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Key: (1) language to be deleted (2) new language


                         Laws of Minnesota 1987 

                        CHAPTER 153-H.F.No. 450 
           An act relating to commerce; regulating the 
          advertisement of interest rates of investment 
          products; providing penalties; proposing coding for 
          new law in Minnesota Statutes, chapter 45.  
    Section 1.  [45.025] [ADVERTISEMENT OF INTEREST RATES.] 
    Subdivision 1.  [DEFINITIONS.] For the purposes of this 
section only, the following terms have the meanings given them: 
    (a) "Advertisement" includes: 
    (1) printed or published material, audio visual material, 
and descriptive literature of an issuer or agent used in direct 
mail, newspapers, magazines, other periodicals, radio scripts, 
television scripts, billboards, and other similar displays, 
excluding advertisements prepared for the sole purpose of 
obtaining employees, agents, or agencies; 
    (2) descriptive literature and sales aids of all kinds 
issued by an issuer or agent for presentation to members of the 
public, including but not limited to circulars, leaflets, 
booklets, depictions, illustrations, and form letters; 
    (3) prepared sales talks, presentations, and materials for 
use by issuers and agents and representations made by issuers 
and agents in accordance with these talks, presentations, and 
materials; and 
    (4) statements, written or oral, by an agent or issuer.  
    (b) "Agent" is a person who effects or attempts to effect 
or assist in the purchase or sale of an investment product.  
    (c) "Commissioner" means the commissioner of commerce.  
    (d) "Effective annual yield" is the annualized income 
expressed as a simple interest rate per annum based on the 
initial investment principal. 
    (e) "Effective net annual yield" means the effective annual 
yield, based on a hypothetical $1,000 investment, minus any 
annual fee or similar regular periodic charges.  
    (f) "Investment product" includes but is not limited to:  
    (1) certificate of deposits, deposits, or fiduciary funds 
entrusted to banks, savings associations, trust companies, 
credit unions, savings banks, industrial loan and thrift 
companies, and any other financial institution whether or not 
licensed by or registered with the department of commerce; 
    (2) annuities, endowment policies, or other life insurance 
    (3) securities, including:  a note; stock; treasury stock; 
bond; debenture; evidence of indebtedness; certificate of 
interest or participation in any profit sharing agreement; 
collateral trust certificate; preorganizational certificate or 
subscription; transferrable shares; investment contract, 
including but not limited to metals, gems, and coins; 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 securities listed in this clause. 
    (g) "Issuer" includes but is not limited to:  banks, 
savings associations, trust companies, credit unions, savings 
banks, industrial loan and thrift companies, insurance 
companies, investment companies, trusts, or a person who issues 
an investment product.  
    (h) "Person" means an individual, corporation, a 
partnership, an association, a joint stock company, a trust 
where the interests of the beneficiaries are evidenced by a 
security, an unincorporated organization, a government, a 
political subdivision of a government, or any other entity.  
    Subd. 2.  [GENERAL RESTRICTION.] A person may not advertise 
the interest rate of an investment product unless the effective 
net annual yield is disclosed in an equally prominent manner.  
    The name and address of the issuer and any prepayment 
expense, surrender charge, or withdrawal penalty charged by the 
issuer must also be disclosed in a prominent manner.  If the 
expense, charge, or penalty varies according to the length of 
time the product is held, the advertisement must disclose the 
expense, fee, or penalty imposed if surrendered or terminated 
within one year. 
    Subd. 3.  [VARIABLE RATES.] With the exception of life 
insurance policy and annuity contract illustrations based upon a 
prospective purchaser's age and sex that do not provide a 
comparison with another policy or contract, an investment 
product whose interest rate varies according to the income or 
earnings of the issuer may not advertise projections of 
effective annual yield for a period exceeding one year.  In 
addition, the advertisement must include in a prominent manner 
substantially the following statement:  
 "The effective annual yield or total return will fluctuate 
along with market and other economic conditions.  Past 
performance does not guarantee future results."  
    Subd. 4.  [PAST PERFORMANCE.] If the advertisement refers 
to the past performance of an investment product, the 
advertisement must disclose the effective net annual yield for 
the one-year period immediately preceding the most recent 
quarter.  "Quarters" for the purposes of this subdivision end on 
March 31, June 30, September 30, and December 31. 
    Subd. 5.  [COMPARATIVE ILLUSTRATIONS.] Illustrations 
comparing a life insurance policy or annuity contract of one 
company with a life insurance policy or an annuity contract of 
another company must clearly disclose with equal prominence for 
each policy or contract:  
    (1) the guaranteed rate of interest paid on the cash value; 
    (2) the current dividend scale or current rate of interest 
paid on the cash value;  
    (3) the nonguaranteed nature of any current dividends, 
current interest rates, charges, or other fees applied to the 
policy or contract, including the issuer's rights to alter any 
of these factors;  
    (4) any limitations on the crediting of dividends or 
    (5) the frequency and timing by which dividends or the 
current interest rate is determined; and 
    (6) the net cash surrender value at all ages and contract 
durations illustrated. 
    Subd. 6.  [WAIVER.] The commissioner may by rule or order 
waive or defer implementation of the provisions of subdivisions 
2 to 5 with regard to any person or persons who comply with 
similar restrictions imposed by the Securities and Exchange 
Commission or other regulatory agency. 
    Subd. 7.  [MISDEMEANOR.] A person who willfully violates a 
provision of this section, knowing that the advertisement was 
false or misleading in any material respect, may be fined not 
more than $700 or imprisoned not more than 90 days, or both.  
Each act in violation of this section constitutes a separate 
offense and a prosecution or conviction for any violation of 
this section does not bar prosecution or conviction for another 
violation under this section.  
    Subd. 8.  [CIVIL REMEDY.] A person violating this section 
is liable to a purchaser of the investment product.  The 
purchaser may sue either in equity for recision upon tender of 
the investment product or at law for damages if the purchaser no 
longer owns the investment product.  In an action for recision, 
the purchaser is entitled to recover the consideration paid for 
the investment product, together with interest at the legal 
rate, costs, and reasonable attorney fees, less the amount of 
any income received on the investment product.  In an action at 
law, damages are the consideration paid for the investment 
product together with interest at the legal rate to the date of 
disposition, costs, and reasonable attorney fees, less the value 
of the investment product at the date of disposition.  If the 
advertisement advertises an investment product whose interest 
rate varies according to the earnings or income of the issuer 
and if the advertisement projects the accumulated earnings for a 
period longer than one year, the issuer and agent are jointly 
and severally liable to the purchaser for the difference in the 
principal and interest received by the purchaser and the 
principal and interest as projected in the advertisement.  
commissioner may by order deny, suspend, or revoke an agent's or 
issuer's license or may censure the licensee if the commissioner 
finds that:  (1) the order is in the public interest; (2) the 
agent or issuer violated any provision of this section; and (3) 
the agent or issuer is licensed by the department. 
    Approved May 15, 1987

Official Publication of the State of Minnesota
Revisor of Statutes