Office of the Revisor of Statutes
Minnesota Session Laws - 1999, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 137-S.F.No. 1715
An act relating to commerce; providing enforcement
authority for the commissioner; regulating service of
process; regulating residential building contractors
and remodelers; providing criminal penalties; amending
Minnesota Statutes 1998, sections 45.027, subdivisions
6 and 7; 45.028, subdivision 2; 80A.15, subdivision 2;
326.83, subdivision 18; 326.89, subdivision 3; 326.92,
by adding a subdivision; 326.94, subdivision 2; and
332.37; proposing coding for new law in Minnesota
Statutes, chapter 82B; repealing Minnesota Statutes
1998, section 326.89, subdivision 3a.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1998, section 45.027,
subdivision 6, is amended to read:
Subd. 6. [VIOLATIONS AND PENALTIES.] The commissioner may
impose a civil penalty not to exceed $2,000 $10,000 per
violation upon a person who violates any law, rule, or order
related to the duties and responsibilities entrusted to the
commissioner unless a different penalty is specified.
Sec. 2. Minnesota Statutes 1998, section 45.027,
subdivision 7, is amended to read:
Subd. 7. [ACTIONS AGAINST LICENSEES.] (a) In addition to
any other actions authorized by this section, the commissioner
may, by order, deny, suspend, or revoke the authority or license
of a person subject to the duties and responsibilities entrusted
to the commissioner, as described under section 45.011,
subdivision 4, or censure that person if the commissioner finds
that:
(1) the order is in the public interest; and
(2) the person has violated any law, rule, or order related
to the duties and responsibilities entrusted to the
commissioner; or
(3) the person has provided false, misleading, or
incomplete information to the commissioner or has refused to
allow a reasonable inspection of records or premises; or
(4) the person has engaged in an act or practice, whether
or not the act or practice directly involves the business for
which the person is licensed or authorized, which demonstrates
that the applicant or licensee is untrustworthy, financially
irresponsible, or otherwise incompetent or unqualified to act
under the authority or license granted by the commissioner.
(b) The commissioner shall issue an order requiring a
licensee or applicant for a license to show cause why the
license should not be revoked or suspended, or the licensee
censured, or the application denied. The order must be
calculated to give reasonable notice of the time and place for a
hearing on the action, and must state the reasons for the entry
of the order. The commissioner may, by order, summarily suspend
a license pending final determination of an order to show cause.
If a license is suspended pending final determination of an
order to show cause, a hearing on the merits must be held within
30 days of the issuance of the order of suspension. All
hearings must be conducted according to chapter 14. After the
hearing, the commissioner shall enter an order disposing of the
matter as the facts require. If the licensee or applicant fails
to appear at a hearing after having been duly notified of it,
the person is considered in default, and the proceeding may be
determined against the licensee or applicant upon consideration
of the order to show cause, the allegations of which may be
considered true. The summary suspension or summary revocation
procedures does not apply to action by the commissioner against
the certificate of authority of an insurer authorized to do
business in Minnesota.
Except for information classified as confidential under
sections 60A.03, subdivision 9; 60A.031; 60A.93; and 60D.22, the
commissioner may make any data otherwise classified as private
or confidential pursuant to this section accessible to an
appropriate person or agency if the commissioner determines that
the access will aid the law enforcement process, promote public
health or safety, or dispel widespread rumor or unrest. If the
commissioner determines that private or confidential information
should be disclosed, the commissioner shall notify the attorney
general as to the information to be disclosed, the purpose of
the disclosure, and the need for the disclosure. The attorney
general shall review the commissioner's determination. If the
attorney general believes that the commissioner's determination
does not satisfy the purpose and intent of this provision, the
attorney general shall advise the commissioner in writing that
the information may not be disclosed. If the attorney general
believes the commissioner's determination satisfies the purpose
and intent of this provision, the attorney general shall advise
the commissioner in writing, accordingly.
After disclosing information pursuant to this provision,
the commissioner shall advise the chairs of the senate and house
of representatives judiciary committees of the disclosure and
the basis for it.
Sec. 3. Minnesota Statutes 1998, section 45.028,
subdivision 2, is amended to read:
Subd. 2. [HOW MADE.] Service of process under this section
may be made by leaving a copy of the process in the office of
the commissioner, or by sending a copy of the process to the
commissioner by certified mail, and is not effective unless: (1)
the plaintiff, who may be the commissioner in an action or
proceeding instituted by the commissioner, sends notice of the
service and a copy of the process by certified mail to the
defendant or respondent at the last known address; and (2) the
plaintiff's affidavit of compliance is filed in the action or
proceeding on or before the return day of the process, if any,
or within further time as the court allows.
Sec. 4. Minnesota Statutes 1998, 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 sales, whether or not effected through a
broker-dealer, provided that:
(1) no person shall make more than ten sales of securities
of the same issuer pursuant to this exemption, exclusive of
sales according to clause (2), 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,
(i) the seller reasonably believes that all buyers are
purchasing for investment, and (ii) 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; and
(2) no issuer shall make more than 25 sales of its
securities according to this exemption, exclusive of sales
pursuant to clause (1), during any period of 12 consecutive
months; provided further, that the issuer meets the conditions
in clause (1) and, in addition meets the following additional
conditions: (i) files with the commissioner, ten days before a
sale according to this clause, a statement of issuer on a form
prescribed by the commissioner; and (ii) no commission or other
remuneration is paid or given directly or indirectly for
soliciting any prospective buyers in this state in connection
with a sale according to this clause except reasonable and
customary commissions paid by the issuer to a broker-dealer
licensed under this chapter.
(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 the 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 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, 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) An offer or sale of securities by an issuer made in
reliance on the exemptions provided by Rule 505 or 506 of
Regulation D promulgated by the Securities and Exchange
Commission, Code of Federal Regulations, title 17, sections
230.501 to 230.508, subject to the conditions and definitions
provided by Rules 501 to 503 of Regulation D, if the offer and
sale also satisfies the conditions and limitations in clauses
(1) to (10).
(1) The exemption under this paragraph is not available for
the securities of an issuer if any of the persons described in
Rule 252(c) to (f) of Regulation A promulgated by the Securities
and Exchange Commission, Code of Federal Regulations, title 17,
sections 230.251 to 230.263:
(i) has filed a registration statement that is the subject
of a currently effective order entered against the issuer, its
officers, directors, general partners, controlling persons, or
affiliates, according to any state's law within five years
before the filing of the notice required under clause (5),
denying effectiveness to, or suspending or revoking the
effectiveness of, the registration statement;
(ii) has been convicted, within five years before the
filing of the notice required under clause (5), of a felony or
misdemeanor in connection with the offer, sale, or purchase of a
security or franchise, 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 subject to an effective administrative order or
judgment entered by a state securities administrator within five
years before the filing of the notice required under clause (5),
that prohibits, denies, or revokes the use of an exemption from
securities registration, that prohibits the transaction of
business by the person as a broker-dealer or agent, or that is
based on fraud, deceit, an untrue statement of a material fact,
or an omission to state a material fact; or
(iv) is subject to an order, judgment, or decree of a court
entered within five years before the filing of the notice
required under clause (5), temporarily, preliminarily, or
permanently restraining or enjoining the person from engaging in
or continuing any conduct or practice in connection with the
offer, sale, or purchase of a security, or the making of a false
filing with a state.
A disqualification under paragraph (h) involving a
broker-dealer or agent is waived if the broker-dealer or agent
is or continues to be licensed in the state in which the
administrative order or judgment was entered against the person
or if the broker-dealer or agent is or continues to be licensed
in this state as a broker-dealer or agent after notifying the
commissioner of the act or event causing disqualification.
The commissioner may waive a disqualification under
paragraph (h) upon a showing of good cause that it is not
necessary under the circumstances that use of the exemption be
denied.
A disqualification under paragraph (h) may be waived if the
state securities administrator or agency of the state that
created the basis for disqualification has determined, upon a
showing of good cause, that it is not necessary under the
circumstances that an exemption from registration of securities
under the state's laws be denied.
It is a defense to a violation of paragraph (h) based upon
a disqualification if the issuer sustains the burden of proof to
establish that the issuer did not know, and in the exercise of
reasonable care could not have known, that a disqualification
under paragraph (h) existed.
(2) This exemption must not be available to an issuer with
respect to a transaction that, although in technical compliance
with this exemption, is part of a plan or scheme to evade
registration or the conditions or limitations explicitly stated
in paragraph (h).
(3) No commission, finder's fee, or other remuneration
shall be paid or given, directly or indirectly, for soliciting a
prospective purchaser, unless the recipient is appropriately
licensed, or exempt from licensure, in this state as a
broker-dealer.
(4) Nothing in this exemption is intended to or should be
in any way construed as relieving issuers or persons acting on
behalf of issuers from providing disclosure to prospective
investors adequate to satisfy the antifraud provisions of the
securities law of Minnesota.
(5) The issuer shall file with the commissioner a notice on
form D as adopted by the Securities and Exchange Commission
according to Regulation D, Code of Federal Regulations, title
17, section 230.502. The notice must be filed not later than 15
days after the first sale in this state of securities in an
offering under this exemption. Every notice on form D must be
manually signed by a person duly authorized by the issuer and
must be accompanied by a consent to service of process on a form
prescribed by the commissioner.
(6) A failure to comply with a term, condition, or
requirement of paragraph (h) will not result in loss of the
exemption for an offer or sale to a particular individual or
entity if the person relying on the exemption shows that: (i)
the failure to comply did not pertain to a term, condition, or
requirement directly intended to protect that particular
individual or entity, and the failure to comply was
insignificant with respect to the offering as a whole; and (ii)
a good faith and reasonable attempt was made to comply with all
applicable terms, conditions, and requirements of paragraph (h),
except that, where an exemption is established only through
reliance upon this provision, the failure to comply shall
nonetheless constitute a violation of section 80A.08 and be
actionable by the commissioner.
(7) The issuer, upon request by the commissioner, shall,
within ten days of the request, furnish to the commissioner a
copy of any and all information, documents, or materials
furnished to investors or offerees in connection with the offer
and sale according to paragraph (h).
(8) Neither compliance nor attempted compliance with the
exemption provided by paragraph (h), nor the absence of an
objection or order by the commissioner with respect to an offer
or sale of securities undertaken according to this exemption,
shall be considered to be a waiver of a condition of the
exemption or considered to be a confirmation by the commissioner
of the availability of this exemption.
(9) The commissioner may, by rule or order, increase the
number of purchasers or waive any other condition of this
exemption.
(10) The determination whether offers and sales made in
reliance on the exemption set forth in paragraph (h) shall be
integrated with offers and sales according to other paragraphs
of this subdivision shall be made according to the integration
standard set forth in Rule 502 of Regulation D promulgated by
the Securities and Exchange Commission, Code of Federal
Regulations, title 17, section 230.502. If not subject to
integration according to that rule, offers and sales according
to paragraph (h) shall not otherwise be integrated with offers
and sales according to other exemptions set forth in this
subdivision.
(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 the commissioner deems
appropriate, consistent with the purposes of sections 80A.01 to
80A.31.
(j) The offer and sale by a cooperative organized under
chapter 308A or under the laws of another state, 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 the cooperative, or
when such securities are issued as patronage dividends. This
paragraph applies to a cooperative organized under the laws of
another state only if the cooperative has filed with the
commissioner a consent to service of process under section
80A.27, subdivision 7, and has, not less than ten days prior to
the issuance or delivery, furnished the commissioner with a
written general description of the transaction and any other
information that the commissioner requires by rule or otherwise.
This exemption only applies when the issuing cooperative is
seeking to raise up to $1,000,000.
(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 the commissioner
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.
(q) Any nonissuer sales of any security, including a
revenue obligation, issued by the state of Minnesota or any of
its political or governmental subdivisions, municipalities,
governmental agencies, or instrumentalities.
(r) Any transaction as to which the commissioner by rule or
order finds that registration is not necessary in the public
interest and for the protection of investors.
(s) An offer or sale of a security issued in connection
with an employee's stock purchase, savings, option, profit
sharing, pension, or similar employee benefit plan, if the
following conditions are met:
(1) the issuer, its parent corporation or any of its
majority-owned subsidiaries offers or sells the security
according to a written benefit plan or written contract relating
to the compensation of the purchaser; and
(2) the class of securities offered according to the plan
or contract, or if an option or right to purchase a security,
the class of securities to be issued upon the exercise of the
option or right, is registered under section 12 of the
Securities Exchange Act of 1934, or is a class of securities
with respect to which the issuer files reports according to
section 15(d) of the Securities Exchange Act of 1934; or
(3) the issuer fully complies with the provisions of Rule
701 as adopted by the Securities and Exchange Commission, Code
of Federal Regulations, title 12, section 230.701.
The issuer shall file not less than ten days before the
transaction, a general description of the transaction and any
other information that the commissioner requires by rule or
otherwise or, if applicable, a Securities and Exchange Form S-8.
Annually, within 90 days after the end of the issuer's fiscal
year, the issuer shall file a notice as provided with the
commissioner.
(t) Any sale of a security of an issuer that is a pooled
income fund, a charitable remainder trust, or a charitable lead
trust that has a qualified charity as the only charitable
beneficiary.
(u) Any sale by a qualified charity of a security that is a
charitable gift annuity if the issuer has a net worth, otherwise
defined as unrestricted fund balance, of not less than $300,000
and either: (1) has been in continuous operation for not less
than three years; or (2) is a successor or affiliate of a
qualified charity that has been in continuous operation for not
less than three years.
Sec. 5. [82B.201] [CRIMINAL PENALTY.]
Any person who violates any provision of this chapter, or
any rule or order of the commissioner, is guilty of a gross
misdemeanor.
Sec. 6. Minnesota Statutes 1998, section 326.83,
subdivision 18, is amended to read:
Subd. 18. [ROOFER.] "Roofer" means a person engaged in the
business of doing contracting, or offering to contract with an
owner, to complete work on residential real estate in roof
coverings, roof sheathing, roof weatherproofing and insulation,
and repair of roof systems, but not construction of new roof
systems.
Sec. 7. Minnesota Statutes 1998, section 326.89,
subdivision 3, is amended to read:
Subd. 3. [EXAMINATION.] (a) Each qualifying person must
satisfactorily complete a written examination for the type of
license requested. The commissioner may establish the
examination qualifications, including related education
experience and education, the examination procedure, and the
examination for each licensing group. The examination must
include at a minimum the following areas:
(1) appropriate knowledge of technical terms commonly used
and the knowledge of reference materials and code books to be
used for technical information; and
(2) understanding of the general principles of business
management and other pertinent state laws.
(b) Each examination must be designed for the specified
type of license requested. The council shall advise the
commissioner on the grading, monitoring, and updating of
examinations.
(c) A person's passing examination results expire two years
from the examination date. A person who passes the examination
but does not choose to apply to act as a qualifying person for a
licensee within two years from the examination date, must, upon
application provide:
(1) passing examination results within two years from the
date of application; or
(2) proof that the person has fulfilled the continuing
education requirements in section 326.87 in the manner required
for a qualifying person of a licensee for each license period
after the expiration of the examination results.
Sec. 8. Minnesota Statutes 1998, section 326.92, is
amended by adding a subdivision to read:
Subd. 1a. [GROSS MISDEMEANOR.] A person required to be
licensed under sections 326.84 to 326.991 who violates an order
under subdivision 3 is guilty of a gross misdemeanor.
Sec. 9. Minnesota Statutes 1998, section 326.94,
subdivision 2, is amended to read:
Subd. 2. [INSURANCE.] Licensees must have public liability
insurance with limits of at least $100,000 per occurrence, which
must include at least $10,000 property damage coverage. The
insurance must be written by an insurer licensed to do business
in this state. The commissioner may increase the minimum amount
of insurance required for any licensee or class of licensees if
the commissioner considers it to be in the public interest and
necessary to protect the interests of Minnesota consumers.
Sec. 10. Minnesota Statutes 1998, section 332.37, is
amended to read:
332.37 [PROHIBITED PRACTICES.]
No collection agency or collectors shall:
(1) in collection letters or publications, or in any
communication, oral or written threaten wage garnishment or
legal suit by a particular lawyer, unless it has actually
retained the lawyer;
(2) use or employ constables, sheriffs or any other officer
authorized to serve legal papers in connection with the
collection of a claim, except when performing their legally
authorized duties;
(3) use or threaten to use methods of collection which
violate Minnesota law;
(4) furnish legal advice or otherwise engage in the
practice of law or represent that it is competent to do so;
(5) communicate with debtors in a misleading or deceptive
manner by using the stationery of a lawyer, forms or instruments
which only lawyers are authorized to prepare, or instruments
which simulate the form and appearance of judicial process;
(6) exercise authority on behalf of a creditor to employ
the services of lawyers unless the creditor has specifically
authorized the agency in writing to do so and the agency's
course of conduct is at all times consistent with a true
relationship of attorney and client between the lawyer and the
creditor;
(7) publish or cause to be published any list of debtors
except for credit reporting purposes, use shame cards or shame
automobiles, advertise or threaten to advertise for sale any
claim as a means of forcing payment thereof, or use similar
devices or methods of intimidation;
(8) refuse to return any claim or claims and all valuable
papers deposited with a claim or claims upon written request of
the creditor, claimant or forwarder after tender of the amounts
due and owing to the agency within 30 days after the request;
refuse or intentionally fail to account to its clients for all
money collected within 30 days from the last day of the month in
which the same is collected; or, refuse or fail to furnish at
intervals of not less than 90 days upon written request of the
claimant or forwarder, a written report upon claims received
from the claimant or forwarder;
(9) operate under a name or in a manner which implies that
the agency is a branch of or associated with any department of
federal, state, county or local government or an agency thereof;
(10) commingle money collected for a customer with the
agency's operating funds or use any part of a customer's money
in the conduct of the agency's business;
(11) transact business or hold itself out as a debt
prorater, debt adjuster, or any person who settles, adjusts,
prorates, pools, liquidates or pays the indebtedness of a
debtor, unless there is no charge to the debtor, or the pooling
or liquidation is done pursuant to court order or under the
supervision of a creditor's committee;
(12) violate any of the provisions of the Fair Debt
Collection Practices Act of 1977 while attempting to collect on
any account, bill or other indebtedness;
(13) communicate with a debtor by use of a recorded message
utilizing an automatic dialing announcing device unless the
recorded message is immediately preceded by a live operator who
discloses prior to the message the name of the collection agency
and the fact the message intends to solicit payment and the
operator obtains the consent of the debtor to hearing the
message;
(14) in collection letters or publications, or in any
communication, oral or written, imply or suggest that health
care services will be withheld in an emergency situation;
(15) when a debtor has a listed telephone number, enlist
the aid of a neighbor or third party to request that the debtor
contact the licensee, except a person who resides with the
debtor or a third party with whom the debtor has authorized the
licensee to place the request. This clause does not apply to a
call back message left at the debtor's place of employment which
is limited to the licensee's telephone and the collector's name;
(16) when attempting to collect a debt, fail to provide the
debtor with the full name of the collection agency as it appears
on its license;
(17) collect any money from a debtor that is not reported
to a creditor or fail to return any amount of overpayment from a
debtor to the debtor or to the state of Minnesota pursuant to
the requirements of chapter 345;
(18) accept currency or coin as payment for a debt without
issuing an original receipt to the debtor and maintain a
duplicate receipt in the debtor's payment records; or
(19) attempt to collect any amount of money from a debtor
or charge a fee to a creditor that is not authorized by
agreement with the client;
(20) falsify any collection agency documents with the
intent to deceive a debtor, creditor, or governmental agency; or
(19) (21) when initially contacting a Minnesota debtor by
mail, fail to include a disclosure on the contact notice, in a
type size or font which is equal to or larger than the largest
other type of type size or font used in the text of the notice.
The disclosure must state: "This collection agency is licensed
by the Minnesota Department of Commerce."
Sec. 11. [REPEALER.]
Minnesota Statutes 1998, section 326.89, subdivision 3a, is
repealed.
Sec. 12. [EFFECTIVE DATES.]
Sections 1 to 3, 5 to 8, 10, and 11 are effective the day
following final enactment. Sections 4 and 9 are effective
August 1, 1999.
Presented to the governor May 6, 1999
Signed by the governor May 10, 1999, 1:10 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes