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Applying Provisions of Certain Regulations, Bulletins, Policy Statements and Orders in Effect Prior to July 1, 2006, to the Vermont Uniform Securities Act.

Order
Friday, July 7, 2006
Docket No. 06-43-S

 

Please note:  Exhibit 3.1 Agent Registration Fees have increased from $55.00 to $60.00.  (Please see printer-friendly version for all exhibits.)

 

Docket 06-43-S

In the Matter of: Applying Provisions of Certain Regulations, Bulletins, Policy Statements and Orders In Effect Prior to July 1, 2006 to the Vermont Uniform Securities Act

WHEREAS, the Vermont Uniform Securities Act (2002), codified at 9 V.S.A. chapter 150 (the "Vermont Securities Act" or the "Act"), is effective as of July 1, 2006 and supersedes the Securities Act codified at 9 V.S.A. chapter 131 (the "Predecessor Act"), which is repealed effective as of July 1, 2006 except to the extent provided in Section 3 of 2005 No. 11§ 3;

WHEREAS, the Commissioner of the Department of Banking, Insurance, Securities and Health Care Administration (the "Commissioner") is charged with the administration of the Vermont Securities Act;

WHEREAS, the Commissioner has promulgated certain regulations, bulletins, policy statements and orders pursuant to the Predecessor Act to implement the Predecessor Act (collectively, the "Existing Administrative Rules");

WHEREAS, the Act authorizes the Commissioner to issue orders and interpretive opinions as the Commissioner deems necessary and appropriate to carry out the provisions and purposes of the Act;

WHEREAS, the Commissioner has determined that certain provisions of the Existing Administrative Rules should continue to apply on and after the effective date of the Vermont Securities Act and until such time as such provisions are amended or repealed;

WHEREAS, Section 3(a) of 2005 No. 11 provides that "[t]he [Predecessor Act]

exclusively governs all actions or proceedings that are pending on the effective date of [the Vermont Securities Act] or may be instituted on the basis of conduct occurring before the effective date of [the Vermont Securities Act], 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 [the Vermont Securities Act], whichever is earlier";

WHEREAS, Section 3(b) of 2005 No. 11 provides that "[a]ll effective registrations under the [Predecessor Act], all administrative orders relating to the registrations, rules, statements of policy, interpretive opinions, declaratory rulings, no action determinations, and conditions imposed on the registrations under the [Predecessor Act] remain in effect as they would have remained in effect if[the Vermont Securities Act] had not been enacted. They are considered to have been filed, issued, or imposed under [the Vermont Securities Act], but are exclusively governed by the [Predecessor Act]";

WHEREAS, Section 3(c) of 2005 No. 11 provides that the Predecessor Act "exclusively applies to an offer or sale made within one year after the effective date of [the Vermont Securities Act] pursuant to an offering made in good faith before the effective date of [the Vermont Securities Act] on the basis of an exemption available under the [Predecessor Act]";

WHEREAS, the Securities Division of the Department of Banking, Insurance, Securities and Health Care Administration (the "Division") is engaged in the process of drafting new regulations to implement the Vermont Securities Act, and it is in the public interest for the Commissioner to issue an order to ensure that certain provisions contained in the Existing Administrative Rules are in effect to implement the Act until such regulations are promulgated; and

WHEREAS, the Commissioner finds that this Order is necessary and appropriate in the public interest and is consistent with the purposes intended by the Vermont Securities Act;

NOW, THEREFORE, IT IS HEREBY ORDERED THAT:

Section 1. Effectiveness of the Existing Administrative Rules; Interpretation of the Act

1.1 Except as provided in Section 3 of 2005 No. 11, as of July 1, 2006 the provisions of the Existing Administrative Rules shall be rescinded and shall have no further force or effect.

1.2 As provided in Section 4 of 2005 No. 11, the Official Comments of the 2002 Uniform Securities Act, promulgated by the National Conference of Commissioners on Uniform State Laws, shall guide administrative and judicial interpretations of the Vermont Securities Act.

1.3 Any no action determination or interpretive opinion issued under the Predecessor Act shall have no force or effect under the Act. An interpretive opinion or no action determination under the Act may be requested pursuant to Section 5605(d) of the Act. A fee will apply as provided in Exhibit 3.1 to this Order.

Section 2. Definitions

2.1 Any term used in this Order shall have the meaning provided in the Act, except as the specific context otherwise requires or as specifically provided in this Order.

2.2 The definition of "security" in Section 5102(28) of the Act shall include variable insurance products, consistent with the Division's interpretation of the definition of "security" under the Predecessor Act as including variable insurance products.

Section 3. Fees

3.1 The schedule of fees attached hereto as Exhibit 3.1, which is incorporated as if set forth fully herein, shall apply to registrations, notice filings and certain other amounts payable under the Act, but shall not be construed as an exclusive list of fees and other amounts payable under the Act. The schedule does not include fees payable to a third party designated for the filing and processing of registrations associated with broker­ dealers, agents, investment advisers, federal covered investment advisers and investment adviser representatives (as of the date of this Order, the Central Registration Depository (CRD) and the Investment Adviser Registration Depository (IARD)). The Division reserves the right to adjust fees as provided in the Act, and to charge any fee or other amount specifically provided for in the Act that may not be included in Exhibit 3.1.

Section 4. Hearing Procedures

4.1 The provisions of Regulation 82-1 shall continue to apply other than as expressly provided in the Act.

Section 5. Privacy of Consumer Financial and Health Information

5.1 The provisions of Exhibit 5.1, attached hereto, regarding disclosure of consumer nonpublic personal information, are incorporated as if set forth fully herein. Cf. Regulation S-2001-1 (Privacy of Consumer Financial and Health Information).

Section 6. Regulation of Broker-Dealers, Agents, Investment Advisers, Federal Covered Investment Advisers and Investment Adviser Representatives

6.1 Unethical or Dishonest Practices - Broker-Dealers and Agents. The provisions of Exhibit 6.1, attached hereto, regarding unethical or dishonest practices of broker-dealers and agents, are incorporated as if set forth fully herein. Cf. Regulation S-91-1 (Unethical or Dishonest Practices of Broker-Dealers and Sales Representatives).

6.2 Registration of Broker-Dealers, Agents and Branch Offices. The provisions of Exhibit 6.2, attached hereto, regarding registration of broker-dealers, agents and branch offices, are incorporated as if set forth fully herein. Cf. Order 05-47-S.

6.3 Broker-Dealer Recordkeeping Requirements. The provisions of Exhibit 6.3, attached hereto, regarding recordkeeping requirements applicable to broker-dealers and agents, are incorporated as if set forth fully herein. Cf. Bulletin 05-1-S.

6.4 Registration of Investment Advisers and Investment Adviser Representatives.

The provisions of Exhibit 6.4, attached hereto, regarding registration of investment advisers, federal covered investment advisers and investment adviser representatives, are incorporated as if set forth fully herein. Cf. Order 01-040-S; Order 02-051-S; Regulation S-95-1.

6.5 Other Requirements of Investment Advisers and Investment Adviser Representatives. The provisions of Exhibit 6.5, attached hereto, regarding the regulation of activities of investment advisers and investment adviser representatives, are incorporated as if set forth fully herein. Cf. Regulation S-95-1.

6.6 Broker-Dealers and Investment Advisers On Premises of Depository Institutions. The provisions of Exhibit 6.6, attached hereto, regarding conduct of business by broker­ dealers and investment advisers on the premises of depository institutions, are incorporated as if set forth fully herein. Cf. Policy Statement 00-3-S (Guidelines for broker-dealer and investment adviser/depository institution brokerage service arrangements under the Vermont Securities Act).

Section 7. Securities Registration

7.1 Multijurisdictional Disclosure System. The provisions of Exhibit 7.1, attached hereto, regarding registration of certain Canadian securities through the Multijurisdictional Disclosure System, are incorporated as if set forth fully herein. Cf. Policy Statement S-91-3 (MJDS).

7.2 Notice Filing of Securities of Registered Investment Companies. The provisions of Exhibit 7.2, attached hereto, regarding notice filing with respect to certain securities issued by investment companies, are incorporated as if set forth fully herein. Cf. Policy Statement 98-1-SE (notice filing for investment companies); Policy Statement 92-2-S (open-end investment companies and unit trusts).

Section 8. Exemptions from Registration and Other Registration Provisions

8.1 Agent Registration in Connection with Offers and Sales of Securities Under SEC Rule 701. The provisions of Exhibit 8.1, attached hereto, regarding registration of agents in connection with offers and sales of securities pursuant to SEC Rule 701, are incorporated as if set forth fully herein. Cf. Order 00-22-S (Offers and Sales of Securities pursuant to SEC Rule 701).

8.2 Bank Employees Effecting Transactions in Bank Securities. The provisions of Exhibit 8.2, attached hereto, regarding agent registration of employees of banks and depository recordkeeping requirements applicable to broker-dealers and agents, are incorporated as if set forth fully herein. Cf. Order 02-001-S (Bank Employees Effecting Transactions in Bank Securities).

8.3 Federal Home Loan Bank Transactions - Agent Registration. The provisions of Exhibit 8.3, attached hereto, regarding registration of employees in connection with federal home loan bank transactions, are incorporated as if set forth fully herein. Cf. Order 02-062-S (Federal Home Loan Bank Transactions - Sales Representative Registration).

8.4 Housing Vermont Limited Partnership Interests- Agent Registration. The provisions of Exhibit 8.4, attached hereto, regarding exemption from registration for sales of limited partnership interests by Housing Vermont and agent registration of Housing Vermont employees and agents, are incorporated as if fully set forth herein. Cf. Order 03-072-S (Exemption Order- Employees, officers and general partner of a limited partnership created by a nonprofit corporation to provide affordable housing in Vermont are exempt from issuer sales representative registration).

8.5 Broker-Dealers as Institutional Investors. The provisions of Exhibit 8.5, attached hereto, regarding registration of the offer and sale of securities to broker-dealers as institutional investors, are incorporated as if fully set forth herein. Cf. Order 93-030-S (Exemption Order- Designation of Broker-Dealers as Institutional Buyers).

8.6 Agent Registration For Employee Benefit Plans. The provisions of Exhibit 8.6, attached hereto, regarding registration of persons involved in the distribution of securities from employee benefit plans, are incorporated as if fully set forth herein. Cf. Order 91- 016-S (Exemption Order- Employee Benefit Plans).

8.7 Offers and Sales under SEC Rule 144A. The provisions of Exhibit 8.7, attached hereto, regarding registration of securities, broker-dealers and agents involved in the offer and sale of securities pursuant to SEC Rule 144A, are incorporated as if fully set forth herein. Cf. Order 91-022-S (Exemption Order- QIBs).

8.8 Multijurisdictional Disclosure System Exemption of Non-Issuer Transactions Filed with the SEC under Forms F-8, F-9 and F-10. The provisions of Exhibit 8.8, attached hereto, regarding registration of certain nonissuer transactions involving Canadian securities filed with the SEC pursuant to the Multijurisdictional Disclosure System, are incorporated as if fully set forth herein. Cf. Order 9-090-S (Exemption Order - Multijurisdictional Disclosure System).

8.9 Solicitation of Interest Prior to Filing Registration Statement. The provisions of Exhibit 8.9, attached hereto, regarding registration of securities that are the subject of a solicitation of interest, are incorporated as if fully set forth herein. Cf. Order 93-9-SE (Exemption Order- Solicitations of Interest).

8.10 Internet Offers. The provisions of Exhibit 8.10, attached hereto, regarding offers of securities over the Internet, are incorporated as if fully set forth herein. Cf. Order 97- 1-SE (Exemption Order- Offers Made Over the Internet).

8.11 Vermont Small Business Offering Exemption. The provisions of Exhibit 8.11, attached hereto, regarding registration of certain small business offerings, are incorporated as if fully set forth herein. Cf. Order 96-4-SE (Exemption Order- VSBOE).

8.12 Federal Covered Securities--Notice Filing and Fees. The provisions of Exhibit 8.12, attached hereto, regarding notice filings and fees for certain federal covered securities, are incorporated as if fully set forth herein. Cf. Policy Statement 98-2-S.

8.13 Vermont Accredited Investor Exemption. The provisions of Exhibit 8.13, attached hereto, regarding registration of securities offered and sold to accredited investors, are incorporated as if fully set forth herein. Cf. Order 00-037-S (Vermont Accredited Investor Exemption).

8.14 Shares Issued by Commonwealth Cash Reserve Fund. The provisions of Exhibit 8.14, attached hereto, regarding registration with respect to the offer and sale of shares in the Commonwealth Cash Reserve Fund, are incorporated as if fully set forth herein. Cf Order 03-065-S (Exemption Order- Shares of portfolios issued by a fund fall within the transactional exemption for sales to "other institutional investors").

8.15 Internet Communications. The provisions of Exhibit 8.15, attached hereto, regarding registration of broker-dealers, agents, investment advisers and investment adviser representatives involved in certain communications over the Internet, are incorporated as if fully set forth herein. Cf. Order 98-1-SE.

8.16 Uniform Limited Offering Registration. The provisions of Exhibit 8.16, attached hereto, regarding the Uniform Limited Offering Registration, are incorporated as if fully set forth herein. Cf. Regulation S-92-1 (Uniform Limited Offering Exemption).

8.17 Rule 505 Offerings. The provisions of Exhibit 8.17, attached hereto, regarding offers and sales of securities pursuant to Rule 505 of SEC Regulation D, are incorporated as if fully set forth herein. Cf. Order 94-2-SE (Offerings under Rules 505 and 506 of SEC Regulation D).

8.18 Transactions Involving Self-Directed Canadian Retirement Accounts. The provisions of Exhibit 8.18, attached hereto, regarding registration of securities, broker­ dealers and agents in connection with certain transactions involving self-directed· · Canadian retirement accounts, are incorporated as if fully set forth herein. Cf. Order 00- 042-S (Transactions Involving Self-Directed Canadian Retirement Accounts).

8.19 Transactions Involving Canadians Temporarily in Vermont. The provisions of Exhibit 8.19, attached hereto, regarding registration of securities, broker-dealers and agents in connection with certain transactions involving Canadian residents temporarily present in Vermont, are incorporated as if fully set forth herein. Cf. Order 01-015-S (Transactions Involving Canadians Temporarily in Vermont).

8.20 Charitable Organization Transactions. The provisions of Exhibit 8.20, attached hereto, regarding offers and sales of charitable gift annuities and related instruments issued by certain nonprofit organizations, are incorporated as if fully set forth herein. Cf. Order 01-43-S.

Section 9. General Provisions

9.1 NASAA Periodic Payment Guidelines. The provisions of Exhibit 9.1, attached hereto, regarding agreements for periodic payment plans with respect to a security, are incorporated as if fully set forth herein. Cf. Policy Statement 92-5-S (Adoption of NASAA periodic payment plan guidelines).

9.2 Filing of Advertising. The provisions of Exhibit 9.2, attached hereto, regarding filing and approval of advertising, are incorporated as if set forth fully herein.

9.3 Mutual Fund Prospectus Wrapper Brochures. The provisions of Exhibit 9.3, attached hereto, regarding the form and content of mutual fund prospectus wrapper brochures, are incorporated as if set forth fully herein. Cf. Policy Statement 94-1-S.

9.4 Electronic Records and Signatures. A record may be filed electronically to the extent permitted in the Act and as specifically provided in this Order, and an electronic signature may be used on any form or filing that may be filed electronically pursuant to the Act and any provision of this Order, provided the filing of such record or signature complies with the provisions of 15 U.S.C. § 7004(a), and such filing or signature complies with the requirements of any person authorized to accept them. Any filing requiring a signature shall be executed by the person making the filing or an authorized representative of such person.

9.5 Designation of Repository. Pursuant to Section 5608(c)(l) of the Act, the Central Registration Depository ("CRD") and the Investment Adviser Registration Depository ("IARD") are hereby designated as central depositories for registration and notice filings, as more specifically provided in this Order.

9.6 Civil Unions. The provisions of Exhibit 9.6, attached hereto, regarding the status of parties to a civil union in Vermont, are incorporated as if set forth fully herein.

Section 10. Applicability of Exemptions and Anti-Fraud Provisions

10.1 Other Exemptions. Except to the extent explicitly stated in this Order, the specific exemptions provided in this Order are not intended to limit the applicability of any other exemption available under the Act.

10.2 Anti-Fraud Provisions. Any exemption or waiver granted under this Order shall not be construed to limit the applicability of any provision of the Act not specifically covered by such exemption or waiver, including but not limited to the anti-fraud and enforcement provisions of the Act.

This Order shall be effective as of July 1, 2006 and shall remain in effect unless and until subsequently amended or rescinded by order or regulation adopted under the Vermont Securities Act