Minnesota Session Laws - 1986, Regular Session

  

                         Laws of Minnesota 1986 

                        CHAPTER 358-H.F.No. 1984 
           An act relating to commerce; regulating securities; 
          regulating the assignment of certain real property 
          loans and the administration of certain escrow 
          accounts; providing certain exemptions; regulating 
          real estate brokers and salespersons; modifying 
          re-examination requirements; providing trust account 
          requirements for licensees acting as principals; 
          granting certain enforcement powers to the 
          commissioner; providing certain remedies; requiring 
          storage of abstracts of title within Minnesota; 
          amending Minnesota Statutes 1984, sections 47.20, 
          subdivision 9; 80A.14, subdivision 18; 80A.15, 
          subdivision 1; 82.17, subdivision 4; 82.22, 
          subdivisions 3, 6, and 13; 82.24, subdivision 2; 
          82.26; 82.27, subdivision 1; 82.33, subdivision 2; 
          386.375; and Minnesota Statutes 1985 Supplement, 
          sections 80A.13, subdivision 1; 80A.15, subdivision 2; 
          and 82.19, subdivision 3; proposing coding for new law 
          in Minnesota Statutes, chapter 47. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  [47.205] [ASSIGNMENT OF MORTGAGE; DUTIES; 
PENALTIES.] 
    Subdivision 1.  [DEFINITIONS.] For the purposes of this 
section, the terms defined in this subdivision have the meanings 
given them. 
    (a) "Lender" means all state banks and trust companies, 
national banking associations, state and federally chartered 
savings and loan associations, mortgage banks, mutual savings 
banks, insurance companies, credit unions making a loan, or any 
person making a conventional loan as defined under section 
47.20, subdivision 2, clause (3) or cooperative apartment loan 
as defined under section 47.20, subdivision 2, clause (4).  A 
"selling lender" is a lender who sells, assigns, or transfers 
the servicing of a loan, to a "purchasing lender or a servicing 
agent." 
    (b) "Loan" means all loans and advances of credit 
authorized under section 47.20, subdivision 1, clauses (1) to 
(4) and conventional loans as defined under section 47.20, 
subdivision 2, clause (3) or cooperative apartment loan as 
defined under section 47.20, subdivision 2, clause (4). 
    (c) "Escrow account" means escrow, agency, or similar 
account for the payment of taxes or insurance premiums with 
respect to a mortgaged one-to-four family, owner occupied 
residence located in this state. 
    (d) "Person" means an individual, corporation, business 
trust, partnership or association, or any other legal entity. 
    Subd. 2.  [ASSIGNMENT OR SALE OF MORTGAGE LOANS.] If the 
servicing of mortgage loans financing one-to-four family owner 
occupied residences located in this state is sold or assigned to 
another person: 
    (1) the selling lender shall notify the mortgagor of the 
sale no less than ten days after the actual date of transfer.  
The notification must include the name, address, and telephone 
number of the person who will assume responsibility for 
servicing and accept payments for the mortgage loan and the 
notification must also include a detailed written financial 
breakdown, including but not limited to, interest rate, monthly 
payment amount, and current escrow balance; 
    (2) the purchasing lender shall issue corrected coupon or 
payment books, if used, and shall provide notification to the 
mortgagor within 20 days after the first payment to the 
purchasing lender is due, of the name, address, and telephone 
number of the person from whom the mortgagor can receive 
information regarding the servicing of the loan, and shall 
inform the mortgagor of any changes made regarding the mortgage 
escrow accounts or servicing requirements including, but not 
limited to, interest rate, monthly payment amount, and current 
escrow balance; and 
    (3) the purchasing lender shall respond within 15 business 
days to a written request for information from a mortgagor.  A 
written response must include the telephone number of the 
company representative who can assist the mortgagor. 
    Subd. 3.  [ADMINISTRATION OF ESCROW ACCOUNTS.] Each lender 
requiring funds of a mortgagor to be paid into an escrow account 
for payment of taxes or insurance premiums with respect to a 
mortgaged one-to-four family owner occupied residence located in 
this state shall make payments for the taxes or insurance from 
the escrow account in a timely manner as these obligations 
become due provided that funds paid into the account by the 
mortgagor are sufficient for the payment.  If there is a 
shortage of funds, the lender shall promptly notify the 
mortgagor of the shortage.  If the lender fails to make timely 
payments, the lender is liable to the mortgagor for actual 
damages caused by the failure to pay the amounts when due and is 
subject to penalties provided in subdivision 4, except that the 
lender may present any legal defense in any subsequent hearing.  
The lender is permitted to make a payment on behalf of the 
mortgagor even though there are not sufficient funds in a 
particular account to cover the payment. 
    Subd. 4.  [PENALTIES.] If a lender fails to comply with the 
requirements of subdivisions 2 and 3, the lender is liable to 
the mortgagor for $500 per occurrence, in addition to actual 
damages caused by the violation. 
    Sec. 2.  Minnesota Statutes 1984, section 47.20, 
subdivision 9, is amended to read: 
    Subd. 9.  (1) For purposes of this subdivision the term 
"mortgagee" shall mean all state banks and trust companies, 
national banking associations, state and federally chartered 
savings and loan associations, mortgage banks, mutual savings 
banks, insurance companies, credit unions or assignees of the 
above.  Each mortgagee requiring funds of a mortgagor to be paid 
into an escrow, agency or similar account for the payment of 
taxes or insurance premiums with respect to a mortgaged one to 
four family, owner occupied residence located in this state, 
unless the account is required by federal law or regulation or 
maintained in connection with a conventional loan in an original 
principal amount in excess of 80 percent of the lender's 
appraised value of the residential unit at the time the loan is 
made or maintained in connection with loans insured or 
guaranteed by the secretary of housing and urban development, by 
the administrator of veterans affairs, or by the administrator 
of the farmers home administration, shall calculate interest on 
such funds at a rate of not less than five percent per annum.  
Such interest shall be computed on the average monthly balance 
in such account on the first of each month for the immediately 
preceding 12 months of the calendar year or such other fiscal 
year as may be uniformly adopted by the mortgagee for such 
purposes and shall be annually credited to the remaining 
principal balance on the mortgage, or at the election of the 
mortgagee, paid to the mortgagor or credited to his account.  If 
the interest exceeds the remaining balance, the excess shall be 
paid to the mortgagor or vendee.  The requirement to pay 
interest shall apply to such accounts created prior to June 1, 
1976 as well as to accounts created after June 1, 1976. 
    (2) A mortgagee offering the following option (c) to a 
mortgagor but not requiring maintenance of escrow accounts as 
described in clause (1), whether or not the accounts were 
required by the mortgagee or were optional with the mortgagor, 
shall offer to each of such mortgagors the following options: 
    (a) the mortgagor may manage the payment of insurance and 
taxes by himself; 
    (b) the mortgagor may open with the mortgagee a passbook 
savings account carrying the current rate of interest being paid 
on such accounts by the mortgagee in which the mortgagor can 
deposit the funds previously paid into the escrow account; or 
    (c) the mortgagor may elect to maintain a non-interest 
bearing escrow account as described in clause (1) to be serviced 
by the mortgagee at no charge to the mortgagor. 
    A mortgagee that is not a depository institution offering 
passbook savings accounts shall instead of offering option (b) 
above notify its mortgagors (1) that they may open such accounts 
at a depository institution and (2) of the current maximum legal 
interest rate on such accounts. 
    A mortgagee offering option (c) above to a mortgagor but 
not requiring the maintenance of escrow accounts shall notify 
its mortgagor of the options under (a), (b) and (c).  The notice 
shall state the option and state that an escrow account is not 
required by the mortgagee, that the mortgagor is legally 
responsible for the payment of taxes and insurance, and that the 
notice is being given pursuant to this subdivision. 
    Notice shall be given within 30 days after the effective 
date of the provisions of Laws 1977, Chapter 350 amending the 
subdivision, as to mortgagees offering option (c) above to 
mortgagors but not requiring escrow accounts as of the effective 
date, or within 30 days after a mortgagee's decision to 
discontinue requiring escrow accounts if the mortgagee continues 
to offer option (c) above to mortgagors.  If no reply is 
received within 30 days, option (c) shall be selected for the 
mortgagor but the mortgagor may, at any time, select another 
option. 
    A mortgagee making a new mortgage and offering option (c) 
above to a prospective mortgagor shall, at the time of loan 
application, notify the prospective mortgagor of options (a), 
(b) and (c) above which must be extended to the prospective 
mortgagor.  The mortgagor shall select one of the options at the 
time the loan is made. 
    Any notice required by this clause (2) shall be on forms 
approved by the commissioner of commerce and shall provide that 
at any time a mortgagor may select a different option.  The form 
shall contain a blank where the current passbook rate of 
interest shall be entered by the mortgagee.  Any option selected 
by the mortgagor shall be binding on the mortgagee. 
    This clause (2) does not apply to escrow accounts which are 
excepted from the interest paying requirements of clause (1). 
    (3) A mortgagee shall be prohibited from charging a direct 
fee for the administration of the escrow account. 
    (4) A mortgagee shall make timely payments of tax and 
insurance bills provided that funds paid into the account by the 
mortgagor are sufficient for the payment.  If there is a 
shortage of funds the mortgagee shall promptly notify the 
mortgagor of the shortage.  Failure to make the payment required 
by this clause shall subject the mortgagee to liability for all 
damages caused by the failure except that this sentence shall 
not deprive the mortgagee of the right to present any legal 
defenses in any subsequent proceeding.  The mortgagee is 
permitted to make any payment on behalf of the mortgagor even 
though there are not sufficient funds in a particular account to 
cover the payment. 
    Sec. 3.  Minnesota Statutes 1985 Supplement, section 
80A.13, subdivision 1, is amended to read: 
    Subdivision 1.  The commissioner may issue a stop order 
denying effectiveness to, or suspending or revoking the 
effectiveness of, any registration statement if he finds (a) 
that the order is in the public interest and (b) that 
    (1) the registration statement as of its effective date or 
as of any earlier date in the case of an order denying 
effectiveness, or any amendment under section 80A.12, 
subdivision 9, as of its effective date, or any report under 
section 80A.12, subdivision 8, is incomplete in any material 
respect or contains any statement which was, in the light of the 
circumstances under which it was made, false or misleading with 
respect to any material fact; 
    (2) any provision of sections 80A.01 to 80A.31 or any rule, 
order, or condition lawfully imposed under sections 80A.01 to 
80A.31 has been willfully violated in connection with the 
offering, by (i) the person filing the registration statement, 
(ii) the issuer, any partner, officer, or director of the 
issuer, any person occupying a similar status or performing 
similar functions, or any 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 (iii) any underwriter;
    (3) the security registered or sought to be registered is 
the subject of an administrative stop order or similar order or 
a permanent or temporary injunction of any court of competent 
jurisdiction entered under any other federal or state act 
applicable to the offering; but (i) the commissioner may not 
institute a proceeding against an effective registration 
statement under this clause more than one year from the date of 
the order or injunction relied on, and (ii) may not enter an 
order under this clause on the basis of an order or injunction 
entered under any other state act unless that order or 
injunction was based on facts which would currently constitute a 
ground for a stop order under this section; 
     (4) the issuer's enterprise or method of business includes 
or would include activities which are illegal where performed; 
     (5) the offering has worked or tended to work a fraud upon 
purchasers or would so operate; 
     (6) except with respect to securities which are being 
registered by notification, the terms of the securities are 
unfair and inequitable; provided, however, that the commissioner 
may not determine that an offering is unfair and inequitable 
solely on the grounds that the securities are to be sold at an 
excessive price where the offering price has been determined by 
arms length negotiation between nonaffiliated parties.  The 
selling price of any security being sold by a broker-dealer 
licensed in this state shall be presumed to have been determined 
by arms length negotiation; 
    (7) when a security is sought to be registered by 
coordination there has been a failure to comply with the 
undertaking required by section 80A.10, subdivision 2, clause 
(d);  
    (8) the applicant or registrant has failed to pay the 
proper filing fee; but the commissioner may enter only a denial 
order under this clause and he shall vacate any such order when 
the deficiency has been corrected; or 
    (9) the offering of securities sought to be registered is 
not firmly underwritten and (i) the maximum minimum amount of 
proceeds from the sale of the securities is (i) not more than 
$500,000, and (ii) the maximum amount of proceeds is more than 
200 percent of the minimum amount of proceeds required to go 
forward with the offering. 
    The commissioner may not institute a stop order proceeding 
against an effective registration statement solely on the basis 
of a fact or transaction known to him when the registration 
statement became effective unless the proceeding is instituted 
within the next 30 days.  
    Sec. 4.  Minnesota Statutes 1984, section 80A.14, 
subdivision 18, is amended to read: 
    Subd. 18.  [SECURITY.] (a) "Security" means any note; stock;
treasury stock; bond; debenture; evidence of indebtedness; 
certificate of interest or participation in any profit sharing 
agreement; collateral trust certificate; preorganization 
certificate or subscription; transferable shares; investment 
contract; investment metal contract or investment gem contract; 
voting trust certificate; certificate of deposit for a security; 
certificate of interest or participation in an oil, gas or 
mining right, title or lease or in payments out of production 
under the right, title or lease; or, in general, any interest or 
instrument commonly known as a security, or any certificate of 
interest or participation in, temporary or interim certificate 
for, receipt for guarantee of, or warrant or right to subscribe 
to or purchase, any of the foregoing.  "Security" does not 
include any insurance or endowment policy or annuity contract 
under which an insurance company promises to pay money either in 
a lump sum or periodically for life or for some other specified 
period. 
    (b) A security that is offered and sold pursuant to section 
4(5) of the Securities Act of 1933 or that is a "mortgage 
related security" (as defined in section 3(a)(41) of the 
Securities Exchange Act of 1934) is not a security exempt from 
registration under section 80A.15, subdivision 1, paragraph (a), 
in the same manner as obligations issued or guaranteed as to 
principal and interest by the United States or its agencies or 
instrumentalities.  This provision specifically overrides the 
preemption of state law contained in section 106(c) of the 
Secondary Mortgage Market Enhancement Act of 1984, Public Law 
Number 98-440. 
    Sec. 5.  Minnesota Statutes 1984, section 80A.15, 
subdivision 1, is amended to read: 
    Subdivision 1.  The following securities are exempted from 
sections 80A.08 and 80A.16: 
    (a) Any security, including a revenue obligation, issued or 
guaranteed by the United States, any state, any political 
subdivision of a state or any corporate or other instrumentality 
of one or more of the foregoing; but this exemption shall not 
include any industrial revenue bond.  Pursuant to section 106(c) 
of the Secondary Mortgage Market Enhancement Act of 1984, Public 
Law Number 98-440, this exemption does not apply to a security 
that is offered or sold pursuant to section 106(a)(1) or (2) of 
that act. 
    (b) Any security issued or guaranteed by Canada, any 
Canadian province, any political subdivision of any province, 
any agency or corporate or other instrumentality of one or more 
of the foregoing, if the security is recognized as a valid 
obligation by the issuer or guarantor; but this exemption shall 
not include any revenue obligation payable solely from payments 
to be made in respect of property or money used under a lease, 
sale or loan arrangement by or for a nongovernmental industrial 
or commercial enterprise. 
    (c) Any security issued by and representing an interest in 
or a debt of, or guaranteed by, any bank organized under the 
laws of the United States, or any bank, savings institution or 
trust company organized under the laws of any state and subject 
to regulation in respect of the issuance or guarantee of its 
securities by a governmental authority of that state. 
    (d) Any security issued by and representing an interest in 
or a debt of, or guaranteed by, any federal savings and loan 
association, or any building and loan or similar association 
organized under the laws of any state and authorized to do 
business in this state. 
      (e) Any security issued or guaranteed by any federal credit 
union or any credit union, or similar association organized and 
supervised under the laws of this state. 
      (f) Any security listed or approved for listing upon notice 
of issuance on the New York Stock Exchange, the American Stock 
Exchange, the Midwest Stock Exchange, the Pacific Stock 
Exchange, or the Chicago Board Options Exchange; any other 
security of the same issuer which is of senior or substantially 
equal rank; any security called for by subscription rights or 
warrants so listed or approved; or any warrant or right to 
purchase or subscribe to any of the foregoing. 
      (g) Any commercial paper which arises out of a current 
transaction or the proceeds of which have been or are to be used 
for current transactions, and which evidences an obligation to 
pay cash within nine months of the date of issuance, exclusive 
of days of grace, or any renewal of the paper which is likewise 
limited, or any guarantee of the paper or of any renewal which 
are not advertised for sale to the general public in newspapers 
or other publications of general circulation or otherwise, or by 
radio, television or direct mailing. 
      (h) Any interest in any employee's savings, stock purchase, 
pension, profit sharing or similar benefit plan, or a 
self-employed person's retirement plan. 
      (i) Any security issued or guaranteed by any railroad, 
other common carrier or public utility which is subject to 
regulation in respect to the issuance or guarantee of its 
securities by a governmental authority of the United States. 
      (j) Any interest in a common trust fund or similar fund 
maintained by a state bank or trust company organized and 
operating under the laws of Minnesota, or a national bank 
wherever located, for the collective investment and reinvestment 
of funds contributed thereto by the bank or trust company in its 
capacity as trustee, executor, administrator, or guardian; and 
any interest in a collective investment fund or similar fund 
maintained by the bank or trust company, or in a separate 
account maintained by an insurance company, for the collective 
investment and reinvestment of funds contributed thereto by the 
bank, trust company or insurance company in its capacity as 
trustee or agent, which interest is issued in connection with an 
employee's savings, pension, profitsharing or similar benefit 
plan, or a self-employed person's retirement plan. 
      (k) Any security which meets all of the following 
conditions: 
      (1) If the issuer is not organized under the laws of the 
United States or a state, it has appointed a duly authorized 
agent in the United States for service of process and has set 
forth the name and address of the agent in its prospectus; 
      (2) A class of the issuer's securities is required to be 
and is registered under section 12 of the Securities Exchange 
Act of 1934, and has been so registered for the three years 
immediately preceding the offering date; 
      (3) Neither the issuer nor a significant subsidiary has had 
a material default during the last seven years, or for the 
period of the issuer's existence if less than seven years, in 
the payment of (i) principal, interest, dividend, or sinking 
fund installment on preferred stock or indebtedness for borrowed 
money, or (ii) rentals under leases with terms of three years or 
more; 
      (4) The issuer has had consolidated net income, before 
extraordinary items and the cumulative effect of accounting 
changes, of at least $1,000,000 in four of its last five fiscal 
years including its last fiscal year; and if the offering is of 
interest bearing securities, has had for its last fiscal year, 
net income, before deduction for income taxes and depreciation, 
of at least 1-1/2 times the issuer's annual interest expense, 
giving effect to the proposed offering and the intended use of 
the proceeds. For the purposes of this clause "last fiscal year" 
means the most recent year for which audited financial 
statements are available, provided that such statements cover a 
fiscal period ended not more than 15 months from the 
commencement of the offering; 
      (5) If the offering is of stock or shares other than 
preferred stock or shares, the securities have voting rights and 
the rights include (i) the right to have at least as many votes 
per share, and (ii) the right to vote on at least as many 
general corporate decisions, as each of the issuer's outstanding 
classes of stock or shares, except as otherwise required by law; 
and 
    (6) If the offering is of stock or shares, other than 
preferred stock or shares, the securities are owned beneficially 
or of record, on any date within six months prior to the 
commencement of the offering, by at least 1,200 persons, and on 
that date there are at least 750,000 such shares outstanding 
with an aggregate market value, based on the average bid price 
for that day, of at least $3,750,000.  In connection with the 
determination of the number of persons who are beneficial owners 
of the stock or shares of an issuer, the issuer or broker-dealer 
may rely in good faith for the purposes of this clause upon 
written information furnished by the record owners. 
    (l) Any certificate of indebtedness sold or issued for 
investment, other than a certificate of indebtedness pledged as 
a security for a loan made contemporaneously therewith, and any 
savings account or savings deposit issued, by an industrial loan 
and thrift company. 
    Sec. 6.  Minnesota Statutes 1985 Supplement, section 
80A.15, subdivision 2, is amended to read: 
    Subd. 2.  The following transactions are exempted from 
sections 80A.08 and 80A.16: 
     (a) Any isolated sales, whether or not effected through a 
broker-dealer, provided that no person shall make more than ten 
sales of securities of the same issuer pursuant to this 
exemption during any period of 12 consecutive months; provided 
further, that in the case of sales by an issuer, except sales of 
securities registered under the Securities Act of 1933 or 
exempted by section 3(b) of that act, (1) the seller reasonably 
believes that all buyers are purchasing for investment, and (2) 
the securities are not advertised for sale to the general public 
in newspapers or other publications of general circulation or 
otherwise, or by radio, television, electronic means or similar 
communications media, or through a program of general 
solicitation by means of mail or telephone. 
     (b) Any nonissuer distribution of an outstanding security 
if (1) either Moody's, Fitch's, or Standard & Poor's Securities 
Manuals, or other recognized manuals approved by the 
commissioner contains the names of the issuer's officers and 
directors, a balance sheet of the issuer as of a date not more 
than 18 months prior to the date of the sale, and a profit and 
loss statement for the fiscal year preceding the date of the 
balance sheet, and (2) the issuer or its predecessor has been in 
active, continuous business operation for the five-year period 
next preceding the date of sale, and (3) if the security has a 
fixed maturity or fixed interest or dividend provision, the 
issuer has not, within the three preceding fiscal years, 
defaulted in payment of principal, interest, or dividends on the 
securities. 
      (c) The execution of any orders by a licensed broker-dealer 
for the purchase or sale of any security, pursuant to an 
unsolicited offer to purchase or sell; provided that the 
broker-dealer acts as agent for the purchaser or seller, and has 
no direct material interest in the sale or distribution of the 
security, receives no commission, profit, or other compensation 
from any source other than the purchaser and seller and delivers 
to the purchaser and seller written confirmation of the 
transaction which clearly itemizes his commission, or other 
compensation. 
      (d) Any nonissuer sale of notes or bonds secured by a 
mortgage lien if the entire mortgage, together with all notes or 
bonds secured thereby, is sold to a single purchaser at a single 
sale. 
     (e) Any judicial sale, exchange, or issuance of securities 
made pursuant to an order of a court of competent jurisdiction. 
     (f) The sale, by a pledge holder, of a security pledged 
with him in good faith as collateral for a bona fide debt. 
     (g) Any offer or sale to a bank, savings institution, trust 
company, insurance company, investment company as defined in the 
Investment Company Act of 1940, pension or profit sharing trust, 
or other financial institution or institutional buyer, or to a 
broker-dealer, whether the purchaser is acting for itself or in 
some fiduciary capacity. 
     (h) Any sales by an issuer to the number of persons that 
shall not exceed 25 persons in this state, or 35 persons if the 
sales are made in compliance with Regulation D promulgated by 
the Securities and Exchange Commission, Code of Federal 
Regulations, title 17, sections 230.501 to 230.506, (other than 
those designated in paragraph (a) or (g)), whether or not any of 
the purchasers is then present in this state, if (1) the issuer 
reasonably believes that all of the buyers in this state (other 
than those designated in clause (g)) are purchasing for 
investment, and (2) no commission or other remuneration is paid 
or given directly or indirectly for soliciting any prospective 
buyer in this state (other than those designated in clause (g)), 
except reasonable and customary commissions paid by the issuer 
to a broker-dealer licensed under this chapter, and (3) the 
issuer has, ten days prior to any sale pursuant to this 
paragraph, supplied the commissioner with a statement of issuer 
on forms prescribed by the commissioner, containing the 
following information:  (i) the name and address of the issuer, 
and the date and state of its organization; (ii) the number of 
units, price per unit, and a description of the securities to be 
sold; (iii) the amount of commissions to be paid and the persons 
to whom they will be paid; (iv) the names of all officers, 
directors and persons owning five percent or more of the equity 
of the issuer; (v) a brief description of the intended use of 
proceeds; (vi) a description of all sales of securities made by 
the issuer within the six-month period next preceding the date 
of filing; and (vii) a copy of the investment letter, if any, 
intended to be used in connection with any sale.  Sales that are 
made more than six months before the start of an offering made 
pursuant to this exemption or are made more than six months 
after completion of an offering made pursuant to this exemption 
will not be considered part of the offering, so long as during 
those six-month periods there are no sales of unregistered 
securities (other than those made pursuant to paragraph (a) or 
(g)) by or for the issuer that are of the same or similar class 
as those sold under this exemption.  The commissioner may by 
rule or order as to any security or transaction or any type of 
security or transaction, withdraw or further condition this 
exemption, or increase the number of offers and sales permitted, 
or waive the conditions in clause (1), (2), or (3) with or 
without the substitution of a limitation or remuneration. 
     (i) Any offer (but not a sale) of a security for which a 
registration statement has been filed under sections 80A.01 to 
80A.31, if no stop order or refusal order is in effect and no 
public proceeding or examination looking toward an order is 
pending; and any offer of a security if the sale of the security 
is or would be exempt under this section.  The commissioner may 
by rule exempt offers (but not sales) of securities for which a 
registration statement has been filed as he deems appropriate, 
consistent with the purposes of sections 80A.01 to 80A.31. 
     (j) The offer and sale by a cooperative association 
organized under chapter 308, of its securities when the 
securities are offered and sold only to its members, or when the 
purchase of the securities is necessary or incidental to 
establishing membership in such association, or when such 
securities are issued as patronage dividends. 
     (l) The issuance and delivery of any securities of one 
corporation to another corporation or its security holders in 
connection with a merger, exchange of shares, or transfer of 
assets whereby the approval of stockholders of the other 
corporation is required to be obtained, provided, that the 
commissioner has been furnished with a general description of 
the transaction and with other information as he by rule 
prescribes not less than ten days prior to the issuance and 
delivery. 
     (m) Any transaction between the issuer or other person on 
whose behalf the offering is made and an underwriter or among 
underwriters. 
     (n) The distribution by a corporation of its or other 
securities to its own security holders as a stock dividend or as 
a dividend from earnings or surplus or as a liquidating 
distribution; or upon conversion of an outstanding convertible 
security; or pursuant to a stock split or reverse stock split. 
     (o) Any offer or sale of securities by an affiliate of the 
issuer thereof if:  (1) a registration statement is in effect 
with respect to securities of the same class of the issuer and 
(2) the offer or sale has been exempted from registration by 
rule or order of the commissioner.  
    (p) Any transaction pursuant to an offer to existing 
security holders of the issuer, including persons who at the 
time of the transaction are holders of convertible securities, 
nontransferable warrants, or transferable warrants exercisable 
within not more than 90 days of their issuance, if:  (1) no 
commission or other remuneration (other than a standby 
commission) is paid or given directly or indirectly for 
soliciting any security holder in this state; and (2) the 
commissioner has been furnished with a general description of 
the transaction and with other information as the commissioner 
may by rule prescribe no less than ten days prior to the 
transaction. 
    Sec. 7.  Minnesota Statutes 1984, section 82.17, 
subdivision 4, is amended to read: 
    Subd. 4.  "Real estate broker" or "broker" means any person 
who: 
     (a) for another and for commission, fee or other valuable 
consideration or with the intention or expectation of receiving 
the same directly or indirectly lists, sells, exchanges, buys or 
rents, manages, or offers or attempts to negotiate a sale, 
option, exchange, purchase or rental of an interest or estate in 
real estate, or advertises or holds himself, herself, or itself 
out as engaged in these activities; 
     (b) for another and for commission, fee or other valuable 
consideration or with the intention or expectation of receiving 
the same directly or indirectly negotiates or offers or attempts 
to negotiate a loan, secured or to be secured by a mortgage or 
other encumbrance on real estate; 
     (c) for another and for commission, fee or other valuable 
consideration or with the intention or expectation of receiving 
the same directly or indirectly lists, sells, exchanges, buys, 
rents, manages, offers or attempts to negotiate a sale, option, 
exchange, purchase or rental of any business opportunity or 
business, or its goodwill, inventory, or fixtures, or any 
interest therein; 
     (d) for another and for commission, fee or other valuable 
consideration or with the intention or expectation of receiving 
the same directly or indirectly offers, sells or attempts to 
negotiate the sale of property that is subject to the 
registration requirements of chapter 83, concerning subdivided 
land; 
    (e) engages in the business of charging an advance fee or 
contracting for collection of a fee in connection with any 
contract whereby he or she undertakes to promote the sale of 
real estate through its listing in a publication issued 
primarily for this purpose; 
    (f) engages wholly or in part in the business of selling 
real estate to the extent that a pattern of real estate sales is 
established, whether or not the real estate is owned by the 
person.  A person shall be presumed to be engaged in the 
business of selling real estate if the person engages as 
principal in five or more transactions during any 12-month 
period, unless the person is represented by a licensed real 
estate broker or salesperson;  
    (g) makes more than five conventional loans under section 
47.20 during any 12-month period and who is not a bank, savings 
bank, mutual savings bank, building and loan association, or 
savings and loan association organized under the laws of this 
state or the United States, trust company, trust company acting 
as a fiduciary, or other financial institution subject to the 
supervision of the commissioner of commerce, or mortgagee or 
lender approved or certified by the secretary of housing and 
urban development or approved or certified by the administrator 
of veterans affairs, or approved or certified by the 
administrator of the Farmers Home Administration, or approved or 
certified by the Federal Home Loan Mortgage Corporation, or 
approved or certified by the Federal National Mortgage 
Association. 
     Sec. 8.  Minnesota Statutes 1985 Supplement, section 82.19, 
subdivision 3, is amended to read:  
    Subd. 3.  No real estate broker or salesperson shall offer, 
pay or give, and no person shall accept, any compensation or 
other thing of value from any real estate broker or salesperson 
by way of commission-splitting, rebate, finder's fees or 
otherwise, in connection with any real estate or business 
opportunity transaction; provided this subdivision does not 
apply to transactions (1) between a licensed real estate broker 
or salesperson and the person by whom he is engaged to purchase 
or sell real estate or business opportunity, (2) among persons 
licensed as provided herein, and (3) between a licensed real 
estate broker or salesperson and persons from other 
jurisdictions similarly licensed in that jurisdiction, and (4) 
involving timeshare or other recreational lands where the amount 
offered or paid does not exceed $150, and payment is not 
conditioned upon any sale but is made merely for providing the 
referral and the person paying the fee is bound by any 
representations the person receiving the fee makes.  A licensed 
real estate broker or salesperson may assign or direct that 
commissions or other compensation earned in connection with any 
real estate or business opportunity transaction be paid to a 
corporation of which the licensed real estate broker or 
salesperson is the sole owner.  
    Sec. 9.  Minnesota Statutes 1984, section 82.22, 
subdivision 3, is amended to read: 
    Subd. 3.  [RE-EXAMINATIONS.] An examination may be required 
before the renewal of any license which has been suspended, or 
before the issuance of a license to any person whose license has 
been ineffective for a period of one year two years, except no 
re-examination shall be required of any individual who has 
failed to cause renewal of an existing license because of 
absence from the state while on active duty with the armed 
services of the United States of America. 
    Sec. 10.  Minnesota Statutes 1984, section 82.22, 
subdivision 6, is amended to read: 
    Subd. 6.  [INSTRUCTION; NEW LICENSES.] (a) Every 
salesperson, licensed after July 1, 1973 and before July 1, 1976 
shall, within two years of the date his license was first 
granted be required to successfully complete a course of study 
in the real estate field consisting of not less than 60 hours of 
instruction, approved by the commissioner.  Upon appropriate 
showing of hardship by the licensee, or for persons licensed 
pursuant to section 82.20, subdivision 1, clause (b), the 
commissioner may waive or modify the requirements of this 
subdivision.  Every salesperson licensed after July 1, 1976 and 
before July 1, 1978 shall, within three years of the date his 
license was first issued, be required to successfully complete a 
course of study in the real estate field consisting of not less 
than 90 hours of instruction, approved by the commissioner; 
    (b) After July 1, 1978, and before January 1, 1984 January 
1, 1987, every applicant for a salesperson's license shall be 
required to successfully complete a course of study in the real 
estate field consisting of 30 hours of instruction approved by 
the commissioner before taking the examination specified in 
subdivision 1.  Every salesperson licensed after July 1, 1978, 
and before January 1, 1984, shall, within one year of the date 
his license was first issued, be required to successfully 
complete a course of study in the real estate field consisting 
of 60 hours of instruction approved by the commissioner.  After 
January 1, 1987, every applicant for a salesperson's license 
shall be required to successfully complete an additional course 
of study in the real estate field consisting of 60 hours of 
instruction approved by the commissioner before filing an 
application for the license.  Every salesperson licensed after 
January 1, 1987, shall, within one year of licensure, be 
required to successfully complete a course of study in the real 
estate field consisting of 30 hours of instruction approved by 
the commissioner. 
    (c) (b) After December 31, 1983, and before January 1, 
1987, every applicant for a salesperson's license shall be 
required to successfully complete a course of study in the real 
estate field consisting of 30 hours of instruction approved by 
the commissioner before taking the examination specified in 
subdivision 1.  After December 31, 1983, and before January 1, 
1987, every applicant for a salesperson's license shall be 
required to successfully complete an additional course of study 
in the real estate field consisting of 30 hours of instruction 
approved by the commissioner before filing an application for 
the license.  Every salesperson licensed after December 31, 
1983, and before January 1, 1987, shall, within one year of the 
date his license was first issued, be required to successfully 
complete a course of study in the real estate field consisting 
of 30 hours of instruction approved by the commissioner.  
    (d) (c) The commissioner may approve courses of study in 
the real estate field offered in educational institutions of 
higher learning in this state or courses of study in the real 
estate field developed by and offered under the auspices of the 
national association of realtors, its affiliates, or private 
real estate schools.  The commissioner may by rule prescribe the 
curriculum and qualification of those employed as instructors. 
    Sec. 11.  Minnesota Statutes 1984, section 82.22, 
subdivision 13, is amended to read: 
    Subd. 13.  [CONTINUING EDUCATION.] (a) After July 1, 
1978 1987, all real estate salespersons not subject to or who 
have completed the educational requirements contained in 
subdivision 6 and all real estate brokers shall be required to 
successfully complete 45 15 hours of real estate education, 
either as a student or a lecturer, in courses of study approved 
by the commissioner, within three years each year after their 
initial annual renewal date or after the expiration of their 
currently assigned three year continuing education due date.  
All salespersons and brokers shall report continuing education 
on an annual basis no later than June 30, 1990.  Hours in excess 
of 15 earned in any one year may be carried forward to the 
following year. 
    (b) For the purposes of administration, the commissioner 
shall classify by lot, the real estate brokers and salespersons 
subject to (a) above, in three classifications of substantially 
equal size.  The first class shall complete 15 hours of approved 
real estate study between July 1, 1978 and June 30, 1979 
inclusive.  The second class shall complete 30 hours of approved 
real estate study between the dates of July 1, 1978 and June 30, 
1980 inclusive.  The third class shall complete 45 hours of 
approved real estate study between the dates of July 1, 1978 and 
June 30, 1981.  After the first period, each class shall 
complete the prescribed educational requirements during 
successive three year periods. 
    (c) The commissioner shall adopt rules defining the 
standards for course and instructor approval, and may adopt 
rules for the proper administration of this subdivision. 
    (d) (c) Any program approved by Minnesota Continuing Legal 
Education shall be approved by the commissioner of commerce for 
continuing education for real estate brokers and salespeople if 
the program or any part thereof relates to real estate.  
    Sec. 12.  Minnesota Statutes 1984, section 82.24, 
subdivision 2, is amended to read: 
    Subd. 2.  [LICENSEE ACTING AS PRINCIPAL.] Any licensed real 
estate broker or salesperson acting in the capacity of principal 
in the sale or rental of interests in real estate owned or 
rented by him shall deposit in a Minnesota bank or trust 
company, any foreign bank which authorizes the commissioner to 
examine its records of such the deposits, or an industrial loan 
and thrift company organized under chapter 53 with deposit 
liabilities, in a trust account, those parts of all payments 
received on contracts which that are necessary to meet any 
amounts concurrently due and payable on any existing mortgages, 
contracts for deed or other conveyancing instruments, and 
reserve for taxes and insurance or any other encumbrance on such 
the receipts.  Such The deposits shall must be maintained 
until disbursement is made under the terms of the 
encumbrance pertaining thereto and proper accounting on such the 
property made to the parties entitled thereto to an accounting.  
    Sec. 13.  Minnesota Statutes 1984, section 82.26, is 
amended to read: 
    82.26 [LEGAL ACTIONS; INJUNCTIONS; CEASE AND DESIST 
ORDERS.] 
    Whenever it appears to the commissioner that any person has 
engaged or is about to engage in any act or practice 
constituting a violation of this chapter or any rule or order 
hereunder adopted or issued under this chapter, he the 
commissioner has the following powers:  
    (a) The commissioner may bring an action in the name of the 
state in the district court of the appropriate county to enjoin 
the acts or practices and to enforce compliance with this 
chapter or any rule or order hereunder adopted or issued under 
this chapter, or he may refer the matter to the attorney 
general.  Upon a proper showing, a permanent or temporary 
injunction, restraining order, or other appropriate relief shall 
must be granted.  
    (b) The commissioner may issue and cause to be served upon 
the person an order requiring the person to cease and desist 
from violations of sections 82.17 to 82.28 or any rule or order 
adopted or issued under this chapter.  The order must be 
calculated to give reasonable notice of the rights of the person 
to request a hearing and must state the reasons for the entry of 
the order.  A hearing must be held not later than seven days 
after the request for the hearing is received by the 
commissioner after which and within 20 days of the date of the 
hearing the commissioner shall issue a further order vacating 
the cease and desist order or making it permanent as the facts 
require.  If no hearing is requested within 30 days of service 
of the order, the order will become final and will remain in 
effect until it is modified or vacated by the commissioner.  All 
hearings must be conducted in accordance with chapter 14.  If 
the person to whom a cease and desist order is issued fails to 
appear at the hearing after being duly notified, the person 
shall be deemed in default, and the proceeding may be determined 
against that person upon consideration of the cease and desist 
order, the allegations of which may be deemed to be true.  The 
commissioner shall adopt rules of procedure concerning all 
proceedings conducted pursuant to this subdivision. 
    Sec. 14.  Minnesota Statutes 1984, section 82.27, 
subdivision 1, is amended to read: 
    Subdivision 1.  The commissioner may by order deny, suspend 
or revoke any license or may censure a licensee if he finds (1) 
that the order is in the public interest, and (2) that the 
applicant or licensee or, in the case of a broker, any officer, 
director, partner, employee or agent or any person occupying a 
similar status or performing similar functions, or any person 
directly or indirectly controlling the broker or controlled by 
the broker: 
    (a) Has filed an application for a license which is 
incomplete in any material respect or contains any statement 
which, in light of the circumstances under which it is made, is 
false or misleading with respect to any material fact; 
    (b) Has engaged in a fraudulent, deceptive or dishonest 
practice; 
    (c) 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 real estate 
business; 
    (d) Has failed to reasonably supervise his brokers or 
salesperson so as to cause injury or harm to the public; or 
    (e) Has violated or failed to comply with any provision of 
this chapter or any rule or order under this chapter; or 
    (f) Has, in the conduct of the licensee's affairs under the 
license, been shown to be incompetent, untrustworthy, or 
financially irresponsible. 
    Sec. 15.  Minnesota Statutes 1984, section 82.33, 
subdivision 2, is amended to read: 
    Subd. 2.  No person required by this chapter to be licensed 
shall bring or maintain any action in the courts for any 
commission, fee or other compensation with respect to 
the purchase, sale, lease or other disposition or conveyance of 
real property, or with respect to the negotiation or attempt to 
negotiate any sale, lease or other disposition or conveyance of 
real property unless such property was first listed in writing 
for sale, lease or other disposition there is a written 
agreement with the person bringing or maintaining the action. 
    Sec. 16.  Minnesota Statutes 1984, section 386.375, is 
amended to read: 
    386.375 [ABSTRACT OF TITLE; STORAGE WITHIN MINNESOTA OF 
ABSTRACTS.] 
    Subdivision 1.  [DEFINITIONS.] For the purposes of this 
section, "lender" means all state banks and trust companies, 
national banking associations, state and federally chartered 
savings and loan associations, mortgage banks, mutual savings 
banks, insurance companies, credit unions making a loan, or any 
person making a conventional loan as defined under section 
47.20, subdivision 2, clause (3), or cooperative apartment loan 
as defined under section 47.20, subdivision 2, clause (4).  A 
"selling lender" is a lender who sells, assigns, or transfers a 
loan and/or the servicing of a loan to a "purchasing lender" or 
"servicing agent." 
    Subd. 2.  [RESPONSIBILITY FOR STORAGE.] Any title company, 
lender, or anyone other than the mortgagor or fee simple owner 
holding an abstract of title to Minnesota real estate shall be 
stored within the state of Minnesota transfer the abstract of 
title to the mortgagor or fee simple owner of the real estate to 
which the abstract pertains before August 1, 1987.  After August 
1, 1987, the abstract of title shall be provided to the 
mortgagor or fee simple owner at the time of closing.  This 
section does not apply if the holder of the abstract of title is 
the mortgagor or fee simple owner of the real estate to which 
the abstract pertains. 
    Subd. 3.  [PENALTIES.] If a title company or lender fails 
to comply with the requirements of subdivision 2, the mortgagor 
or fee simple owner has the right to have an abstract made at 
the expense of the lender or title company holding the abstract. 
    Approved March 19, 1986