SF 2563

as introduced - 91st Legislature (2019 - 2020) Posted on 03/18/2019 02:18pm

A bill for an act
relating to securities; establishing an Intrastate Securities Exchange Act; proposing
coding for new law in Minnesota Statutes, chapter 80A.

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

Section 1.

new text begin [80A.462] INTRASTATE SECURITIES EXCHANGE ACT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) "Intrastate offering exemption" means the exemptions
described in sections 80A.461, 80A.50, 80A.52, or any other exemption from federal
securities regulation under United States Code, title 15, section 77c(a)(11), and Code of
Federal Regulations, title 17, part 230.147A.
new text end

new text begin (b) "MNtrade business" means a qualifying entity under this section that has conducted
an intrastate offering exemption and has engaged a MNtrade exchange to list its securities.
new text end

new text begin (c) "MNtrade exchange" means a person that is (1) a broker-dealer, (2) exempt from
federal registration under section 15(a)(1) of the Securities Exchange Act of 1934, United
States Code, title 15, section 78O, or (3) a transfer agent that provides a service to facilitate
a market at which transactions in securities of MNtrade businesses are sold or offered for
sale in Minnesota under an intrastate offering exemption.
new text end

new text begin (d) "Online" means functioning on or over the Internet.
new text end

new text begin (e) "Personal identifying information" means any information used to locate or accurately
categorize an individual, household, or business.
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new text begin (f) "Resident of Minnesota" means one of the following, as applicable:
new text end

new text begin (1) if a person is an individual, the person's principal residence is located in Minnesota;
or
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new text begin (2) a business meeting the requirements of subdivision 6, paragraph (b), clause (2).
new text end

new text begin (g) "Service" means (1) to include securities issued by a person in or on a MNtrade
exchange for sale, or (2) to assist in facilitating securities transactions in or on a MNtrade
exchange.
new text end

new text begin (h) "Transfer agent" means a person registered under Code of Federal Regulations, title
12, section 341.
new text end

new text begin Subd. 2. new text end

new text begin Registration required. new text end

new text begin (a) A person is prohibited from transacting business
in Minnesota as a MNtrade exchange unless the person is registered as a MNtrade exchange
under this section.
new text end

new text begin (b) A person must register as a MNtrade exchange by filing a written application with
the administrator and paying the fee specified under subdivision 3. If a person complies
with this section and demonstrates by clear and convincing evidence that the person meets
the requirements for registration under this section, the administrator must register that
person as a MNtrade exchange. If a person fails to provide clear and convincing evidence
that the person meets the requirements for registration, the registration of the person remains
at the discretion of the administrator.
new text end

new text begin (c) An application for registration as a MNtrade exchange must contain:
new text end

new text begin (1) the names, mailing addresses, and telephone numbers of all individuals serving as
executive officers of the MNtrade exchange or who are direct or indirect owners with at
least a ten percent ownership interest in the MNtrade exchange;
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new text begin (2) the uniform resource locator (URL) used by the MNtrade exchange to effect
transactions online; and
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new text begin (3) any other information the administrator requests that is necessary to make a
determination regarding MNtrade exchange registration under this section.
new text end

new text begin (d) If the information contained in an application filed under this subdivision is or
becomes inaccurate or incomplete in any material respect, the registrant must promptly file
a corrective amendment.
new text end

new text begin (e) A MNtrade exchange registration expires 12 months from the date the administrator
approves the applicant as a MNtrade exchange. Subsequent registration for the succeeding
12-month period must be issued upon written application and upon payment of the renewal
fee, without filing additional statements or furnishing additional information unless
specifically requested by the administrator.
new text end

new text begin Subd. 3. new text end

new text begin Filing fees. new text end

new text begin (a) A person must pay a fee of $500 when initially filing an
application to register as a MNtrade exchange. A person must pay a fee of $250 when filing
to renew registration as a MNtrade exchange.
new text end

new text begin (b) If an initial or renewal registration application is denied or withdrawn, the
administrator must retain all of the filing fee for the denied or withdrawn application.
new text end

new text begin Subd. 4. new text end

new text begin Records; examination or inspection; report. new text end

new text begin (a) A MNtrade exchange that
is registered or is required to register under this section must (1) make a written or electronic
record of each transaction conducted between users through the MNtrade exchange, (2)
maintain the record for at least seven years after the date of the transaction, and (3) provide
a written or electronic copy of the record for the transaction to each user involved in the
transaction.
new text end

new text begin (b) In addition to the records required under paragraph (a), a MNtrade exchange that is
registered or is required to register under this section must make and maintain the accounts,
correspondence, memoranda, papers, books, and other records required by the administrator.
A MNtrade exchange must maintain the records in a form of data storage the administrator
deems acceptable.
new text end

new text begin (c) The records of a MNtrade exchange that is registered or is required to register under
this section are subject to reasonable periodic, special, or other examinations or inspections
by a representative of the administrator, as the administrator deems necessary or appropriate
in the public interest and to protect investors. An examination or inspection may be made
with reasonable notice to the MNtrade exchange. The administrator may reasonably request
paper or electronic copies and remove from the premises, for examination or inspection,
copies of all records the administrator reasonably considers necessary or appropriate to
conduct the examination or inspection.
new text end

new text begin (d) At the request of the administrator, the MNtrade exchange must file a report with
the administrator that includes a record of each transaction the MNtrade exchange effected
in the preceding calendar year.
new text end

new text begin Subd. 5. new text end

new text begin Registration application; notice of filing; duties of administrator; factors
to be considered; order; sanctions; discipline; proceeding. new text end

new text begin (a) When the administrator
receives an application for registration as a MNtrade exchange, the administrator must
within 20 days after the date of receipt of the notice:
new text end

new text begin (1) if the administrator finds this section's requirements are satisfied, issue an order
granting registration; or
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new text begin (2) if paragraph (a) is not met, issue an order that (1) denies registration, or (2) grants a
conditional or limited registration.
new text end

new text begin (b) A list of MNtrade exchanges must be made available to the public on the
administrator's website.
new text end

new text begin Subd. 6. new text end

new text begin Servicing; requirements. new text end

new text begin (a) A MNtrade exchange must not service a MNtrade
business if the MNtrade business has already used and has not terminated the services of a
MNtrade exchange. The MNtrade business must not be, or request to be, serviced on two
or more MNtrade exchanges at any given time.
new text end

new text begin (b) A MNtrade exchange must service only a MNtrade business if the MNtrade business,
at the time of any offer and sale, has its principal place of business in Minnesota and does
business within Minnesota. The MNtrade business is deemed to have its principal place of
business in Minnesota if the officers, partners, or managers of the MNtrade business primarily
direct, control, and coordinate the activities of the MNtrade business from within Minnesota.
The MNtrade business is deemed to be doing business in Minnesota if the MNtrade business
is doing business in Minnesota at the time the business conducts any offers, sales, or reselling
of its intrastate securities. For purposes of this paragraph, a business is considered to be
doing business in Minnesota if all of the following are met:
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new text begin (1) the MNtrade business derived at least 80 percent of its consolidated gross revenues
from operating a business or real property located in Minnesota or from rendering services
within Minnesota. Revenues must be calculated based on the MNtrade business's most
recent fiscal year, if the first offer of securities under this section is made during the first
six months of the MNtrade business's current fiscal year, and based on the first six months
of the MNtrade business's current fiscal year or during the 12-month fiscal period ending
with the six-month period, if the first offer of securities under this section is made during
the last six months of the MNtrade business's current fiscal year;
new text end

new text begin (2) the MNtrade business had, at the end of its most recent semiannual fiscal period prior
to an initial offer of securities, at least 80 percent of its assets and the assets of its subsidiaries
on a consolidated basis located within Minnesota;
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new text begin (3) if the MNtrade business has conducted an intrastate offering exemption, it intends
to use and uses at least 80 percent of the net proceeds to the MNtrade business from sales
made pursuant to Code of Federal Regulations, title 17, part 230.147A, in connection with
operating a business or real property in Minnesota, purchasing real property located in
Minnesota, or rendering services in Minnesota; or
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new text begin (4) a majority of the MNtrade business's employees are based in Minnesota.
new text end

new text begin (c) A MNtrade business must not be insolvent. For purposes of this paragraph, "insolvent"
means:
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new text begin (1) the business's liabilities exceed its assets;
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new text begin (2) the business is unable to pay its debts as the debts mature; or
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new text begin (3) the business has filed for bankruptcy or made an assignment for the benefit of
creditors.
new text end

new text begin (d) A MNtrade business must not be subject to a current or pending disciplinary court
order or injunctions.
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new text begin (e) A MNtrade business must not be a defendant in a pending court proceeding.
new text end

new text begin (f) A MNtrade business must comply with the laws of Minnesota applicable to the
conduct of its business.
new text end

new text begin Subd. 7. new text end

new text begin MNtrade business required information. new text end

new text begin The MNtrade business must provide
and the MNtrade exchange must make available the following information:
new text end

new text begin (1) the exact name of the MNtrade business and its predecessor, if any;
new text end

new text begin (2) the name of the chief executive officer and members of the board of directors;
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new text begin (3) the address of its principal executive offices;
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new text begin (4) the state of incorporation, if the MNtrade business is a corporation;
new text end

new text begin (5) the nature of the business, including products or services offered;
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new text begin (6) the nature and extent of the MNtrade business facilities;
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new text begin (7) the exact title and class of the security;
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new text begin (8) the par or stated value of the security;
new text end

new text begin (9) the number of shares or total amount of the securities outstanding as of the end of
the MNtrade business's most recent fiscal year;
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new text begin (10) the name and address of the transfer agent;
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new text begin (11) the issuer's most recent balance sheet, profit and loss statement, and retained earnings
statement;
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new text begin (12) similar financial information for the parts of the two preceding fiscal years the
issuer or its predecessor have been in existence;
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new text begin (13) whether the MNtrade exchange or any associated person is directly or indirectly
affiliated with the issuer; and
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new text begin (14) whether the quote is being submitted or published directly or indirectly on behalf
of the MNtrade business, or any director, officer, or person that is directly or indirectly the
beneficial owner of more than ten percent of the outstanding units or shares of any equity
security of the issuer, and, if so, the name of the person.
new text end

new text begin Subd. 8. new text end

new text begin Prohibited conduct. new text end

new text begin (a) A MNtrade exchange must not charge a fee for a
securities transaction conducted through the MNtrade exchange that exceeds five percent
of the transaction's value, as determined by the value passed from seller to purchaser in
exchange for the security.
new text end

new text begin (b) A MNtrade exchange must (1) provide disclaimers and restrictive legends that
conspicuously state the MNtrade exchange's transactions are limited to residents of Minnesota
under section 3(a)(11) of the Securities Act of 1933, United States Code, title 15, section
77c, and (2) limit access to information regarding specific investment opportunities to
individuals who confirm they are residents of Minnesota.
new text end

new text begin (c) At its sole discretion, a MNtrade exchange may elect to not effect any transaction
that, in the opinion of the MNtrade exchange, is severely adverse or unconscionable as it
relates to a party involved in the transaction.
new text end

new text begin Subd. 9. new text end

new text begin Individual shown to be out-of-state resident; prima facie evidence of
residency. new text end

new text begin (a) An individual's participation in a MNtrade exchange in Minnesota is
considered a representation that the individual is a resident of Minnesota. If it is later
determined that an individual that participated in a MNtrade exchange was not a resident
of Minnesota at the time the individual participated in a MNtrade exchange, any transaction
conducted by the individual while the individual was not a resident of Minnesota is void.
new text end

new text begin (b) For purposes of this section, each of the following is prima facie evidence that an
individual is a resident of Minnesota:
new text end

new text begin (1) a valid operator's license, chauffeur's license, or official personal identification card
issued in Minnesota;
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new text begin (2) a current Minnesota voter registration; and
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new text begin (3) evidence that the individual occupies a primary residence in Minnesota.
new text end