SB 0974 - Fiscal Note

Fiscal Note - SB 0974 - Revises securities registration and sales

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 4022-01

BILL NO. SB 974

SUBJECT: Secretary of State: Securities

TYPE: Original

DATE: March 6, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	$135,000	$160,000	$200,000
Total Estimated Net Effect on All State Funds	$135,000	$160,000	$200,000

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials from the Office of the Secretary of State (SOS) assume the proposed legislation would result in an increase in state revenues, based upon the Cease and Desist Orders issued by the Securities Division of the Secretary of State's office during the last two years and the penalties that would have been assessed in each of these Orders. The amount for each penalty was determined by using the National Association of Securities Dealers' sanction guidelines. The total amount was then reduced by the number of firms named in these Orders that the Division could not locate or who had ceased operating and would be unlikely to pay such a penalty.

This legislation would also result in the promulgation of some administrative rules. The actual number of rules that would be promulgated is unknown, but it is assumed this number would be offset by the rules which would be deleted.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
GENERAL REVENUE FUND
Income-Office of the Secretary of State (SOS)
Penalties	$135,000	$160,000	$200,000
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND	$135,000	$160,000	$200,000
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	0	0	0
FISCAL IMPACT - Small Business

Small businesses could have a direct fiscal impact as a result of this proposal, since it would reduce the paperwork requirements of firms registering some securities by decreasing the number of copies of the prospectus that would be required to be filed. The branch office registration would increase the paperwork requirements for broker-dealers who wish to open a branch office located in the state. These costs should be minimal, since these firms are already required to register branch offices with the National Association of Securities Dealers.

DESCRIPTION

The proposed legislation would revise various aspects of securities regulation within Chapter 409, RSMo. Prohibitions against insider trading of securities is added to Section 409.101, RSMo. Broker-dealers and investment advisers must register branch offices and an adviser must register as a broker-dealer with investment advisor capacity. "Security" is expanded to include interests in viatical settlement contracts. Violations of Chapter 409, or threatened violations, can subject a defendant to a cease and desist order issued by the Commissioner and/or court action of a legal or equitable nature. Penalties imposed by a court or the Commissioner can be as high as $10,000 for a single violation or $100,000 for multiple violations. An internet securities solicitation originating outside of Missouri does not constitute an offer for sale or purchase within the state if it is clear that it was not intended to be a direct solicitation. Section 409.417 is added for the state to reject participation in the federal limits imposed by the Philanthropy Protection Act of 1995.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

This proposal could affect Total State Revenues.

SOURCES OF INFORMATION

Office of the Secretary of State

Jeanne Jarrett, CPA

Director

March 6, 1998