2004 Minnesota Statutes

     45.025 Advertisement of interest rates. 

    Subdivision 1.    Definitions.  For the purposes of this 
 section only, the following terms have the meanings given them: 

    (a) "Advertisement" includes: 

    (1) printed or published material, audio visual material, 
 and descriptive literature of an issuer or agent used in direct 
 mail, newspapers, magazines, other periodicals, radio scripts, 
 television scripts, billboards, and other similar displays, 
 excluding advertisements prepared for the sole purpose of 
 obtaining employees, agents, or agencies; 

    (2) descriptive literature and sales aids of all kinds 
 issued by an issuer or agent for presentation to members of the 
 public, including but not limited to circulars, leaflets, 
 booklets, depictions, illustrations, and form letters; 

    (3) prepared sales talks, presentations, and materials for 
 use by issuers and agents and representations made by issuers 
 and agents in accordance with these talks, presentations, and 
 materials; and 

    (4) statements, written or oral, by an agent or issuer.  

    (b) "Agent" is a person who effects or attempts to effect 
 or assist in the purchase or sale of an investment product.  

    (c) "Commissioner" means the commissioner of commerce.  

    (d) "Effective annual yield" is the annualized income 
 expressed as a simple interest rate per annum based on the 
 initial investment principal. 

    (e) "Effective net annual yield" means the effective annual 
 yield, based on a hypothetical $1,000 investment, minus any 
 annual fee or similar regular periodic charges.  

    (f) "Investment product" includes but is not limited to:  

    (1) certificate of deposits, deposits, or fiduciary funds 
 entrusted to banks, savings associations, trust companies, 
 credit unions, savings banks, industrial loan and thrift 
 companies, and any other financial institution whether or not 
 licensed by or registered with the Department of Commerce; 

    (2) annuities, endowment policies, or other life insurance 
 products; 

    (3) securities, including:  a note; stock; treasury stock; 
 bond; debenture; evidence of indebtedness; certificate of 
 interest or participation in any profit sharing agreement; 
 collateral trust certificate; preorganizational certificate or 
 subscription; transferable shares; investment contract, 
 including but not limited to metals, gems, and coins; voting 
 trust certificate; certificate of deposit for a security; 
 certificate of interest or participation in an oil, gas, or 
 mining right, title or lease, or in payments out of production 
 under the right, title or lease; or, in general, any interest or 
 instrument commonly known as a security, or any certificate of 
 interest or participation in, temporary or interim certificate 
 for, receipt for guarantee of, or warrant or right to subscribe 
 to or purchase, any of the securities listed in this clause. 

    (g) "Issuer" includes but is not limited to:  banks, 
 savings associations, trust companies, credit unions, savings 
 banks, industrial loan and thrift companies, insurance 
 companies, investment companies, trusts, or a person who issues 
 an investment product.  

    (h) "Person" means an individual, corporation, a 
 partnership, an association, a joint stock company, a trust 
 where the interests of the beneficiaries are evidenced by a 
 security, an unincorporated organization, a government, a 
 political subdivision of a government, or any other entity.  

    (i) "Yield to maturity" means the discount rate which, when 
 applied to all future principal and interest payments to be 
 received from an investment product assuming the investment 
 product is held to maturity, results in a present value exactly 
 equal to the price of the investment product. 

    Subd. 2.    General restriction.  A person may not 
 advertise the interest rate of an investment product unless the 
 effective net annual yield, or the yield to maturity if the 
 investment product is a note, bond, or debenture that bears 
 interest at a fixed rate and has a stated maturity, is disclosed 
 in an equally prominent manner. 

    The name and address of the issuer, or a person from whom 
 the name and address of the issuer may be obtained, and any 
 prepayment expense, surrender charge, or withdrawal penalty 
 charged by the issuer must also be disclosed in a prominent 
 manner.  If the expense, charge, or penalty varies according to 
 the length of time the product is held, the advertisement must 
 disclose the expense, fee, or penalty imposed if surrendered or 
 terminated within one year. 

    Subd. 3.    Variable rates.  With the exception of life 
 insurance policy and annuity contract illustrations based upon a 
 prospective purchaser's age and sex that do not provide a 
 comparison with another policy or contract, an investment 
 product whose interest rate varies according to the income or 
 earnings of the issuer may not advertise projections of 
 effective annual yield for a period exceeding one year.  In 
 addition, the advertisement must include in a prominent manner 
 substantially the following statement:  

    "The effective annual yield or total return will fluctuate 
    along with market and other economic conditions.  Past 
    performance does not guarantee future results."  

    Subd. 4.    Past performance.  If the advertisement 
 refers to the past performance of an investment product, the 
 advertisement must disclose the effective net annual yield for 
 the one-year period immediately preceding the most recent 
 quarter.  "Quarters" for the purposes of this subdivision end on 
 March 31, June 30, September 30, and December 31. 

    Subd. 5.    Comparative illustrations.  Illustrations 
 comparing a life insurance policy or annuity contract of one 
 company with a life insurance policy or an annuity contract of 
 another company must clearly disclose with equal prominence for 
 each policy or contract:  

    (1) the guaranteed rate of interest paid on the cash value; 

    (2) the current dividend scale or current rate of interest 
 paid on the cash value; 

    (3) the nonguaranteed nature of any current dividends, 
 current interest rates, charges, or other fees applied to the 
 policy or contract, including the issuer's rights to alter any 
 of these factors; 

    (4) any limitations on the crediting of dividends or 
 interest; 

    (5) the frequency and timing by which dividends or the 
 current interest rate is determined; and 

    (6) the net cash surrender value at all ages and contract 
 durations illustrated. 

    Subd. 6.    Waiver.  The commissioner may by rule or 
 order waive or defer implementation of the provisions of 
 subdivisions 2 to 5 with regard to any person or persons who 
 comply with similar restrictions imposed by the Securities and 
 Exchange Commission or other regulatory agency. 

    Subd. 7. Repealed, 1992 c 427 s 3 

    Subd. 8.    Civil remedy.  A person violating this 
 section is liable to a purchaser of the investment product.  The 
 purchaser may sue either in equity for rescission upon tender of 
 the investment product or at law for damages if the purchaser no 
 longer owns the investment product.  In an action for 
 rescission, the purchaser is entitled to recover the 
 consideration paid for the investment product, together with 
 interest at the legal rate, costs, and reasonable attorney fees, 
 less the amount of any income received on the investment 
 product.  In an action at law, damages are the consideration 
 paid for the investment product together with interest at the 
 legal rate to the date of disposition, costs, and reasonable 
 attorney fees, less the value of the investment product at the 
 date of disposition.  Subject to the exceptions in subdivision 
 3, if the advertisement advertises an investment product whose 
 interest rate varies according to the earnings or income of the 
 issuer and if the advertisement projects the accumulated 
 earnings for a period longer than one year, the issuer and agent 
 are jointly and severally liable to the purchaser for the 
 difference in the principal and interest received by the 
 purchaser and the principal and interest as projected in the 
 advertisement.  

    Subd. 9.    Denial, suspension, or revocation.  The 
 commissioner may by order deny, suspend, or revoke an agent's or 
 issuer's license or may censure the licensee if the commissioner 
 finds that:  (1) the order is in the public interest; (2) the 
 agent or issuer violated any provision of this section; and (3) 
 the agent or issuer is licensed by the department. 

    Subd. 10.    Alternative compliance.  In lieu of 
 complying with the provisions of this section with respect to 
 any deposit or certificate of deposit, a depository institution 
 defined in section 19(b)(1)(A)(i)-(vi) of the Federal Reserve 
 Act, United States Code, title 12, section 461, or a deposit 
 broker defined in section 29(g) of the Federal Deposit Insurance 
 Act, United States Code, title 12, section 1831f(g), may comply 
 with the requirements of the Federal Truth in Savings Act and 
 regulations, notwithstanding whether or not that act or those 
 regulations apply to the deposit or certificate of deposit. 

    HIST: 1987 c 153 s 1; 1989 c 330 s 1; 1992 c 427 s 1,2; 1992 c 
 540 art 3 s 1; 1993 c 257 s 1