SB 0383 - Fiscal Note

Fiscal Note - SB 0383 - Modifies the regulation of securities

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 1767-01

BILL NO.: SB 383

SUBJECT: Secretary of State; Securities

TYPE: Original

DATE: February 24, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None	$0	$0	$0
Total Estimated Net Effect on All State Funds	$0	$0	$0

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None	$0	$0	$0
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

The State Court's Administrator's Office assumes no fiscal impact to the State's Courts.

The Attorney General's Office assumes no fiscal impact.

Officials from the Office of the Secretary of State (SOS) assume the proposed legislation is to be used as a deterrent mechanism rather than a revenue generator. Overall the penalties assessed and collected would be minimal resulting in marginal anticipated increases in state revenues. SOS would utilize current staff to monitor compliance with the provisions of the proposal, however other expenses to collect these revenues (such as locating assets, obtaining court orders, etc.) would be incurred. SOS assumes any increase in revenues would be offset by the costs associated with collecting these penalties, thus resulting in a zero fiscal impact.

Officials from the Office of State Courts Administrator stated there would be no fiscal impact on the courts.

Oversight assumes the anticipated revenues associated with the assessment of penalties and the corresponding costs incurred by SOS to collect the penalties are unknown. Both revenue and costs have been shown as unknown with a net to $0.

In addition, the proposal states that the SOS should assign an Assistant Commissioner of Securities. The SOS has already appointed this position by promoting and renaming a current FTE within the department, thus eliminating the need to request an additional FTE position.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
GENERAL REVENUE
Revenue - Secretary of State (SOS)
Assessment of penalties	Unknown	Unknown	Unknown
Cost - Secretary of State (SOS)
Collection of penalties	(Unknown)	(Unknown)	(Unknown)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND *	$0	$0	$0
* Assuming the unknown costs net to $0.
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business
This proposal could result in a savings to small businesses by reducing the amount of paperwork required to be filed by firms registering securities.

DESCRIPTION

This proposal makes changes in the requirements for registering securities. The act allows a securities dealer located in Canada who has no office or physical presence in the state to register and effect transactions in securities under certain conditions. A Canadian dealer may register by filing an application, by filing a consent to service of process, by registering in the jurisdiction from which the dealer is effecting transactions, and by maintaining membership of a self-

regulatory organization or stock exchange in Canada. Associated persons representing Canadian dealers may also effect transactions in securities if they are registered and meet certain guidelines.

The act authorizes the Commissioner of Securities to fix a reasonable period of time in which applicants or registrants must furnish required information; applicants or registrants who fail

to furnish the information within that time may be denied, suspended, revoked or canceled.

The act requires every person renewing a securities registration statement, other than registration statements for securities of a similar character involving a continuous offering, to pay a renewal fee of one hundred dollars.

The act excludes from the definition of "investment adviser representative" persons employed by a federal covered adviser and having a place of business within the state with a clientele ten

percent or less of whom are natural persons. To be excluded from the definition, the persons cannot regularly meet with or solicit clients of the investment adviser but may provide mere investment advisory services. The act includes within the definition of "security" any fractional or pooled interest in a viatical settlement contract. Certain exemptions from filing securities are deemed to be self-executing and require no filing with the division of securities.

The act allows the Commissioner of Securities to appoint, with the approval of the Secretary of State, an assistant commissioner.

Failure to respond to an investigative request by the Commissioner of Securities within fifteen days is made the basis for the issuance of a cease and desist order. The act changes certain enforcement powers of the commissioner to allow the issuance of a cease and desist order

DESCRIPTION (continued)

or, in cases of willful violations, an order imposing an administrative assessment. Administrative assessments may be imposed of up to $10,000 for a single violation and up to $50,000 for multiple violations. Appeals of circuit court orders will not operate as a stay of the commissioner's order unless ordered by the court; however, certain administrative assessments will be stayed until the circuit court issues its final order or decree.

An offer to sell or to buy securities is considered not to be made in this state if it is an Internet solicitation originating outside the state and received in the state specifying that it is not being offered to persons in this state, is not specifically directed to any person in this state, and does not result in an offer, sale or purchase of the issuer's securities in this state.

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

SOURCES OF INFORMATION

Secretary of State

Office of State Courts Administrator

Jeanne Jarrett, CPA

Director

February 24, 1999