involving the making of a false filing with a state or with the Securities
and Exchange Commission entered within five years before the filing of the small corporate
offering registration application; or

(v) is subject to a state's administrative enforcement order, or judgment that prohibits,
denies, or revokes the use of an exemption for registration in connection with the offer,
purchase, or sale of securities,

(I) except that clauses (i) to (iv) do not apply if the person subject to the disqualification
is duly licensed or registered to conduct securities-related business in the state in which the
administrative order or judgment was entered against the person or if the dealer employing
the party is licensed or registered in this state and the form BD filed in this state discloses
the order, conviction, judgment, or decree relating to the person, and

(II) except that the disqualification under this subdivision is automatically waived if the
state securities administrator or federal agency that created the basis for disqualification
determines upon a showing of good cause that it is not necessary under the circumstances
to deny the registration.

(4) Filing and effectiveness of registration statement. A small corporate offering
registration statement must be filed with the administrator. If no stop order is in effect and
no proceeding is pending under section 80A.54, such registration statement shall become
effective automatically at the close of business on the 20th day after filing of the registration
statement or the last amendment of the registration statement or at such earlier time as the
administrator may designate by rule or order. For the purposes of a nonissuer transaction,
other than by an affiliate of the issuer, all outstanding securities of the same class identified
in the small corporate offering registration statement as a security registered under this
chapter are considered to be registered while the small corporate offering registration
statement is effective. A small corporate offering registration statement is effective for one
year after its effective date or for any longer period designated in an order under this chapter.
A small corporate offering registration statement may be withdrawn only with the approval
of the administrator.

(5) Contents of registration statement. A small corporate offering registration statement
under this section shall be on Form U-7, including exhibits required by the instructions
thereto, as adopted by the North American Securities Administrators Association, or such
alternative form as may be designated by the administrator by rule or order and must include:

(A) a consent to service of process complying with section 80A.88;

(B) a statement of the type and amount of securities to be offered and the amount of
securities to be offered in this state;

(C) a specimen or copy of the security being registered, unless the security is
uncertificated, a copy of the issuer's articles of incorporation and bylaws or their substantial
equivalents in effect, and a copy of any indenture or other instrument covering the security
to be registered;

(D) a signed or conformed copy of an opinion of counsel concerning the legality of the
securities being registered which states whether the securities, when sold, will be validly
issued, fully paid, and nonassessable and, if debt securities, binding obligations of the issuer;

(E) the states (i) in which the securities are proposed to be offered; (ii) in which a
registration statement or similar filing has been made in connection with the offering
including information as to effectiveness of each such filing; and (iii) in which a stop order
or similar proceeding has been entered or in which proceedings or actions seeking such an
order are pending;

(F) a copy of the offering document proposed to be delivered to offerees; and

(G) a copy of any other pamphlet, circular, form letter, advertisement, or other sales
literature intended as of the effective date to be used in connection with the offering and
any solicitation of interest used in compliance with section 80A.46(17)(B).

(6) Copy to purchaser. A copy of the offering document as filed with the administrator
must be delivered to each person purchasing the securities prior to sale of the securities to
such person.

(c) Offering limit. Offers and sales of securities under a small corporate offering
registration as set forth in this section are allowed up to the limit prescribed by Code of
Federal Regulations, title 17, part 230.504 (b)(2), as amended.

(d) Regulation A - Tier 2 filing requirements.

(1) Initial filing. An issuer planning to offer and sell securities in Minnesota in an
offering exempt under Tier 2 of federal Regulation A must, at least 21 calendar days before
the date of the initial sale of securities in Minnesota, submit to the administrator:

(A) a completed Regulation A - Tier 2 offering notice filing form or copies of all the
documents filed with the Securities Exchange Commission; and

(B) a consent to service of process on Form U-2, if consent to service of process is not
provided in the Regulation A - Tier 2 offering notice filing form.

The initial notice filing made in Minnesota is effective for 12 months after the date the
filing is made.

(2) Renewal. For each additional 12-month period in which the same offering is
continued, an issuer conducting a Tier 2 offering under federal Regulation A may renew
the notice filing by filing (i) the Regulation A - Tier 2 offering notice filing form marked
"renewal," or (ii) a cover letter or other document requesting renewal. The renewal filing
must be made on or before the date notice filing expires.

(3) Amendment. An issuer may increase the amount of securities offered in Minnesota
by submitting a Regulation A - Tier 2 offering notice filing form or other document
describing the transaction.

new text begin (e) Notice filing requirement for federal crowdfunding offerings. This paragraph
applies to offerings made under Regulation Crowdfunding, Code of Federal Regulations,
title 17, part 227, and sections 4(a)(6) and 18(b)(4)(C) of the Securities Act of 1933, United
States Code, title 15, sections 77d(A)(6) and 77r(b)(4)(C).
new text end

new text begin (1) Initial filing. An issuer that (i) offers and sells securities in Minnesota in an offering
exempt under federal Regulation Crowdfunding, and (ii) has a principal place of business
in Minnesota or sells at least 50 percent of the offering's aggregate amount to Minnesota
residents, must file with the administrator:
new text end

new text begin (A) a completed Uniform Notice of Federal Crowdfunding Offering form or copies of
all documents filed with the Securities Exchange Commission; and
new text end

new text begin (B) if the issuer is not filing on the Uniform Notice of Federal Crowdfunding Offering
form, consent to service of process on Form U-2.
new text end

new text begin If the issuer's principal place of business is in Minnesota, the initial filing must be submitted
with the administrator when the issuer makes the issuer's initial Form C filing concerning
the offering with the Securities and Exchange Commission. If the issuer's principal place
of business is not in Minnesota but Minnesota residents have purchased at least 50 percent
of the aggregate amount of the offering, the filing must be submitted when the issuer becomes
aware that the aggregate purchases made by Minnesota residents meets the threshold, but
no later than 30 days after the date the offering is complete. The initial notice filing is
effective for a 12-month period beginning on the date the initial filing is submitted to the
administrator.
new text end

new text begin (2) Renewal. For each additional 12-month period in which a single offering is continued,
an issuer conducting an offering under federal Regulation Crowdfunding may renew the
issuer's notice filing by filing with the administrator on or before the date the current notice
filing expires:
new text end

new text begin (A) a completed Uniform Notice of Federal Crowdfunding Offering form that is marked
"renewal"; or
new text end

new text begin (B) a cover letter or other document requesting renewal new text end new text begin .
new text end

new text begin (3) Amendment. An issuer may increase the amount of securities offered in Minnesota
by submitting (i) a completed Uniform Notice of Federal Crowdfunding Offering form that
is marked "amendment," or (ii) another document that describes the modified transaction.
new text end

Sec. 2.

Minnesota Statutes 2025 Supplement, section 80A.66, is amended to read:

80A.66 SECTION 411; POSTREGISTRATION REQUIREMENTS.

(a) Financial requirements. Subject to Section 15(h) of the Securities Exchange Act
of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940
(15 U.S.C. Section 80b-22), a rule adopted or order issued under this chapter may establish
minimum financial requirements for broker-dealers registered or required to be registered
under this chapter and investment advisers registered or required to be registered under this
chapter.

(b) Financial reports. Subject to Section 15(h) of the Securities Exchange Act of 1934
(15 U.S.C. Section 78o(h)) or Section 222(b) of the Investment Advisers Act of 1940 (15
U.S.C. Section 80b-22), a broker-dealer registered or required to be registered under this
chapter and an investment adviser registered or required to be registered under this chapter
shall file such financial reports as are required by a rule adopted or order issued under this
chapter. If the information contained in a record filed under this subsection is or becomes
inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting
amendment.

(c) Record keeping. Subject to Section 15(h) of the Securities Exchange Act of 1934
(15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15
U.S.C. Section 80b-22):

(1) a broker-dealer registered or required to be registered under this chapter and an
investment adviser registered or required to be registered under this chapter shall make and
maintain the accounts, correspondence, memoranda, papers, books, and other records
required by rule adopted or order issued under this chapter;

(2) broker-dealer records required to be maintained under paragraph (1) may be
maintained in any form of data storage acceptable under Section 17(a) of the Securities
Exchange Act of 1934 (15 U.S.C. Section 78q(a)) if they are readily accessible to the
administrator; deleted text begin and
deleted text end

new text begin (3) a broker-dealer must establish and maintain: (i) a set of written supervisory procedures
that reasonably prevent and detect violations of chapter 80A; Minnesota Rules, chapter
2876; or related orders issued by the commissioner; and (ii) a system to apply the procedures
established under this clause. The procedures must designate by name or title a number of
supervisory employees that is reasonable relative to the number of the broker-dealer's
registered agents, offices, and transactions in Minnesota. A copy of the written procedures
and the system to apply the procedures must be kept and maintained at each branch office
affiliated with the broker-dealer; and
new text end

deleted text begin (3) deleted text end new text begin (4) new text end investment adviser records required to be maintained under paragraph (d)(1) may
be maintained in any form of data storage required by rule adopted or order issued under
this chapter.

(d) Records and reports of private funds.

(1) In general. An investment adviser to a private fund shall maintain such records of,
and file with the administrator such reports and amendments thereto, that an exempt reporting
adviser is required to file with the Securities and Exchange Commission pursuant to SEC
Rule 204-4, Code of Federal Regulations, title 17, section 275.204-4.

(2) Treatment of records. The records and reports of any private fund to which an
investment adviser provides investment advice shall be deemed to be the records and reports
of the investment adviser.

(3) Required information. The records and reports required to be maintained by an
investment adviser, which are subject to inspection by a representative of the administrator
at any time, shall include for each private fund advised by the investment adviser, a
description of:

(A) the amount of assets under management;

(B) the use of leverage, including off-balance-sheet leverage, as to the assets under
management;

(C) counterparty credit risk exposure;

(D) trading and investment positions;

(E) valuation policies and practices of the fund;

(F) types of assets held;

(G) side arrangements or side letters, whereby certain investors in a fund obtain more
favorable rights or entitlements than other investors;

(H) trading practices; and

(I) such other information as the administrator determines is necessary and appropriate
in the public interest and for the protection of investors, which may include the establishment
of different reporting requirements for different classes of fund advisers, based on the type
or size of the private fund being advised.

(4) Filing of records. A rule or order under this chapter may require each investment
adviser to a private fund to file reports containing such information as the administrator
deems necessary and appropriate in the public interest and for the protection of investors.

(e) Audits or inspections. The records of a broker-dealer registered or required to be
registered under this chapter and of an investment adviser registered or required to be
registered under this chapter, including the records of a private fund described in paragraph
(d) and the records of investment advisers to private funds, are subject to such reasonable
periodic, special, or other audits or inspections by a representative of the administrator,
within or without this state, as the administrator considers necessary or appropriate in the
public interest and for the protection of investors. An audit or inspection may be made at
any time and without prior notice. The administrator may copy, and remove for audit or
inspection copies of, all records the administrator reasonably considers necessary or
appropriate to conduct the audit or inspection. The administrator may assess a reasonable
charge for conducting an audit or inspection under this subsection.

(f) Custody and discretionary authority bond or insurance. Subject to Section 15(h)
of the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the
Investment Advisers Act of 1940 (15 U.S.C. Section 80b-22), a rule adopted or order issued
under this chapter may require a broker-dealer or investment adviser that has custody of or
discretionary authority over funds or securities of a customer or client to obtain insurance
or post a bond or other satisfactory form of security in an amount of at least $25,000, but
not to exceed $100,000. The administrator may determine the requirements of the insurance,
bond, or other satisfactory form of security. Insurance or a bond or other satisfactory form
of security may not be required of a broker-dealer registered under this chapter whose net
capital exceeds, or of an investment adviser registered under this chapter whose minimum
financial requirements exceed, the amounts required by rule or order under this chapter.
The insurance, bond, or other satisfactory form of security must permit an action by a person
to enforce any liability on the insurance, bond, or other satisfactory form of security if
instituted within the time limitations in section 80A.76(j)(2).

(g) Requirements for custody. Subject to Section 15(h) of the Securities Exchange Act
of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940
(15 U.S.C. Section 80b-22), an agent may not have custody of funds or securities of a
customer except under the supervision of a broker-dealer and an investment adviser
representative may not have custody of funds or securities of a client except under the
supervision of an investment adviser or a federal covered investment adviser. A rule adopted
or order issued under this chapter may prohibit, limit, or impose conditions on a broker-dealer
regarding custody of funds or securities of a customer and on an investment adviser regarding
custody of securities or funds of a client.

(h) Investment adviser brochure rule. With respect to an investment adviser registered
or required to be registered under this chapter, a rule adopted or order issued under this
chapter may require that information or other record be furnished or disseminated to clients
or prospective clients in this state as necessary or appropriate in the public interest and for
the protection of investors and advisory clients.

(i) Continuing education. A rule adopted or order issued under this chapter may require
an individual registered under section 80A.57 or 80A.58 to participate in a continuing
education program approved by the Securities and Exchange Commission and administered
by a self-regulatory organization, the North American Securities Administrators Association,
or the commissioner.

new text begin (j) Business continuity and succession plan. An investment adviser must establish,
maintain, and enforce written policies and procedures relating to business continuity and
succession planning. At a minimum, the policies and procedures under this paragraph must
provide:
new text end

new text begin (1) a means to protect, back up, and recover books and records;
new text end

new text begin (2) an alternate method to provide notice to customers; key personnel; employees;
vendors; service providers, including third-party custodians; and regulators, regarding issues
pertaining to the investment adviser's business operations, including but not limited to
significant business interruption, the death or unavailability of key personnel, other disruption
to business activities, or ceasing business operations;
new text end

new text begin (3) a plan to relocate the office space for a principal place of business that is subject to
a temporary or permanent loss;
new text end

new text begin (4) a plan to assign duties to qualified responsible persons if key personnel die or are
otherwise unavailable; and
new text end

new text begin (5) a plan to otherwise minimize service disruption and client harm that might result
from sudden and significant business interruption.
new text end

new text begin (k) Physical security and cybersecurity policies and procedures. An investment
adviser must establish, implement, update, and enforce written physical security and
cybersecurity policies and procedures that are designed to ensure the confidentiality, integrity,
and availability of physical and electronic records and information. The policies and
procedures must be tailored to the investment adviser's business model and must take into
account the investment advisor's business size, type of service provided, and number of
locations.
new text end

new text begin (1) The physical security and cybersecurity policies and procedures must:
new text end

new text begin (A) protect against reasonably anticipated threats or hazards to the security or integrity
of client records and information;
new text end

new text begin (B) ensure that the investment adviser protects confidential client records and information;
and
new text end

new text begin (C) protect client records and information that, if released, might result in harm or
inconvenience to the client.
new text end

new text begin (2) At a minimum, the physical security and cybersecurity policies and procedures must
develop and implement:
new text end

new text begin (A) an organizational understanding to manage information security risk with respect
to systems, assets, data, and capabilities;
new text end

new text begin (B) safeguards to ensure delivery of critical infrastructure services;
new text end

new text begin (C) actions and tools to identify when an information security event occurs;
new text end

new text begin (D) actions to take when a information security event is detected; and
new text end

new text begin (E) plans for security and system resilience, and to restore capabilities or services that
are impaired due to an information security event.
new text end

new text begin (3) At the time a client engages an investment adviser and on an annual basis thereafter,
an investment adviser must deliver to the client a privacy policy that is reasonably designed
to assist the client understand how the investment adviser collects and shares, to the extent
permitted by state and federal law, nonpublic personal information. If information in the
policy becomes inaccurate, the investment adviser must promptly update and deliver an
amended privacy policy to the client.
new text end

new text begin (l) Written confirmation. A broker-dealer must promptly provide to the customer a
written confirmation after executing a transaction and before completing a transaction. The
confirmation must:
new text end

new text begin (1) describe the security purchased or sold, the date of the transaction, the price of the
security purchased or sold, and any commission charged;
new text end

new text begin (2) indicate whether the broker-dealer acted for the broker-dealer's account, as an agent
for a customer, as an agent for another person, or an agent for both a customer and another
person;
new text end

new text begin (3) if the broker-dealer is acting as an agent for a customer, include (i) the name of the
person who purchased the security, (ii) the name of the person who sold the security, or (iii)
a statement that the information in item (i) or (ii) is available to a customer on request if
the broker-dealer knows the information or is able to ascertain the information with
reasonable diligence;
new text end

new text begin (4) indicate whether the transaction was unsolicited; and
new text end

new text begin (5) indicate the name of the agent that executed the transaction.
new text end

new text begin A broker-dealer that complies with Securities and Exchange Commission Rule 10b-10,
Code of Federal Regulations, title 17, part 240.10b-10, or article III, section 12, of the
Financial Institutions Regulatory Authority Rules of Fair Practice, complies with this
paragraph.
new text end

new text begin (m) Conditions; stipulations; provisions. A broker-dealer is prohibited from entering
into a contract with a customer if the contract contains a condition, stipulation, or provision
that binds the customer to waive rights under chapter 80A; Minnesota Rules, chapter 2876;
or an order issued by the commissioner. A condition, stipulation, or provision included in
a contract subject to this paragraph is void.
new text end

new text begin (n) Principal office; employment. A broker-dealer whose principal office is located in
Minnesota must have at least one registered person employed on a full-time basis at the
principal office located in Minnesota. This paragraph does not apply to a broker-dealer
engaged solely in offering and selling:
new text end

new text begin (1) interests in a direct participation program; or
new text end

new text begin (2) securities issued by open-end investment companies, face amount certificate
companies, or unit investment trusts registered under the Investment Company Act of 1940,
United State Code, title 15, sections 80a-1 to 80a-64.
new text end

Sec. 3.

Minnesota Statutes 2024, section 80A.69, is amended to read:

80A.69 SECTION 502; PROHIBITED CONDUCT IN PROVIDING INVESTMENT
ADVICE.

(a) 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:

(1) to employ a device, scheme, or artifice to defraud another person; or

(2) to engage in an act, practice, or course of business that operates or would operate as
a fraud or deceit upon another person.

(b) 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 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 of a federal covered
investment adviser, from engaging in acts, practices, and courses of business defined as
fraudulent, deceptive, or manipulative.

(c) 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.

new text begin (d) Use of client login information. An investment adviser is prohibited from accessing
a client's account by using the client's unique identifying information, including but not
limited to the client's username and password.
new text end

Sec. 4.

new text begin [80A.691] BROKER-DEALERS; AGENTS; DISHONEST OR UNETHICAL
BUSINESS PRACTICES.
new text end

new text begin Subdivision 1. new text end

new text begin Broker-dealers; standards and principles. new text end

new text begin A broker-dealer must observe
high standards of commercial honor and just and equitable principles of trade when
conducting the broker-dealer's business. An act or practice that is contrary to the standards
constitutes grounds for the administrator to deny, suspend, or revoke the broker-dealer's
registration or to take other action authorized by statute. For purposes of this subdivision,
an act or practice that is contrary to the standards includes:
new text end

new text begin (1) engaging in a pattern of unreasonable and unjustifiable delays with respect to: (i)
delivering securities purchased by a customer; or (ii) upon request, paying free credit balances
reflecting a customer's completed transactions;
new text end

new text begin (2) inducing trading in a customer's account that is excessive in size or frequency
considering the account's financial resources and character;
new text end

new text begin (3) recommending that a customer purchase, sell, or exchange a security without
reasonable grounds to believe the transaction or recommendation is suitable for the customer,
based on: (i) a reasonable inquiry regarding the customer's investment objectives, financial
situation, and needs; and (ii) other relevant information known by the broker-dealer;
new text end

new text begin (4) executing a transaction on behalf of a customer without the customer's authorization;
new text end

new text begin (5) exercising discretionary power to effect 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 the order is executed or the order's price;
new text end

new text begin (6) executing a transaction in a margin account without securing from the customer a
properly executed written margin agreement promptly after the account's initial transaction;
new text end

new text begin (7) failing to segregate customers' free securities or securities held in safekeeping;
new text end

new text begin (8) hypothecating a customer's securities without having a lien on the customer's
securities, unless the broker-dealer secures the customer's properly executed written consent
promptly after the initial transaction, except as permitted by Securities and Exchange
Commission regulations;
new text end

new text begin (9) entering into a transaction with or for a customer at a price that is not reasonably
related to the security's current market price, or receiving an unreasonable commission or
profit;
new text end

new text begin (10) failing to furnish to a customer purchasing securities in an offering, no later than
the due date for the transaction's confirmation: (i) a final prospectus; or (ii) a preliminary
prospectus and an additional document that, when combined with the preliminary prospectus,
includes all of the information included in the final prospectus;
new text end

new text begin (11) charging an unreasonable or inequitable fee for services performed, including: (i)
miscellaneous services that include but are not limited to collecting money due for principal,
dividends or interest, exchanging or transferring securities, appraisals, safekeeping, or
maintaining custody of securities; and (ii) other services related to the broker-dealer's
securities business;
new text end

new text begin (12) offering to buy or sell a security at a stated price if the broker-dealer is not prepared
to purchase or sell at the stated price and under the stated conditions at the time the offer
to buy or sell is made;
new text end

new text begin (13) representing that a security is being offered to a customer "at the market" or at a
price relevant to the market price, unless the broker-dealer knows or has reasonable grounds
to believe a market for the security exists other than the market made, created, or controlled
by: (i) the broker-dealer; (ii) a person for whom the broker-dealer is acting or with whom
the broker-dealer is associated with respect to the security's distribution; or (iii) a person
controlled by, controlling, or under common control with the broker-dealer;
new text end

new text begin (14) effecting a transaction in, or inducing the purchase or sale of, a security using a
manipulative, deceptive, or fraudulent device, practice, plan, program, design, or contrivance,
which includes but is not limited to:
new text end

new text begin (i) effecting a transaction in a security that involves no change in the security's beneficial
ownership;
new text end

new text begin (ii) entering an order to purchase or sell a security with the knowledge that at least one
other order for the same security that is substantially the same size, entered at substantially
the same time, and for substantially the same price as the order has been or will be entered
by or for the same or a different party to create (A) a false or misleading appearance of
active trading in the security, or (B) a false or misleading appearance with respect to the
market for the security. This item does not prohibit a broker-dealer from entering bona fide
agency cross transactions for the broker-dealer's customers; or
new text end

new text begin (iii) effecting, alone or with another person, a series of transactions in a security that
creates actual or apparent active trading in the security, or raises or reduces the price of the
security, to induce others to purchase or sell the security;
new text end

new text begin (15) guaranteeing a customer against loss in: (i) a securities account the broker-dealer
carries for the customer; (ii) a securities transaction effected by the broker-dealer; or (iii) a
securities transaction effected by the broker-dealer with or for the customer;
new text end

new text begin (16) publishing or circulating, or causing to be published or circulated, a notice, circular,
advertisement, newspaper article, investment service, or communication of any kind that
purports to: (i) report a transaction as a purchase or sale of a security, unless the broker-dealer
believes that the transaction was a bona fide purchase or sale of the security; or (ii) quote
the bid price or asked price for a security, unless the broker-dealer believes the quote
represents a bona fide bid for or offer of the security;
new text end

new text begin (17) using an advertising or sales presentation in a manner that is deceptive or misleading,
including but not limited to distributing: (i) nonfactual data, material, or a presentation based
on conjecture, unfounded or unrealistic claims; or (ii) assertions in a brochure, flyer, or
display using words, pictures, graphs, or other representations that are designed to
supplement, detract from, supersede, or defeat a prospectus' or disclosure's purpose or effect;
new text end

new text begin (18) failing to disclose to a customer, before entering into a contract with or for a customer
to purchase or sell a security, that the broker-dealer is controlled by, controlling, affiliated
with, or under common control with the security's issuer. If a disclosure under this clause
is not made in writing, the disclosure must be supplemented by giving or sending written
disclosure before or at the time the transaction is completed;
new text end

new text begin (19) failing to make a bona fide public offering of all of the securities allotted to a
broker-dealer for distribution, whether the securities are acquired as an underwriter, a selling
group member, or from a member participating in the distribution as an underwriter or
selling group member;
new text end

new text begin (20) failing or refusing to: (i) furnish a customer, upon reasonable request, information
the customer is entitled to; or (ii) respond to a formal written request or complaint;
new text end

new text begin (21) failing to pay and fully satisfy a final judgment or arbitration award resulting from
an arbitration or court proceeding relating to an investment and initiated by the customer,
unless: (i) the customer and broker-dealer, or broker-dealer's agent, agree in writing to an
alternative payment arrangement; and (ii) the broker-dealer or broker-dealer's agent complies
with the terms of the alternative payment arrangement;
new text end

new text begin (22) attempting to avoid paying a final judgment or arbitration award resulting from an
arbitration or court proceeding relating to an investment and initiated by the customer,
unless: (i) the customer and broker-dealer, or broker-dealer's agent, agree in writing to an
alternative payment arrangement; and (ii) the broker-dealer or broker-dealer's agent complies
with the terms of the alternative payment arrangement;
new text end

new text begin (23) failing to pay and fully satisfy a fine, civil penalty, order of restitution, order of
disgorgement, or similar monetary payment obligation imposed upon the broker-dealer or
broker-dealer's agent by the Securities and Exchange Commission, a state or provincial
securities or other financial services regulator, or a self-regulatory organization;
new text end

new text begin (24) accessing a client's account by using the client's unique identifying information,
including but not limited to the client's username and password;
new text end

new text begin (25) in connection with soliciting a sale or purchase of an over-the-counter non-NASDAQ
security, failing to promptly provide the most current prospectus or the most recently filed
periodic report filed under Section 13 of the Securities Exchange Act of 1934, United States
Code, title 15, section 78m, as amended, if the broker-dealer receives a request from a
customer;
new text end

new text begin (26) marking an order ticket or confirmation as unsolicited if the transaction is solicited;
new text end

new text begin (27) for each month in which activity has occurred in a customer's account and no less
frequently than once every three months regardless of whether customer account activity
has occurred, failing to provide the customer with an account statement that, with respect
to all over-the-counter non-NASDAQ equity securities in the account, contains a value for
each security based on the closing market bid on a date certain. This clause applies only if
the broker-dealer has been a market maker in the security at any time during the month in
which the monthly or quarterly statement is issued; or
new text end

new text begin (28) failing to comply with an applicable provision of the Financial Institutions
Regulatory Authority conduct rules or an applicable fair practice or ethical standard
promulgated by the Securities Exchange Commission or a self-regulatory organization
approved by the Securities Exchange Commission.
new text end

new text begin Subd. 2. new text end

new text begin Broker-dealer's agents; standards and principles. new text end

new text begin A broker-dealer's agent
must observe high standards of commercial honor and just and equitable principles of trade
when conducting the broker-dealer's agent's business. An act or practice that is contrary to
the standards constitutes grounds for the administrator to deny, suspend, or revoke the
broker-dealer's agent's registration or to take other action authorized by statute. For purposes
of this subdivision, an act or practice that is contrary to the standards includes:
new text end

new text begin (1) lending to or borrowing from a customer money or securities, or acting as a custodian
for a customer's money, securities, or executed stock power;
new text end

new text begin (2) effecting securities transactions that are not recorded on the regular books or records
maintained by the broker-dealer the broker-dealer's agent represents, unless the transactions
are authorized in writing by the broker-dealer before executing the transaction;
new text end

new text begin (3) establishing or maintaining an account that contains fictitious information in order
to execute transactions that are otherwise prohibited;
new text end

new text begin (4) sharing directly or indirectly in profits or losses in a customer account without the
written authorization from the customer and the broker-dealer the broker-dealer's agent
represents;
new text end

new text begin (5) dividing or otherwise splitting the broker-dealer's agent's commissions, profits, or
other compensation from purchasing or selling securities with a person who is not also
registered as a broker-dealer's agent for the same broker-dealer or for a broker-dealer under
direct or indirect common control; or
new text end

new text begin (6) engaging in the conduct specified under subdivision 1, clauses (2), (3), (4), (5), (6),
(9), (10), (14), (15), (16), (17), (21), (22), (23), (24), (25), (26), (27), or (28).
new text end

new text begin Subd. 3. new text end

new text begin Conduct specified not exclusive. new text end

new text begin The conduct identified as a violation under
subdivisions 1 and 2 is not exclusive. A broker-dealer or broker-dealer's agent that engages
in other conduct, including but not limited to forgery, embezzlement, nondisclosure,
incomplete disclosure or misstatement of material facts, or manipulative or deceptive
practices, is also subject to denial, suspension, or revocation of registration.
new text end

Sec. 5.

Minnesota Statutes 2024, section 80C.12, subdivision 1, is amended to read:

Subdivision 1.

Grounds.

The commissioner, with or without prior notice or hearing,
may issue a cease and desist order and may issue an order denying, suspending or revoking
any registration, amendment or exemption on finding any of the following:

deleted text begin (a) deleted text end new text begin (1) new text end that the applicant, registrant or franchisor or any officer, director, agent or
employee thereof or any other person has violated or failed to comply with any provision
of sections 80C.01 to 80C.22 or any rule or order of the commissioner;

deleted text begin (b) deleted text end new text begin (2) new text end that the offer, sale, or purchase of the franchise would constitute misrepresentation
to or deceit or fraud upon purchasers thereof, or has worked or tended to work a fraud upon
purchasers or would so operate;

deleted text begin (c) deleted text end new text begin (3) new text end that the applicant, registrant or franchisor or any officer, director, agent or
employee thereof or any other person is engaging or about to engage in false, fraudulent or
deceptive practices in connection with the offer and sale of a franchise;

deleted text begin (d) deleted text end new text begin (4) new text end that any person identified in a public offering statement has been new text begin : new text end new text begin (i) new text end convicted
of an offense new text begin or held liable in a civil action by final judgment new text end described in section 80C.04, new text begin
subdivision 1, paragraph (e), new text end clause deleted text begin (5) deleted text end new text begin (1) new text end new text begin , has a civil or criminal action pending as described
in section 80C.04, subdivision 1, paragraph (e), clause (5) new text end , or is subject to an order deleted text begin , or has
had a civil judgment entered against the person as described in section 80C.04, clause (5), deleted text end new text begin
described in section 80C.04, subdivision 1, paragraph (e), clauses (2) to (4); new text end and new text begin (ii) new text end the
involvement of the person in the business of the applicant or franchisor creates a substantial
risk to prospective franchisees;

deleted text begin (e) deleted text end new text begin (5) new text end that the financial condition of the franchisor adversely affects or would adversely
affect the ability of the franchisor to fulfill its obligations under the franchise agreement;

deleted text begin (f) deleted text end new text begin (6) new text end that the franchisor's enterprise or method of business includes or would include
activities which are illegal where performed; new text begin or
new text end

deleted text begin (g) deleted text end new text begin (7) new text end that the method of sale or proposed method of sale of franchises or the operation
of the business of the franchisor or any term or condition of the franchise agreement or any
practice of the franchisor is or would be unfair or inequitable to franchisees.

Sec. 6. new text begin OTHER REAL ESTATE; EXPEDITED RULEMAKING.
new text end

new text begin The commissioner of commerce must adopt rules amending Minnesota Rules, part
2675.2170, item A, to conform with generally accepted accounting principles. The
commissioner of commerce may use the expedited rulemaking process under Minnesota
Statutes, section 14.389, to amend Minnesota Rules, part 2675.2170, item A, under this
section.
new text end