Minnesota Office of the Revisor of Statutes
[*Add Subtitle/link: Office]

Menu

Revisor of Statutes Menu

Pdf

Minnesota Session Laws

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

CHAPTER 196--H.F.No. 2514
An act
relating to securities; enacting and modifying the 2002 Uniform Securities
Act of the National Conference of Commissioners on Uniform State Laws;
prescribing criminal penalties; amending Minnesota Statutes 2004, sections
60A.077, subdivision 9; 82.23; 82.43, subdivision 7; 144A.01, subdivision 4;
245A.02, subdivision 5a; 302A.011, subdivision 26; 302A.251, subdivision
4; 308A.505; 308B.465, subdivision 2; 322B.03, subdivision 43; 322B.663,
subdivision 4; 356A.06, subdivision 6; proposing coding for new law in
Minnesota Statutes, chapter 80A; repealing Minnesota Statutes 2004, sections
80A.01; 80A.02; 80A.03; 80A.04; 80A.041; 80A.05; 80A.06; 80A.07; 80A.08;
80A.09; 80A.10; 80A.11; 80A.115; 80A.12; 80A.122; 80A.125; 80A.13;
80A.14; 80A.15; 80A.16; 80A.17; 80A.18; 80A.19; 80A.22; 80A.23; 80A.24;
80A.25; 80A.26; 80A.27; 80A.28; 80A.29; 80A.30; 80A.31.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1
UNIFORM SECURITIES ACT GENERAL PROVISIONS

    Section 1. [80A.40] SECTION 101; SHORT TITLE.
    This chapter may be cited as the Uniform Securities Act (2002).

    Sec. 2. [80A.41] SECTION 102; DEFINITIONS.
    In this chapter, unless the context otherwise requires:
    (1) "Administrator" means the commissioner of commerce.
    (2) "Agent" means an individual, other than a broker-dealer, who represents a
broker-dealer in effecting or attempting to effect purchases or sales of securities or
represents an issuer in effecting or attempting to effect purchases or sales of the issuer's
securities. But a partner, officer, or director of a broker-dealer or issuer, or an individual
having a similar status or performing similar functions is an agent only if the individual
otherwise comes within the term. The term does not include an individual excluded by
rule adopted or order issued under this chapter.
    (3) "Bank" means:
    (A) a banking institution organized under the laws of the United States;
    (B) a member bank of the Federal Reserve System;
    (C) any other banking institution, whether incorporated or not, doing business
under the laws of a state or of the United States, a substantial portion of the business
of which consists of receiving deposits or exercising fiduciary powers similar to those
permitted to be exercised by national banks under the authority of the Comptroller of the
Currency pursuant to Section 1 of Public Law 87-722 (12 U.S.C. Section 92a), and which
is supervised and examined by a state or federal agency having supervision over banks,
and which is not operated for the purpose of evading this chapter; and
    (D) a receiver, conservator, or other liquidating agent of any institution or firm
included in subparagraph (A), (B), or (C).
    (4) "Broker-dealer" means a person engaged in the business of effecting transactions
in securities for the account of others or for the person's own account. The term does
not include:
    (A) an agent;
    (B) an issuer;
    (C) a depository institution; provided such activities are conducted in accordance
with such rules as may be adopted by the administrator;
    (D) an international banking institution; or
    (E) a person excluded by rule adopted or order issued under this chapter.
    (5) "Depository institution" means:
    (A) a bank; or
    (B) a savings institution, trust company, credit union, or similar institution that
is organized or chartered under the laws of a state or of the United States, authorized
to receive deposits, and supervised and examined by an official or agency of a state or
the United States if its deposits or share accounts are insured to the maximum amount
authorized by statute by the Federal Deposit Insurance Corporation, the National Credit
Union Share Insurance Fund, or a successor authorized by federal law. The term does
not include:
    (i) an insurance company or other organization primarily engaged in the business
of insurance;
    (ii) a Morris Plan bank; or
    (iii) an industrial loan company that is not an "insured depository institution" as
defined in section 3(c)(2) of the Federal Deposit Insurance Act, United States Code, title
12, section 1813(c)(2), or any successor federal statute.
    (6) "Federal covered investment adviser" means a person registered under the
Investment Advisers Act of 1940.
    (7) "Federal covered security" means a security that is, or upon completion of a
transaction will be, a covered security under Section 18(b) of the Securities Act of 1933
(15 U.S.C. Section 77r(b)) or rules or regulations adopted pursuant to that provision.
    (8) "Filing" means the receipt under this chapter of a record by the administrator or
a designee of the administrator.
    (9) "Fraud," "deceit," and "defraud" are not limited to common law deceit.
    (10) "Guaranteed" means guaranteed as to payment of all principal and all interest.
    (11) "Institutional investor" means any of the following, whether acting for itself or
for others in a fiduciary capacity:
    (A) a depository institution or international banking institution;
    (B) an insurance company;
    (C) a separate account of an insurance company;
    (D) an investment company as defined in the Investment Company Act of 1940;
    (E) a broker-dealer registered under the Securities Exchange Act of 1934;
    (F) an employee pension, profit-sharing, or benefit plan if the plan has total assets
in excess of $10,000,000 or its investment decisions are made by a named fiduciary, as
defined in the Employee Retirement Income Security Act of 1974, that is a broker-dealer
registered under the Securities Exchange Act of 1934, an investment adviser registered
or exempt from registration under the Investment Advisers Act of 1940, an investment
adviser registered under this chapter, a depository institution, or an insurance company;
    (G) a plan established and maintained by a state, a political subdivision of a state, or
an agency or instrumentality of a state or a political subdivision of a state for the benefit
of its employees, if the plan has total assets in excess of $10,000,000 or its investment
decisions are made by a duly designated public official or by a named fiduciary, as
defined in the Employee Retirement Income Security Act of 1974, that is a broker-dealer
registered under the Securities Exchange Act of 1934, an investment adviser registered
or exempt from registration under the Investment Advisers Act of 1940, an investment
adviser registered under this chapter, a depository institution, or an insurance company;
    (H) a trust, if it has total assets in excess of $10,000,000, its trustee is a depository
institution, and its participants are exclusively plans of the types identified in subparagraph
(F) or (G), regardless of the size of their assets, except a trust that includes as participants
self-directed individual retirement accounts or similar self-directed plans;
    (I) an organization described in Section 501(c)(3) of the Internal Revenue Code (26
U.S.C. Section 501(c)(3)), corporation, Massachusetts trust or similar business trust,
limited liability company, or partnership, not formed for the specific purpose of acquiring
the securities offered, with total assets in excess of $10,000,000;
    (J) a small business investment company licensed by the Small Business
Administration under Section 301(c) of the Small Business Investment Act of 1958 (15
U.S.C. Section 681(c)) with total assets in excess of $10,000,000;
    (K) a private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-2(a)(22)) with total assets
in excess of $10,000,000;
    (L) a federal covered investment adviser acting for its own account;
    (M) a "qualified institutional buyer" as defined in Rule 144A(a)(1), other than Rule
144A(a)(1)(i)(H), adopted under the Securities Act of 1933 (17 C.F.R. 230.144A);
    (N) a "major U.S. institutional investor" as defined in Rule 15a-6(b)(4)(i) adopted
under the Securities Exchange Act of 1934 (17 C.F.R. 240.15a-6);
    (O) any other person, other than an individual, of institutional character with total
assets in excess of $10,000,000 not organized for the specific purpose of evading this
chapter; or
    (P) any other person specified by rule adopted or order issued under this chapter;
    (12) "Insurance company" means a company organized as an insurance company
whose primary business is writing insurance or reinsuring risks underwritten by insurance
companies and which is subject to supervision by the insurance commissioner or a similar
official or agency of a state.
    (13) "Insured" means insured as to payment of all principal and all interest.
    (14) "International banking institution" means an international financial institution
of which the United States is a member and whose securities are exempt from registration
under the Securities Act of 1933.
    (15) "Investment adviser" means a person that, for compensation, engages in the
business of advising others, either directly or through publications or writings, as to the
value of securities or the advisability of investing in, purchasing, or selling securities or
that, for compensation and as a part of a regular business, issues or promulgates analyses
or reports concerning securities. The term includes a financial planner or other person
that, as an integral component of other financially related services, provides investment
advice to others for compensation as part of a business or that holds itself out as providing
investment advice to others for compensation. The term does not include:
    (A) an investment adviser representative;
    (B) a lawyer, accountant, engineer, or teacher whose performance of investment
advice is solely incidental to the practice of the person's profession;
    (C) a broker-dealer or its agents whose performance of investment advice is solely
incidental to the conduct of business as a broker-dealer and that does not receive special
compensation for the investment advice;
    (D) a publisher of a bona fide newspaper, news magazine, or business or financial
publication of general and regular circulation;
    (E) a federal covered investment adviser;
    (F) a bank or savings institution;
    (G) any other person that is excluded by the Investment Advisers Act of 1940 from
the definition of investment adviser; or
    (H) any other person excluded by rule adopted or order issued under this chapter.
    (16) "Investment adviser representative" means an individual employed by or
associated with an investment adviser or federal covered investment adviser and who
makes any recommendations or otherwise gives investment advice regarding securities,
manages accounts or portfolios of clients, determines which recommendation or advice
regarding securities should be given, provides investment advice or holds herself or
himself out as providing investment advice, receives compensation to solicit, offer, or
negotiate for the sale of or for selling investment advice, or supervises employees who
perform any of the foregoing. The term does not include an individual who:
    (A) performs only clerical or ministerial acts;
    (B) is an agent whose performance of investment advice is solely incidental to
the individual acting as an agent and who does not receive special compensation for
investment advisory services;
    (C) is employed by or associated with a federal covered investment adviser, unless
the individual has a "place of business" in this state as that term is defined by rule adopted
under Section 203A of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-3a)
and is
    (i) an "investment adviser representative" as that term is defined by rule adopted
under Section 203A of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-3a); or
    (ii) not a "supervised person" as that term is defined in Section 202(a)(25) of the
Investment Advisers Act of 1940 (15 U.S.C. Section 80b-2(a)(25)); or
    (D) is excluded by rule adopted or order issued under this chapter.
    (17) "Issuer" means a person that issues or proposes to issue a security, subject to
the following:
    (A) The issuer of a voting trust certificate, collateral trust certificate, certificate of
deposit for a security, or share in an investment company without a board of directors or
individuals performing similar functions is the person performing the acts and assuming
the duties of depositor or manager pursuant to the trust or other agreement or instrument
under which the security is issued.
    (B) The issuer of an equipment trust certificate or similar security serving the same
purpose is the person by which the property is or will be used or to which the property
or equipment is or will be leased or conditionally sold or that is otherwise contractually
responsible for assuring payment of the certificate.
    (C) The issuer of a fractional undivided interest in an oil, gas, or other mineral lease
or in payments out of production under a lease, right, or royalty is the owner of an interest
in the lease or in payments out of production under a lease, right, or royalty, whether
whole or fractional, that creates fractional interests for the purpose of sale.
    (18) "Nonissuer transaction" or "nonissuer distribution" means a transaction or
distribution not directly or indirectly for the benefit of the issuer.
    (19) "Offer to purchase" includes an attempt or offer to obtain, or solicitation of an
offer to sell, a security or interest in a security for value. The term does not include a
tender offer that is subject to Section 14(d) of the Securities Exchange Act of 1934 (15
U.S.C. Section 78n(d)).
    (20) "Person" means an individual; corporation; business trust; estate; trust;
partnership; limited liability company; association; joint venture; government;
governmental subdivision, agency, or instrumentality; public corporation; or any other
legal or commercial entity.
    (21) "Place of business" of a broker-dealer, an investment adviser, or a federal
covered investment adviser means:
    (A) an office at which the broker-dealer, investment adviser, or federal covered
investment adviser regularly provides brokerage or investment advice or solicits, meets
with, or otherwise communicates with customers or clients; or
    (B) any other location that is held out to the general public as a location at which
the broker-dealer, investment adviser, or federal covered investment adviser provides
brokerage or investment advice or solicits, meets with, or otherwise communicates with
customers or clients.
    (22) "Predecessor Act" means Minnesota Statutes 2002, sections 80A.01 to 80A.31.
    (23) "Price amendment" means the amendment to a registration statement filed under
the Securities Act of 1933 or, if an amendment is not filed, the prospectus or prospectus
supplement filed under the Securities Act of 1933 that includes a statement of the offering
price, underwriting and selling discounts or commissions, amount of proceeds, conversion
rates, call prices, and other matters dependent upon the offering price.
    (24) "Principal place of business" of a broker-dealer or an investment adviser means
the executive office of the broker-dealer or investment adviser from which the officers,
partners, or managers of the broker-dealer or investment adviser direct, control, and
coordinate the activities of the broker-dealer or investment adviser.
    (24a) "Purchaser" does not include:
    (A) any relative, spouse, or relative of the spouse of a purchaser who has the same
principal residence as the purchaser;
    (B) any trust or estate in which a purchaser and any of the persons related to him as
specified in Regulation D, Rule 501(e)(1)(i) or (e)(1)(ii) collectively have more than 50
percent of the beneficial interest (excluding contingent interests);
    (C) any corporation or other organization of which a purchaser and any of the
persons related to the purchaser as specified in Regulation D, Rule 501(e)(1)(i) or
(e)(1)(ii) collectively are beneficial owners of more than 50 percent of the equity securities
(excluding directors' qualifying shares) or equity interests; and
    (D) any accredited investor as defined by Regulation D, Rule 501(3).
    A corporation, partnership, or other entity must be counted as one purchaser. If,
however, that entity is organized for the specific purpose of acquiring the securities offered
and is not an accredited investor, then each beneficial owner of equity securities or equity
interests in the entity shall count as a separate purchaser for all provisions of Regulation
D, except to the extent provided in Regulation D, Rule 501(e)(1).
    A noncontributory employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 shall be counted as one purchaser
where the trustee makes all investment decisions for the plan.
    (25) "Record," except in the phrases "of record," "official record," and "public
record," means information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form.
    (26) "Sale" includes every contract of sale, contract to sell, or disposition of, a
security or interest in a security for value, and "offer to sell" includes every attempt or
offer to dispose of, or solicitation of an offer to purchase, a security or interest in a
security for value.
    (A) A security given or delivered with, or as a bonus on account of, any purchase of
securities or any other thing is considered to constitute part of the subject of the purchase
and to have been offered and sold for value.
    (B) A gift of assessable stock is considered to involve an offer and sale.
    (C) A sale or offer of a warrant or right to purchase or subscribe to another security
of the same or another issuer and a sale or offer of a security that gives the holder a present
or future right or privilege to convert the security into another security of the same or
another issuer, are each considered to include an offer of the other security.
    (27) "Securities and Exchange Commission" means the United States Securities and
Exchange Commission.
    (28) "Security" means a note; stock; treasury stock; security future; bond; debenture;
evidence of indebtedness; certificate of interest or participation in a profit-sharing
agreement; collateral trust certificate; preorganization certificate or subscription;
transferable share; investment contract; voting trust certificate; certificate of deposit for a
security; fractional undivided interest in oil, gas, or other mineral rights; put, call, straddle,
option, or privilege on a security, certificate of deposit, or group or index of securities,
including an interest therein or based on the value thereof; put, call, straddle, option, or
privilege entered into on a national securities exchange relating to foreign currency; or,
in general, an interest or instrument commonly known as a "security"; or a 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. The term:
    (A) includes both a certificated and an uncertificated security;
    (B) does not include an insurance or endowment policy or annuity contract under
which an insurance company promises to pay a fixed or variable sum of money either in a
lump sum or periodically for life or other specified period;
    (C) does not include an interest in a contributory or noncontributory pension or
welfare plan subject to the Employee Retirement Income Security Act of 1974;
    (D) includes as an "investment contract" an investment in a common enterprise with
the expectation of profits to be derived primarily from the efforts of a person other than
the investor and a "common enterprise" means an enterprise in which the fortunes of the
investor are interwoven with those of either the person offering the investment, a third
party, or other investors;
    (E) includes as an "investment contract," among other contracts, an interest in
a limited partnership and a limited liability company and an investment in a viatical
settlement or similar agreement; and
    (F) does not include any equity interest of a closely held corporation or other entity
with not more than 35 holders of the equity interest of such entity offered or sold pursuant
to a transaction in which 100 percent of the equity interest of such entity is sold as a means
to effect the sale of the business of the entity if the transaction has been negotiated on
behalf of all purchasers and if all purchasers have access to inside information regarding
the entity before consummating the transaction.
    (29) "Self-regulatory organization" means a national securities exchange registered
under the Securities Exchange Act of 1934, a national securities association of
broker-dealers registered under the Securities Exchange Act of 1934, a clearing agency
registered under the Securities Exchange Act of 1934, or the Municipal Securities
Rulemaking Board established under the Securities Exchange Act of 1934.
    (30) "Sign" means, with present intent to authenticate or adopt a record:
    (A) to execute or adopt a tangible symbol; or
    (B) to attach or logically associate with the record an electronic symbol, sound,
or process.
    (31) "State" means a state of the United States, the District of Columbia, Puerto
Rico, the United States Virgin Islands, or any territory or insular possession subject to the
jurisdiction of the United States.
    (32) "Associated with" with respect to a person means any partner, officer, director,
or manager of such person or any person occupying a similar status or performing
similar functions or any person directly or indirectly controlling, controlled by, or in
common control with, such person, but does not include a person whose primary duties
are ministerial or clerical.

    Sec. 3. [80A.42] SECTION 103; REFERENCES TO FEDERAL STATUTES.
    "Securities Act of 1933" (15 U.S.C. Section 77a et seq.), "Securities Exchange
Act of 1934" (15 U.S.C. Section 78a et seq.), "Public Utility Holding Company Act of
1935" (15 U.S.C. Section 79 et seq.), "Investment Company Act of 1940" (15 U.S.C.
Section 80a-1 et seq.), "Investment Advisers Act of 1940" (15 U.S.C. Section 80b-1 et
seq.), "Employee Retirement Income Security Act of 1974" (29 U.S.C. Section 1001 et
seq.), "National Housing Act" (12 U.S.C. Section 1701 et seq.), "Commodity Exchange
Act" (7 U.S.C. Section 1 et seq.), "Internal Revenue Code" (26 U.S.C. Section 1 et seq.),
"Securities Investor Protection Act of 1970" (15 U.S.C. Section 78aaa et seq.), "Securities
Litigation Uniform Standards Act of 1998" (112 Stat. 3227), "Small Business Investment
Act of 1958" (15 U.S.C. Section 661 et seq.), and "Electronic Signatures in Global and
National Commerce Act" (15 U.S.C. Section 7001 et seq.) mean those statutes and the
rules and regulations adopted under those statutes, as in effect on the date of enactment of
this chapter, or as later amended.

    Sec. 4. [80A.43] SECTION 104; REFERENCES TO FEDERAL AGENCIES.
    A reference in this chapter to an agency or department of the United States is also a
reference to a successor agency or department.

    Sec. 5. [80A.44] SECTION 105; ELECTRONIC RECORDS AND SIGNATURES.
    This chapter modifies, limits, and supersedes the federal Electronic Signatures in
Global and National Commerce Act, but does not modify, limit, or supersede Section
101(c) of that act (15 U.S.C. Section 7001(c)) or authorize electronic delivery of any of
the notices described in Section 103(b) of that act (15 U.S.C. Section 7003(b)). This
chapter authorizes the filing of records and signatures, when specified by provisions of
this chapter or by a rule adopted or order issued under this chapter, in a manner consistent
with Section 104(a) of that act (15 U.S.C. Section 7004(a)).
EXEMPTIONS FROM REGISTRATION OF SECURITIES

    Sec. 6. [80A.45] SECTION 201; EXEMPT SECURITIES.
    The following securities are exempt from the requirements of sections 80A.49
through 80A.54 and 80A.71:
    (1) a security, including a revenue obligation or a separate security as defined in
Rule 131 (17 C.F.R. 230.131) adopted under the Securities Act of 1933, issued, insured,
or guaranteed by the United States; by a state; by a political subdivision of a state;
by a public authority, agency, or instrumentality of one or more states; by a political
subdivision of one or more states or by a person controlled or supervised by and acting
as an instrumentality of the United States under authority granted by Congress; or a
certificate of deposit for any of the foregoing;
    (2) a security issued, insured, or guaranteed by a foreign government with which the
United States maintains diplomatic relations, or any of its political subdivisions, if the
security is recognized as a valid obligation by the issuer, insurer, or guarantor;
    (3) a security issued by and representing or that will represent an interest in or a
direct obligation of, or be guaranteed by:
    (A) an international banking institution;
    (B) a banking institution organized under the laws of the United States; a member
bank of the Federal Reserve System; or a depository institution a substantial portion of
the business of which consists or will consist of receiving deposits or share accounts
that are insured to the maximum amount authorized by statute by the Federal Deposit
Insurance Corporation, the National Credit Union Share Insurance Fund, or a successor
authorized by federal law or exercising fiduciary powers that are similar to those permitted
for national banks under the authority of the Comptroller of Currency pursuant to Section
1 of Public Law 87-722 (12 U.S.C. Section 92a); or
    (C) any other depository institution, unless by rule or order the administrator
proceeds under section 80A.48;
    (4) a security issued by and representing an interest in, or a debt of, or insured or
guaranteed by, an insurance company authorized to do business in this state;
    (5) a security issued or guaranteed by a railroad, other common carrier, public utility,
or public utility holding company that is:
    (A) regulated in respect to its rates and charges by the United States or a state;
    (B) regulated in respect to the issuance or guarantee of the security by the United
states, a state, Canada, or a Canadian province or territory; or
    (C) a public utility holding company registered under the Public Utility Holding
Company Act of 1935 or a subsidiary of such a registered holding company within the
meaning of that act;
    (6) a federal covered security specified in Section 18(b)(1) of the Securities Act of
1933 (15 U.S.C. Section 77r(b)(1)) or by rule adopted under that provision or a security
listed or approved for listing on another securities market specified by rule under this
chapter; a put or a call option contract; a warrant; a subscription right on or with respect
to such securities; or an option or similar derivative security on a security or an index of
securities or foreign currencies issued by a clearing agency registered under the Securities
Exchange Act of 1934 and listed or designated for trading on a national securities
exchange, a facility of a national securities exchange, or a facility of a national securities
association registered under the Securities Exchange Act of 1934 or an offer or sale, of the
underlying security in connection with the offer, sale, or exercise of an option or other
security that was exempt when the option or other security was written or issued; or an
option or a derivative security designated by the Securities and Exchange Commission
under Section 9(b) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78i(b));
    (7) a security issued by a person organized and operated exclusively for religious,
educational, benevolent, fraternal, charitable, social, athletic, or reformatory purposes,
or as a chamber of commerce, and not for pecuniary profit, no part of the net earnings
of which inures to the benefit of a private stockholder or other person, or a security of a
company that is excluded from the definition of an investment company under Section
3(c)(10)(B) of the Investment Company Act of 1940 (15 U.S.C. Section 80a-3(c)(10)(B));
except that with respect to the offer or sale, an issuer of such a note, bond, debenture, or
other evidence of indebtedness is required to file a notice specifying the material terms of
the proposed offer or sale and copies of any proposed sales and advertising literature to be
used together with the fee required by section 80A.65 and provided that this exemption
shall be effective if the administrator does not disallow the exemption in writing within 15
days following the date of the notice filing.

    Sec. 7. [80A.46] SECTION 202; EXEMPT TRANSACTIONS.
    The following transactions are exempt from the requirements of sections 80A.49
through 80A.54 and 80A.71:
    (1) isolated nonissuer transactions, consisting of sale to not more than ten purchasers
in Minnesota during any period of 12 consecutive months, whether effected by or through
a broker-dealer or not;
    (2) a nonissuer transaction by or through a broker-dealer registered, or exempt from
registration under this chapter, and a resale transaction by a sponsor of a unit investment
trust registered under the Investment Company Act of 1940, in a security of a class that
has been outstanding in the hands of the public for at least 90 days, if, at the date of
the transaction:
    (A) the issuer of the security is engaged in business, the issuer is not in the
organizational stage or in bankruptcy or receivership, and the issuer is not a blank check,
blind pool, or shell company that has no specific business plan or purpose or has indicated
that its primary business plan is to engage in a merger or combination of the business with,
or an acquisition of, an unidentified person;
    (B) the security is sold at a price reasonably related to its current market price;
    (C) the security does not constitute the whole or part of an unsold allotment to, or
a subscription or participation by, the broker-dealer as an underwriter of the security
or a redistribution;
    (D) a nationally recognized securities manual or its electronic equivalent designated
by rule adopted or order issued under this chapter or a record filed with the Securities and
Exchange Commission that is publicly available contains:
    (i) a description of the business and operations of the issuer;
    (ii) the names of the issuer's executive officers and the names of the issuer's
directors, if any;
    (iii) an audited balance sheet of the issuer as of a date within 18 months before the
date of the transaction or, in the case of a reorganization or merger when the parties to
the reorganization or merger each had an audited balance sheet, a pro forma balance
sheet for the combined organization; and
    (iv) an audited income statement for each of the issuer's two immediately previous
fiscal years or for the period of existence of the issuer, whichever is shorter, or, in the case
of a reorganization or merger when each party to the reorganization or merger had audited
income statements, a pro forma income statement; and
    (E) any one of the following requirements is met:
    (i) the issuer of the security has a class of equity securities listed on a national
securities exchange registered under Section 6 of the Securities Exchange Act of 1934
or designated for trading on the National Association of Securities Dealers Automated
Quotation System;
    (ii) the issuer of the security is a unit investment trust registered under the Investment
Company Act of 1940;
    (iii) the issuer of the security, including its predecessors, has been engaged in
continuous business for at least three years; or
    (iv) the issuer of the security has total assets of at least $2,000,000 based on an
audited balance sheet as of a date within 18 months before the date of the transaction or, in
the case of a reorganization or merger when the parties to the reorganization or merger
each had such an audited balance sheet, a pro forma balance sheet for the combined
organization;
    (3) a nonissuer transaction by or through a broker-dealer registered or exempt from
registration under this chapter in a security of a foreign issuer that is a margin security
defined in regulations or rules adopted by the Board of Governors of the Federal Reserve
System;
    (4) a nonissuer transaction by or through a broker-dealer registered or exempt
from registration under this chapter in an outstanding security if the guarantor of the
security files reports with the Securities and Exchange Commission under the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.
Sections 78m or 78o(d));
    (5) a nonissuer transaction by or through a broker-dealer registered or exempt from
registration under this chapter in a security that:
    (A) is rated at the time of the transaction by a nationally recognized statistical rating
organization in one of its four highest rating categories; or
    (B) has a fixed maturity or a fixed interest or dividend, if:
    (i) a default has not occurred during the current fiscal year or within the three
previous fiscal years or during the existence of the issuer and any predecessor if less than
three fiscal years, in the payment of principal, interest, or dividends on the security; and
    (ii) the issuer is engaged in business, is not in the organizational stage or in
bankruptcy or receivership, and is not and has not been within the previous 12 months a
blank check, blind pool, or shell company that has no specific business plan or purpose or
has indicated that its primary business plan is to engage in a merger or combination of the
business with, or an acquisition of, an unidentified person;
    (6) a nonissuer transaction by or through a broker-dealer registered or exempt from
registration under this chapter effecting an unsolicited order or offer to purchase;
    (7) a nonissuer transaction executed by a bona fide pledgee without the purpose
of evading this chapter;
    (8) a nonissuer transaction by a federal covered investment adviser with investments
under management in excess of $100,000,000 acting in the exercise of discretionary
authority in a signed record for the account of others;
    (9) a transaction in a security, whether or not the security or transaction is otherwise
exempt, in exchange for one or more bona fide outstanding securities, claims, or property
interests, or partly in such exchange and partly for cash, if the terms and conditions of
the issuance and exchange or the delivery and exchange and the fairness of the terms and
conditions have been approved by the administrator after a hearing;
    (10) a transaction between the issuer or other person on whose behalf the offering is
made and an underwriter, or among underwriters;
    (11) a transaction in a note, bond, debenture, or other evidence of indebtedness
secured by a mortgage or other security agreement if:
    (A) the note, bond, debenture, or other evidence of indebtedness is offered and sold
with the mortgage or other security agreement as a unit;
    (B) a general solicitation or general advertisement of the transaction is not made; and
    (C) a commission or other remuneration is not paid or given, directly or indirectly, to
a person not registered under this chapter as a broker-dealer or as an agent;
    (12) a transaction by an executor, administrator of an estate, sheriff, marshal,
receiver, trustee in bankruptcy, guardian, or conservator;
    (13) a sale or offer to sell to:
    (A) an institutional investor;
    (B) an accredited investor as that term is defined in Regulation D, Rule 501(a);
    (C) a federal covered investment adviser; or
    (D) any other person exempted by rule adopted or order issued under this chapter;
    (14) a sale or an offer to sell securities by an issuer, if the transaction is part of
a single issue in which:
    (A) not more than 35 purchasers are present in this state during any 12 consecutive
months, other than those designated in paragraph (13);
    (B) a general solicitation or general advertising is not made in connection with
the offer to sell or sale of the securities;
    (C) a commission or other remuneration is not paid or given, directly or indirectly, to
a person other than a broker-dealer registered under this chapter or an agent registered
under this chapter for soliciting a prospective purchaser in this state; and
    (D) the issuer reasonably believes that all the purchasers in this state, other than
those designated in paragraph (13), are purchasing for investment;
    (15) a transaction under an offer to existing security holders of the issuer, including
persons that at the date of the transaction are holders of convertible securities, options, or
warrants, if a commission or other remuneration, other than a standby commission, is not
paid or given, directly or indirectly, for soliciting a security holder in this state;
    (16) an offer to sell, but not a sale, of a security not exempt from registration under
the Securities Act of 1933 if:
    (A) a registration or offering statement or similar record as required under the
Securities Act of 1933 has been filed, but is not effective, or the offer is made in compliance
with Rule 165 adopted under the Securities Act of 1933 (17 C.F.R. 230.165); and
    (B) a stop order of which the offeror is aware has not been issued against the offeror
by the administrator or the Securities and Exchange Commission, and an audit, inspection,
or proceeding that is public and that may culminate in a stop order is not known by the
offeror to be pending;
    (17) an offer to sell, but not a sale, of a security exempt from registration under the
Securities Act of 1933 if:
    (A) a registration statement has been filed under this chapter, but is not effective;
    (B) a solicitation of interest is provided in a record to offerees in compliance with a
rule adopted by the administrator under this chapter; and
    (c) a stop order of which the offeror is aware has not been issued by the administrator
under this chapter and an audit, inspection, or proceeding that may culminate in a stop
order is not known by the offeror to be pending;
    (18) a transaction involving the distribution of the securities of an issuer to the
security holders of another person in connection with a merger, consolidation, exchange
of securities, sale of assets, or other reorganization to which the issuer, or its parent or
subsidiary and the other person, or its parent or subsidiary, are parties;
    (19) a rescission offer, sale, or purchase under section 80A.77;
    (20) an offer or sale of a security to a person not a resident of this state and not
present in this state if the offer or sale does not constitute a violation of the laws of the
state or foreign jurisdiction in which the offeree or purchaser is present and is not part of
an unlawful plan or scheme to evade this chapter;
    (21) employees' stock purchase, savings, option, profit-sharing, pension, or
similar employees' benefit plan, including any securities, plan interests, and guarantees
issued under a compensatory benefit plan or compensation contract, contained in a
record, established by the issuer, its parents, its majority-owned subsidiaries, or the
majority-owned subsidiaries of the issuer's parent for the participation of their employees
including offers or sales of such securities to:
    (A) directors; general partners; trustees, if the issuer is a business trust; officers;
consultants; and advisors;
    (B) family members who acquire such securities from those persons through gifts or
domestic relations orders;
    (C) former employees, directors, general partners, trustees, officers, consultants, and
advisors if those individuals were employed by or providing services to the issuer when
the securities were offered; and
    (D) insurance agents who are exclusive insurance agents of the issuer, or the issuer's
subsidiaries or parents, or who derive more than 50 percent of their annual income from
those organizations;
    (22) a transaction involving:
    (A) a stock dividend or equivalent equity distribution, whether the corporation or
other business organization distributing the dividend or equivalent equity distribution is
the issuer or not, if nothing of value is given by stockholders or other equity holders for
the dividend or equivalent equity distribution other than the surrender of a right to a cash
or property dividend if each stockholder or other equity holder may elect to take the
dividend or equivalent equity distribution in cash, property, or stock;
    (B) an act incident to a judicially approved reorganization in which a security is
issued in exchange for one or more outstanding securities, claims, or property interests, or
partly in such exchange and partly for cash; or
    (C) the solicitation of tenders of securities by an offeror in a tender offer in
compliance with Rule 162 adopted under the Securities Act of 1933 (17 C.F.R. 230.162);
    (23) a nonissuer transaction in an outstanding security by or through a broker-dealer
registered or exempt from registration under this chapter, if the issuer is a reporting
issuer in a foreign jurisdiction designated by this paragraph or by rule adopted or order
issued under this chapter; has been subject to continuous reporting requirements in the
foreign jurisdiction for not less than 180 days before the transaction; and the security is
listed on the foreign jurisdiction's securities exchange that has been designated by this
paragraph or by rule adopted or order issued under this chapter, or is a security of the same
issuer that is of senior or substantially equal rank to the listed security or is a warrant or
right to purchase or subscribe to any of the foregoing. For purposes of this paragraph,
Canada, together with its provinces and territories, is a designated foreign jurisdiction
and The Toronto Stock Exchange, Inc., is a designated securities exchange. After an
administrative hearing in compliance with chapter 14, the administrator, by rule adopted
or order issued under this chapter, may revoke the designation of a securities exchange
under this paragraph, if the administrator finds that revocation is necessary or appropriate
in the public interest and for the protection of investors;
    (24) any transaction effected by or through a Canadian broker-dealer exempted from
broker-dealer registration pursuant to section 80A.56(b)(3); or
    (25)(A) 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 the 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 administrator a consent to service of process
under section 80A.88 and has, not less than ten days before the issuance or delivery,
furnished the administrator with a written general description of the transaction and any
other information that the administrator requires by rule or otherwise;
    (B) the offer and sale by a cooperative organized under chapter 308B of its securities
when the securities are offered and sold to its existing members or when the purchase of the
securities is necessary or incidental to establishing patron membership in the cooperative,
or when such securities are issued as patronage dividends. The administrator has the
power to define "patron membership" for purposes of this paragraph. This paragraph
applies to securities, other than securities issued as patronage dividends, only when:
    (i) the issuer, before the completion of the sale of the securities, provides each
offeree or purchaser disclosure materials that, to the extent material to an understanding of
the issuer, its business, and the securities being offered, substantially meet the disclosure
conditions and limitations found in rule 502(b) of Regulation D promulgated by the
Securities and Exchange Commission, Code of Federal Regulations, title 17, section
230.502; and
    (ii) within 15 days after the completion of the first sale in each offering completed in
reliance upon this exemption, the cooperative has filed with the administrator a consent to
service of process under section 80A.88 (or has previously filed such a consent), and has
furnished the administrator with a written general description of the transaction and any
other information that the administrator requires by rule or otherwise; and
(C) a cooperative may, at or about the same time as offers or sales are being
completed in reliance upon the exemptions from registration found in this subpart and as
part of a common plan of financing, offer or sell its securities in reliance upon any other
exemption from registration available under this chapter. The offer or sale of securities in
reliance upon the exemptions found in this subpart will not be considered or deemed a part
of or be integrated with any offer or sale of securities conducted by the cooperative in
reliance upon any other exemption from registration available under this chapter, nor will
offers or sales of securities by the cooperative in reliance upon any other exemption from
registration available under this chapter be considered or deemed a part of or be integrated
with any offer or sale conducted by the cooperative in reliance upon this paragraph.

    Sec. 8. [80A.47] SECTION 203; ADDITIONAL EXEMPTIONS AND WAIVERS.
    A rule adopted or order issued under this chapter may exempt a security, transaction,
or offer; a rule under this chapter may exempt a class of securities, transactions, or offers
from any or all of the requirements of sections 80A.49 through 80A.54 and 80A.71; and
an order under this chapter may waive, in whole or in part, any or all of the conditions for
an exemption or offer under sections 80A.45 and 80A.46.

    Sec. 9. [80A.48] SECTION 204; DENIAL, SUSPENSION, REVOCATION,
CONDITION, OR LIMITATION OF EXEMPTIONS.
    (a) Enforcement related powers. Except with respect to a federal covered security
or a transaction involving a federal covered security, an order under this chapter may
deny, suspend application of, condition, limit, or revoke an exemption created under
section 80A.45(3)(C), (7) or (8) or 80A.46 or an exemption or waiver created under
section 80A.47 with respect to a specific security, transaction, or offer. An order under this
section may be issued only pursuant to the procedures in section 80A.54(d) or 80A.81
and only prospectively.
    (b) Knowledge of order required. A person does not violate sections 80A.49,
80A.51 through 80A.54, 80A.71, or 80A.77 by an offer to sell, offer to purchase, sale, or
purchase effected after the entry of an order issued under this section if the person did not
know, and in the exercise of reasonable care could not have known, of the order.
REGISTRATION OF SECURITIES AND NOTICE FILING OF
FEDERAL COVERED SECURITIES

    Sec. 10. [80A.49] SECTION 301; SECURITIES REGISTRATION
REQUIREMENT.
    It is unlawful for a person to offer or sell a security in this state unless:
    (1) the security is a federal covered security;
    (2) the security, transaction, or offer is exempted from registration under sections
80A.45 through 80A.47; or
    (3) the security is registered under this chapter.

    Sec. 11. [80A.50] SECTION 302; FEDERAL COVERED SECURITIES; SMALL
CORPORATE OFFERING REGISTRATION.
    (a) Federal covered securities.
    (1) Required filing of records. With respect to a federal covered security, as defined
in Section 18(b)(2) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(2)), that is not
otherwise exempt under sections 80A.45 through 80A.47, a rule adopted or order issued
under this chapter may require the filing of any or all of the following records:
    (A) before the initial offer of a federal covered security in this state, all records
that are part of a federal registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933 and a consent to service of process
complying with section 80A.88 signed by the issuer;
    (B) after the initial offer of the federal covered security in this state, all records that
are part of an amendment to a federal registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933; and
    (C) to the extent necessary or appropriate to compute fees, a report of the value of
the federal covered securities sold or offered to persons present in this state, if the sales
data are not included in records filed with the Securities and Exchange Commission.
    (2) Notice filing effectiveness and renewal. A notice filing under subsection (a) is
effective for one year commencing on the later of the notice filing or the effectiveness of
the offering filed with the Securities and Exchange Commission. On or before expiration,
the issuer may renew a notice filing by filing a copy of those records filed by the issuer
with the Securities and Exchange Commission that are required by rule or order under
this chapter to be filed. A previously filed consent to service of process complying with
section 80A.88 may be incorporated by reference in a renewal. A renewed notice filing
becomes effective upon the expiration of the filing being renewed.
    (3) Notice filings for federal covered securities under section 18(b)(4)(D). With
respect to a security that is a federal covered security under Section 18(b)(4)(D) of the
Securities Act of 1933 (15 U.S.C. Section 77r(b)(4)(D)), a rule under this chapter may
require a notice filing by or on behalf of an issuer to include a copy of Form D, including
the Appendix, as promulgated by the Securities and Exchange Commission, and a consent
to service of process complying with section 80A.88 signed by the issuer not later than 15
days after the first sale of the federal covered security in this state.
    (4) Stop orders. Except with respect to a federal security under Section 18(b)(1)
of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(1)), if the administrator finds
that there is a failure to comply with a notice or fee requirement of this section, the
administrator may issue a stop order suspending the offer and sale of a federal covered
security in this state. If the deficiency is corrected, the stop order is void as of the time of
its issuance and no penalty may be imposed by the administrator.
    (b) Small corporation offering registration.
    (1) Registration required. A security meeting the conditions set forth in this section
may be registered as set forth in this section.
    (2) Availability. Registration under this section is available only to the issuer of
securities and not to an affiliate of the issuer or to any other person for resale of the issuer's
securities. The issuer must be organized under the laws of one of the states or possessions
of the United States. The securities offered must be exempt from registration under the
Securities Act of 1933 pursuant to Rule 504 of Regulation D (15 U.S.C. section 77c).
    (3) Disqualification. Registration under this section is not available to any of the
following issuers:
    (A) an issuer subject to the reporting requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934;
    (B) an investment company;
    (C) a development stage company that either has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or acquisition with
an unidentified company or companies or other entity or person;
    (D) an issuer if the issuer or any of its predecessors, officers, directors, governors,
partners, ten percent stock or equity holders, promoters, or any selling agents of the
securities to be offered, or any officer, director, governor, or partner of the selling agent:
    (i) has filed a registration statement that is the subject of a currently effective
registration stop order entered under a federal or state securities law within five years
before the filing of the small corporate offering registration application;
    (ii) has been convicted within five years before the filing of the small corporate
offering registration application of a felony or misdemeanor in connection with the
offer, purchase, or sale of a security or a felony involving fraud or deceit, including, but
not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny,
or conspiracy to defraud;
    (iii) is currently subject to a state administrative enforcement order or judgment
entered by a state securities administrator or the Securities and Exchange Commission
within five years before the filing of the small corporate offering registration application,
or is subject to a federal or state administrative enforcement order or judgment in which
fraud or deceit, including, but not limited to, making untrue statements of material facts or
omitting to state material facts, was found and the order or judgment was entered within
five years before the filing of the small corporate offering registration application;
    (iv) is currently subject to an order, judgment, or decree of a court of competent
jurisdiction temporarily restraining or enjoining, or is subject to an order, judgment, or
decree of a court of competent jurisdiction permanently restraining or enjoining the party
from engaging in or continuing any conduct or practice in connection with the purchase
or sale of any security or involving the making of a false filing with a state or with the
Securities and Exchange Commission entered within five years before the filing of the
small corporate offering registration application; or
    (v) is subject to a state's administrative enforcement order, or judgment that
prohibits, denies, or revokes the use of an exemption for registration in connection with
the offer, purchase, or sale of securities,
    (I) except that clauses (i) to (iv) do not apply if the person subject to the
disqualification is duly licensed or registered to conduct securities-related business in the
state in which the administrative order or judgment was entered against the person or if
the dealer employing the party is licensed or registered in this state and the form BD filed
in this state discloses the order, conviction, judgment, or decree relating to the person, and
    (II) except that the disqualification under this subdivision is automatically
waived if the state securities administrator or federal agency that created the basis for
disqualification determines upon a showing of good cause that it is not necessary under
the circumstances to deny the registration.
    (4) Filing and effectiveness of registration statement. A small corporate offering
registration statement must be filed with the administrator. If no stop order is in effect
and no proceeding is pending under section 80A.54, such registration statement shall
become effective automatically at the close of business on the 20th day after filing of the
registration statement or the last amendment of the registration statement or at such earlier
time as the administrator may designate by rule or order.
    (5) Contents of registration statement. A small corporate offering registration
statement under this section shall be on Form U-7, including exhibits required by
the instructions thereto, as adopted by the North American Securities Administrators
Association, or such alternative form as may be designated by the administrator by rule or
order and must include:
    (A) a consent to service of process complying with section 80A.88;
    (B) a statement of the type and amount of securities to be offered and the amount of
securities to be offered in this state;
    (C) a specimen or copy of the security being registered, unless the security
is uncertificated, a copy of the issuer's articles of incorporation and bylaws or their
substantial equivalents in effect, and a copy of any indenture or other instrument covering
the security to be registered;
    (D) a signed or conformed copy of an opinion of counsel concerning the legality
of the securities being registered which states whether the securities, when sold, will be
validly issued, fully paid, and nonassessable and, if debt securities, binding obligations
of the issuer;
    (E) the states (i) in which the securities are proposed to be offered; (ii) in which a
registration statement or similar filing has been made in connection with the offering
including information as to effectiveness of each such filing; and (iii) in which a stop
order or similar proceeding has been entered or in which proceedings or actions seeking
such an order are pending;
    (F) a copy of the offering document proposed to be delivered to offerees; and
    (G) a copy of any other pamphlet, circular, form letter, advertisement, or other sales
literature intended as of the effective date to be used in connection with the offering and
any solicitation of interest used in compliance with section 80A.46(17)(B).
    (6) Copy to purchaser. A copy of the offering document as filed with the
administrator must be delivered to each person purchasing the securities prior to sale
of the securities to such person.

    Sec. 12. [80A.51] SECTION 303; SECURITIES REGISTRATION BY
COORDINATION.
    (a) Registration permitted. A security for which a registration statement has been
filed under the Securities Act of 1933 in connection with the same offering may be
registered by coordination under this section.
    (b) Required records. A registration statement and accompanying records under
this section must contain or be accompanied by the following records in addition to the
information specified in section 80A.53 and a consent to service of process complying
with section 80A.88:
    (1) a copy of the latest form of prospectus filed under the Securities Act of 1933;
    (2) a copy of the articles of incorporation and bylaws or their substantial equivalents
currently in effect; a copy of any agreement with or among underwriters; a copy of any
indenture or other instrument governing the issuance of the security to be registered;
and a specimen, copy, or description of the security that is required by rule adopted or
order issued under this chapter;
    (3) copies of any other information or any other records filed by the issuer under the
Securities Act of 1933 requested by the administrator; and
    (4) an undertaking to forward each amendment to the federal prospectus, other than
an amendment that delays the effective date of the registration statement, promptly after
it is filed with the Securities and Exchange Commission.
    (c) Conditions for effectiveness of registration statement. A registration statement
under this section becomes effective simultaneously with or subsequent to the federal
registration statement when all of the following conditions are satisfied:
    (1) a stop order under subsection (d) or section 80A.54 or issued by the Securities
and Exchange Commission is not in effect and a proceeding is not pending against the
issuer under section 80A.54; and
    (2) the registration statement has been on file for at least 20 days or a shorter period
provided by rule adopted or order issued under this chapter.
    (d) Notice of federal registration statement effectiveness. The registrant shall
promptly notify the administrator in a record of the date when the federal registration
statement becomes effective and the content of any price amendment and shall promptly
file a record containing the price amendment. If the notice is not timely received, the
administrator may issue a stop order, without prior notice or hearing, retroactively denying
effectiveness to the registration statement or suspending its effectiveness until compliance
with this section. The administrator shall promptly notify the registrant of an order by
telegram, telephone, or electronic means and promptly confirm this notice by a record. If
the registrant subsequently complies with the notice requirement of this section, the stop
order is void as of the date of its issuance.
    (e) Effectiveness of registration statement. If the federal registration statement
becomes effective before each of the conditions in this section is satisfied or is waived
by the administrator, the registration statement is automatically effective under this
chapter when all the conditions are satisfied or waived. If the registrant notifies the
administrator of the date when the federal registration statement is expected to become
effective, the administrator shall promptly notify the registrant by telegram, telephone, or
electronic means and promptly confirm this notice by a record, indicating whether all the
conditions are satisfied or waived and whether the administrator intends the institution of a
proceeding under section 80A.54. The notice by the administrator does not preclude the
institution of such a proceeding.

    Sec. 13. [80A.52] SECTION 304; SECURITIES REGISTRATION BY
QUALIFICATION.
    (a) Registration permitted. A security may be registered by qualification under
this section.
    (b) Required records. A registration statement under this section must contain
the information or records specified in section 80A.53, a consent to service of process
complying with section 80A.88, and, if required by rule adopted under this chapter, the
following information or records:
    (1) with respect to the issuer and any significant subsidiary, its name, address, and
form of organization; the state or foreign jurisdiction and date of its organization; the
general character and location of its business; a description of its physical properties
and equipment; and a statement of the general competitive conditions in the industry or
business in which it is or will be engaged;
    (2) with respect to each director and officer of the issuer, and other person having a
similar status or performing similar functions, the person's name, address, and principal
occupation for the previous five years; the amount of securities of the issuer held by
the person as of the 30th day before the filing of the registration statement; the amount
of the securities covered by the registration statement to which the person has indicated
an intention to subscribe; and a description of any material interest of the person in any
material transaction with the issuer or a significant subsidiary effected within the previous
three years or proposed to be effected;
    (3) with respect to persons covered by paragraph (2), the aggregate sum of the
remuneration paid to those persons during the previous 12 months and estimated to be
paid during the next 12 months, directly or indirectly, by the issuer, and all predecessors,
parents, subsidiaries, and affiliates of the issuer;
    (4) with respect to a person owning of record or owning beneficially, if known, ten
percent or more of the outstanding shares of any class of equity security of the issuer, the
information specified in paragraph (2) other than the person's occupation;
    (5) with respect to a promoter, if the issuer was organized within the previous three
years, the information or records specified in paragraph (2), any amount paid to the
promoter within that period or intended to be paid to the promoter, and the consideration
for the payment;
    (6) with respect to a person on whose behalf any part of the offering is to be made
in a nonissuer distribution, the person's name and address; the amount of securities of
the issuer held by the person as of the date of the filing of the registration statement; a
description of any material interest of the person in any material transaction with the issuer
or any significant subsidiary effected within the previous three years or proposed to be
effected, and a statement of the reasons for making the offering;
    (7) the capitalization and long-term debt, on both a current and pro forma basis,
of the issuer and any significant subsidiary, including a description of each security
outstanding or being registered or otherwise offered, and a statement of the amount and
kind of consideration, whether in the form of cash, physical assets, services, patents,
goodwill, or anything else of value, for which the issuer or any subsidiary has issued its
securities within the previous two years or is obligated to issue its securities;
    (8) the kind and amount of securities to be offered; the proposed offering price or the
method by which it is to be computed; any variation at which a proportion of the offering is
to be made to a person or class of persons other than the underwriters, with a specification
of the person or class; the basis on which the offering is to be made if otherwise than for
cash; the estimated aggregate underwriting and selling discounts or commissions and
finders' fees, including separately cash, securities, contracts, or anything else of value to
accrue to the underwriters or finders in connection with the offering or, if the selling
discounts or commissions are variable, the basis of determining them and their maximum
and minimum amounts; the estimated amounts of other selling expenses, including legal,
engineering, and accounting charges; the name and address of each underwriter and each
recipient of a finder's fee; a copy of any underwriting or selling group agreement under
which the distribution is to be made or the proposed form of any such agreement whose
terms have not yet been determined; and a description of the plan of distribution of any
securities that are to be offered otherwise than through an underwriter;
    (9) the estimated monetary proceeds to be received by the issuer from the offering;
the purposes for which the proceeds are to be used by the issuer; the estimated amount to
be used for each purpose; the order or priority in which the proceeds will be used for the
purposes stated; the amounts of any funds to be raised from other sources to achieve the
purposes stated; the sources of the funds; and, if a part of the proceeds is to be used to
acquire property, including goodwill, otherwise than in the ordinary course of business,
the names and addresses of the vendors, the purchase price, the names of any persons that
have received commissions in connection with the acquisition, and the amounts of the
commissions and other expenses in connection with the acquisition, including the cost of
borrowing money to finance the acquisition;
    (10) a description of any stock options or other security options outstanding, or to
be created in connection with the offering, and the amount of those options held or to be
held by each person required to be named in paragraph (2), (4), (5), (6), or (8) and by any
person that holds or will hold ten percent or more in the aggregate of those options;
    (11) the dates of, parties to, and general effect concisely stated of each managerial
or other material contract made or to be made otherwise than in the ordinary course of
business to be performed in whole or in part at or after the filing of the registration
statement or that was made within the previous two years, and a copy of the contract;
    (12) a description of any pending litigation, action, or proceeding to which the issuer
is a party and that materially affects its business or assets, and any litigation, action, or
proceeding known to be contemplated by governmental authorities;
    (13) a copy of any prospectus, pamphlet, circular, form letter, advertisement, or other
sales literature intended as of the effective date to be used in connection with the offering
and any solicitation of interest used in compliance with section 80A.46(17)(B);
    (14) a specimen or copy of the security being registered, unless the security
is uncertificated; a copy of the issuer's articles of incorporation and bylaws or their
substantial equivalents, in effect; and a copy of any indenture or other instrument covering
the security to be registered;
    (15) a signed or conformed copy of an opinion of counsel concerning the legality of
the security being registered, with an English translation if it is in a language other than
English, which states whether the security when sold will be validly issued, fully paid, and
nonassessable and, if a debt security, a binding obligation of the issuer;
    (16) a signed or conformed copy of a consent of any accountant, engineer, appraiser,
or other person whose profession gives authority for a statement made by the person, if the
person is named as having prepared or certified a report or valuation, other than an official
record, that is public, which is used in connection with the registration statement;
    (17) a balance sheet of the issuer as of a date within four months before the filing of
the registration statement; a statement of income and a statement of case flows for each of
the three fiscal years preceding the date of the balance sheet and for any period between
the close of the immediately previous fiscal year and the date of the balance sheet, or for
the period of the issuer's and any predecessor's existence if less than three years; and, if
any part of the proceeds of the offering is to be applied to the purchase of a business, the
financial statements that would be required if that business were the registrant; and
    (18) any additional information or records required by rule adopted or order issued
under this chapter.
    (c) Conditions for effectiveness of registration statement. A registration statement
under this section becomes effective 30 days, or any shorter period provided by rule
adopted or order issued under this chapter, after the date the registration statement or the
last amendment other than a price amendment is filed, if:
    (1) a stop order is not in effect and a proceeding is not pending under section 80A.54;
    (2) the administrator has not issued an order under section 80A.54 delaying
effectiveness; and
    (3) the applicant or registrant has not requested that effectiveness be delayed.
    (d) Delay of effectiveness of registration statement. The administrator may
delay effectiveness once for not more than 90 days if the administrator determines the
registration statement is not complete in all material respects and promptly notifies
the applicant or registrant of that determination. The administrator may also delay
effectiveness for a further period of not more than 30 days if the administrator determines
that the delay is necessary or appropriate.
    (e) Prospectus distribution may be required. A rule adopted or order issued
under this chapter may require as a condition of registration under this section that a
prospectus containing a specified part of the information or record specified in subsection
(b) be sent or given to each person to which an offer is made, before or concurrently,
with the earliest of:
    (1) the first offer made in a record to the person otherwise than by means of a public
advertisement, by or for the account of the issuer or another person on whose behalf the
offering is being made or by an underwriter or broker-dealer that is offering part of an
unsold allotment or subscription taken by the person as a participant in the distribution;
    (2) the confirmation of a sale made by or for the account of the person;
    (3) payment pursuant to such a sale; or
    (4) delivery of the security pursuant to such a sale.

    Sec. 14. [80A.53] SECTION 305; SECURITIES REGISTRATION FILINGS.
    (a) Who may file. A registration statement may be filed by the issuer, a person on
whose behalf the offering is to be made, or a broker-dealer registered under this chapter.
    (b) Status of offering. A registration statement filed under section 80A.51 or
80A.52 must specify:
    (1) the amount of securities to be offered in this state;
    (2) the states in which a registration statement or similar record in connection with
the offering has been or is to be filed; and
    (3) any adverse order, judgment, or decree issued in connection with the offering by
a state securities regulator, the Securities and Exchange Commission, or a court.
    (c) Incorporation by reference. A record filed under this chapter or the predecessor
act within five years preceding the filing of a registration statement may be incorporated
by reference in the registration statement to the extent that the record is currently accurate.
    (d) Nonissuer distribution. In the case of a nonissuer distribution, information
or a record may not be required under subsection (i) or section 80A.52, unless it is
known to the person filing the registration statement or to the person on whose behalf
the distribution is to be made or unless it can be furnished by those persons without
unreasonable effort or expense.
    (e) Escrow and impoundment. A rule adopted or order issued under this chapter
may require as a condition of registration that a security issued within the previous five
years or to be issued to a promoter for a consideration substantially less than the public
offering price or to a person for a consideration other than cash be deposited in escrow; and
that the proceeds from the sale of the registered security in this state be impounded until
the issuer receives a specified amount from the sale of the security either in this state or
elsewhere. The conditions of any escrow or impoundment required under this subsection
may be established by rule adopted or order issued under this chapter, but the administrator
may not reject a depository institution solely because of its location in another state.
    (f) Form of subscription. A rule adopted or order issued under this chapter may
require as a condition of registration that a security registered under this chapter be sold
only on a specified form of subscription or sale contract and that a signed or conformed
copy of each contract be filed under this chapter or preserved for a period specified by
the rule or order, which may not be longer than five years.
    (g) Effective period. Except while a stop order is in effect under section 80A.54, a
registration statement is effective for one year after its effective date, or for any longer
period designated in an order under this chapter during which the security is being offered
or distributed in a nonexempted transaction by or for the account of the issuer or other
person on whose behalf the offering is being made or by an underwriter or broker-dealer
that is still offering part of an unsold allotment or subscription taken as a participant in
the distribution. For the purposes of a nonissuer transaction, all outstanding securities of
the same class identified in the registration statement as a security registered under this
chapter are considered to be registered while the registration statement is effective. If any
securities of the same class are outstanding, a registration statement may not be withdrawn
until one year after its effective date. A registration statement may be withdrawn only
with the approval of the administrator.
    (h) Periodic reports. While a registration statement is effective, a rule adopted or
order issued under this chapter may require the person that filed the registration statement
to file reports, not more often than quarterly, to keep the information or other record in the
registration statement reasonably current and to disclose the progress of the offering.
    (i) Posteffective amendments. A registration statement may be amended after its
effective date. The posteffective amendment becomes effective when the administrator
so orders. If a posteffective amendment is made to increase the number of securities
specified to be offered or sold, the person filing the amendment shall pay a registration
fee. A posteffective amendment relates back to the date of the offering of the additional
securities being registered if, within one year after the date of the sale, the amendment is
filed and the additional registration fee is paid.

    Sec. 15. [80A.54] SECTION 306; DENIAL, SUSPENSION, AND REVOCATION
OF SECURITIES REGISTRATION.
    (a) Stop orders. The administrator may issue a stop order denying effectiveness to,
or suspending or revoking the effectiveness of, a registration statement if the administrator
finds that the order is in the public interest and that:
    (1) the registration statement as of its effective date or before the effective date in the
case of an order denying effectiveness, an amendment under section 80A.53(j) as of its
effective date, or a report under section 80A.53(i), is incomplete in a material respect or
contains a statement that, in the light of the circumstances under which it was made, was
false or misleading with respect to a material fact;
    (2) this chapter or a rule adopted or order issued under this chapter or a condition
imposed under this chapter has been willfully violated, in connection with the offering, by:
    (A) the person filing the registration statement, if the person is directly or indirectly
controlled by or acting for the issuer;
    (B) the issuer;
    (C) a partner, officer, or director of the issuer or a person having a similar status
or performing similar functions;
    (D) a promoter of the issuer;
    (E) a person directly or indirectly controlling or controlled by the issuer; or
    (F) an underwriter;
    (3) the security registered or sought to be registered is the subject of a permanent or
temporary injunction of a court of competent jurisdiction or an administrative stop order
or similar order issued under any federal, foreign, or state law other than this chapter
applicable to the offering, but the administrator may not institute a proceeding against an
effective registration statement under this paragraph more than one year after the date of
the order or injunction on which it is based, and the administrator may not issue an order
under this paragraph on the basis of an order or injunction issued under the securities act
of another state unless the order or injunction was based on conduct that would constitute,
as of the date of the order, a ground for a stop order under this section;
    (4) the issuer's enterprise or method of business includes or would include activities
that are unlawful where performed;
    (5) with respect to a security sought to be registered under section 80A.51, there has
been a failure to comply with the undertaking required by section 80A.51(b)(4); or
    (6) the applicant or registrant has not paid the filing fee, but the administrator shall
void the order if the deficiency is corrected.
    (b) Institution of stop order. The administrator may not institute a stop order
proceeding against an effective registration statement on the basis of conduct or a
transaction known to the administrator when the registration statement became effective
unless the proceeding is instituted within 30 days after the registration statement became
effective.
    (c) Summary process. The administrator may summarily revoke, deny, postpone,
or suspend the effectiveness of a registration statement pending final determination of
an administrative proceeding. Upon the issuance of the order, the administrator shall
promptly notify each person specified in subsection (d) that the order has been issued;
the reasons for the revocation, denial, postponement, or suspension; and that within 15
days after the receipt of a request in a record from the person the matter will be scheduled
for a hearing. If a hearing is not requested and none is ordered by the administrator,
within 30 days after the date of service of the order, the order becomes final. If a hearing
is requested or ordered, the administrator, after notice of and opportunity for hearing for
each person subject to the order, may modify or vacate the order or extend the order
until final determination.
    (d) Procedural requirements for stop order. A stop order may not be issued
under this section without:
    (1) appropriate notice to the applicant or registrant, the issuer, and the person on
whose behalf the securities are to be or have been offered;
    (2) an opportunity for hearing; and
    (3) findings of fact and conclusions of law in a record in accordance with chapter 14.
    (e) Modification or vacation of stop order. The administrator may modify or
vacate a stop order issued under this section if the administrator finds that the conditions
that caused its issuance have changed or that it is necessary or appropriate in the public
interest or for the protection of investors.

    Sec. 16. [80A.55] SECTION 307; WAIVER AND MODIFICATION.
    The administrator may waive or modify, in whole or in part, any or all of the
requirements of sections 80A.50, 80A.51, and 80A.52(b) or the requirement of any
information or record in a registration statement or in a periodic report filed pursuant to
section 80A.53(i).
BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS,
INVESTMENT ADVISER REPRESENTATIVES, AND FEDERAL
COVERED INVESTMENT ADVISERS

    Sec. 17. [80A.56] SECTION 401; BROKER-DEALER REGISTRATION
REQUIREMENT AND EXEMPTIONS.
    (a) Registration requirement. It is unlawful for a person to transact business in this
state as a broker-dealer unless the person is registered under this chapter as a broker-dealer
or is exempt from registration as a broker-dealer under subsection (b) or (d).
    (b) Exemptions from registration. The following persons are exempt from the
registration requirement of subsection (a):
    (1) a broker-dealer without a place of business in this state if its only transactions
effected in the state are with:
    (A) the issuer of the securities involved in the transactions;
    (B) a broker-dealer registered under this chapter or not required to be registered as a
broker-dealer under this chapter;
    (C) an institutional investor;
    (D) a nonaffiliated federal covered investment adviser with investments under
management in excess of $100,000,000 acting for the account of others pursuant to
discretionary authority in a signed record;
    (E) a bona fide preexisting customer whose principal place of residence is not in
this state and the person is registered as a broker-dealer under the Securities Exchange
Act of 1934 or not required to be registered under the Securities Exchange Act of 1934
and is registered under the securities act of the state in which the customer maintains a
principal place of residence;
    (F) a bona fide preexisting customer whose principal place of residence is in this
state but was not present in this state when the customer relationship was established, if:
    (i) the broker-dealer is registered under the Securities Exchange Act of 1934 or not
required to be registered under the Securities Exchange Act of 1934 and is registered
under the securities laws of the state in which the customer relationship was established
and where the customer had maintained a principal place of residence; and
    (ii) within 45 days after the customer's first transaction in this state, the person files
an application for registration as a broker-dealer in this state and a further transaction is not
effected more than 75 days after the date on which the application is filed, or, if earlier, the
date on which the administrator notifies the person that the administrator has denied the
application for registration or has stayed the pendency of the application for good cause;
    (G) not more than three customers in this state during the previous 12 months,
in addition to those customers specified in subparagraphs (A) through (F) and under
subparagraph (H), if the broker-dealer is registered under the Securities Exchange Act of
1934 or not required to be registered under the Securities Exchange Act of 1934 and is
registered under the securities act of the state in which the broker-dealer has its principal
place of business; and
    (H) any other person exempted by rule adopted or order issued under this chapter;
and
    (2) a person that deals solely in United States government securities and is supervised
as a dealer in government securities by the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation,
or the Office of Thrift Supervision; and
    (3) a broker-dealer that is registered in Canada and who has no office or other
physical presence in this state if the broker-dealer complies with the following conditions:
    (A) the broker-dealer is registered with or is a member of a self-regulatory
organization in Canada, a stock exchange in Canada, or the Bureau des services financiers;
    (B) the broker-dealer maintains in good standing its provincial or territorial
registration and its registration with or membership in a self-regulatory organization in
Canada, a stock exchange in Canada, or the Bureau des services financiers; and
    (C) the broker-dealer effects or attempts to effect transactions in securities:
    (i) with or for a person from Canada who is temporarily present in this state, with
whom the broker-dealer had a bona fide broker-dealer-client relationship before the person
entered the United States; or
    (ii) with or for a person from Canada who is present in this state, whose transactions
are in a Canadian self-directed tax advantaged retirement account of which the person is
the holder or contributor.
    (c) Limits on employment or association. It is unlawful for a broker-dealer, or
for an issuer engaged in offering, offering to purchase, purchasing, or selling securities in
this state, directly or indirectly, to employ or associate with an individual to engage in an
activity related to securities transactions in this state if the registration of the individual is
suspended or revoked or the individual is barred from employment or association with a
broker-dealer, an issuer, an investment adviser, or a federal covered investment adviser by
an order of the administrator under this chapter, the Securities and Exchange Commission,
or a self-regulatory organization. A broker-dealer or issuer does not violate this subsection
if the broker-dealer or issuer did not know and in the exercise of reasonable care could not
have known, of the suspension, revocation, or bar. Upon request from a broker-dealer or
issuer and for good cause, an order under this chapter may modify or waive, in whole or in
part, the application of the prohibitions of this subsection to the broker-dealer.
    (d) Foreign transactions. A rule adopted or order issued under this chapter may
permit:
    (1) a broker-dealer that is registered in Canada or other foreign jurisdiction and that
does not have a place of business in this state to effect transactions in securities with or
for, or attempt to effect the purchase or sale of any securities by:
    (A) an individual from Canada or other foreign jurisdiction who is temporarily
present in this state and with whom the broker-dealer had a bona fide customer relationship
before the individual entered the United States;
    (B) an individual from Canada or other foreign jurisdiction who is present in the
state and whose transactions are in a self-directed tax advantaged retirement plan of which
the individual is the holder or contributor in that foreign jurisdiction; or
    (C) an individual who is present in this state, with whom the broker-dealer customer
relationship arose while the individual was temporarily or permanently resident in Canada
or the other foreign jurisdiction; and
    (2) an agent who represents a broker-dealer that is exempt under this subsection to
effect transactions in securities or attempt to effect the purchase or sale of securities in this
state as permitted for a broker-dealer described in paragraph (1).

    Sec. 18. [80A.57] SECTION 402; AGENT REGISTRATION REQUIREMENT
AND EXEMPTIONS.
    (a) Registration requirement. It is unlawful for an individual to transact business
in the state as an agent unless the individual is registered under this chapter as an agent or
is exempt from registration as an agent under subsection (b).
    (b) Exemptions from registration. The following individuals are exempt from the
registration requirement of subsection (a):
    (1) an individual who represents a broker-dealer in effecting transactions in this state
limited to those described in Section 15(h)(2) of the Securities Exchange Act of 1934 (15
U.S.C. Section 78(o)(2));
    (2) an individual who represents a broker-dealer that is exempt under section
80A.56(b) or (d);
    (3) an individual who represents an issuer with respect to an offer or sale of the
issuer's own securities or those of the issuer's parent or any of the issuer's subsidiaries, and
who is not compensated in connection with the individual's participation by the payment
of commissions or other remuneration based, directly or indirectly, on transactions in
those securities;
    (4) an individual who represents an issuer and who effects transactions in the issuer's
securities exempted by section 80A.46, other than section 80A.46(11) and (14);
    (5) an individual who represents an issuer that effects transactions solely in federal
covered securities of the issuer, but an individual who effects transactions in a federal
covered security under Section 18(b)(3) or 18(b)(4)(D) of the Securities Act of 1933 (15
U.S.C. Section 77r(b)(3) or 77r(b)(4)(D)) is not exempt if the individual is compensated
in connection with the agent's participation by the payment of commissions or other
remuneration based, directly or indirectly, on transactions in those securities;
    (6) an individual who represents a broker-dealer registered in this state under section
80A.56(a) or exempt from registration under section 80A.56(b) in the offer and sale
of securities for an account of a nonaffiliated federal covered investment adviser with
investments under management in excess of $100,000,000 acting for the account of others
pursuant to discretionary authority in a signed record;
    (7) an individual who represents an issuer in connection with the purchase of the
issuer's own securities;
    (8) an individual who represents an issuer and who restricts participation to
performing clerical or ministerial acts;
(9) an individual who represents an issuer in effecting transactions in a security
exempted by section 80A.45;
(10) an individual who represents an issuer in effecting transactions with existing
employees, partners, or directors of the issuer if no commission or other remuneration is
paid or given directly or indirectly for soliciting any person in this state;
(11) an individual who represents one or more issuers with respect to an offer or sale
of the issuer's securities if the offer or sale of the securities is exempted by section 80A.46
and the individual complies with or satisfies each of the following conditions:
(A) the individual (i) would not be deemed disqualified pursuant to section 80A.50
(b)(3)(D)(ii) to (iv); (ii) is not employed by or associated with a broker-dealer; and
(iii) has not been the subject of (a) an action, order, or decision by any self-regulatory
organization, commodities exchange, or securities exchange resulting in a censure or
other sanction within 12 months prior to the offer or sale or (b) a denial, revocation, or
restriction of any license or membership by any self-regulatory organization, commodities
exchange, or securities exchange that has been effective at any time within 12 months
prior to the offer or sale;
(B) neither the individual nor any person associated with the individual handles
or takes possession of funds or securities;
(C) the individual files with the administrator a consent to service of process
complying with Section 611 before commencing any such representation; and
(D) the individual files with the administrator a notice that contains (i) the full legal
name, address, and phone of the individual; (ii) any other names used by the individual in
the prior five years; (iii) a statement whether the individual is, or within the last prior years
has been, licensed by or registered with any state or federal government, government
agency, or any self-regulatory organization, commodities exchange, or securities exchange
as a broker-dealer, registered representative, investment advisor, or investment advisor
representative, including, if applicable, the individual's IARD/CRD number; (iv) an
undertaking to notify the administrator in writing of a change in any of the foregoing
within five business days of such change; and (v) any additional information that may be
required by rule adopted or order issued under this chapter. This notice must be filed
before the individual commences any issuer representation. The notice is effective through
December 31 of the year following the year in which it is filed and may be renewed
annually in such manner as prescribed by the administrator; and
    (12) any other individual exempted by rule adopted or order issued under this chapter.
    (c) Registration effective only while employed or associated. The registration of
an agent is effective only while the agent is employed by or associated with a broker-dealer
registered under this chapter or an issuer that is offering, selling, or purchasing its
securities in this state.
    (d) Limit on employment or association. It is unlawful for a broker-dealer, or an
issuer engaged in offering, selling, or purchasing securities in this state, to employ or
associate with an agent who transacts business in the state on behalf of broker-dealers or
issuers unless the agent is registered under subsection (a) or exempt from registration
under subsection (b).
    (e) Limit on affiliations. An individual may not act as an agent for more than one
broker-dealer or one issuer at a time, unless the broker-dealer or the issuer for which the
agent acts are affiliated by direct or indirect common control or are authorized by rule or
order under this chapter.

    Sec. 19. [80A.58] SECTION 403; INVESTMENT ADVISER REGISTRATION
REQUIREMENT AND EXEMPTIONS.
    (a) Registration requirement. It is unlawful for a person to transact business in
this state as an investment adviser unless the person is registered under this chapter as
an investment adviser or is exempt from registration as an investment adviser under
subsection (b).
    (b) Exemptions from registration. The following persons are exempt from the
registration requirement of subsection (a):
(1) any person whose only clients in this state are:
    (A) federal covered investment advisers, investment advisers registered under this
chapter, or broker-dealers registered under this chapter;
    (B) institutional investors;
    (C) bona fide preexisting clients whose principal places of residence are not in this
state if the investment adviser is registered under the securities act of the state in which the
clients maintain principal places of residence; or
    (D) any other client exempted by rule adopted or order issued under this chapter;
    (2) a person without a place of business in this state if the person has had, during the
preceding 12 months, not more than five clients that are resident in this state in addition
to those specified under paragraph (1); or
    (3) any other person exempted by rule adopted or order issued under this chapter.
    (c) Limits on employment or association. It is unlawful for an investment adviser,
directly or indirectly, to employ or associate with an individual to engage in an activity
related to investment advice in this state if the registration of the individual is suspended
or revoked or the individual is barred from employment or association with an investment
adviser, federal covered investment adviser, or broker-dealer by an order under this
chapter, the Securities and Exchange Commission, or a self-regulatory organization,
unless the investment adviser did not know, and in the exercise of reasonable care could
not have known, of the suspension, revocation, or bar. Upon request from the investment
adviser and for good cause, the administrator, by order, may waive, in whole or in part, the
application of the prohibitions of this subsection to the investment adviser.

    Sec. 20. [80A.60] SECTION 405; FEDERAL COVERED INVESTMENT
ADVISER NOTICE FILING REQUIREMENT.
    (a) Notice filing requirement. Except with respect to a federal covered investment
adviser described in subsection (b), it is unlawful for a federal covered investment adviser
to transact business in this state as a federal covered investment adviser unless the federal
covered investment adviser complies with subsection (c).
    (b) Notice filing requirement not required. The following federal covered
investment advisers are not required to comply with subsection (c):
    (1) a federal covered investment adviser without a place of business in this state if
its only clients in this state are:
    (A) federal covered investment advisers, investment advisers registered under this
chapter, and broker-dealers registered under this chapter;
    (B) institutional investors;
    (C) bona fide preexisting clients whose principal places of residence are not in
this state; or
    (D) other clients specified by rule adopted or order issued under this chapter;
    (2) a federal covered investment adviser without a place of business in this state if
the person has had, during the preceding 12 months, not more than five clients that are
resident in this state in addition to those specified under paragraph (1); and
    (3) any other person excluded by rule adopted or order issued under this chapter.
    (c) Notice filing procedure. A person acting as a federal covered investment adviser,
not excluded under subsection (b), shall file a notice, a consent to service of process
complying with section 80A.88, and such records as have been filed with the Securities
and Exchange Commission under the Investment Advisers Act of 1940 required by rule
adopted or order issued under this chapter and pay the fees specified in section 80A.65(e).
    (d) Effectiveness of filing. The notice under subsection (c) becomes effective upon
its filing.

    Sec. 21. [80A.61] SECTION 406; REGISTRATION BY BROKER-DEALER,
AGENT, AND INVESTMENT ADVISER.
    (a) Application for initial registration. A person shall register as a broker-dealer,
agent, or investment adviser by filing an application and a consent to service of process
complying with section 80A.88, and paying the fee specified in section 80A.65 and any
reasonable fees charged by the designee of the administrator for processing the filing. The
application must contain:
    (1) the information or record required for the filing of a uniform application; and
    (2) upon request by the administrator, any other financial or other information or
record that the administrator determines is appropriate.
    (b) Amendment. If the information or record contained in an application filed under
subsection (a) is or becomes inaccurate or incomplete in a material respect, the registrant
shall promptly file a correcting amendment.
    (c) Effectiveness of registration. If an order is not in effect and a proceeding is not
pending under section 80A.67, registration becomes effective at noon on the 45th day after
a completed application is filed, unless the registration is denied. A rule adopted or order
issued under this chapter may set an earlier effective date or may defer the effective date
until noon on the 45th day after the filing of any amendment completing the application.
    (d) Registration renewal. A registration is effective until midnight on December
31 of the year for which the application for registration is filed. Unless an order is in
effect under section 80A.67, a registration may be automatically renewed each year by
filing such records as are required by rule adopted or order issued under this chapter, by
paying the fee specified in section 80A.65, and by paying costs charged by the designee of
the administrator for processing the filings.
    (e) Additional conditions or waivers. A rule adopted or order issued under this
chapter may impose such other conditions, not inconsistent with the National Securities
Markets Improvement Act of 1996. An order issued under this chapter may waive, in
whole or in part, specific requirements in connection with registration as are in the public
interest and for the protection of investors.

    Sec. 22. [80A.62] SECTION 407; SUCCESSION AND CHANGE IN
REGISTRATION OF BROKER-DEALER OR INVESTMENT ADVISER.
    (a) Succession. A broker-dealer or investment adviser may succeed to the current
registration of another broker-dealer or investment adviser or a notice filing of a federal
covered investment adviser, and a federal covered investment adviser may succeed to the
current registration of an investment adviser or notice filing of another federal covered
investment adviser, by filing as a successor an application for registration pursuant to
section 80A.56 or 80A.58 or a notice pursuant to section 80A.60 for the unexpired portion
of the current registration or notice filing.
    (b) Organizational change. A broker-dealer or investment adviser that changes its
form of organization or state of incorporation or organization may continue its registration
by filing an amendment to its registration if the change does not involve a material change
in its financial condition or management. The amendment becomes effective when filed or
on a date designated by the registrant in its filing. The new organization is a successor
to the original registrant for the purposes of this chapter. If there is a material change in
financial condition or management, the broker-dealer or investment adviser shall file a
new application for registration. A predecessor registered under this chapter shall stop
conducting its securities business other than winding down transactions and shall file
for withdrawal of broker-dealer or investment adviser registration within 45 days after
filing its amendment to effect succession.
    (c) Name change. A broker-dealer or investment adviser that changes its name
may continue its registration by filing an amendment to its registration. The amendment
becomes effective when filed or on a date designated by the registrant.
    (d) Change of control. A change of control of a broker-dealer or investment adviser
may be made in accordance with a rule adopted or order issued under this chapter.

    Sec. 23. [80A.63] SECTION 408; TERMINATION OF EMPLOYMENT
OR ASSOCIATION OF AGENT AND TRANSFER OF EMPLOYMENT OR
ASSOCIATION.
    (a) Notice of termination. If an agent registered under this chapter terminates
employment by or association with a broker-dealer or issuer, or terminates activities that
require registration as an agent, the broker-dealer, or issuer shall promptly file a notice
of termination. If the registrant learns that the broker-dealer or issuer has not filed the
notice, the registrant may do so.
    (b) Transfer of employment or association. If an agent registered under this
chapter terminates employment by or association with a broker-dealer registered under this
chapter and begins employment by or association with another broker-dealer registered
under this chapter, then upon the filing by or on behalf of the registrant, within 30 days
after the termination, of an application for registration that complies with the requirement
of section 80A.61(a) and payment of the filing fee required under section 80A.65, the
registration of the agent is:
    (1) immediately effective as of the date of the completed filing, if the agent's Central
Registration Depository record or successor record does not contain a new or amended
disciplinary disclosure within the previous 12 months; or
    (2) temporarily effective as of the date of the completed filing, if the agent's
Central Registration Depository record or successor record contains a new or amended
disciplinary disclosure within the preceding 12 months.
    (c) Withdrawal of temporary registration. The administrator may withdraw a
temporary registration if there are or were grounds for discipline as specified in section
80A.67 and the administrator does so within 30 days after the filing of the application. If
the administrator does not withdraw the temporary registration within the 30 day period,
registration becomes automatically effective on the 31st day after filing.
    (d) Power to prevent registration. The administrator may prevent the effectiveness
of a transfer of an agent under subsection (b)(1) or (2) based on the public interest and the
protection of investors.
    (e) Termination of registration or application for registration. If the
administrator determines that a registrant or applicant for registration is no longer in
existence or has ceased to act as a broker-dealer, agent, or investment adviser, or is
the subject of an adjudication of incapacity or is subject to the control of a committee,
conservator, or guardian, or cannot reasonably be located, a rule adopted or order issued
under this chapter may require the registration be canceled or terminated or the application
denied. The administrator may reinstate a canceled or terminated registration, with or
without hearing, and may make the registration retroactive.

    Sec. 24. [80A.64] SECTION 409; WITHDRAWAL OF REGISTRATION OF
BROKER-DEALER, AGENT, AND INVESTMENT ADVISER.
    Withdrawal of registration by a broker-dealer, agent, or investment adviser becomes
effective 60 days after the filing of the application to withdraw or within any shorter
period as provided by rule adopted or order issued under this chapter unless a revocation
or suspension proceeding is pending when the application is filed. If a proceeding is
pending, withdrawal becomes effective when and upon such conditions as required by rule
adopted or order issued under this chapter. The administrator may institute a revocation or
suspension proceeding under section 80A.67 within one year after the withdrawal became
effective automatically and issue a revocation or suspension order as of the last date on
which registration was effective if a proceeding is not pending.

    Sec. 25. [80A.65] SECTION 410; FEES AND EXPENSES.
    Subdivision 1. Registration or notice filing fee. (a) There shall be a filing fee of
$100 for every application for registration or notice filing. There shall be an additional fee
of one-tenth of one percent of the maximum aggregate offering price at which the securities
are to be offered in this state, and the maximum combined fees shall not exceed $300.
    (b) When an application for registration is withdrawn before the effective date
or a preeffective stop order is entered under section 80A.54, all but the $100 filing fee
shall be returned. If an application to register securities is denied, the total of all fees
received shall be retained.
    (c) Where a filing is made in connection with a federal covered security under
section 18(b)(2) of the Securities Act of 1933, there is a fee of $100 for every initial filing.
If the filing is made in connection with redeemable securities issued by an open end
management company or unit investment trust, as defined in the Investment Company Act
of 1940, there is an additional annual fee of 1/20 of one percent of the maximum aggregate
offering price at which the securities are to be offered in this state during the notice filing
period. The fee must be paid at the time of the initial filing and thereafter in connection
with each renewal no later than July 1 of each year and must be sufficient to cover the
shares the issuer expects to sell in this state over the next 12 months. If during a current
notice filing the issuer determines it is likely to sell shares in excess of the shares for which
fees have been paid to the administrator, the issuer shall submit an amended notice filing
to the administrator under section 80A.50, together with a fee of 1/20 of one percent of the
maximum aggregate offering price of the additional shares. Shares for which a fee has
been paid, but which have not been sold at the time of expiration of the notice filing, may
not be sold unless an additional fee to cover the shares has been paid to the administrator
as provided in this section and section 80A.50. If the filing is made in connection with
redeemable securities issued by such a company or trust, there is no maximum fee for
securities filings made according to this paragraph. If the filing is made in connection
with any other federal covered security under Section 18(b)(2) of the Securities Act of
1933, there is an additional fee of one-tenth of one percent of the maximum aggregate
offering price at which the securities are to be offered in this state, and the combined fees
shall not exceed $300. Beginning with fiscal year 2001 and continuing each fiscal year
thereafter, as of the last day of each fiscal year, the administrator shall determine the total
amount of all fees that were collected under this paragraph in connection with any filings
made for that fiscal year for securities of an open-end investment company on behalf of a
security that is a federal covered security pursuant to section 18(b)(2) of the Securities
Act of 1933. To the extent the total fees collected by the administrator in connection
with these filings exceed $25,000,000 in a fiscal year, the administrator shall refund, on
a pro rata basis, to all persons who paid any fees for that fiscal year, the amount of fees
collected by the administrator in excess of $25,000,000. No individual refund is required
of amounts of $100 or less for a fiscal year.
    Subd. 2. Registration application and renewal filing fee. Every applicant for an
initial or renewal registration shall pay a filing fee of $200 in the case of a broker-dealer,
$50 in the case of an agent, and $100 in the case of an investment adviser. When an
application is denied or withdrawn, the filing fee shall be retained. A registered agent who
has terminated employment with one broker-dealer shall, before beginning employment
with another broker-dealer, pay a transfer fee of $25. The fee for a filing made according
to section 80A.56 is $100.
    Subd. 3. Amendment fee. Any amendment to an existing registration requiring
an order of the administrator shall require payment of an amendment fee of $25. If the
amendment increases the aggregate amount of securities to be registered, there shall be
an additional fee calculated in accordance with subdivision 1, provided the maximum
additional fees, if applicable, have not previously been paid. The administrator shall by
rule designate those amendments which require an order of the administrator.
    Subd. 4. Periodic report fee. Every periodic report required by section 80A.53
shall be accompanied by a fee of $100.
    Subd. 5. Exemption filing fee. The filing of any exemption for which notice is
required to be given the administrator under section 80A.45 shall be accompanied by a
fee of $50.
    Subd. 6. Rescission offer filing fee. The filing of a rescission offer under section
80A.77 shall be accompanied by the fees as calculated in subdivision 1.
    Subd. 7. Written opinion request fee. Every request for a written opinion from
the administrator shall be accompanied by a fee of $50.
    Subd. 7a. Excess securities registration filing fee. If securities of an issuer are sold
in this state in excess of the quantity registered, the excess securities may be registered by
paying a filing fee of $100, and an additional fee in the amount of three times that which
is prescribed under subdivision 1, for the excess securities to be registered. There shall
be no maximum combined fees under this subdivision, notwithstanding the limitation set
forth in subdivision 1, clause (a).
    Registration of the excess securities shall be effective retroactively to the date of sale.
    Subd. 8. Expense deposits. When the administrator deems it necessary to incur any
expense in connection with any application or registration, the administrator shall have the
power to require the interested person to make an advance deposit with the administrator
in an amount estimated as sufficient to cover such expense. All such deposits shall be
covered into the state treasury and credited to the state administrator's investigation fund,
from which fund the administrator shall have power to make disbursements to pay for
expenses necessarily incurred in the investigation. Any unexpended portion shall be
refunded. On field examinations made by the administrator or an employee away from
the office of the administrator, a per diem of $10 for each such person may be charged in
addition to actual expenses. Where additional technical, expert, or special services are
used, the actual cost of such services may be charged in addition to actual expenses.
    Subd. 9. Generally. No filing for which a fee is required shall be deemed to be filed
or given any effect until the proper fee is paid. All fees and charges collected by the
administrator shall be covered into the state treasury. When any person is entitled to a
refund under this section, the administrator shall certify to the commissioner of finance
the amount of the fee to be refunded to the applicant, and the commissioner of finance
shall issue a warrant in payment thereof out of the fund to which such fee was credited in
the manner provided by law. There is hereby appropriated to the person entitled to such
refunds from the fund in the state treasury to which such fees were credited an amount to
make such refunds and payments.

    Sec. 26. [80A.66] SECTION 411; POSTREGISTRATION REQUIREMENTS.
    (a) Financial requirements. Subject to Section 15(h) of the Securities Exchange
Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act
of 1940 (15 U.S.C. Section 80b-22), a rule adopted or order issued under this chapter
may establish minimum financial requirements for broker-dealers registered or required
to be registered under this chapter and investment advisers registered or required to be
registered under this chapter.
    (b) Financial reports. Subject to Section 15(h) of the Securities Exchange Act of
1934 (15 U.S.C. Section 78o(h)) or Section 222(b) of the Investment Advisers Act of 1940
(15 U.S.C. Section 80b-22), a broker-dealer registered or required to be registered under
this chapter and an investment adviser registered or required to be registered under this
chapter shall file such financial reports as are required by a rule adopted or order issued
under this chapter. If the information contained in a record filed under this subsection is or
becomes inaccurate or incomplete in a material respect, the registrant shall promptly file
a correcting amendment.
    (c) Record keeping. Subject to Section 15(h) of the Securities Exchange Act of
1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940
(15 U.S.C. Section 80b-22):
    (1) a broker-dealer registered or required to be registered under this chapter and an
investment adviser registered or required to be registered under this chapter shall make
and maintain the accounts, correspondence, memoranda, papers, books, and other records
required by rule adopted or order issued under this chapter;
    (2) broker-dealer records required to be maintained under paragraph (1) may be
maintained in any form of data storage acceptable under Section 17(a) of the Securities
Exchange Act of 1934 (15 U.S.C. Section 78q(a)) if they are readily accessible to the
administrator; and
    (3) investment adviser records required to be maintained under paragraph (1)
may be maintained in any form of data storage required by rule adopted or order issued
under this chapter.
    (d) Audits or inspections. The records of a broker-dealer registered or required
to be registered under this chapter and of an investment adviser registered or required to
be registered under this chapter are subject to such reasonable periodic, special, or other
audits or inspections by a representative of the administrator, within or without this state,
as the administrator considers necessary or appropriate in the public interest and for the
protection of investors. An audit or inspection may be made at any time and without prior
notice. The administrator may copy, and remove for audit or inspection copies of, all
records the administrator reasonably considers necessary or appropriate to conduct the
audit or inspection. The administrator may assess a reasonable charge for conducting an
audit or inspection under this subsection.
    (e) Custody and discretionary authority bond or insurance. Subject to Section
15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222
of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-22), a rule adopted or
order issued under this chapter may require a broker-dealer or investment adviser that has
custody of or discretionary authority over funds or securities of a customer or client to
obtain insurance or post a bond or other satisfactory form of security in an amount not
to exceed $25,000. The administrator may determine the requirements of the insurance,
bond, or other satisfactory form of security. Insurance or a bond or other satisfactory form
of security may not be required of a broker-dealer registered under this chapter whose net
capital exceeds, or of an investment adviser registered under this chapter whose minimum
financial requirements exceed, the amounts required by rule or order under this chapter.
The insurance, bond, or other satisfactory form of security must permit an action by
a person to enforce any liability on the insurance, bond, or other satisfactory form of
security if instituted within the time limitations in section 80A.76(j)(2).
    (f) Requirements for custody. Subject to Section 15(h) of the Securities Exchange
Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of
1940 (15 U.S.C. Section 80b-22), an agent may not have custody of funds or securities
of a customer except under the supervision of a broker-dealer and an investment adviser
representative may not have custody of funds or securities of a client except under the
supervision of an investment adviser or a federal covered investment adviser. A rule
adopted or order issued under this chapter may prohibit, limit, or impose conditions on a
broker-dealer regarding custody of funds or securities of a customer and on an investment
adviser regarding custody of securities or funds of a client.
    (g) Investment adviser brochure rule. With respect to an investment adviser
registered or required to be registered under this chapter, a rule adopted or order
issued under this chapter may require that information or other record be furnished or
disseminated to clients or prospective clients in this state as necessary or appropriate in the
public interest and for the protection of investors and advisory clients.
    (h) Continuing education. A rule adopted or order issued under this chapter
may require an individual registered under section 80A.57 or 80A.59 to participate in a
continuing education program approved by the Securities and Exchange Commission and
administered by a self-regulatory organization or, in the absence of such a program, a
rule adopted or order issued under this chapter may require continuing education for an
individual registered under section 80A.59.

    Sec. 27. [80A.67] SECTION 412; DENIAL, REVOCATION, SUSPENSION,
WITHDRAWAL, RESTRICTION, CONDITION, OR LIMITATION OF
REGISTRATION.
    (a) Disciplinary conditions-applicants. If the administrator finds that the order is
in the public interest and subsection (d) authorizes the action, an order issued under this
chapter may deny an application, or may condition or limit registration of an applicant to
be a broker-dealer, agent, or investment adviser, and, if the applicant is a broker-dealer
or investment adviser, of a partner, officer, director, or person having a similar status
or performing similar functions, or a person directly or indirectly in control of the
broker-dealer or investment adviser.
    (b) Disciplinary conditions-registrants. If the administrator finds that the order is
in the public interest and subsection (d) authorizes the action an order issued under this
chapter may revoke, suspend, condition, or limit the registration of a registrant and, if the
registrant is a broker-dealer or investment adviser, of a partner, officer, director, or person
having a similar status or performing similar functions, or a person directly or indirectly in
control of the broker-dealer or investment adviser. However, the administrator may not:
    (1) institute a revocation or suspension proceeding under this subsection based on an
order issued under a law of another state that is reported to the administrator or a designee
of the administrator more than one year after the date of the order on which it is based; or
    (2) under subsection (d)(5)(A) or (B), issue an order on the basis of an order issued
under the securities act of another state unless the other order was based on conduct for
which subsection (d) would authorize the action had the conduct occurred in this state.
    (c) Disciplinary penalties-registrants. If the administrator finds that the order is
in the public interest and subsection (d)(1) through (6), (8), (9), (10), or (12) and (13)
authorizes the action, an order under this chapter may censure, impose a bar, or impose a
civil penalty in an amount up to $10,000 for each violation, on a registrant, and, if the
registrant is a broker-dealer or investment adviser, a partner, officer, director, person
having a similar status or performing similar functions, or a person directly or indirectly in
control, of the broker-dealer or investment adviser.
    (d) Grounds for discipline. A person may be disciplined under subsections (a)
through (c) if the person:
    (1) has filed an application for registration in this state under this chapter or the
predecessor act within the previous ten years, which, as of the effective date of registration
or as of any date after filing in the case of an order denying effectiveness, was incomplete
in any material respect or contained a statement that, in light of the circumstances under
which it was made, was false or misleading with respect to a material fact;
    (2) willfully violated or willfully failed to comply with this chapter or the
predecessor act or a rule adopted or order issued under this chapter or the predecessor
act within the previous ten years;
    (3) has been convicted of a felony or within the previous ten years has been
convicted of a misdemeanor involving a security, a commodity future or option contract,
or an aspect of a business involving securities, commodities, investments, franchises,
insurance, banking, or finance;
    (4) is enjoined or restrained by a court of competent jurisdiction in an action
instituted by the administrator under this chapter or the predecessor act, a state, the
Securities and Exchange Commission, or the United States from engaging in or continuing
an act, practice, or course of business involving an aspect of a business involving
securities, commodities, investments, franchises, insurance, banking, or finance.
    (5) is the subject of an order, issued after notice and opportunity for hearing by:
    (A) the securities, depository institution, insurance, or other financial services
regulator of a state or by the Securities and Exchange Commission or other federal agency
denying, revoking, barring, or suspending registration as a broker-dealer, agent, investment
adviser, federal covered investment adviser, or investment adviser representative;
    (B) the securities regulator of a state or the Securities and Exchange Commission
against a broker-dealer, agent, investment adviser, investment adviser representative, or
federal covered investment adviser;
    (C) the Securities and Exchange Commission or a self-regulatory organization
suspending or expelling the registrant from membership in the self-regulatory organization;
    (D) a court adjudicating a United States Postal Service fraud order;
    (E) the insurance regulator of a state denying, suspending, or revoking registration
as an insurance agent; or
    (F) a depository institution regulator suspending or barring the person from the
depository institution business;
    (6) is the subject of an adjudication or determination, after notice and opportunity
for hearing, by the Securities and Exchange Commission, the Commodity Futures Trading
Commission; the Federal Trade Commission; a federal depository institution regulator,
or a depository institution, insurance, or other financial services regulator of a state that
the person willfully violated the Securities Act of 1933, the Securities Exchange Act of
1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, or the
Commodity Exchange Act, the securities or commodities law of a state, or a federal or
state law under which a business involving investments, franchises, insurance, banking, or
finance is regulated;
    (7) is insolvent, either because the person's liabilities exceed the person's assets
or because the person cannot meet the person's obligations as they mature, but the
administrator may not enter an order against an applicant or registrant under this paragraph
without a finding of insolvency as to the applicant or registrant;
    (8) refuses to allow or otherwise impedes the administrator from conducting an audit
or inspection under section 80A.66(d) or refuses access to a registrant's office to conduct
an audit or inspection under section 80A.66(d);
    (9) has failed to reasonably supervise an agent, investment adviser representative,
or other individual, if the agent, investment adviser representative, or other individual
was subject to the person's supervision and committed a violation of this chapter or the
predecessor act or a rule adopted or order issued under this chapter or the predecessor
act within the previous ten years;
    (10) has not paid the proper filing fee within 30 days after having been notified by
the administrator of a deficiency, but the administrator shall vacate an order under this
paragraph when the deficiency is corrected;
    (11) after notice and opportunity for a hearing, has been found within the previous
ten years:
    (A) by a court of competent jurisdiction to have willfully violated the laws of a
foreign jurisdiction under which the business of securities, commodities, investment,
franchises, insurance, banking, or finance is regulated;
    (B) to have been the subject of an order of a securities regulator of a foreign
jurisdiction denying, revoking, or suspending the right to engage in the business of
securities as a broker-dealer, agent, investment adviser, investment adviser representative,
or similar person; or
    (C) to have been suspended or expelled from membership by or participation in
a securities exchange or securities association operating under the securities laws of a
foreign jurisdiction;
    (12) is the subject of a cease and desist order issued by the Securities and Exchange
Commission or issued under the securities, commodities, investment, franchise, banking,
finance, or insurance laws of a state;
    (13) has engaged in dishonest or unethical practices in the securities, commodities,
investment, franchise, banking, finance, or insurance business within the previous ten
years; or
    (14) is not qualified on the basis of factors such as training, experience, and
knowledge of the securities business. However, in the case of an application by an agent
for a broker-dealer that is a member of a self-regulatory organization or by an individual
for registration as an investment adviser representative, a denial order may not be based on
this paragraph if the individual has successfully completed all examinations required by
subsection (e). The administrator may require an applicant for registration under section
80A.57 or 80A.59 who has not been registered in a state within the two years preceding
the filing of an application in this state to successfully complete an examination.
    (e) Examinations. A rule adopted or order issued under this chapter may require that
an examination, including an examination developed or approved by an organization of
securities regulators, be successfully completed by a class of individuals or all individuals.
An order issued under this chapter may waive, in whole or in part, an examination as to
an individual and a rule adopted under this chapter may waive, in whole or in part, an
examination as to a class of individuals if the administrator determines that the examination
is not necessary or appropriate in the public interest and for the protection of investors.
    (f) Summary process. The administrator may suspend or deny an application
summarily; restrict, condition, limit, or suspend a registration; or censure, bar, or impose a
civil penalty on a registrant before final determination of an administrative proceeding.
Upon the issuance of an order, the administrator shall promptly notify each person subject
to the order that the order has been issued, the reasons for the action, and that within 15
days after the receipt of a request in a record from the person the matter will be scheduled
for a hearing. If a hearing is not requested and none is ordered by the administrator within
30 days after the date of service of the order, the order becomes final by operation of law.
If a hearing is requested or ordered, the administrator, after notice of and opportunity for
hearing to each person subject to the order, may modify or vacate the order or extend the
order until final determination.
    (g) Procedural requirements. An order issued may not be issued under this section,
except under subsection (f), without:
    (1) appropriate notice to the applicant or registrant;
    (2) opportunity for hearing; and
    (3) findings of fact and conclusions of law in a record in accordance with chapter 14.
    (h) Control person liability. A person that controls, directly or indirectly, a person
not in compliance with this section may be disciplined by order of the administrator under
subsections (a) through (c) to the same extent as the noncomplying person, unless the
controlling person did not know, or knowingly or recklessly disregarded evidence, of the
existence of conduct that is a ground for discipline under this section.
    (i) Limit on investigation or proceeding. The administrator may not institute a
proceeding under subsection (a), (b), or (c) based solely on material facts actually known
by the administrator unless an investigation or the proceeding is instituted within one year
after the administrator actually acquires knowledge of the material facts.
FRAUD AND LIABILITIES

    Sec. 28. [80A.68] SECTION 501; GENERAL FRAUD.
    It is unlawful for a person, in connection with the offer, sale, or purchase of a
security, directly or indirectly:
    (1) to employ a device, scheme, or artifice to defraud;
    (2) to make an untrue statement of a material fact or to omit to state a material fact
necessary in order to make a statement made, in the light of the circumstances under
which it is made, not misleading; or
    (3) to engage in an act, practice, or course of business that operates or would operate
as a fraud or deceit upon another person.

    Sec. 29. [80A.69] SECTION 502; PROHIBITED CONDUCT IN PROVIDING
INVESTMENT ADVICE.
    (a) Fraud in providing investment advice. It is unlawful for a person that advises
others for compensation, either directly or indirectly or through publications or writings,
as to the value of securities or the advisability of investing in, purchasing, or selling
securities or that, for compensation and as part of a regular business, issues or promulgates
analyses or reports relating to securities:
    (1) to employ a device, scheme, or artifice to defraud another person; or
    (2) to engage in an act, practice, or course of business that operates or would operate
as a fraud or deceit upon another person.
    (b) Rules defining fraud. A rule adopted under this chapter may define an act,
practice, or course of business of an investment adviser or an investment adviser
representative, other than a supervised person of a federal covered investment adviser,
as fraudulent, deceptive, or manipulative, and prescribe means reasonably designed to
prevent investment advisers and investment adviser representatives, other than supervised
persons of a federal covered investment adviser, from engaging in acts, practices, and
courses of business defined as fraudulent, deceptive, or manipulative.
    (c) Rules specifying contents of advisory contract. A rule adopted under this
chapter may specify the contents of an investment advisory contract entered into,
extended, or renewed by an investment adviser.

    Sec. 30. [80A.70] SECTION 503; EVIDENTIARY BURDEN.
    (a) Civil. In a civil action or administrative proceeding under this chapter, a person
claiming an exemption, exception, preemption, or exclusion has the burden to prove the
applicability of the claim.
    (b) Criminal. In a criminal proceeding under this chapter, a person claiming an
exemption, exception, preemption, or exclusion has the burden of going forward with
evidence of the claim.

    Sec. 31. [80A.71] SECTION 504; FILING OF SALES AND ADVERTISING
LITERATURE.
    (a) Filing requirement. Except as otherwise provided in subsection (b), a rule
adopted or order issued under this chapter may require the filing of a prospectus, pamphlet,
circular, form letter, advertisement, sales literature, or other advertising record relating
to a security or investment advice, addressed or intended for distribution to prospective
investors, including clients or prospective clients of a person registered or required to be
registered as an investment adviser under this chapter.
    (b) Excluded communications. This section does not apply to sales and advertising
literature specified in subsection (a) which relates to a federal covered security, a federal
covered investment adviser, or a security or transaction exempted by section 80A.45,
80A.46, or 80A.47 except as required pursuant to section 80A.45(7).

    Sec. 32. [80A.72] SECTION 505; MISLEADING FILINGS.
    It is unlawful for a person to make or cause to be made, in a record that is used in
an action or proceeding or filed under this chapter other than a contested case hearing,
a statement that, at the time and in the light of the circumstances under which it is
made, is false or misleading in a material respect, or, in connection with the statement,
to omit to state a material fact necessary to make the statement made, in the light of the
circumstances under which it was made, not false or misleading.

    Sec. 33. [80A.73] SECTION 506; MISREPRESENTATIONS CONCERNING
REGISTRATION OR EXEMPTION.
    The filing of an application for registration, a registration statement, a notice
filing under this chapter, the registration of a person, the notice filing by a person, or
the registration of a security under this chapter does not constitute a finding by the
administrator that a record filed under this chapter is true, complete, and not misleading.
The filing or registration or the availability of an exemption, exception, preemption, or
exclusion for a security or a transaction does not mean that the administrator has passed
upon the merits or qualifications of, or recommended or given approval to, a person,
security, or transaction. It is unlawful to make, or cause to be made, to a purchaser,
customer, client, or prospective customer or client a representation inconsistent with
this section.

    Sec. 34. [80A.74] SECTION 507; QUALIFIED IMMUNITY.
    A broker-dealer, agent, investment adviser, federal covered investment adviser, or
investment adviser representative is not liable to another broker-dealer, agent, investment
adviser, federal covered investment adviser, or investment adviser representative
for defamation relating to a statement that is contained in a record required by the
administrator, or designee of the administrator, the Securities and Exchange Commission,
or a self-regulatory organization, unless the person knew, or should have known at the
time that the statement was made, that is was false in a material respect or the person acted
in reckless disregard of the statement's truth or falsity.

    Sec. 35. [80A.75] SECTION 508; CRIMINAL PENALTIES.
    (a) Criminal penalties. A person that willfully violates this chapter, or a rule adopted
or order issued under this chapter, except section 80A.71 or the notice filing requirements
of section 80A.50 or 80A.60, or that willfully violates section 80A.72 knowing the
statement made to be false or misleading in a material respect, upon conviction, shall be
fined not more than $10,000 or imprisoned not more than five years or both. Each of the
acts specified constitutes a separate offense and a prosecution or conviction for any such
offense does not bar prosecution or conviction for any other offense.
    (b) Criminal reference not required. The attorney general with or without a
reference from the administrator, may institute criminal proceedings under this chapter.
    (c) No limitation on other criminal enforcement. This chapter does not limit
the power of this state to punish a person for conduct that constitutes a crime under
other laws of this state.

    Sec. 36. [80A.76] SECTION 509; CIVIL LIABILITY.
    (a) Securities Litigation Uniform Standards Act. Enforcement of civil liability
under this section is subject to the Securities Litigation Uniform Standards Act of 1998.
    (b) Liability of seller to purchaser. A person is liable to the purchaser if the person
sells a security in violation of section 80A.49 or, by means of an untrue statement of a
material fact or an omission to state a material fact necessary in order to make the statement
made, in light of the circumstances under which it is made, not misleading, the purchaser
not knowing the untruth or omission and the seller not sustaining the burden of proof that
the seller did not know and, in the exercise of reasonable care, could not have known of
the untruth or omission. An action under this subsection is governed by the following:
    (1) The purchaser may maintain an action to recover the consideration paid for the
security, less the amount of any income received on the security, and interest from the date
of the purchase, costs, and reasonable attorneys' fees determined by the court, upon the
tender of the security, or for actual damages as provided in paragraph (3).
    (2) The tender referred to in paragraph (1) may be made any time before entry
of judgment. Tender requires only notice in a record of ownership of the security and
willingness to exchange the security for the amount specified. A purchaser that no longer
owns the security may recover actual damages as provided in paragraph (3).
    (3) Actual damages in an action arising under this subsection are the amount that
would be recoverable upon a tender less the value of the security when the purchaser
disposed of it, and interest from the date of the purchase, costs, and reasonable attorneys'
fees determined by the court.
    (c) Liability of purchaser to seller. A person is liable to the seller if the person
buys a security by means of an untrue statement of a material fact or omission to state a
material fact necessary in order to make the statement made, in light of the circumstances
under which it is made, not misleading, the seller not knowing of the untruth or omission,
and the purchaser not sustaining the burden of proof that the purchaser did not know, and
in the exercise of reasonable care, could not have known of the untruth or omission. An
action under this subsection is governed by the following:
    (1) The seller may maintain an action to recover the security, and any income
received on the security, costs, and reasonable attorneys' fees determined by the court,
upon the tender of the purchase price, or for actual damages as provided in paragraph (3).
    (2) The tender referred to in paragraph (1) may be made any time before entry
of judgment. Tender requires only notice in a record of the present ability to pay the
amount tendered and willingness to take delivery of the security for the amount specified.
If the purchaser no longer owns the security, the seller may recover actual damages as
provided in paragraph (3).
    (3) Actual damages in an action arising under this subsection are the difference
between the price at which the security was sold and the value the security would have
had at the time of the sale in the absence of the purchaser's conduct causing liability, and
interest from the date of the sale of the security, costs, and reasonable attorneys' fees
determined by the court.
    (d) Liability of unregistered broker-dealer and agent. A person acting as a
broker-dealer or agent that sells or buys a security in violation of section 80A.56(a),
80A.57(a), or 80A.73 is liable to the customer. The customer, if a purchaser, may maintain
an action for recovery of actual damages as specified in subsections (b)(1) through (3), or,
if a seller, for a remedy as specified in subsections (c)(1) through (3).
    (e) Liability of unregistered investment adviser and investment adviser
representative. A person acting as an investment adviser or investment adviser
representative that provides investment advice for compensation in violation of section
80A.58(a), 80A.59(a), or 80A.73 is liable to the client. The client may maintain an action
to recover the consideration paid for the advice, interest from the date of payment, costs,
and reasonable attorneys' fees determined by the court.
    (f) Liability for investment advice. A person that receives directly or indirectly
any consideration for providing investment advice to another person and that employs a
device, scheme, or artifice to defraud the other person or engages in an act, practice, or
course of business that operates or would operate as a fraud or deceit on the other person,
is liable to the other person. An action under this subsection is governed by the following:
    (1) The person defrauded may maintain an action to recover the consideration
paid for the advice and the amount of any actual damages caused by the fraudulent
conduct, interest from the date of the fraudulent conduct, costs, and reasonable attorneys'
fees determined by the court, less the amount of any income received as a result of the
fraudulent conduct.
    (2) This subsection does not apply to a broker-dealer or its agents if the investment
advice provided is solely incidental to transacting business as a broker-dealer and no
special compensation is received for the investment advice.
    (g) Joint and several liability. The following persons are liable jointly and severally
with and to the same extent as persons liable under subsections (b) through (f):
    (1) a person that directly or indirectly controls a person liable under subsections (b)
through (f), unless the controlling person sustains the burden of proof that the person did
not know, and in the exercise of reasonable care could not have known, of the existence of
conduct by reason of which the liability is alleged to exist;
    (2) an individual who is a managing partner, executive officer, or director of a person
liable under subsections (b) through (f), including an individual having a similar status or
performing similar functions, unless the individual sustains the burden of proof that the
individual did not know and, in the exercise of reasonable care could have known, of the
existence of conduct by reason of which the liability is alleged to exist;
    (3) an individual who is an employee of or associated with a person liable under
subsections (b) through (f) and who materially aids the conduct giving rise to the liability,
unless the individual sustains the burden of proof that the individual did not know and,
in the exercise of reasonable care could not have known, of the existence of conduct by
reason of which the liability is alleged to exist; and
    (4) a person that is a broker-dealer, agent, investment adviser, or investment adviser
representative that materially aids the conduct giving rise to the liability under subsections
(b) through (f), unless the person sustains the burden of proof that the person did not know
and, in the exercise of reasonable care could not have known, of the existence of conduct
by reason of which liability is alleged to exist.
    (h) Right of contribution. A person liable under this section has a right of
contribution as in cases of tort against any other person liable under this section for the
same conduct.
    (i) Survival of cause of action. A cause of action under this section survives the
death of an individual who might have been a plaintiff or defendant.
    (j) Statute of limitations. A person may not obtain relief:
    (1) under subsection (b) for violation of section 80A.49, or under subsection (d) or
(e), unless the action is instituted within one year after the violation occurred; or
    (2) under subsection (b), other than for violation of section 80A.49, or under
subsection (c) or (f), unless the action is instituted within the earlier of two years after
discovery of the facts constituting the violation or five years after the violation.
    (k) No enforcement of violative contract. A person that has made, or has engaged
in the performance of, a contract in violation of this chapter or a rule adopted or order
issued under this chapter, or that has acquired a purported right under the contract with
knowledge of conduct by reason of which its making or performance was in violation of
this chapter, may not base an action on the contract.
    (l) No contractual waiver. A condition, stipulation, or provision binding a person
purchasing or selling a security or receiving investment advice to waive compliance with
this chapter or a rule adopted or order issued under this chapter is void.
    (m) Survival of other right or remedies. The rights and remedies provided by this
chapter are in addition to any other rights or remedies that may exist, but this chapter does
not create a cause of action not specified in this section or section 80A.66(e).

    Sec. 37. [80A.77] SECTION 510; RESCISSION OFFERS.
    A purchaser, seller, or recipient of investment advice may not maintain an action
under section 80A.76 if:
    (1) the purchaser, seller, or recipient of investment advice receives in a record,
before the action is instituted:
    (A) an offer stating the respect in which liability under section 80A.76 may have
arisen and fairly advising the purchaser, seller, or recipient of investment advice of
that person's rights in connection with the offer, and any financial or other information
necessary to correct all material misrepresentations or omissions in the information that
was required by this chapter to be furnished to that person at the time of this purchase,
sale, or investment advice;
    (B) if the basis for relief under this section may have been a violation of section
80A.76(b), an offer to repurchase the security for cash, payable on delivery of the security,
equal to the consideration paid, and interest from the date of the purchase, less the amount
of any income received on the security, or, if the purchaser no longer owns the security, an
offer to pay the purchaser upon acceptance of the offer damages in an amount that would
be recoverable upon a tender, less the value of the security when the purchaser disposed
of it, and interest from the date of the purchase in cash equal to the damages computed
in the manner provided in this subsection.
    (C) if the basis for relief under this section may have been a violation of section
80A.76(c), an offer to tender the security, on payment by the seller of an amount equal to
the purchase price paid, less income received on the security by the purchaser and interest
from the date of the sale; or if the purchaser no longer owns the security, an offer to pay
the seller upon acceptance of the offer, in cash, damages in the amount of the difference
between the price at which the security was purchased and the value the security would
have had at the time of the purchase in the absence of the purchaser's conduct that may
have caused liability and interest from the date of the sale.
    (D) if the basis for relief under this section may have been a violation of section
80A.76(d); and if the customer is a purchaser, an offer to pay as specified in subparagraph
(B); or, if the customer is a seller, an offer to tender or to pay as specified in subparagraph
(C);
    (E) if the basis for relief under this section may have been a violation of section
80A.76(e), an offer to reimburse in cash the consideration paid for the advice and interest
from the date of payment; or
    (F) if the basis for relief under this section may have been a violation of section
80A.76(f), an offer to reimburse in cash the consideration paid for the advice, the amount
of any actual damages that may have been caused by the conduct, and interest from the
date of the violation causing the loss;
    (2) the offer under paragraph (1) states that it must be accepted by the purchaser,
seller, or recipient of investment advice within 30 days after the date of its receipt by the
purchaser, seller, or recipient of investment advice or any shorter period, of not less than
three days, that the administrator, by order, specifies;
    (3) the offeror has the present ability to pay the amount offered or to tender the
security under paragraph (1);
    (4) the offer under paragraph (1) is delivered to the purchaser, seller, or recipient
of investment advice, or sent in a manner that ensures receipt by the purchaser, seller, or
recipient of investment advice; and
    (5) the purchaser, seller, or recipient of investment advice that accepts the offer
under paragraph (1) in a record within the period specified under paragraph (2) is paid
in accordance with the terms of the offer.
ADMINISTRATION AND JUDICIAL REVIEW

    Sec. 38. [80A.78] SECTION 601; ADMINISTRATION.
    (a) Administration. The administrator shall administer this chapter.
    (b) Unlawful use of records or information. It is unlawful for the administrator
or an officer, employee, or designee of the administrator to use for personal benefit
or the benefit of others records or other information obtained by or filed with the
administrator that are not public under section 80A.84(b). This chapter does not authorize
the administrator or an officer, employee, or designee of the administrator to disclose the
record or information, except in accordance with section 80A.79, 80A.84(c), or 80A.85.
    (c) No privilege or exemption created or diminished. This chapter does not
create or diminish a privilege or exemption that exists at common law, by statute or rule,
or otherwise.
    (d) Investor education. The administrator may develop and implement investor
education initiatives to inform the public about investing in securities, with particular
emphasis on the prevention and detection of securities fraud. In developing and
implementing these initiatives, the administrator may collaborate with public and
nonprofit organizations with an interest in investor education. The administrator may
accept a grant or donation from a person that is not affiliated with the securities industry
or from a nonprofit organization, regardless of whether the organization is affiliated with
the securities industry, to develop and implement investor education initiatives. This
subsection does not authorize the administrator to require participation or monetary
contributions of a registrant in an investor education program.

    Sec. 39. [80A.79] SECTION 602; INVESTIGATIONS AND SUBPOENAS.
    (a) Authority to investigate. The administrator may:
    (1) conduct public or private investigations within or outside of this state which
the administrator considers necessary or appropriate to determine whether a person has
violated, is violating, or is about to violate this chapter or a rule adopted or order issued
under this chapter, or to aid in the enforcement of this chapter or in the adoption of rules
and forms under this chapter;
    (2) require or permit a person to testify, file a statement, or produce a record, under
oath or otherwise as the administrator determines, as to all the facts and circumstances
concerning a matter to be investigated or about which an action or proceeding is to be
instituted; and
    (3) publish a record concerning an action, proceeding, or an investigation under,
or a violation of, this chapter or a rule adopted or order issued under this chapter if the
administrator determines it is necessary or appropriate in the public interest and for the
protection of investors.
    (b) Administrator powers to investigate. For the purpose of an investigation
under this chapter, the administrator or its designated officer may administer oaths and
affirmations, subpoena witnesses, seek compulsion of attendance, take evidence, require
the filing of statements, and require the production of any records that the administrator
considers relevant or material to the investigation.
    (c) Procedure and remedies for noncompliance. If a person does not appear or
refuses to testify, file a statement, produce records, or otherwise does not obey a subpoena
as required by the administrator under this chapter, the administrator may refer the matter
to the attorney general, who may apply to the district court or a court of another state to
enforce compliance. The court may:
    (1) hold the person in contempt;
    (2) order the person to appear before the administrator;
    (3) order the person to testify about the matter under investigation or in question;
    (4) order the production of records;
    (5) grant injunctive relief, including restricting or prohibiting the offer or sale of
securities or the providing of investment advice;
    (6) impose a civil penalty up to $10,000 for each violation; and
    (7) grant any other necessary or appropriate relief.
    (d) Application for relief. This section does not preclude a person from applying to
the district court or a court of another state for relief from a request to appear, testify, file a
statement, produce records, or obey a subpoena.
    (e) Use immunity procedure. An individual is not excused from attending,
testifying, filing a statement, producing a record or other evidence, or obeying a subpoena
of the administrator under this chapter or in an action or proceeding instituted by the
administrator under this chapter on the ground that the required testimony, statement,
record, or other evidence, directly or indirectly, may tend to incriminate the individual or
subject the individual to a criminal fine, penalty, or forfeiture. If the individual refuses to
testify, file a statement or produce a record or other evidence on the basis of the individual's
privilege against self-incrimination, the administrator may apply to the district court to
compel the testimony, the filing of the statement, the production of the record, or the giving
of other evidence. The testimony, record, or other evidence compelled under such an order
may not be used, directly or indirectly, against the individual in a criminal case, except in
a prosecution for perjury or contempt or otherwise failing to comply with the order.
    (f) Assistance to securities regulator of another jurisdiction. At the request of
the securities regulator of another state or a foreign jurisdiction, the administrator may
provide assistance if the requesting regulator states that it is conducting an investigation to
determine whether a person has violated, is violating, or is about to violate a law or rule
of the other state or foreign jurisdiction relating to securities matters that the requesting
regulator administers or enforces. The administrator may provide the assistance by using
the authority to investigate and the powers conferred by this section as the administrator
determines is necessary or appropriate. The assistance may be provided without regard
to whether the conduct described in the request would also constitute a violation of this
chapter or other law of this state if occurring in this state. In deciding whether to provide
the assistance, the administrator may consider whether the requesting regulator is permitted
and has agreed to provide assistance reciprocally within its state or foreign jurisdiction
to the administrator on securities matters when requested; whether compliance with the
request would violate or prejudice the public policy of this state; and the availability of
resources and employees of the administrator to carry out the request for assistance.

    Sec. 40. [80A.80] SECTION 603; CIVIL ENFORCEMENT.
    (a) Civil action instituted by administrator. If the administrator believes that a
person has engaged, is engaging, or is about to engage in an act, practice, or course of
business constituting a violation of this chapter or a rule adopted or order issued under
this chapter or that a person has, is, or is about to engage in an act, practice, or course of
business that materially aids a violation of this chapter or a rule adopted or order issued
under this chapter, the administrator may maintain an action in the district court to enjoin
the act, practice, or course of business and to enforce compliance with this chapter or a
rule adopted or order issued under this chapter.
    (b) Relief available. In an action under this section and on a proper showing, the
court may:
    (1) issue a permanent or temporary injunction, restraining order, or declaratory
judgment;
    (2) order other appropriate or ancillary relief, which may include:
    (A) an asset freeze, accounting, writ of attachment, writ of general or specific
execution, and appointment of a receiver or conservator, that may be the administrator,
for the defendant or the defendant's assets;
    (B) ordering the administrator to take charge and control of a defendant's property,
including investment accounts and accounts in a depository institution, rents, and profits;
to collect debts; and to acquire and dispose of property;
    (C) imposing a civil penalty up to $10,000 for each violation; an order of rescission,
restitution, or disgorgement directed to a person that has engaged in an act, practice, or
course of business constituting a violation of this chapter or the predecessor act or a rule
adopted or order issued under this chapter or the predecessor act; and
    (D) ordering the payment of prejudgment and postjudgment interest; or
    (3) order such other relief as the court considers appropriate.
    (c) No bond required. The administrator may not be required to post a bond in an
action or proceeding under this chapter.

    Sec. 41. [80A.81] SECTION 604; ADMINISTRATIVE ENFORCEMENT.
    (a) Issuance of an order or notice. If the administrator determines that a person
has engaged, is engaging, or is about to engage in an act, practice, or course of business
constituting a violation of this chapter or a rule adopted or order issued under this chapter
or that a person has materially aided, is materially aiding, or is about to materially aid an
act, practice, or course of business constituting a violation of this chapter or a rule adopted
or order issued under this chapter, the administrator may:
    (1) issue an order directing the person to cease and desist from engaging in the
act, practice, or course of business or to take other action necessary or appropriate to
comply with this chapter;
    (2) issue an order denying, suspending, revoking, or conditioning the exemptions
for a broker-dealer under section 80A.56(b)(1)(D) or (F) or an investment adviser under
section 80A.58(b)(1)(C); or
    (3) issue an order under section 80A.48.
    (b) Summary process. An order under subsection (a) is effective on the date of
issuance. Upon issuance of the order, the administrator shall promptly serve each person
subject to the order with a copy of the order and a notice that the order has been entered.
The order must include a statement whether the administrator will seek a civil penalty or
costs of the investigation, a statement of the reasons for the order, and notice that, within
15 days after receipt of a request in a record from the person, the matter will be scheduled
for a hearing. If a person subject to the order does not request a hearing and none is
ordered by the administrator within 30 days after the date of service of the order, the order,
which may include a civil penalty or costs of the investigation if a civil penalty or costs
were sought in the statement accompanying the order, becomes final as to that person by
operation of law. If a hearing is requested or ordered, the administrator, after notice of
an opportunity for hearing to each person subject to the order, may modify or vacate the
order or extend it until final determination.
    (c) Procedure for final order. If a hearing is requested or ordered pursuant to
subsection (b), a hearing must be held under chapter 14. A final order may not be issued
unless the administrator makes findings of fact and conclusions of law in a record
according to chapter 14. The final order may make final, vacate, or modify the order
issued under subsection (a).
    (d) Civil penalty. In a final order under subsection (c), the administrator may
impose a civil penalty up to $10,000 for each violation.
    (e) Costs. In a final order, the administrator may charge the actual cost of an
investigation or proceeding for a violation of this chapter or a rule adopted or order issued
under this chapter.
    (f) Filing of certified final order with court; effect of filing. If a petition for
judicial review of a final order is not filed in accordance with section 80A.86, the
administrator may file a certified copy of the final order with the clerk of a court of
competent jurisdiction. The order so filed has the same effect as a judgment of the court
and may be recorded, enforced, or satisfied in the same manner as a judgment of the court.
    (g) Enforcement by court; further civil penalty. If a person does not comply
with an order under this section, the administrator may petition a court of competent
jurisdiction to enforce the order. The court may not require the administrator to post a
bond in an action or proceeding under this section. If the court finds, after service and
opportunity for hearing, that the person was not in compliance with the order, the court
may adjudge the person in civil contempt of the order. The court may impose a further
civil penalty against the person for contempt in an amount up to $10,000 for each violation
and may grant any other relief the court determines is just and proper in the circumstances.

    Sec. 42. [80A.82] SECTION 605; RULES, FORMS, ORDERS,
INTERPRETATIVE OPINIONS, AND HEARINGS.
    (a) Issuance and adoption of forms, orders, and rules. The administrator may:
    (1) issue forms and orders and, after notice and comment, may adopt and amend
rules necessary or appropriate to carry out this chapter and may repeal rules, including
rules and forms governing registration statements, applications, notice filings, reports,
and other records;
    (2) by rule, define terms, whether or not used in this chapter, but those definitions
may not be inconsistent with this chapter; and
    (3) by rule, classify securities, persons, and transactions and adopt different
requirements for different classes.
    (b) Findings and cooperation. Under this chapter, a rule or form may not be
adopted or amended, or an order issued or amended, unless the administrator finds that the
rule, form, order, or amendment is necessary or appropriate in the public interest or for the
protection of investors and is consistent with the purposes intended by this chapter. In
adopting, amending, and repealing rules and forms, section 80A.85 applies in order to
achieve uniformity among the states and coordination with federal laws in the form and
content of registration statements, applications, reports, and other records, including the
adoption of uniform rules, forms, and procedures.
    (c) Financial statements. Subject to Section 15(h) of the Securities Exchange Act
and Section 222 of the Investment Advisers Act of 1940, the administrator may require
that a financial statement filed under this chapter be prepared in accordance with generally
accepted accounting principles in the United States and comply with other requirements
specified by rule adopted or order issued under this chapter. A rule adopted or order
issued under this chapter may establish:
    (1) subject to Section 15(h) of the Securities Exchange Act and Section 222 of the
Investment Advisors Act of 1940, the form and content of financial statements required
under this chapter;
    (2) whether unconsolidated financial statements must be filed; and
    (3) whether required financial statements must be audited by an independent
certified public accountant.
    (d) Interpretative opinions. The administrator may provide interpretive opinions
or issue determinations that the administrator will not institute a proceeding or an
action under this chapter against a specified person for engaging in a specified act,
practice, or course of business if the determination is consistent with this chapter. A
rule adopted or order issued under this chapter may establish a reasonable charge for
interpretative opinions or determinations that the administrator will not institute an action
or a proceeding under this chapter.
    (e) Effect of compliance. A penalty under this chapter may not be imposed for, and
liability does not arise from conduct that is engaged in or omitted in good faith believing it
conforms to a rule, form, or order of the administrator under this chapter.
    (f) Presumption for public hearings. A hearing in an administrative proceeding
under this chapter must be conducted in public unless the administrator for good cause
consistent with this chapter determines that the hearing will not be so conducted.

    Sec. 43. [80A.83] SECTION 606; ADMINISTRATIVE FILES AND OPINIONS.
    (a) Public register of filings. The administrator shall maintain, or designate a person
to maintain, a register of applications for registration of securities; registration statements;
notice filings; applications for registration of broker-dealers, agents, investment advisers,
and investment adviser representatives; notice filings by federal covered investment
advisers that are or have been effective under this chapter or the predecessor act; notices of
claims of exemption from registration or notice filing requirements contained in a record;
orders issued under this chapter or the predecessor act; and interpretative opinions or no
action determinations issued under this chapter.
    (b) Public availability. The administrator shall make all rules, forms, interpretative
opinions, and orders available to the public.
    (c) Copies of public records. The administrator shall furnish a copy of a record
that is a public record or a certification that the public record does not exist to a person
that so requests. A rule adopted under this chapter may establish a reasonable charge
for furnishing the record or certification. A copy of the record certified or a certificate
by the administrator of a record's nonexistence is prima facie evidence of a record or its
nonexistence.

    Sec. 44. [80A.84] SECTION 607; PUBLIC RECORDS; CONFIDENTIALITY.
    (a) Presumption of public records. Except as otherwise provided in subsection
(b), records obtained by the administrator or filed under this chapter, including a record
contained in or filed with a registration statement, application, notice filing, or report, are
public records and are available for public examination.
    (b) Nonpublic records. The following records are not public records and are not
available for public examination under subsection (a):
    (1) a record obtained by the administrator in connection with an audit or inspection
under section 80A.66(d) or an investigation under section 80A.79;
    (2) a part of a record filed in connection with a registration statement under sections
80A.49 and 80A.51 through 80A.53 or a record under section 80A.66(d) that contains
trade secrets or confidential information if the person filing the registration statement or
report has asserted a claim of confidentiality or privilege that is authorized by law;
    (3) a record that is not required to be provided to the administrator or filed under this
chapter and is provided to the administrator only on the condition that the record will not
be subject to public examination or disclosure;
    (4) a nonpublic record received from a person specified in section 80A.85(a);
    (5) any social security number, residential address unless used as a business address,
and residential telephone number contained in a record that is filed; and
    (6) a record obtained by the administrator through a designee of the administrator
that a rule or order under this chapter determines has been:
    (A) expunged from the administrator's records by the designee; or
    (B) determined to be nonpublic or nondisclosable by that designee if the
administrator finds the determination to be in the public interest and for the protection of
investors.
    (c) Administrator discretion to disclose. If disclosure is for the purpose of a civil,
administrative, or criminal investigation, action, or proceeding or to a person specified
in section 80A.85(a), the administrator may disclose a record obtained in connection
with an audit or inspection under section 80A.66(d) or a record obtained in connection
with an investigation under section 80A.79.

    Sec. 45. [80A.85] SECTION 608; UNIFORMITY AND COOPERATION WITH
OTHER AGENCIES.
    (a) Objective of uniformity. The administrator shall, in its discretion, cooperate,
coordinate, consult, and, subject to section 80A.84, share records and information with the
securities regulator of another state, Canada, a Canadian province or territory, a foreign
jurisdiction, the Securities and Exchange Commission, the United States Department of
Justice, the Commodity Futures Trading Commission, the Federal Trade Commission, the
Securities Investor Protection Corporation, a self-regulatory organization, a national or
international organization of securities regulators, a federal or state banking and insurance
regulator, and a governmental law enforcement agency to effectuate greater uniformity in
securities matters among the federal government, self-regulatory organizations, states,
and foreign governments.
    (b) Policies to consider. In cooperating, coordinating, consulting, and sharing
records and information under this section and in acting by rule, order, or waiver under
this chapter, the administrator shall, in its discretion, take into consideration in carrying
out the public interest the following general policies:
    (1) maximizing effectiveness of regulation for the protection of investors;
    (2) maximizing uniformity in federal and state regulatory standards; and
    (3) minimizing burdens on the business of capital formation, without adversely
effecting essentials of investor protection.
    (c) Subjects for cooperation. The cooperation, coordination, consultation, and
sharing of records and information authorized by this section includes:
    (1) establishing or employing one or more designees as a central depository for
registration and notice filings under this chapter and for records required or allowed to
be maintained under this chapter;
    (2) developing and maintaining uniform forms;
    (3) conducting a joint examination or investigation;
    (4) holding a joint administrative hearing;
    (5) instituting and prosecuting a joint civil or administrative proceeding;
    (6) sharing and exchanging personnel;
    (7) coordinating registrations under sections 80A.49 and 80A.56 through 80A.59
and exemptions under section 80A.47;
    (8) sharing and exchanging records, subject to section 80A.84;
    (9) formulating rules, statements of policy, guidelines, forms, and interpretative
opinions and releases;
    (10) formulating common systems and procedures;
    (11) notifying the public of proposed rules, forms, statements of policy, and
guidelines;
    (12) attending conferences and other meetings among securities regulators, which
may include representatives of governmental and private sector organizations involved in
capital formation, deemed necessary or appropriate to promote or achieve uniformity; and
    (13) developing and maintaining a uniform exemption from registration for small
issuers, and taking other steps to reduce the burden of raising investment capital by small
businesses.

    Sec. 46. [80A.86] SECTION 609; JUDICIAL REVIEW.
    (a) Judicial review of orders. A final order issued by the administrator under this
chapter is subject to judicial review in accordance with chapter 14.
    (b) Judicial review of rules. A rule adopted under this chapter is subject to judicial
review in accordance with chapter 14.

    Sec. 47. [80A.87] SECTION 610; JURISDICTION.
    (a) Sales and offers to sell. Sections 80A.49, 80A.50, 80A.56(a), 80A.57(a),
80A.58(a), 80A.59(a), 80A.68, 80A.73, 80A.76, and 80A.77 do not apply to a person that
sells or offers to sell a security unless the offer to sell or the sale is made in this state or the
offer to purchase or the purchase is made and accepted in this state.
    (b) Purchases and offers to purchase. Sections 80A.56(a), 80A.57(a), 80A.58(a),
80A.59(a), 80A.68, 80A.73, 80A.76, and 80A.77 do not apply to a person that purchases
or offers to purchase a security unless the offer to purchase or the purchase is made in this
state or the offer to sell or the sale is made and accepted in this state.
    (c) Offers in this state. For the purpose of this section, an offer to sell or to purchase
a security is made in this state, whether or not either party is then present in this state, if
the offer:
    (1) originates from within this state; or
    (2) is directed by the offeror to a place in this state and received at the place to
which it is directed.
    (d) Acceptances in this state. For the purpose of this section, an offer to purchase
or to sell is accepted in this state, whether or not either party is then present in this
state, if the acceptance:
    (1) is communicated to the offeror in this state and the offeree reasonably believes
the offeror to be present in this state and the acceptance is received at the place in this
state to which it is directed; and
    (2) has not previously been communicated to the offeror, orally or in a record,
outside this state.
    (e) Publications, radio, television, or electronic communications. An offer
to sell or to purchase is not made in this state when a publisher circulates or there is
circulated on the publisher's behalf in this state a bona fide newspaper or other publication
of general, regular, and paid circulation that is not published in this state, or that is
published in this state but has had more than two-thirds of its circulation outside this state
during the previous 12 months or when a radio or television program or other electronic
communication originating outside this state is received in this state. A radio or television
program, or other electronic communication is considered as having originated in this
state if either the broadcast studio or the originating source of transmission is located
in this state, unless:
    (1) the program or communication is syndicated and distributed from outside this
state for redistribution to the general public in this state;
    (2) the program or communication is supplied by a radio, television, or other
electronic network with the electronic signal originating from outside this state for
redistribution to the general public in this state;
    (3) the program or communication is an electronic communication that originates
outside this state and is captured for redistribution to the general public in this state by a
community antenna or cable, radio, cable television, or other electronic system; or
    (4) the program or communication consists of an electronic communication that
originates in this state, but which is not intended for distribution to the general public in
this state.
    (f) Investment advice and misrepresentations. Sections 80A.58(a), 80A.59(a),
80A.60(a), 80A.69, 80A.72, and 80A.73 apply to a person if the person engages in an act,
practice, or course of business instrumental in effecting prohibited or actionable conduct
in this state, whether or not either party is then present in this state.

    Sec. 48. [80A.88] SECTION 611; SERVICE OF PROCESS.
    (a) Signed consent to service of process. A consent to service of process complying
with this section required by this chapter must be signed and filed in the form required
by a rule or order under this chapter. A consent appointing the administrator the person's
agent for service of process in a noncriminal action or proceeding against the person, or
the person's successor or personal representative under this chapter or a rule adopted or
order issued under this chapter after the consent is filed, has the same force and validity as
if the service were made personally on the person filing the consent. A person that has
filed a consent complying with this subsection in connection with a previous application
for registration or notice filing need not file an additional consent.
    (b) Conduct constituting appointment of agent for service. If a person, including
a nonresident of this state, engages in an act, practice, or course of business prohibited
or made actionable by this chapter or a rule adopted or order issued under this chapter
and the person has not filed a consent to service of process under subsection (a), the act,
practice, or course of business constitutes the appointment of the administrator as the
person's agent for service of process in a noncriminal action or proceeding against the
person or the person's successor or personal representative.
    (c) Procedure for service of process. Service under subsection (a) or (b) may be
made by providing a copy of the process to the office of the administrator, but it is not
effective unless:
    (1) the plaintiff, which may be the administrator, promptly sends notice of the
service and a copy of the process, return receipt requested, to the defendant or respondent
at the address set forth in the consent to service of process or, if a consent to service of
process has not been filed, at the last known address, or takes other reasonable steps
to give notice; and
    (2) the plaintiff files an affidavit of compliance with this subsection in the action or
proceeding on or before the return day of the process, if any, or within the time that the
court, or the administrator in a proceeding before the administrator, allows.
    (d) Service in administrative proceedings or civil actions by administrator.
Service pursuant to subsection (c) may be used in a proceeding before the administrator or
by the administrator in a civil action in which the administrator is the moving party.
    (e) Opportunity to defend. If process is served under subsection (c), the court, or
the administrator in a proceeding before the administrator, shall order continuances as are
necessary or appropriate to afford the defendant or respondent reasonable opportunity
to defend.

    Sec. 49. [80A.89] SECTION 612; SEVERABILITY CLAUSE.
    If any provision of this chapter or its application to any person or circumstances is
held invalid, the invalidity does not affect other provisions or applications of this chapter
that can be given effect without the invalid provision or application, and to this end the
provisions of this chapter are severable.
TRANSITION

    Sec. 50. [80A.90] SECTION 703; APPLICATION OF ACT TO EXISTING
PROCEEDING AND EXISTING RIGHTS AND DUTIES.
    (a) Applicability of predecessor act to pending proceedings and existing rights.
The predecessor act exclusively governs all actions or proceedings that are pending on the
effective date of this chapter or may be instituted on the basis of conduct occurring before
the effective date of this chapter, but a civil action may not be maintained to enforce any
liability under the predecessor act unless instituted within any period of limitation that
applied when the cause of action accrued or within five years after the effective date of
this chapter, whichever is earlier.
    (b) Continued effectiveness under predecessor act. All effective registrations
under the predecessor act, all administrative orders relating to the registrations, rules,
statements of policy, interpretative opinions, declaratory rulings, no action determinations,
and conditions imposed on the registrations under the predecessor act remain in effect
while they would have remained in effect if this chapter had not been enacted. They are
considered to have been filed, issued, or composed under this chapter, but are exclusively
governed by the predecessor act.
    (c) Applicability of predecessor act to offers or sales. The predecessor act
exclusively applies to an offer or sale made within one year after the effective date of this
chapter pursuant to an offering made in good faith before the effective date of this chapter
on the basis of an exemption available under the predecessor act.

    Sec. 51. REPEALER.
Minnesota Statutes 2004, sections 80A.01; 80A.02; 80A.03; 80A.04; 80A.041;
80A.05; 80A.06; 80A.07; 80A.08; 80A.09; 80A.10; 80A.11; 80A.115; 80A.12; 80A.122;
80A.125; 80A.13; 80A.14; 80A.15; 80A.16; 80A.17; 80A.18; 80A.19; 80A.22; 80A.23;
80A.24; 80A.25; 80A.26; 80A.27; 80A.28; 80A.29; 80A.30; and 80A.31, are repealed.

    Sec. 52. EFFECTIVE DATE.
    This act is effective August 1, 2007.

ARTICLE 2
CONFORMING CHANGES

    Section 1. Minnesota Statutes 2004, section 60A.077, subdivision 9, is amended to
read:
    Subd. 9. Membership interests. A membership interest in a domestic mutual
insurance holding company does not constitute a security as defined in section 80A.14,
subdivision 18 80A.41(28). No member of a mutual insurance holding company may
transfer or pledge membership in the mutual insurance holding company or any right
arising from the membership except as attendant to the valid transfer or assignment
of the member's policy in any reorganized company that gave rise to the member's
membership interest. A member of a mutual insurance holding company is not, as a
member, personally liable for the acts, debts, liabilities, or obligations of the company.
No assessments of any kind may be imposed upon the members of a mutual insurance
holding company by the directors or members, or because of any liability of any company
owned or controlled by the mutual insurance holding company or because of any act, debt,
or liability of the mutual insurance holding company. A member's interest in the mutual
insurance holding company shall automatically terminate upon cancellation, nonrenewal,
expiration, or termination of the member's policy in any insurance company that gave
rise to the member's membership interest.

    Sec. 2. Minnesota Statutes 2004, section 82.23, is amended to read:
82.23 EXCEPTIONS.
    Unless a person is licensed or otherwise required to be licensed under this chapter,
the term real estate broker does not include:
    (a) a licensed practicing attorney if the attorney complies in all respects with the
trust account provisions of this chapter;
    (b) a receiver, trustee, administrator, guardian, executor, or other person appointed
by or acting under the judgment or order of any court;
    (c) any person owning and operating a cemetery and selling lots therein solely for
use as burial plots;
    (d) any custodian, janitor, or employee of the owner or manager of a residential
building who leases residential units in the building;
    (e) any bank, trust company, savings association, industrial loan and thrift company,
regulated lender under chapter 56, public utility, or land mortgage or farm loan association
organized under the laws of this state or the United States, when engaged in the transaction
of business within the scope of its corporate powers as provided by law;
    (f) public officers while performing their official duties;
    (g) employees of persons enumerated in clauses (b), (e), and (f), when engaged in
the specific performance of their duties;
    (h) any person who acts as an auctioneer bonded in conformity with section 330.02,
when that person is engaged in the specific performance of duties as an auctioneer, and
when that person has been employed to auction real estate by a person licensed under this
chapter or when the auctioneer has engaged a licensed attorney to supervise the real
estate transaction;
    (i) any person who acquires real estate for the purpose of engaging in and does
engage in, or who is engaged in the business of constructing residential, commercial or
industrial buildings for the purpose of resale if no more than 25 such transactions occur in
any 12-month period and the person complies with section 82.50;
    (j) any person who is licensed as a securities broker-dealer or is licensed as a
securities agent representing a broker-dealer pursuant to chapter 80A and who offers to
sell or sells an interest or estate in real estate which is a security as defined in section
80A.14, subdivision 18 80A.41(28), and is registered or exempt from registration or part
of a transaction exempt from registration pursuant to chapter 80A, when acting solely as
an incident to the sale of these securities;
    (k) any person who offers to sell or sells a business opportunity which is a franchise
registered pursuant to chapter 80C, when acting solely to sell the franchise;
    (l) any person who contracts with or solicits on behalf of a provider a contract
with a resident or prospective resident to provide continuing care in a facility, pursuant
to the Continuing Care Facility Disclosure and Rehabilitation Act (chapter 80D), when
acting solely as incident to the contract;
    (m) any broker-dealer or agent of a broker-dealer when participating in a transaction
in which all or part of a business opportunity or business, including any interest therein, is
conveyed or acquired pursuant to an asset purchase, merger, exchange of securities, or
other business combination, if the agent or broker-dealer is licensed pursuant to chapter
80A;
    (n) an accountant acting incident to the practice of the accounting profession if the
accountant complies in all respects with the trust account provisions of this chapter.

    Sec. 3. Minnesota Statutes 2004, section 82.43, subdivision 7, is amended to read:
    Subd. 7. Application for recovery. When any aggrieved person obtains a final
judgment in any court of competent jurisdiction regardless of whether the judgment
has been discharged by a bankruptcy court against an individual licensed under this
chapter, on grounds of fraudulent, deceptive, or dishonest practices, or conversion of
trust funds arising directly out of any transaction when the judgment debtor was licensed
and performed acts for which a license is required under this chapter, or performed acts
permitted by section 327B.04, subdivision 5, the aggrieved person may, upon the judgment
becoming final, and upon termination of all proceedings, including reviews and appeals,
file a verified application in the court in which the judgment was entered. The application
shall state with specificity the grounds upon which the application seeks to recover from
the fund, and request an order directing payment out of the fund of the amount of actual
and direct out of pocket loss in the transaction, but excluding any attorney's fees, interest
on the loss and on any judgment obtained as a result of the loss, up to the sum of $150,000
of the amount unpaid upon the judgment, provided that nothing in this chapter shall be
construed to obligate the fund for more than $150,000 per claimant, per transaction,
subject to the limitations set forth in subdivision 14, regardless of the number of persons
aggrieved or parcels of real estate involved in the transaction, provided that regardless
of the number of claims against a licensee, nothing in this chapter may obligate the fund
for more than $250,000 per licensee. An aggrieved person who has a cause of action
under section 80A.23 80A.76 shall first seek recovery as provided in section 80A.05,
subdivision 5 80A.66(e), before the commissioner may order payment from the recovery
fund. For purposes of this section, persons who are joint tenants or tenants in common are
deemed to be a single claimant. A copy of the verified application shall be served upon
the commissioner and upon the judgment debtor, and a certificate or affidavit of service
filed with the court. For the purpose of this section, "aggrieved person" does not include
a government agency, financial institution, or other entity that purchases, guarantees, or
insures a loan secured by real estate, and does not include a licensee unless (1) the licensee
is acting in the capacity of principal in the sale of interests in real property owned by the
licensee; or (2) the licensee is acting in the capacity of principal in the purchase of interests
in real property to be owned by the licensee. Under no circumstances shall a licensee be
entitled to payment under this section for the loss of a commission or similar fee.
    For the purposes of this section, recovery is limited to transactions where the property
involved is intended for the direct personal habitation or commercial use of the buyer.
    Except for securities permitted to be sold by a licensee pursuant to section 82.41,
subdivision 8, for any action commenced after July 1, 1993, recovery under this section is
not available where the buyer's participation is for investment purposes only, and is limited
to providing capital to fund the transaction.

    Sec. 4. Minnesota Statutes 2004, section 144A.01, subdivision 4, is amended to read:
    Subd. 4. Controlling person. "Controlling person" means any public body,
governmental agency, business entity, officer, nursing home administrator, or director
whose responsibilities include the direction of the management or policies of a nursing
home. "Controlling person" also means any person who, directly or indirectly, beneficially
owns any interest in:
    (a) Any corporation, partnership or other business association which is a controlling
person;
    (b) The land on which a nursing home is located;
    (c) The structure in which a nursing home is located;
    (d) Any mortgage, contract for deed, or other obligation secured in whole or part by
the land or structure comprising a nursing home; or
    (e) Any lease or sublease of the land, structure, or facilities comprising a nursing
home.
    "Controlling person" does not include:
    (a) A bank, savings bank, trust company, savings association, credit union, industrial
loan and thrift company, investment banking firm, or insurance company unless the entity
directly or through a subsidiary operates a nursing home;
    (b) An individual state official or state employee, or a member or employee of the
governing body of a political subdivision of the state which operates one or more nursing
homes, unless the individual is also an officer or director of a nursing home, receives any
remuneration from a nursing home, or owns any of the beneficial interests not excluded
in this subdivision;
    (c) A natural person who is a member of a tax-exempt organization under section
290.05, subdivision 1, clause (i), unless the individual is also an officer or director of a
nursing home, or owns any of the beneficial interests not excluded in this subdivision; and
    (d) A natural person who owns less than five percent of the outstanding common
shares of a corporation:
    (1) whose securities are exempt by virtue of section 80A.15, subdivision 1, clause (f)
80A.45(6); or
    (2) whose transactions are exempt by virtue of section 80A.15, subdivision 2, clause
(b) 80A.46(7).

    Sec. 5. Minnesota Statutes 2004, section 245A.02, subdivision 5a, is amended to read:
    Subd. 5a. Controlling individual. "Controlling individual" means a public body,
governmental agency, business entity, officer, owner, or managerial official whose
responsibilities include the direction of the management or policies of a program. For
purposes of this subdivision, owner means an individual who has direct or indirect
ownership interest in a corporation, partnership, or other business association issued a
license under this chapter. For purposes of this subdivision, managerial official means
those individuals who have the decision-making authority related to the operation of
the program, and the responsibility for the ongoing management of or direction of the
policies, services, or employees of the program. Controlling individual does not include:
    (1) a bank, savings bank, trust company, savings association, credit union, industrial
loan and thrift company, investment banking firm, or insurance company unless the entity
operates a program directly or through a subsidiary;
    (2) an individual who is a state or federal official, or state or federal employee, or a
member or employee of the governing body of a political subdivision of the state or
federal government that operates one or more programs, unless the individual is also an
officer, owner, or managerial official of the program, receives remuneration from the
program, or owns any of the beneficial interests not excluded in this subdivision;
    (3) an individual who owns less than five percent of the outstanding common
shares of a corporation:
    (i) whose securities are exempt under section 80A.15, subdivision 1, clause (f)
80A.45(6); or
    (ii) whose transactions are exempt under section 80A.15, subdivision 2, clause (b)
80A.46(2); or
    (4) an individual who is a member of an organization exempt from taxation under
section 290.05, unless the individual is also an officer, owner, or managerial official of
the program or owns any of the beneficial interests not excluded in this subdivision. This
clause does not exclude from the definition of controlling individual an organization that
is exempt from taxation.

    Sec. 6. Minnesota Statutes 2004, section 302A.011, subdivision 26, is amended to read:
    Subd. 26. Security. "Security" has the meaning given it in section 80A.14,
subdivision 18 80A.41(28).

    Sec. 7. Minnesota Statutes 2004, section 302A.251, subdivision 4, is amended to read:
    Subd. 4. Elimination or limitation of liability. A director's personal liability to the
corporation or its shareholders for monetary damages for breach of fiduciary duty as a
director may be eliminated or limited in the articles. The articles shall not eliminate or
limit the liability of a director:
    (a) for any breach of the director's duty of loyalty to the corporation or its
shareholders;
    (b) for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
    (c) under section 302A.559 or 80A.23 80A.76;
    (d) for any transaction from which the director derived an improper personal benefit;
or
    (e) for any act or omission occurring prior to the date when the provision in the
articles eliminating or limiting liability becomes effective.

    Sec. 8. Minnesota Statutes 2004, section 308A.505, is amended to read:
308A.505 SUBJECT TO SECURITIES LAW.
    Cooperatives are subject to the provisions of chapter 80A, except as specifically
provided in section 80A.15 sections 80A.45 and 80A.46.

    Sec. 9. Minnesota Statutes 2004, section 308B.465, subdivision 2, is amended to read:
    Subd. 2. Restrictions on liability limitation. The articles or bylaws may not
eliminate or limit the liability of a director:
    (1) for a breach of the director's duty of loyalty to the cooperative or its members;
    (2) for acts or omissions that are not in good faith or involve intentional misconduct
or a knowing violation of law;
    (3) for knowing violations of securities laws under section 80A.23 or for illegal
distributions;
    (4) for a transaction from which the director derived an improper personal benefit; or
    (5) for an act or omission occurring before the date when the provision in the articles
or bylaws eliminating or limiting liability becomes effective.

    Sec. 10. Minnesota Statutes 2004, section 322B.03, subdivision 43, is amended to read:
    Subd. 43. Security. "Security" has the meaning given it in section 80A.14,
subdivision 18 80A.41(28).

    Sec. 11. Minnesota Statutes 2004, section 322B.663, subdivision 4, is amended to read:
    Subd. 4. Elimination or limitation of liability. A governor's personal liability to
the limited liability company or its members for monetary damages for breach of fiduciary
duty as a governor may be eliminated or limited in the articles of organization or a
member control agreement. Neither the articles nor a member control agreement may
eliminate or limit the liability of a governor:
    (1) for any breach of the governor's duty of loyalty to the limited liability company
or its members;
    (2) for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
    (3) under section 80A.23 80A.76 or 322B.56;
    (4) for any transaction from which the governor derived an improper personal
benefit; or
    (5) for any act or omission occurring before the date when the provision in the
articles of organization or a member control agreement eliminating or limiting liability
becomes effective.

    Sec. 12. Minnesota Statutes 2004, section 356A.06, subdivision 6, is amended to read:
    Subd. 6. Limited list of authorized investment securities. (a) Except to the
extent otherwise authorized by law, a covered pension plan may invest its assets only in
investment securities authorized by this subdivision if the plan does not:
    (1) have assets with a book value in excess of $1,000,000;
    (2) use the services of an investment advisor registered with the Securities and
Exchange Commission in accordance with the Investment Advisers Act of 1940, or
licensed registered as an investment advisor in accordance with sections 80A.04,
subdivision 4 80A.58, and 80A.14, subdivision 9 80A.59, for the investment of at least 60
percent of its assets, calculated on book value;
    (3) use the services of the State Board of Investment for the investment of at least 60
percent of its assets, calculated on book value; or
    (4) use a combination of the services of an investment advisor meeting the
requirements of clause (2) and the services of the State Board of Investment for the
investment of at least 75 percent of its assets, calculated on book value.
    (b) Investment securities authorized for a pension plan covered by this subdivision
are:
    (1) certificates of deposit issued, to the extent of available insurance or
collateralization, by a financial institution that is a member of the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation, is insured
by the National Credit Union Administration, or is authorized to do business in this state
and has deposited with the chief administrative officer of the plan a sufficient amount of
marketable securities as collateral in accordance with section 118A.03;
    (2) savings accounts, to the extent of available insurance, with a financial institution
that is a member of the Federal Deposit Insurance Corporation or the Federal Savings
and Loan Insurance Corporation;
    (3) governmental obligations, including bonds, notes, bills, or other fixed
obligations, issued by the United States, an agency or instrumentality of the United States,
an organization established and regulated by an act of Congress or by a state, state agency
or instrumentality, municipality, or other governmental or political subdivision that:
    (i) for the obligation in question, issues an obligation that equals or exceeds the
stated investment yield of debt securities not exempt from federal income taxation and of
comparable quality;
    (ii) for an obligation that is a revenue bond, has been completely self-supporting
for the last five years; and
    (iii) for an obligation other than a revenue bond, has issued an obligation backed by
the full faith and credit of the applicable taxing jurisdiction and has not been in default on
the payment of principal or interest on the obligation in question or any other nonrevenue
bond obligation during the preceding ten years;
    (4) corporate obligations, including bonds, notes, debentures, or other regularly
issued and readily marketable evidences of indebtedness issued by a corporation organized
under the laws of any state that during the preceding five years has had on average
annual net pretax earnings at least 50 percent greater than the annual interest charges
and principal payments on the total issued debt of the corporation during that period
and that, for the obligation in question, has issued an obligation rated in one of the top
three quality categories by Moody's Investors Service, Incorporated, or Standard and
Poor's Corporation; and
    (5) shares in an open-end investment company registered under the federal
Investment Company Act of 1940, if the portfolio investments of the company are limited
to investments that meet the requirements of clauses (1) to (4).
Presented to the governor May 8, 2006
Signed by the governor May 11, 2006, 12:20 p.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569