By Jay Fishman, J.D.
New Hampshire’s Governor, Maggie Hassan, signed Senate Bill 266, comprising a new uniform securities act. The bill was spurred by the Governor’s Live Free and Start Initiative and has had bipartisan legislative support. The new Act, modeled after the Model Uniform Securities Act of 2002, takes effect January 1, 2016.
Governor Hassan said that “One of Live Free and Start’s top priorities, the Uniform Securities Act modernizes our securities regulations with a focus on investor protection and reducing hurdles for businesses trying to raise the capital that they need. This important bipartisan measure will support the growth of innovative businesses, while also fairly balancing the state’s interest in regulating securities transactions, creating a synchronized and modern law that reflects current thinking and the way business and entrepreneurs work.”
Act highlights. The Act’s main articles are summarized below:
Exemptions. Securities exemptions cover government securities, foreign government securities, international and national banking securities, common carrier and public utility securities, exchange listed securities under Section 18(b)(1) of the Securities Act of 1933, nonprofit organization securities, equipment trust certificates, and common trust fund interests.
Transactional exemptions cover isolated nonissuer transactions, nonissuer transactions through a registered broker-dealer, bona fide pledgee transactions, nonissuer transactions involving a federal covered investment adviser, transactions exchanging securities for cash, underwriter transactions, nonissuer sales of notes or bonds, institutional investor sales, 25-purchaser sales, employee benefit plan transactions, existing securityholder transactions, offers when registered under this Act and not exempt from the Securities Act of 1933; offerings when registration has been filed, but not effective under this Act and exempt from the Securities Act of 1933; control transactions (such as mergers), rescission offers, out-of-state offers or sales; dividends, distributions and judicially approved reorganizations; nonissuer transactions involving specified foreign issuer's securities traded on designated security exchanges; and additional exemptions and waivers.
Federal covered securities. Issuers making an offering of federal covered securities under Section 18(b)(2) of the Securities Act of 1933—investment company securities—must submit SEC-filed records both before and after the initial offer, together with an initial or renewal notice fee. Issuers making a federal covered securities offering under Section 18(b)(4)(D)—a Rule 506 offering—must file a notice consisting of a copy of Form D, including the Appendix, a consent to service of process, and a $500 fee.
Securities registration. Securities may be registered in New Hampshire by coordination or qualification.
Industry persons. The Act covers the regulation of broker-dealers, agents, investment advisers, investment adviser representatives and federal covered investment advisers. Specific topics include licensing, post-licensing such as financial statement and recordkeeping requirements, along with succession, termination, withdrawal and denial/suspension/revocation.
Fraud. It is unlawful for any person, in connection with the offer, sale or purchase of any security (directly or indirectly) to: (1) employ a device, scheme or artifice to defraud; (2) make an untrue statement or omission of material facts; or (3) engage in an act, practice or course of business that operates, or would operate, as a fraud or deceit against another person. Specific topics include prohibited conduct in providing investment advice, evidentiary burden, filing of sales and advertising literature, misleading filings, misrepresentations concerning registration or exemption, qualified immunity, criminal penalties, civil liability and rescission offers.
Administration. The Act provides that: (1) the administrator may administer the Act in accordance with methods specific to the state; (2) the administrator may make it unlawful for the administrator or a designee to use any non-public records or information for personal benefit; (3) nothing in the Act should be construed to either create or derogate any privilege existing at common law, by statute, rule or otherwise; (4) the administrator may develop and implement investor education initiatives to inform the public about investing in securities; and (5) set up a Securities Investor Education and Training Fund to provide for investor education initiatives. More specific topics include investigations and subpoenas; civil enforcement, administrative enforcement, rules, forms, orders, interpretative orders and hearings; administrative files and opinions; public records, confidentiality, uniformity and cooperation with other agencies; judicial review, jurisdiction; service of process, severability, application of chapter to existing proceeding and existing rights and duties; and denial, suspension, condition or limitation of exemptions.