TITLE 71

CHAPTER 1. OKLAHOMA UNIFORM SECURITIES ACT OF 2004

ARTICLE 1

SECURITIES COMMISSION

§ 1-101. Short title,

This act shall be known and may be cited as the "Oklahoma Uniform Securities Act of 2004."

§ 1-102. Definitions

In this act, unless the context otherwise requires:

1. "Administrator" means the securities Administrator appointed by the Oklahoma Securities Commission;

2. "Agent" means an individual, other than a broker-dealer, who represents a broker-dealer in effecting or attempting to effect purchases or sales of securities or represents an issuer in effecting or attempting to effect purchases or sales of the issuer's securities. A partner, officer, or director of a broker-dealer or issuer, or an individual having a similar status or performing similar functions is an agent only if the individual otherwise comes within the term. The term does not include an individual excluded by rule adopted or order issued under this act;

3. "Bank" means:

a. a banking institution organized under the laws of the United States,

b. a member bank of the Federal Reserve System,

c. any other banking institution, whether incorporated or not, doing business under the laws of a state or of the United States, a substantial portion of the business of which consists of receiving deposits or exercising fiduciary powers similar to those permitted to be exercised by national banks under the authority of the Comptroller of the Currency pursuant to Section 1 of Public Law 87-722 (12 U.S.C. Section 92a), and which is supervised and examined by a state or federal agency having supervision over banks, and which is not operated for the purpose of evading this act, and

d. a receiver, conservator, or other liquidating agent of any institution or firm included in subparagraph a, b or c of this paragraph;

4. "Broker-dealer" means a person engaged in the business of effecting transactions in securities for the account of others or for the person's own account. The term does not include:

a. an agent,

b. an issuer,

c. a bank or savings institution if its activities as a broker-dealer are limited to those specified in subsections 3(a)(4)(B)(i) through (vi), (viii) through (x), and (xi) if limited to unsolicited transactions; 3(a)(5)(B); and 3(a)(5)(C) of the Securities Exchange Act of 1934 (15 U.S.C. Sections 78c(a)(4) and (5)) or a bank that satisfies the conditions described in subsection 3(a)(4)(E) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78c(a)(4)),

d. an international banking institution, or

e. a person excluded by rule adopted or order issued under this act;

5. “Commission” means the Oklahoma Securities Commission;

6. “Department” means the Oklahoma Department of Securities;

7. “Depository institution” means:

a. a bank, or

b. a savings institution, trust company, credit union, or similar institution that is organized or chartered under the laws of a state or of the United States, authorized to receive deposits, and supervised and examined by an official or agency of a state or the United States if its deposits or share accounts are insured to the maximum amount authorized by statute by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or a successor authorized by federal law. The term does not include:

(1) an insurance company or other organization primarily engaged in the business of insurance,

(2) a Morris Plan bank, or

(3) an industrial loan company;

8. "Federal covered investment adviser" means a person registered under the Investment Advisers Act of 1940;

9. "Federal covered security" means a security that is, or upon completion of a transaction will be, a covered security under Section 18(b) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)) or rules or regulations adopted pursuant to that provision;

10. "Filing" means the receipt under this act of a record by the Administrator or a designee of the Administrator;

11. "Fraud," "deceit," and "defraud" are not limited to common law deceit;

12. "Guaranteed" means guaranteed as to payment of all principal and all interest;

13. "Institutional investor" means any of the following, whether acting for itself or for others in a fiduciary capacity:

a. a depository institution or international banking institution,

b. an insurance company,

c. a separate account of an insurance company,

d. an investment company as defined in the Investment Company Act of 1940,

e. a broker-dealer registered under the Securities Exchange Act of 1934,

f. an employee pension, profit-sharing, or benefit plan if the plan has total assets in excess of Ten Million Dollars ($10,000,000.00) or its investment decisions are made by a named fiduciary, as defined in the Employee Retirement Income Security Act of 1974, that is a broker-dealer registered under the Securities Exchange Act of 1934, an investment adviser registered or exempt from registration under the Investment Advisers Act of 1940, an investment adviser registered under this act, a depository institution, or an insurance company,

g. a plan established and maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or a political subdivision of a state for the benefit of its employees, if the plan has total assets in excess of Ten Million Dollars ($10,000,000.00) or its investment decisions are made by a duly designated public official or by a named fiduciary, as defined in the Employee Retirement Income Security Act of 1974, that is a broker-dealer registered under the Securities Exchange Act of 1934, an investment adviser registered or exempt from registration under the Investment Advisers Act of 1940, an investment adviser registered under this act, a depository institution, or an insurance company,

h. a trust, if it has total assets in excess of Ten Million Dollars ($10,000,000.00), its trustee is a depository institution, and its participants are exclusively plans of the types identified in subparagraph f or g of this paragraph, regardless of the size of their assets, except a trust that includes as participants self-directed individual retirement accounts or similar self-directed plans,

i. an organization described in Section 501(c)(3) of the Internal Revenue Code (26 U.S.C. Section 501(c)(3)), corporation, Massachusetts trust or similar business trust, limited liability company, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of Ten Million Dollars ($10,000,000.00),

j. a small business investment company licensed by the Small Business Administration under Section 301(c) of the Small Business Investment Act of 1958 (15 U.S.C. Section 681(c)) with total assets in excess of Ten Million Dollars ($10,000,000.00),

k. a “private business development company” as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-2(a)(22)) with total assets in excess of Ten Million Dollars ($10,000,000.00),

l. a federal covered investment adviser acting for its own account,

m. a "qualified institutional buyer" as defined in Rule 144A(a)(1), other than Rule 144A(a)(1)(i)(H), adopted under the Securities Act of 1933 (17 C.F.R. 230.144A),

n. a "major U.S. institutional investor" as defined in Rule 15a-6(b)(4)(i) adopted under the Securities Exchange Act of 1934 (17 C.F.R. 240.15a-6),

o. any other person, other than an individual, of institutional character with total assets in excess of Ten Million Dollars ($10,000,000.00) not organized for the specific purpose of evading this act, or

p. any other person specified by rule adopted or order issued under this act;

14. "Insurance company" means a company organized as an insurer whose primary business is writing insurance or reinsuring risks underwritten by insurance companies and that are subject to supervision by the insurance commissioner or a similar official or agency of a state;

15. "Insured" means insured as to payment of all principal and all interest;

16. "International banking institution" means an international financial institution of which the United States is a member and whose securities are exempt from registration under the Securities Act of 1933;

17. "Investment adviser" means a person that, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities. The term includes a financial planner or other person that, as an integral component of other financially related services, provides investment advice to others for compensation as part of a business or that holds itself out as providing investment advice to others for compensation. The term does not include:

a. an investment adviser representative,

b. a lawyer, accountant, engineer, or teacher whose performance of investment advice is solely incidental to the practice of the person's profession,

c. a broker-dealer or its agents whose performance of investment advice is solely incidental to the conduct of business as a broker-dealer and that does not receive special compensation for the investment advice,

d. a publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation,

e. a depository institution, or

f. any other person excluded by rule adopted or order issued under this act;

18. "Investment adviser representative" means an individual employed by or associated with an investment adviser or federal covered investment adviser and who makes any recommendations or otherwise gives investment advice regarding securities, manages accounts or portfolios of clients, determines which recommendation or advice regarding securities should be given, provides investment advice or holds herself or himself out as providing investment advice, receives compensation to solicit, offer, or negotiate for the sale of or for selling investment advice, or supervises employees who perform any of the foregoing. The term does not include an individual who:

a. performs only clerical or ministerial acts,

b. is an agent whose performance of investment advice is solely incidental to the individual acting as an agent and who does not receive special compensation for investment advisory services, or

c. is excluded by rule adopted or order issued under this act;

19. "Issuer" means a person that issues or proposes to issue a security, subject to the following:

a. the issuer of a voting trust certificate, collateral trust certificate, certificate of deposit for a security, or share in an investment company without a board of directors or individuals performing similar functions is the person performing the acts and assuming the duties of depositor or manager pursuant to the trust or other agreement or instrument under which the security is issued,

b. the issuer of an equipment trust certificate or similar security serving the same purpose is the person by which the property or equipment is or will be used or to which the property or equipment is or will be leased or conditionally sold or that is otherwise contractually responsible for assuring payment of the certificate,

c. the issuer of a fractional undivided interest in an oil, gas, or other mineral lease or in payments out of production under a lease, right, or royalty is the owner of an interest in the lease or in payments out of production under a lease, right, or royalty, whether whole or fractional, that creates fractional interests for the purpose of sale;

20. "Nonissuer transaction" or "nonissuer distribution" means a transaction or distribution not directly or indirectly for the benefit of the issuer;

21. "Offer to purchase" includes an attempt or offer to obtain, or solicitation of an offer to sell, a security or interest in a security for value. The term does not include a tender offer that is subject to Section 14(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(d));

22. "Person" means an individual; corporation; business trust; estate; trust; partnership; limited liability company; association; joint venture; government, governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity;

23. "Place of business" of a broker-dealer, an investment adviser, or a federal covered investment adviser means:

a. an office at which the broker-dealer, investment adviser, or federal covered investment adviser regularly provides brokerage or investment advice or solicits, meets with, or otherwise communicates with customers or clients, or

b. any other location that is held out to the general public as a location at which the broker-dealer, investment adviser, or federal covered investment adviser provides brokerage or investment advice or solicits, meets with, or otherwise communicates with customers or clients;

24. "Predecessor act" means the act repealed by Section 52 of this act [Section 1-701 of this title];

25. "Price amendment" means the amendment to a registration statement filed under the Securities Act of 1933 or, if an amendment is not filed, the prospectus or prospectus supplement filed under the Securities Act of 1933 that includes a statement of the offering price, underwriting and selling discounts or commissions, amount of proceeds, conversion rates, call prices, and other matters dependent upon the offering price;

26. "Principal place of business" of a broker-dealer or an investment adviser means the executive office of the broker-dealer or investment adviser from which the officers, partners, or managers of the broker-dealer or investment adviser direct, control, and coordinate the activities of the broker-dealer or investment adviser;

27. "Promoter" includes:

a. a person who, acting alone or in concert with one or more persons, takes the entrepreneurial initiative in founding or organizing the business or enterprise of an issuer,

b. an officer or director owning securities of an issuer or a person who owns, beneficially or of record, ten percent (10%) or more of a class of securities of the issuer if the officer, director, or person acquires any of those securities in a transaction within three (3) years before the filing by the issuer of a registration statement under this act and the transaction is not an arms-length transaction, or

c. a member of the immediate family of a person within subparagraph a or b of this paragraph if the family member receives securities of the issuer from that person in a transaction within three (3) years before the filing by the issuer of a registration statement under this act and the transaction is not an arms-length transaction.

For purposes of this subsection, "immediate family" means a spouse of a person within subparagraph a or b of this paragraph, an emancipated child residing in such person’s household, or an individual claimed as a dependent by such person for tax purposes;

28. "Record" except in the phrases "of record," "official record," and "public record," means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;

29. "Registration statement" means the documentation provided to the Securities and Exchange Commission or the Department in connection with the registration of securities under the Securities Act of 1933 or this title and includes any amendment thereto and any report, document, exhibit or memorandum filed as part of such statement or incorporated therein by reference;

30. "Sale" includes every contract of sale, contract to sell, or disposition of, a security or interest in a security for value, and "offer to sell" includes every attempt or offer to dispose of, or solicitation of an offer to purchase, a security or interest in a security for value. Both terms include:

a. a security given or delivered with, or as a bonus on account of, a purchase of securities or any other thing constituting part of the subject of the purchase and having been offered and sold for value,

b. a gift of assessable stock involving an offer and sale, and

c. a sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer and a sale or offer of a security that gives the holder a present or future right or privilege to convert the security into another security of the same or another issuer, including an offer of the other security;

31. "Securities and Exchange Commission" means the United States Securities and Exchange Commission;

32. "Security" means a note; stock; treasury stock; security future; bond; debenture; evidence of indebtedness; certificate of interest or participation in a profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; voting trust certificate; certificate of deposit for a security; fractional undivided interest in oil, gas, or other mineral rights; put, call, straddle, option, or privilege on a security, certificate of deposit, or group or index of securities, including an interest therein or based on the value thereof; put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; or, in general, an interest or instrument commonly known as a "security," or a 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 foregoing. The term:

a. includes both a certificated and an uncertificated security,

b. does not include an insurance or endowment policy or annuity contract under which an insurance company promises to pay a sum of money either in a lump sum or periodically for life or other specified period,

c. does not include an interest in a contributory or noncontributory pension or welfare plan subject to the Employee Retirement Income Security Act of 1974,

d. includes as an "investment contract" an investment in a common enterprise with the expectation of profits to be derived primarily from the efforts of a person other than the investor and a "common enterprise" means an enterprise in which the fortunes of the investor are interwoven with those of either the person offering the investment, a third party, or other investors,

e. includes as an "investment contract," among other contracts, an interest in a limited partnership and a third party managed limited liability company and an investment in a viatical or life settlement or similar contract or agreement,

f. includes an investment of money or money’s worth including goods furnished or services performed in the risk capital of a venture with the expectation of some benefit to the investor where the investor has no direct control over the investment or policy decision of the venture, and

g. does not include an interest in an oil, gas or mineral lease as part of a transaction between parties, each of whom is engaged in the business of exploring for or producing oil and gas or other valuable minerals as an ongoing business or the execution of oil and gas leases by land, mineral and royalty owners in favor of a party or parties engaged in the business of exploring for or producing oil and gas or other valuable minerals;

33. "Self-regulatory organization" means a national securities exchange registered under the Securities Exchange Act of 1934, a national securities association of broker-dealers registered under the Securities Exchange Act of 1934, a clearing agency registered under the Securities Exchange Act of 1934, or the Municipal Securities Rulemaking Board established under the Securities Exchange Act of 1934;

34. "Sign" means, with present intent to authenticate or adopt a record:

a. to execute or adopt a tangible symbol, or

b. to attach or logically associate with the record an electronic symbol, sound, or process;

35. "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States; and

36. "Underwriter" means any person who has purchased from an issuer or from any other person with a view to, or offers or sells for an issuer or for any other person in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking. "Underwriter" does not include a person whose interest is limited to a commission from an underwriter or broker-dealer not in excess of the usual and customary distributor's or seller's commission.

§ 1-103. References to federal statutes

"Securities Act of 1933" (15 U.S.C. Section 77a et seq.), "Securities Exchange Act of 1934" (15 U.S.C. Section 78a et seq.), "Public Utility Holding Company Act of 1935" (15 U.S.C. Section 79 et seq.), "Investment Company Act of 1940" (15 U.S.C. Section 80a-1 et seq.), "Investment Advisers Act of 1940" (15 U.S.C. Section 80b-1 et seq.), "Employee Retirement Income Security Act of 1974" (29 U.S.C. Section 1001 et seq.), "National Housing Act" (12 U.S.C. Section 1701 et seq.), "Commodity Exchange Act" (7 U.S.C. Section 1 et seq.), "Internal Revenue Code" (26 U.S.C. Section 1 et seq.), "Securities Investor Protection Act of 1970" (15 U.S.C. Section 78aaa et seq.), "Securities Litigation Uniform Standards Act of 1998" (112 Stat. 3227), "Small Business Investment Act of 1958" (15 U.S.C. Section 661 et seq.), and "Electronic Signatures in Global and National Commerce Act" (15 U.S.C. Section 7001 et seq.) mean those statutes and the rules and regulations adopted under those statutes, as in effect on the date of enactment of this act, or as later amended.

§ 1-104. Reference to federal agencies

A reference in this act to an agency or department of the United States is also a reference to a successor agency or department.

§ 1-105. Electronic records and signatures

This Act modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, but does not modify, limit, or supersede Section 101(c) of that act (15 U.S.C. Section 7001(c)) or authorize electronic delivery of any of the notices described in Section 103(b) of that act (15 U.S.C. Section 7003(b)). This Act authorizes the filing of records and signatures, when specified by provisions of this act or by a rule adopted or order issued under this act, in a manner consistent with Section 104(a) of that act (15 U.S.C. Section 7004(a)).

ARTICLE 2

EXEMPTIONS FROM REGISTRATION OF SECURITIES

§ 1-201. Exempt securities

The following securities are exempt from the requirements of Sections 10 and 32 of this act [Sections 1-301 and 1-504 of this title]:

1. A security, including a revenue obligation or a separate security as defined in Rule 131 (17 C.F.R. 230.131) adopted under the Securities Act of 1933, issued, insured, or guaranteed by the United States; by a state; by a political subdivision of a state; by a public authority, agency, or instrumentality of one or more states; by a political subdivision of one or more states; or by a person controlled or supervised by and acting as an instrumentality of the United States under authority granted by the Congress; or a certificate of deposit for any of the foregoing; however, notwithstanding the provisions of Section 106(c) of the Secondary Mortgage Market Enhancement Act of 1984, Public Law 98-440, any security that is offered and sold pursuant to Section 4(5) of the Securities Act of 1933 or that is a mortgage related security as that term is defined in Section 3(a)(41) of the Securities Exchange Act of 1934 shall not be exempt from Sections 10 and 32 of this act [Sections 1-301 and 1-504 of this title] by virtue of such Secondary Mortgage Market Enhancement Act but may be exempt based upon the availability of the exemptions from registration provided for in this section;

2. A security issued, insured, or guaranteed by a foreign government with which the United States maintains diplomatic relations, or any of its political subdivisions, if the security is recognized as a valid obligation by the issuer, insurer, or guarantor;

3. A security issued by and representing or that will represent an interest in or a direct obligation of, or be guaranteed by:

a. an international banking institution,

b. a banking institution organized under the laws of the United States; a member bank of the Federal Reserve System; or a depository institution a substantial portion of the business of which consists or will consist of receiving deposits or share accounts that are insured to the maximum amount authorized by statute by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or a successor authorized by federal law or exercising fiduciary powers that are similar to those permitted for national banks under the authority of the Comptroller of Currency pursuant to Section 1 of Public Law 87-722 (12 U.S.C. Section 92a),

c. a trust company or other institution that is authorized by federal or state law to exercise fiduciary powers of the type a national bank is permitted to exercise under the authority of the Comptroller of the Currency and is supervised and examined by an official or agency of a state or the United States, or

d. any other depository institution;

4. A security issued by and representing an interest in, or a debt of, or insured or guaranteed by, an insurance company authorized to transact insurance business in this state by the Insurance Commissioner;

5. A security issued or guaranteed by a railroad, other common carrier, public utility, or public utility holding company that is:

a. regulated in respect to its rates and charges by the United States or a state,

b. regulated in respect to the issuance or guarantee of the security by the United States, a state, Canada, or a Canadian province or territory, or

c. a public utility holding company registered under the Public Utility Holding Company Act of 1935 or a subsidiary of such a registered holding company within the meaning of that act;

6. A federal covered security specified in Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(1)) or by rule adopted under that provision or a security listed or approved for listing on another securities market specified by rule under this act; a put or a call option contract, a warrant, or a subscription right on or with respect to such securities; or an option or similar derivative security on a security or an index of securities or foreign currencies issued by a clearing agency registered under the Securities Exchange Act of 1934 and listed or designated for trading on a national securities exchange, a facility of a national securities exchange, or a facility of a national securities association registered under the Securities Exchange Act of 1934 or the underlying security in connection with the offer, sale, or exercise of an option or other derivative security that was exempt when the option or other derivative security was written or issued; or an option or other derivative security designated by the Securities and Exchange Commission under Section 9(b) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78i(b));

7. A security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, social, athletic, or reformatory purposes, or as a chamber of commerce, and not for pecuniary profit, no part of the net earnings of which inures to the benefit of a private stockholder or other person, or a security of a company that is excluded from the definition of an investment company under Section 3(c)(10)(B) of the Investment Company Act of 1940 (15 U.S.C. Section 80a-3(c)(10)(B)); except that with respect to the offer or sale of a note, bond, debenture, or other evidence of indebtedness issued by such a person, a rule may be adopted under this act limiting the availability of this exemption by classifying securities, persons, and transactions, imposing different requirements for different classes, specifying with respect to subparagraph b of this paragraph the scope of the exemption, the requirement of an offering statement, the filing of sales and advertising literature, the filing of consent to service of process complying with Section 49 of this act [Section 1-611 of this title], and the grounds for denial or suspension, and requiring an issuer:

a. to file a notice specifying the material terms of the proposed offer or sale and copies of any proposed sales and advertising literature to be used and providing that the exemption becomes effective if the Administrator does not disallow the exemption within the period established by the rule,

b. to file a request for exemption, or

c. to register under Section 13 of this act [Section 1-304 of this title];

8. A member's or owner's interest in, or a retention certificate or like security given in lieu of a cash patronage dividend issued by, a cooperative organized and operated as a not for profit membership cooperative under the cooperative laws of a state, but not a member's or owner's interest, retention certificate, or like security sold to persons other than bona fide members of the cooperative; and

9. An equipment trust certificate with respect to equipment leased or conditionally sold to a person, if any security issued by the person would be exempt under this section or would be a federal covered security under Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(1)).

§ 1-202. Exempt transactions

The following transactions are exempt from the requirements of Sections 10 and 32 of this act [Sections 1-301 and 1-504 of this title]:

1. An isolated nonissuer transaction, whether effected by or through a broker-dealer or not;

2. A nonissuer transaction by or through a broker-dealer registered, or exempt from registration under this act, and a resale transaction by a sponsor of a unit investment trust registered under the Investment Company Act of 1940, in a security of a class that has been outstanding in the hands of the public for at least ninety (90) days, if, at the date of the transaction:

a. the issuer of the security is engaged in business, the issuer is not in the organizational stage or in bankruptcy or receivership, and the issuer is not a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person,

b. the security is sold at a price reasonably related to its current market price,

c. the security does not constitute the whole or part of an unsold allotment to, or a subscription or participation by, the broker-dealer as an underwriter of the security or a redistribution, and

d. a nationally recognized securities manual or its electronic equivalent designated by rule adopted or order issued under this act or a record filed with the Securities and Exchange Commission that is publicly available contains:

(1) a description of the business and operations of the issuer,

(2) the names of the issuer's executive officers and the names of the issuer's directors, if any,

(3) an audited balance sheet of the issuer as of a date within eighteen (18) months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had an audited balance sheet, a pro forma balance sheet for the combined organization, and

(4) an audited income statement for each of the issuer's two (2) immediately previous fiscal years or for the period of existence of the issuer, whichever is shorter, or, in the case of a reorganization or merger when each party to the reorganization or merger had audited income statements, a pro forma income statement, or

e. the issuer of the security has a class of equity securities listed on a national securities exchange registered under the Securities Exchange Act of 1934 or designated for trading on the National Association of Securities Dealers Automated Quotation System, unless the issuer of the security is a unit investment trust registered under the Investment Company Act of 1940; or the issuer of the security, including its predecessors, has been engaged in continuous business for at least three (3) years; or the issuer of the security has total assets of at least Two Million Dollars ($2,000,000.00) based on an audited balance sheet as of a date within eighteen (18) months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had the audited balance sheet, a pro forma balance sheet for the combined organization;

3. A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this act in a security of a foreign issuer that is a margin security defined in regulations or rules adopted by the Board of Governors of the Federal Reserve System;

4. A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this act in an outstanding security if the guarantor of the security files reports with the Securities and Exchange Commission under the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));

5. A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this act in a security that:

a. is rated at the time of the transaction by a nationally recognized statistical rating organization in one of its four highest rating categories, or

b. has a fixed maturity or a fixed interest or dividend, if:

(1) a default has not occurred during the current fiscal year or within the three (3) previous fiscal years or during the existence of the issuer and any predecessor if less than three (3) fiscal years, in the payment of principal, interest, or dividends on the security, and

(2) the issuer is engaged in business, is not in the organizational stage or in bankruptcy or receivership, and is not and has not been within the previous twelve (12) months a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person;

6. A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this act effecting an unsolicited order or offer to purchase;

7. A nonissuer transaction executed by a bona fide pledgee without the purpose of evading this act;

8. A nonissuer transaction by a federal covered investment adviser with investments under management in excess of One Hundred Million Dollars ($100,000,000.00) acting in the exercise of discretionary authority in a signed record for the account of others;

9. A transaction in a security, whether or not the security or transaction is otherwise exempt, in exchange for one or more bona fide outstanding securities, claims, or property interests, or partly in such exchange and partly for cash, if the terms and conditions of the issuance and exchange or the delivery and exchange and the fairness of the terms and conditions have been approved by the Administrator after a hearing;

10. A transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters;

11. A transaction in a note, bond, debenture, or other evidence of indebtedness secured by a mortgage or other security agreement if:

a. the note, bond, debenture, or other evidence of indebtedness is offered and sold with the mortgage or other security agreement as a unit,

b. a general solicitation or general advertisement of the transaction is not made, and

c. a commission or other remuneration is not paid or given, directly or indirectly, to a person not registered under this act as a broker-dealer or as an agent;

12. A transaction by an executor, administrator of an estate, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator;

13. A sale or offer to sell to:

a. an institutional investor,

b. a federal covered investment adviser, or

c. any other person exempted by rule adopted or order issued under this act;

14. A sale or an offer to sell securities by an issuer, if the transaction is part of a single issue in which:

a. not more than twenty-five purchasers during any twelve (12) consecutive months, other than those designated in paragraph 13 of this section,

b. a general solicitation or general advertising is not made in connection with the offer to sell or sale of the securities,

c. a commission or other remuneration is not paid or given, directly or indirectly, to a person other than a broker-dealer registered under this act or an agent registered under this act for soliciting a prospective purchaser in this state, and

d. the issuer reasonably believes that all the purchasers in this state, other than those designated in paragraph 13 of this section, are purchasing for investment;

15. A transaction under an offer to existing security holders of the issuer, including persons that at the date of the transaction are holders of convertible securities, options, or warrants, if:

a. no commission or other remuneration, other than a standby commission, is paid or given, directly or indirectly, for soliciting a security holder in this state, or

b. the issuer first files a notice specifying the terms of the offer and the Administrator, by order, does not disallow the exemption within the next ten (10) full business days;

16. A sale from or in this state to not more than thirty-two persons of a unit consisting of interests in oil, gas or mining titles or leases or any certificate of interest or participation, or conveyance in any form of an interest therein, or in payments out of production pursuant to such titles or leases, whether or not offered in conjunction with, or as an incident to, an operating agreement or other contract to drill oil or gas wells or otherwise exploit the minerals on the particular leases, whether or not the seller or any buyers are then present in this state, if:

a. the seller reasonably believes that all buyers are purchasing for investment,

b. no commission is paid or given directly or indirectly for the solicitation of any such sale excluding any commission paid or given by and between parties each of whom is engaged in the business of exploring for or producing oil and gas or other valuable minerals,

c. no public advertising or public solicitation is used in any such solicitation or sale, and

d. sales are effected only to persons the seller has reasonable cause to believe are capable of evaluating the risk of the prospective investment and able to bear the economic risk of the investment; but the Administrator, by rule or order, as to any specific transaction, may withdraw or further condition this exemption or decrease the number of sales permitted or waive the conditions in subparagraphs a, b and c of this paragraph, with or without substitution of a limitation on remuneration.

For purposes of this subsection, no units of the issuer shall be integrated; however, this exemption cannot be combined or used in conjunction with any other transactional exemption;

17. An offer to sell, but not a sale, of a security not exempt from registration under the Securities Act of 1933 if:

a. a registration or offering statement or similar record as required under the Securities Act of 1933 has been filed, but is not effective, or the offer is made in compliance with Rule 165 adopted under the Securities Act of 1933 (17 C.F.R. 230.165), and

b. no stop order of which the offeror is aware has been issued against the offeror by the Administrator or the Securities and Exchange Commission, and an audit, inspection, or proceeding that is public and that may culminate in a stop order is not known by the offeror to be pending;

18. An offer to sell, but not a sale, of a security exempt from registration under the Securities Act of 1933 if:

a. a registration statement has been filed under this act, but is not effective,

b. a solicitation of interest is provided in a record to offerees in compliance with a rule adopted by the Administrator under this act, and

c. a stop order of which the offeror is aware has not been issued by the Administrator under this act and an audit, inspection, or proceeding that may culminate in a stop order is not known by the offeror to be pending;

19. A transaction involving the distribution of the securities of an issuer to the security holders of another person in connection with a merger, consolidation, exchange of securities, sale of assets, or other reorganization to which the issuer, or its parent or subsidiary and the other person, or its parent or subsidiary, are parties if:

a. the securities to be distributed are registered under the Securities Act of 1933 before the vote by security holders on the transaction, or

b. the securities to be distributed are not required to be registered under the Securities Act of 1933, written notice of the transaction and a copy of the materials, if any, by which approval of the transaction will be solicited from such security holders is given to the Administrator at least ten (10) full business days before the vote by security holders on the transaction and the Administrator does not commence a proceeding to deny the exemption within the next ten (10) full business days; however, such notice shall not be required if the sole purpose of the transaction is to change an issuer’s domicile solely within the United States;

20. A rescission offer, sale, or purchase under Section 38 of this act [Section 1-510 of this title];

21. An offer or sale of a security through a broker-dealer registered under this act to a person not a resident of this state and not present in this state if the offer or sale does not constitute a violation of the laws of the state or foreign jurisdiction in which the offeree or purchaser is present and is not part of an unlawful plan or scheme to evade this act;

22. Employees' stock purchase, savings, option, profit-sharing, pension, or similar employees' benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majority-owned subsidiaries, or the majority-owned subsidiaries of the issuer's parent for the participation of their employees including offers or sales of such securities to:

a. directors; general partners; trustees, if the issuer is a business trust; and officers,

b. family members who acquire such securities from those persons through gifts or domestic relations orders,

c. former employees, directors, general partners, trustees, and officers if those individuals were employed by or providing services to the issuer when the securities were offered, and

d. insurance agents who are exclusive insurance agents of the issuer, or the issuer's subsidiaries or parents, or who derive more than fifty percent (50%) of their annual income from those organizations;

23. A transaction involving:

a. a stock dividend or equivalent equity distribution, whether the corporation or other business organization distributing the dividend or equivalent equity distribution is the issuer or not, if nothing of value is given by stockholders or other equity holders for the dividend or equivalent equity distribution other than the surrender of a right to a cash or property dividend if each stockholder or other equity holder may elect to take the dividend or equivalent equity distribution in cash, property, or stock,

b. an act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding securities, claims, or property interests, or partly in such exchange and partly for cash, or

c. the solicitation of tenders of securities by an offeror in a tender offer in compliance with Rule 162 adopted under the Securities Act of 1933 (17 C.F.R. 230.162); or

24. A nonissuer transaction in an outstanding security by or through a broker-dealer registered or exempt from registration under this act, if the issuer is a reporting issuer in a foreign jurisdiction designated by this paragraph or by rule adopted or order issued under this act; has been subject to continuous reporting requirements in the foreign jurisdiction for not less than one hundred eighty (180) days before the transaction; and the security is listed on the foreign jurisdiction's securities exchange that has been designated by this paragraph or by rule adopted or order issued under this act, or is a security of the same issuer that is of senior or substantially equal rank to the listed security or is a warrant or right to purchase or subscribe to any of the foregoing. For purposes of this paragraph, Canada, together with its provinces and territories, is a designated foreign jurisdiction and The Toronto Stock Exchange, Inc., is a designated securities exchange. After an administrative hearing in compliance with the Administrative Procedures Act, the Administrator, by rule adopted or order issued under this act, may revoke the designation of a securities exchange under this paragraph, if the Administrator finds that revocation is necessary or appropriate in the public interest and for the protection of investors.

§ 1-203. Additional exemptions and waivers

A rule adopted or order issued under this act may exempt a security, transaction, or offer; a rule under this act may exempt a class of securities, transactions, or offers from any or all of the requirements of Sections 10 and 32 of this act [Sections 1-301 and 1-504 of this title]; and an order under this act may waive, in whole or in part, any or all of the conditions for an exemption or offer under Sections 6 and 7 of this act [Sections 1-201 and 1-202 of this title].

§ 1-204. Denial, suspension of application, revocation, condition, or limitation of exemptions

A. Except with respect to a federal covered security or a transaction involving a federal covered security, an order under this act may deny, suspend application of, condition, limit, or revoke an exemption created under subparagraph c or d of paragraph 3 of Section 6 of this act [Section 1-201 of this title], or paragraph 7 or 8 of Section 6 of this act [Section 1-201 of this title] or Section 7 of this act [Section 1-202 of this title] or an exemption or waiver created under Section 8 of this act [Section 1-203 of this title] with respect to a specific security, transaction, or offer. An order under this section may be issued only pursuant to the procedures in subsection D of Section 15 or Section 42 of this act [Section 1-306 or Section 1-604 of this title] and only prospectively.

B. A person does not violate Section 10, 32 or 38 of this act [Section 1-301, 1-504 or 1-510 of this title] by an offer to sell, offer to purchase, sale, or purchase effected after the entry of an order issued under this section if the person did not know, and in the exercise of reasonable care could not have known, of the order.

ARTICLE 3

REGISTRATION OF SECURITIES AND

NOTICE FILING OF FEDERAL COVERED SECURITIES

§ 1-301. Offer or Sell Security in State

It is unlawful for a person to offer or sell a security in this state unless:

1. The security is a federal covered security;

2. The security, transaction, or offer is exempted from registration under Sections 6 through 8 of this act [Sections 1-201 through 1-203 of this title]; or

3. The security is registered under this act.

§ 1-302. Federal covered security notice filing

A. With respect to a federal covered security, as defined in Section 18(b)(2) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(2)), that is not otherwise exempt under Section 6 through 8 of this act [Sections 1-201 through 1-203 of this title], the issuer shall file a notice with the Administrator prior to an offer in this state. A separate notice shall be filed for each class of an issuer's securities offered in this state. Each notice shall be for an indefinite amount of securities. A notice, or renewal thereof, shall be accompanied by the filing fee set forth in Section 50 of this act [Section 1-612 of this title]. The Administrator may, by rule or order, prescribe notice filing and renewal requirements, and the requirements for filing of reports of the dollar amount of securities sold or offered to be sold to persons located in this state.

B. A notice filing under subsection A of this section is effective for one year commencing on the later of the notice filing or the effectiveness of the offering filed with the Securities and Exchange Commission. On or before expiration, the issuer may renew a notice filing by filing a copy of those records filed by the issuer with the Securities and Exchange Commission that are required by rule or order under this act to be filed and by paying a renewal fee as provided in Section 50 of this act [Section 1-612 of this title]. A previously filed consent to service of process complying with Section 49 of this act [Section 1-611 of this title] may be incorporated by reference in a renewal. A renewed notice filing becomes effective upon the expiration of the filing being renewed.

C. With respect to a security that is a federal covered security under Section 18(b)(4)(D) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(4)(D)), a rule under this act may require a notice filing by or on behalf of an issuer to include a copy of Form D, including the Appendix, as promulgated by the Securities and Exchange Commission, and a consent to service of process complying with Section 49 of this act [Section 1-611 of this title] signed by the issuer not later than fifteen (15) days after the first sale of the federal covered security in this state and the payment of a fee as provided in Section 50 of this act [Section 1-612 of this title].

D. Except with respect to a federal covered security under Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(1)), if the Administrator finds that there is a failure to comply with a notice or fee requirement of this section, the Administrator may issue a stop order suspending the offer and sale of a federal covered security in this state. If the deficiency is corrected, the stop order is void as of the time of its issuance and no penalty may be imposed by the Administrator.

§ 1-303. Securities registration by coordination

A. A security for which a registration statement has been filed under the Securities Act of 1933 in connection with the same offering may be registered by coordination under this section.

B. A registration statement under this section must contain or be accompanied by the following records in addition to the information specified in Section 14 of this act [Section 1-305 of this title] and a consent to service of process complying with Section 49 of this act [Section 1-611 of this title]:

1. A copy of the latest form of prospectus filed under the Securities Act of 1933;

2. A copy of the articles of incorporation and bylaws or their substantial equivalents currently in effect; a copy of any agreement with or among underwriters; a copy of any indenture or other instrument governing the issuance of the security to be registered; and a specimen, copy, or description of the security that is required by rule adopted or order issued under this act;

3. Copies of any other information or any other records filed by the issuer under the Securities Act of 1933 requested by the Administrator; and

4. An undertaking to forward each amendment to the federal prospectus, other than an amendment that delays the effective date of the registration statement, promptly after it is filed with the Securities and Exchange Commission and in any event not later than the first business day after the day the amendment is forwarded to or filed with the Securities and Exchange Commission, whichever first occurs.

C. A registration statement under this section becomes effective simultaneously with or subsequent to the federal registration statement when all the following conditions are satisfied:

1. A stop order under subsection D of this section or Section 15 of this act [Section 1-306 of this title] or issued by the Securities and Exchange Commission is not in effect and a proceeding is not pending against the issuer under Section 15 of this act [Section 1-306 of this title]; and

2. The registration statement has been on file for at least twenty (20) days or a shorter period provided by rule adopted or order issued under this act.

D. The registrant shall promptly notify the Administrator in a record of the date when the federal registration statement becomes effective and the content of any price amendment and shall promptly file a record containing the price amendment. If the notice is not timely received, the Administrator may issue a stop order, without prior notice or hearing, retroactively denying effectiveness to the registration statement or suspending its effectiveness until compliance with this section. The Administrator shall promptly notify the registrant of the order by telegram, telephone, or electronic means and promptly confirm this notice by a record. If the registrant subsequently complies with the notice requirements of this section, the stop order is void as of the date of its issuance.

E. If the federal registration statement becomes effective before each of the conditions in this section is satisfied or is waived by the Administrator, the registration statement is automatically effective under this act when all the conditions are satisfied or waived. If the registrant notifies the Administrator of the date when the federal registration statement is expected to become effective, the Administrator shall promptly notify the registrant by telegram, telephone, or electronic means and promptly confirm this notice by a record, indicating whether all the conditions are satisfied or waived and whether the Administrator intends the institution of a proceeding under Section 15 of this act [Section 1-306 of this title]. The notice by the Administrator does not preclude the institution of such a proceeding.

§ 1-304. Securities registration by qualification

A. A security may be registered by qualification under this section.

B. A registration statement under this section must contain the information or records specified in Section 14 of this act [Section 1-305 of this title], a consent to service of process complying with Section 49 of this act [Section 1-611 of this title], and the following information or records:

1. With respect to the issuer and any significant subsidiary, its name, address, and form of organization; the state or foreign jurisdiction and date of its organization; the general character and location of its business; a description of its physical properties and equipment; and a statement of the general competitive conditions in the industry or business in which it is or will be engaged;

2. With respect to each director and officer of the issuer, and other person having a similar status or performing similar functions, the person's name, address, and principal occupation for the previous five (5) years; the amount of securities of the issuer held by the person as of the 30th day before the filing of the registration statement; the amount of the securities covered by the registration statement to which the person has indicated an intention to subscribe; and a description of any material interest of the person in any material transaction with the issuer or a significant subsidiary effected within the previous three (3) years or proposed to be effected;

3. With respect to persons covered by paragraph 2 of this subsection, the aggregate sum of the remuneration paid to those persons during the previous twelve (12) months and estimated to be paid during the next twelve (12) months, directly or indirectly, by the issuer, and all predecessors, parents, subsidiaries, and affiliates of the issuer;

4. With respect to a person owning of record or owning beneficially, if known, ten percent (10%) or more of the outstanding shares of any class of equity security of the issuer, the information or records specified in paragraph 2 of this subsection other than the person's occupation;

5. With respect to a promoter, if the issuer was organized within the previous three (3) years, the information or records specified in paragraph 2 of this subsection, any amount paid to the promoter within that period or intended to be paid to the promoter, and the consideration for the payment;

6. With respect to a person on whose behalf any part of the offering is to be made in a nonissuer distribution, the person's name and address; the amount of securities of the issuer held by the person as of the date of the filing of the registration statement; a description of any material interest of the person in any material transaction with the issuer or any significant subsidiary effected within the previous three (3) years or proposed to be effected; and a statement of the reasons for making the offering;

7. The capitalization and long term debt, on both a current and pro forma basis, of the issuer and any significant subsidiary, including a description of each security outstanding or being registered or otherwise offered, and a statement of the amount and kind of consideration, whether in the form of cash, physical assets, services, patents, goodwill, or anything else of value, for which the issuer or any subsidiary has issued its securities within the previous two (2) years or is obligated to issue its securities;

8. The kind and amount of securities to be offered; the proposed offering price or the method by which it is to be computed; any variation at which a proportion of the offering is to be made to a person or class of persons other than the underwriters, with a specification of the person or class; the basis on which the offering is to be made if otherwise than for cash; the estimated aggregate underwriting and selling discounts or commissions and finders' fees, including separately cash, securities, contracts, or anything else of value to accrue to the underwriters or finders in connection with the offering or, if the selling discounts or commissions are variable, the basis of determining them and their maximum and minimum amounts; the estimated amounts of other selling expenses, including legal, engineering, and accounting charges; the name and address of each underwriter and each recipient of a finder's fee; a copy of any underwriting or selling group agreement under which the distribution is to be made or the proposed form of any such agreement whose terms have not yet been determined; and a description of the plan of distribution of any securities that are to be offered otherwise than through an underwriter;

9. The estimated monetary proceeds to be received by the issuer from the offering; the purposes for which the proceeds are to be used by the issuer; the estimated amount to be used for each purpose; the order or priority in which the proceeds will be used for the purposes stated; the amounts of any funds to be raised from other sources to achieve the purposes stated; the sources of the funds; and, if a part of the proceeds is to be used to acquire property, including goodwill, otherwise than in the ordinary course of business, the names and addresses of the vendors, the purchase price, the names of any persons that have received commissions in connection with the acquisition, and the amounts of the commissions and other expenses in connection with the acquisition, including the cost of borrowing money to finance the acquisition;

10. A description of any stock options or other security options outstanding, or to be created in connection with the offering, and the amount of those options held or to be held by each person required to be named in paragraph 2, 4, 5, 6, or 8 of this subsection and by any person that holds or will hold ten percent (10%) or more in the aggregate of those options;

11. The dates of, parties to, and general effect concisely stated of each managerial or other material contract made or to be made otherwise than in the ordinary course of business to be performed in whole or in part at or after the filing of the registration statement or that was made within the previous two (2) years, and a copy of the contract;

12. A description of any pending litigation, action, or proceeding to which the issuer is a party and that materially affects its business or assets, and any litigation, action, or proceeding known to be contemplated by governmental authorities;

13. A copy of any prospectus, pamphlet, circular, form letter, advertisement, or other sales literature intended as of the effective date to be used in connection with the offering and any solicitation of interest used in compliance with subparagraph b of paragraph 18 of Section 7 of this act [Section 1-202 of this title];

14. A specimen or copy of the security being registered, unless the security is uncertificated; a copy of the issuer's articles of incorporation and bylaws or their substantial equivalents, in effect; and a copy of any indenture or other instrument covering the security to be registered;

15. A signed or conformed copy of an opinion of counsel concerning the legality of the security being registered, with an English translation if it is in a language other than English, which states whether the security when sold will be validly issued, fully paid, and nonassessable and, if a debt security, a binding obligation of the issuer;

16. A signed or conformed copy of a consent of any accountant, engineer, appraiser, or other person whose profession gives authority for a statement made by the person, if the person is named as having prepared or certified a report or valuation, other than an official record, that is public, which is used in connection with the registration statement;

17. A balance sheet of the issuer as of a date within four (4) months before the filing of the registration statement; a statement of income and changes in financial position for each of the three (3) fiscal years preceding the date of the balance sheet and for any period between the close of the immediately previous fiscal year and the date of the balance sheet, or for the period of the issuer's and any predecessor's existence if less than three (3) years; and, if any part of the proceeds of the offering is to be applied to the purchase of a business, the financial statements that would be required if that business were the registrant; and

18. Any additional information or records required by rule adopted or order issued under this act.

C. A registration statement under this section becomes effective thirty (30) days, or any shorter period provided by rule adopted or order issued under this act, after the date the registration statement or the last amendment other than a price amendment is filed, if:

1. A stop order is not in effect and a proceeding is not pending under Section 15 of this act [Section 1-306 of this title];

2. The Administrator has not issued an order under Section 15 of this act [Section 1-306 of this title] postponing effectiveness; and

3. The applicant or registrant has not requested that effectiveness be delayed.

D. The Administrator may delay effectiveness once for not more than ninety (90) days if the Administrator determines the registration statement is not complete in all material respects and promptly notifies the applicant or registrant of that determination. The Administrator may also delay effectiveness for a further period of not more than thirty (30) days if the Administrator determines that the delay is necessary or appropriate.

E. A rule adopted or order issued under this act may require as a condition of registration under this section that a prospectus containing a specified part of the information or record specified in subsection B of this section be sent or given to each person to which an offer is made, before or concurrently, with the earliest of:

1. The first offer made in a record to the person otherwise than by means of a public advertisement, by or for the account of the issuer or another person on whose behalf the offering is being made or by an underwriter or broker-dealer that is offering part of an unsold allotment or subscription taken by the person as a participant in the distribution;

2. The confirmation of a sale made by or for the account of the person;

3. Payment pursuant to such a sale; or

4. Delivery of the security pursuant to such a sale.

§ 1-305. Registration -- Requirements and provisions

A. A registration statement may be filed by the issuer, a person on whose behalf the offering is to be made, or a broker-dealer registered under this act.

B. A person filing a registration statement shall pay the filing fee set forth in Section 50 of this act [Section 1-612 of this title]. If a registration statement is withdrawn before the effective date or a preeffective stop order is issued under Section 15 of this act [Section 1-306 of this title], the Administrator shall retain the fee.

C. A registration statement filed under Section 12 or 13 of this act [Section 1-303 or 1-304 of this title] must specify:

1. The amount of securities to be offered in this state;

2. The states in which a registration statement or similar record in connection with the offering has been or is to be filed; and

3. Any adverse order, judgment, or decree issued in connection with the offering by a state securities regulator, the Securities and Exchange Commission, or a court.

D. A record filed under this act or the predecessor act within five (5) years preceding the filing of a registration statement may be incorporated by reference in the registration statement to the extent that the record is currently accurate.

E. In the case of a nonissuer distribution, information or a record may not be required under subsection I of this section or Section 13 of this act [Section 1-304 of this title], unless it is known to the person filing the registration statement or to the person on whose behalf the distribution is to be made or unless it can be furnished by those persons without unreasonable effort or expense.

F. A rule adopted or order issued under this act may require as a condition of registration that a security issued within the previous five (5) years or to be issued to a promoter for a consideration substantially less than the public offering price or to a person for a consideration other than cash be deposited in escrow; and that the proceeds from the sale of the registered security in this state be impounded until the issuer receives a specified amount from the sale of the security either in this state or elsewhere. The conditions of any escrow or impoundment required under this subsection may be established by rule adopted or order issued under this act, but the Administrator may not reject a depository institution solely because of its location in another state.

G. A rule adopted or order issued under this act may require as a condition of registration that a security registered under this act be sold only on a specified form of subscription or sale contract and that a signed or conformed copy of each contract be filed under this act or preserved for a period specified by the rule or order, which may not be longer than five (5) years.

H. Except while a stop order is in effect under Section 15 of this act [Section 1-306 of this title], a registration statement is effective for one year after its effective date, or for any longer period designated in an order under this act during which the security is being offered or distributed in a nonexempted transaction by or for the account of the issuer or other person on whose behalf the offering is being made or by an underwriter or broker-dealer that is still offering part of an unsold allotment or subscription taken as a participant in the distribution. For the purposes of a nonissuer transaction, all outstanding securities of the same class identified in the registration statement as a security registered under this act are considered to be registered while the registration statement is effective. If any securities of the same class are outstanding, a registration statement may not be withdrawn until one year after its effective date. A registration statement may be withdrawn only with the approval of the Administrator.

I. While a registration statement is effective, the person that filed the registration statement shall file reports, not more often than quarterly, to keep the information or other record in the registration statement reasonably current and to disclose the progress of the offering.

J. A registration statement may be amended after its effective date. The posteffective amendment becomes effective when the Administrator so orders. If a posteffective amendment is made to increase the number of securities specified to be offered or sold, the person filing the amendment shall pay a registration fee as provided in Section 50 of this act [Section 1-612 of this title]. A posteffective amendment relates back to the date of the offering of the additional securities being registered if, within one year after the date of the sale, the amendment is filed and the additional registration fee is paid.

K. The records of an issuer registered or required to be registered under this act are subject to such reasonable periodic, special, or other audits or inspections by a representative of the Administrator, within or without this state, as the Administrator considers necessary or appropriate in the public interest and for the protection of investors. An audit or inspection may be made at any time and without prior notice. The Administrator may copy, and remove for audit or inspection copies of, all records the Administrator reasonably considers necessary or appropriate to conduct the audit or inspection. The Administrator may assess a reasonable charge for conducting an audit or inspection under this subsection.

§ 1-306. Denial, suspension, or revocation of effectiveness of registration statement

A. The Administrator may issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of, a registration statement if the Administrator finds that the order is in the public interest and that:

1. The registration statement as of its effective date or before the effective date in the case of an order denying effectiveness, an amendment under subsection J of Section 14 of this act [Section 1-305 of this title] as of its effective date, or a report under subsection I of Section 14 of this act [Section 1-305 of this title], is incomplete in a material respect or contains a statement that, in the light of the circumstances under which it was made, was false or misleading with respect to a material fact;

2. This act or a rule adopted or order issued under this act or a condition imposed under this act has been willfully violated, in connection with the offering, by the person filing the registration statement; by the issuer, a partner, officer, or director of the issuer or a person having a similar status or performing a similar function, a promoter of the issuer, or a person directly or indirectly controlling or controlled by the issuer, but only if the person filing the registration statement is directly or indirectly controlled by or acting for the issuer; or by an underwriter;

3. The security registered or sought to be registered is the subject of a permanent or temporary injunction of a court of competent jurisdiction or an administrative stop order or similar order issued under any federal, foreign, or state law other than this act applicable to the offering, but the Administrator may not institute a proceeding against an effective registration statement under this paragraph more than one year after the date of the order or injunction on which it is based, and the Administrator may not issue an order under this paragraph on the basis of an order or injunction issued under the securities act of another state unless the order or injunction was based on conduct that would constitute, as of the date of the order, a ground for a stop order under this section;

4. The issuer's enterprise or method of business includes or would include activities that are unlawful where performed;

5. With respect to a security sought to be registered under Section 12 of this act [Section 1-303 of this title], there has been a failure to comply with the undertaking required by paragraph 4 of subsection B of Section 12 of this act [Section 1-303 of this title];

6. The applicant or registrant has not paid the filing fee, but the Administrator shall void the order if the deficiency is corrected; or

7. The offering:

a. will work or tend to work a fraud upon purchasers or would so operate, or

b. has been or would be made or is being made with unreasonable amounts of underwriters' and sellers' discounts, commissions, or other compensation; promoters' profits or participation; or unreasonable amounts or kinds of options, profits, compensation, or remuneration paid directly or indirectly to any officer, director, employee, contractor or agent.

B. To the extent practicable, the Administrator by rule adopted or order issued under this act shall publish standards that provide notice of conduct that violates paragraph 7 of subsection A of this section.

C. The Administrator may not institute a stop order proceeding against an effective registration statement on the basis of conduct or a transaction known to the Administrator when the registration statement became effective unless the proceeding is instituted within thirty (30) days after the registration statement became effective.

D. The Administrator may summarily revoke, deny, postpone, or suspend the effectiveness of a registration statement pending final determination of an administrative proceeding. Upon the issuance of the order, the Administrator shall promptly notify each person specified in subsection E of this section that the order has been issued, the reasons for the revocation, denial, postponement, or suspension, and that within fifteen (15) days after the receipt of a request in a record from the person the matter will be scheduled for a hearing and such hearing shall be commenced within fifteen (15) days of the matter being set for hearing. If a hearing is not requested and none is ordered by the Administrator, within thirty (30) days after the date of service of the order, the order becomes final. If a hearing is requested or ordered, the Administrator, after notice of and opportunity for hearing for each person subject to the order, may modify or vacate the order or extend the order until final determination.

E. Unless the right to notice and hearing is waived, a stop order may not be issued under this section without:

1. Appropriate notice to the applicant or registrant, the issuer, and the person on whose behalf the securities are to be or have been offered;

2. An opportunity for hearing; and

3. Findings of fact and conclusions of law in a record in accordance with the Administrative Procedures Act.

F. The Administrator may modify or vacate a stop order issued under this section if the Administrator finds that the conditions that caused its issuance have changed or that it is necessary or appropriate in the public interest or for the protection of investors.

§ 1-307. Waiver or modification

The Administrator may waive or modify, in whole or in part, any or all of the requirements of Sections 11, 12, and subsection B of Section 13 of this act [Sections 1-302, 1-303, and 1-304 of this title] or the requirement of any information or record in a registration statement or in a periodic report filed pursuant to subsection I of Section 14 of this act [Section 1-305 of this title].

§ 1-308. Investment certificate issuers -- Registration requirements

A. In addition to all other applicable registration provisions specified in this act, investment certificate issuers are subject to the provisions of this section. As used in this section:

1. “Investment certificate” means thrift certificates, certificates of deposit, savings obligations and similar certificates or obligations issued and sold by an investment certificate issuer as defined in paragraph 2 of this subsection; and

2. “Investment certificate issuer” means any financial institution or person, other than a federally or state chartered bank, bank holding company, trust company or savings and loan association, or any credit union, which accepts investor funds or deposits in exchange for the issuance of investment certificates; provided, however, the term “investment certificate issuer” shall not include a financial institution or person which, as of November 1, 1985, issued only the following securities:

a. investment certificates exempt under the provisions of Sections 6 through 8 of this act [Sections 1-201 through 1-203 of this title],

b. investment certificates registered by coordination under Section 12 of this act [Section 1-303 of this title], or

c. any other security as to which the Administrator, by rule or order, finds that registration is not necessary or appropriate for the protection of investors.

Nothing contained in this act shall be construed as precluding an investment certificate issuer from qualifying for and relying upon any of the exemptions from the provisions of Sections 10 and 32 of this act [Sections 1-301 and 1-504 of this title] as contained in Sections 6 through 8 of this act [Sections 1-201 through 1-203 of this title].

B. In addition to other powers conferred by this act, the Administrator shall have power to require an investment certificate issuer to:

1. Cause its books and records to be made available at its offices and to provide to the Department a trial balance within five (5) days of the commencement of any examination. The books and records shall be audited at least once each year by an independent certified public accountant in accordance with generally accepted auditing standards, and the report thereof, including financial statements prepared in accordance with generally accepted accounting principles, furnished to the Administrator in such form as he or she may require;

2. Observe methods and standards, including classification standards of loans, which the Administrator may prescribe by rule adopted and promulgated pursuant to the Administrative Procedures Act for determining the value of various types of assets;

3. Maintain its accounting systems and procedures in accordance with such regulations as adopted and promulgated by the Administrator pursuant to the Administrative Procedures Act; provided, the accounting system required shall have due regard to the size of the investment certificate issuer;

4. Charge off the whole or any part of an asset, the value of which, at the time of the Administrator’s action, has deteriorated for reasons set forth by the Administrator by rule adopted and promulgated pursuant to the Administrative Procedures Act; and

5. Write down an asset to market value as prescribed by the Administrator by rule adopted and promulgated pursuant to the Administrative Procedures Act.

C. Every investment certificate issuer shall obtain from the Administrator a written acknowledgment, issued in accordance with procedures adopted and promulgated pursuant to the Administrative Procedures Act, that the investment certificate issuer engages in the business of accepting investor funds or deposits in exchange for the issuance of investment certificates. Any investment certificate issuer who obtains such an acknowledgment shall be subject to this section and shall possess all the rights, powers and privileges and shall be subject to all of the duties, restrictions and limitations contained herein. No company or person who fails to obtain such acknowledgment within ninety (90) days of the effective date of the adoption by the Administrator of procedures governing the issuance of a written acknowledgment shall possess or exercise, unless expressly given and possessed or exercised under other laws, any of the benefits, rights, powers or privileges which are herein conferred on investment certificate issuers. Any company or person who fails to obtain a written acknowledgment as described herein may not engage in the business of issuing investment certificates.

D. Any officer, director or employee of an investment certificate issuer found by the Administrator to be dishonest, reckless, unfit to participate in the conduct of the affairs of the institution, or practicing a continuing disregard or violation of laws, rules, regulations or orders which are likely to cause substantial loss to the company or likely to seriously weaken the condition of the company shall be removed immediately from office by the board of directors of the investment certificate issuer of which he or she is an officer, director or employee, on the written order of the Administrator; provided, that the investment certificate issuer or officer, employee, or director may within ten (10) days file a notice of protest for the removal with the Commission, and as soon as possible thereafter, the Commission will review the order of the Administrator and make findings as it deems proper, and that, pending said time, the officer, employee or director shall not perform any of the duties of his office.

E. An investment certificate issuer shall not, without the consent of the Administrator:

1. Make a loan to any of its stockholders owning twenty-five percent (25%) or more of the stock of the investment certificate issuer, or its officers or directors;

2. Make a loan to any employee in excess of Ten Thousand Dollars ($10,000.00); or

3. Make a loan to or other investment in or purchase any asset from any company in which any of its officers, directors or stockholders may have any direct or indirect interest, unless made in an arm’s length transaction.

F. An investment certificate issuer shall not, without the consent of the Administrator:

1. Lend money in excess of ten percent (10%) of its shareholders’ equity to any person, association, partnership or corporation liable for such obligations; provided, however, that this limitation does not apply to the purchase of investment securities; or

2. Engage in, or acquire any interest in, any business prohibited to a bank chartered under the laws of this state.

G. The shareholders’ equity of an investment certificate issuer shall not be less than ten percent (10%) of the investment certificates outstanding. Provided, an investment certificate issuer lawfully incorporated and operating in this state on or before November 1, 1985, with less than the above specified shareholders’ equity shall, at the beginning of each fiscal year thereafter, increase its shareholders’ equity by a minimum of one-fourth (1/4) the difference between its shareholders’ equity on November 1, 1985, and the above specified amount until such time as its shareholders’ equity equals or exceeds the amount specified above. For purposes of computing the shareholders’ equity, the reserve against bad debts shall be included.

H. Every investment certificate issuer shall maintain a reserve against bad debts in an amount required by the Administrator by rule adopted and promulgated pursuant to the Administrative Procedures Act, but in no event shall the reserve against bad debts be less than two percent (2%) of total loans outstanding.

I. If the Administrator finds the capital of an investment certificate issuer to be impaired according to the standard set forth in subsection G of this section, the Administrator may:

1. Give notice of the impairment to the directors and shareholders of the investment certificate issuer and levy an assessment in a designated amount upon the holders of record of the investment certificate issuer’s stock to remedy an impairment of capital. Upon receipt of an order to levy an assessment, the directors shall cause to be sent to all holders of stock, at their addresses as listed on the books of the investment certificate issuer, a notice of the amount of the assessment and a copy of this subsection. If an assessment is not paid within ninety (90) days after the order is mailed, the Administrator, at his or her discretion, may offer the shares of the defaulting stockholders for sale at public auction at a price which shall not be less than the amount of the assessment and the cost of the sale; or

2. Apply to the district court of any county where the assets of the investment certificate issuer are located for an order appointing a conservator of, and directing him to rehabilitate, the investment certificate issuer. If all reasonable efforts to rehabilitate the investment certificate issuer fail, the Administrator may apply to the court for an order directing the appointment of a liquidator to dissolve any such issuer and liquidate its assets. All rights and interests of the stockholders in the stock, property and assets of such investment certificate issuer are thereby terminated except the rights of stockholders to the proceeds of liquidation, if any, after all other valid claims, including interest, against the assets of the investment certificate issuer and the proceeds of liquidation have been satisfied. The conservator or liquidator appointed under this subsection shall meet qualifications established by the Administrator by rule adopted and promulgated pursuant to the Administrative Procedures Act.

J. Whenever the capital or reserve of any investment certificate issuer shall be impaired according to the standards set forth in subsections G and H of this section, the investment certificate issuer shall make no new loans, renew any investment certificates or sell new investment certificates without the consent of the Administrator.

K.      1. It shall be unlawful for any investment certificate issuer to issue investment certificates when insolvent.

2. Every officer, director, principal stockholder, or every other person who materially participates or aids in the issuance of an investment certificate in violation of this subsection, or who directly or indirectly controls any such person, shall be jointly and severally liable, unless the officer, director, principal stockholder, or any other person who so participates, aids or controls, sustains the burden of proof that the person did not know, and could not have known, of the existence of the facts by reason of which liability is alleged to exist. There shall be contribution as in cases of contract among the persons so liable.

3. The rights and remedies provided for in this subsection are in addition to any other rights or remedies provided for in Title 71 of the Oklahoma Statutes, or that may exist at law or in equity.

L. The Administrator may as often as he or she deems it prudent and necessary for the protection of the public, make or cause to be made examinations of the books, records, papers, assets and liabilities of every kind and character owned by, or relating to, every investment certificate issuer.

M. Every investment certificate issuer shall make and file with the Administrator reports at such times and in such form as the Administrator may prescribe by rule or order. The reports shall be verified by the oath of either the president, the vice-president, or the secretary and attested by the signature of two or more of the directors. Each report shall exhibit in detail, as may be required by the Administrator, the resources and liabilities of the investment certificate issuer at the close of business on the day to be specified by the Administrator.

N. Every investment certificate issuer whose investor funds or deposits are not insured by an agency of the government shall disclose on the face of each investment certificate in ten-point type the following:

“This certificate is not insured by the Federal Deposit Insurance Corporation or any other agency of the government.”

ARTICLE 4

BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS, INVESTMENT ADVISER REPRESENTATIVES, AND FEDERAL COVERED INVESTMENT ADVISERS

§ 1-401. Broker-dealer registration requirement and exemptions

A. It is unlawful for a person to transact business in this state as a broker-dealer, unless the person is registered under this act as a broker-dealer or is exempt from registration as a broker-dealer under subsection B or D of this section.

B. The following persons are exempt from the registration requirement of subsection A of this section:

1. A broker-dealer without a place of business in this state if its only transactions effected in this state are with:

a. the issuer of the securities involved in the transactions,

b. a broker-dealer registered under this act or a broker-dealer not required to be registered as a broker-dealer under this act,

c. an institutional investor,

d. a nonaffiliated federal covered investment adviser with investments under management in excess of One Hundred Million Dollars ($100,000,000.00) acting for the account of others pursuant to discretionary authority in a signed record,

e. a bona fide preexisting customer whose principal place of residence is not in this state and the person is registered as a broker-dealer under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the state in which the customer maintains a principal place of residence,

f. a bona fide preexisting customer whose principal place of residence is in this state but was not present in this state when the customer relationship was established, if:

(1) the broker-dealer is registered under the Securities Exchange Act of 1934 or the broker-dealer is not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities laws of the state in which the customer relationship was established and where the customer had maintained a principal place of residence, and

(2) within forty-five (45) days after the customer’s first transaction in this state, the person files an application for registration as a broker-dealer in this state and a further transaction is not effected more than seventy-five (75) days after the date on which the application is filed, or, if earlier, the date on which the Administrator notifies the person that the Administrator has denied the application for registration or has stayed the pendency of the application for cause,

g. not more than three customers in this state during the previous twelve (12) months, in addition to those specified in subparagraphs a through f and under subparagraph h of this paragraph, if the broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the state in which the broker-dealer has its principal place of business, and

h. any other person exempted by rule or order under this act; and

2. A person that deals solely in United States government securities and is supervised as a dealer in government securities by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the Office of Thrift Supervision.

C. It is unlawful for a broker-dealer, or for an issuer engaged in offering, offering to purchase, purchasing, or selling securities in this state, directly or indirectly, to employ or associate with an individual to engage in an activity related to securities transactions in this state if the registration of the individual is suspended or revoked under this act; or the individual is barred from employment or association with a broker-dealer, an issuer, an investment adviser or a federal covered investment adviser by an order of the securities regulator of a state, the Securities and Exchange Commission, or a self-regulatory organization. A broker-dealer or issuer does not violate this subsection if the broker-dealer or issuer did not know, and in the exercise of reasonable care could not have known, of the suspension, revocation, or bar. Upon request from a broker-dealer or issuer and for good cause shown, an order under this act may modify or waive the prohibitions of this subsection.

D. A rule adopted or order issued under this act may permit:

1. A broker-dealer that is registered in Canada or other foreign jurisdiction and that does not have a place of business in this state to effect transactions in securities with or for, or attempt to effect the purchase or sale of any securities by:

a. an individual from Canada or other foreign jurisdiction that is temporarily present in this state and with whom the broker-dealer had a bona fide customer relationship before the individual entered the United States,

b. an individual from Canada or other foreign jurisdiction who is present in this state and whose transactions are in a self-directed tax advantaged retirement plan of which the individual is the holder or contributor in that foreign jurisdiction, or

c. an individual who is resident in this state, with whom the broker-dealer customer relationship arose while the individual was temporarily or permanently resident in Canada or the other foreign jurisdiction, and

2. An agent who represents a broker-dealer, that is exempt under this subsection to effect transactions in securities or attempt to effect the purchase or sale of any securities in this state as permitted for a broker-dealer described in paragraph 1 of this subsection.

§ 1-402. Agent registration requirement and exemptions

A. It is unlawful for an individual to transact business in this state as an agent unless the individual is registered under this act as an agent or is exempt from registration as an agent under subsection B of this section.

B. The following individuals are exempt from the registration requirement of subsection A of this section:

1. An individual who represents a broker-dealer in effecting transactions in this state limited to those described in Section 15(h)(2) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(h)(2));

2. An individual who represents a broker-dealer that is exempt under subsection B or D of Section 18 of this act [Section 1-401 of this title];

3. An individual who represents an issuer with respect to an offer or sale of the issuer’s own securities or those of the issuer’s parent or any of the issuer’s subsidiaries to existing employees, partners, members or directors of the issuer or the issuer’s parent or any of the issuer’s subsidiaries, and who is not compensated in connection with the individual’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities;

4. An individual who represents an issuer and who effects transactions in the issuer’s securities exempted by Section 7 of this act [Section 1-202 of this title], other than paragraphs 11 and 14 of Section 7 of this act [Section 1-202 of this title];

5. An individual who represents an issuer who effects transactions solely in federal covered securities of the issuer, but an individual who effects transactions in a federal covered security under Section 18(b)(3) or 18(b)(4)(D) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(3) or 77r(b)(4)(D)) is not exempt if the individual is compensated in connection with the agent’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities;

6. An individual who represents a broker-dealer registered in this state under subsection A of Section 18 of this act [Section 1-401 of this title] or exempt under subsection B of Section 18 of this act [Section 1-401 of this title] in the offer and sale of securities for an account of a nonaffiliated federal covered investment adviser with investments under management in excess of One Hundred Million Dollars ($100,000,000.00) acting for the account of others pursuant to discretionary authority in a signed record;

7. An individual who represents an issuer in connection with the purchase of the issuer’s own securities;

8. An individual who represents an issuer and who restricts participation to performing ministerial or clerical work; or

9. Any other individual exempted by rule adopted or order issued under this act.

C. The registration of an agent is effective only while the agent is employed by or associated with a broker-dealer registered under this act or an issuer that is offering, selling or purchasing its securities in this state.

D. It is unlawful for a broker-dealer, or an issuer engaged in offering, selling, or purchasing securities in this state, to employ or associate with an agent who transacts business in this state on behalf of broker-dealers or issuers unless the agent is registered under subsection A of this section or exempt from registration under subsection B of this section.

E. Unless prohibited by rule adopted or order issued under this act, an individual may act as an agent for more than one broker-dealer or more than one issuer at a time.

F. It is unlawful for an individual acting as an agent, directly or indirectly, to conduct business in this state on behalf of a broker-dealer or issuer if the registration of the individual as an agent is suspended or revoked under this act; or the individual is barred from employment or association with a broker-dealer by an order under this act, the Securities and Exchange Commission, or a self-regulatory organization; or the individual is subject to an order of a court of competent jurisdiction temporarily, preliminarily or permanently enjoining such individual from conducting business in this state on behalf of a broker-dealer or issuer.

§ 1-403. Investment adviser registration requirement and exemptions

A. It is unlawful for a person to transact business in this state as an investment adviser unless the person is registered under this act as an investment adviser or is exempt from registration as an investment adviser under subsection B of this section.

B. The following persons are exempt from the registration requirement of subsection A of this section:

1. A federal covered investment adviser;

2. A person without a place of business in this state that is registered under the securities act of the state in which that person has its principal place of business if its only clients in this state are:

a. federal covered investment advisers, investment advisers registered under this act, or broker-dealers registered under this act,

b. institutional investors,

c. bona fide preexisting clients whose principal places of residence are not in this state if the investment adviser is registered under the securities act of the state in which the clients maintain principal places of residence, or

d. any other client exempted by rule adopted or order issued under this act;

3. A person without a place of business in this state if the person has had, during the preceding twelve (12) months, not more than five clients that are residents of this state in addition to those specified under paragraph 2 of this subsection; or

4. Any other person exempted by rule adopted or order issued under this act.

C. It is unlawful for an investment adviser, directly or indirectly, to employ or associate with an individual to engage in an activity related to investment advice in this state if the registration of the individual is suspended or revoked under this act, or the individual is barred from employment or association with an investment adviser, federal covered investment adviser, or broker-dealer by an order under this act, the Securities and Exchange Commission, or a self-regulatory organization, unless the investment adviser did not know, and in the exercise of reasonable care could not have known, of the suspension, revocation, or bar. Upon request from the investment adviser and for good cause, the Administrator, by order, may waive, in whole or in part, the application of the prohibitions of this subsection to the investment adviser.

D. It is unlawful for an investment adviser to employ or associate with an individual required to be registered under this act as an investment adviser representative who transacts business in this state on behalf of the investment adviser unless the individual is registered under subsection A of Section 21 of this act [Section 1-404 of this title] or is exempt from registration under subsection B of Section 21 of this act [Section 1-404 of this title].

E. The exemption from registration provided by subparagraph b of paragraph 2 of subsection B of this section shall not be available to any person who acts as an investment adviser to the state, any county, municipality or school district of this state, or any other political subdivision of this state; any agency or corporate or other instrumentality of any such entity; or any pension fund for the benefit of employees of any such entity.

§ 1-404. Investment adviser representative registration requirement and exemptions

A. It is unlawful for an individual to transact business in this state as an investment adviser representative unless the individual is registered under this act as an investment adviser representative or is exempt from registration as an investment adviser representative under subsection B of this section.

B. The following individuals are exempt from the registration requirement of subsection A of this section:

1. An individual who is employed by or associated with an investment adviser that is exempt from registration under subsection B of Section 20 of this act [Section 1-403 of this title] unless the individual has a place of business in this state or is not a “supervised person” as that term is defined in Section 202(a)(25) of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-2(a)(25)); and

2. Any other individual exempted by rule adopted or order issued under this act.

C. The registration of an investment adviser representative is not effective while the investment adviser representative is not employed by or associated with an investment adviser registered under this act or a federal covered investment adviser that has made or is required to make a notice filing under Section 22 of this act [Section 1-405 of this title].

D. An individual may transact business as an investment adviser representative for more than one investment adviser or federal covered investment adviser at a time unless a rule adopted or order issued under this act prohibits or limits an individual from acting as an investment adviser representative for more than one investment adviser or federal covered investment adviser.

E. It is unlawful for an individual acting as an investment adviser representative, directly or indirectly, to conduct business in this state on behalf of an investment adviser or a federal covered investment adviser if the registration of the individual as an investment adviser representative is suspended or revoked; or the individual is barred from employment or association with an investment adviser or a federal covered investment adviser by an order under this act, the Securities and Exchange Commission, or a self-regulatory organization; or the individual is subject to an order of a court of competent jurisdiction temporarily, preliminarily or permanently enjoining such individual from conducting business in this state on behalf of an investment adviser or a federal covered investment adviser. Upon request from a federal covered investment adviser and for good cause, the Administrator, by order issued, may waive, in whole or in part, the application of the requirements of this subsection to the federal covered investment adviser.

F. An investment adviser registered under this act, a federal covered investment adviser that has filed a notice under Section 22 of this act [Section 1-405 of this title], or a broker-dealer registered under this act is not required to employ or associate with an individual as an investment adviser representative for the referral of investment advisory clients so long as any compensation paid by such persons for such referral is paid to an investment adviser registered under this act, a federal covered investment adviser who has filed a notice under Section 22 of this act [Section 1-405 of this title], or a broker-dealer registered under this act with which the individual is employed or associated as an investment adviser representative.

§ 1-405. Federal covered investment adviser notice filing

A. Except with respect to a federal covered investment adviser described in subsection B of this section, it is unlawful for a federal covered investment adviser to transact business in this state as a federal covered investment adviser unless the federal covered investment adviser complies with subsection C of this section.

B. The following federal covered investment advisers are not required to comply with subsection C of this section:

1. A federal covered investment adviser without a place of business in this state if its only clients in this state are:

a. federal covered investment advisers, investment advisers registered under this act, and broker-dealers registered under this act,

b. institutional investors,

c. bona fide preexisting clients whose principal places of residence are not in this state, or

d. other clients specified by rule adopted or order issued under this act;

2. A federal covered investment adviser without a place of business in this state if the person has had, during the preceding twelve (12) months, not more than five clients that are residents in this state in addition to those specified under paragraph 1 of this subsection; and

3. Any other person excluded by rule adopted or order issued under this act.

C. A person acting as a federal covered investment adviser, not excluded under subsection B of this section, shall file a notice containing a consent to service of process complying with Section 49 of this act [Section 1-611 of this title], such records as have been filed with the Securities and Exchange Commission under the Investment Advisers Act of 1940 required by rule or order under this act, and the fee specified in Section 50 of this act [Section 1-612 of this title].

D. The notice under subsection C of this section becomes effective upon its filing and expires at midnight on December 31 each year.

§ 1-406. Registration application -- Time of becoming effective

A. A person shall register as a broker-dealer, agent, investment adviser, or investment adviser representative by filing an application that contains:

1. The information required for the filing of a uniform application, a consent to service of process complying with Section 49 of this act [Section 1-611 of this title], the fee specified in Section 50 of this act [Section 1-612 of this title] and any reasonable fees charged by the designee of the Administrator for processing the filing; and

2. Upon request by the Administrator, any other financial or other information that the Administrator determines is appropriate.

B. If the information contained in an application that is filed under subsection A of this section is or becomes inaccurate or incomplete in any material respect, the registrant shall promptly file a correcting amendment.

C. If an order is not in effect and a proceeding is not pending under Section 28 of this act [Section 1-411 of this title], registration becomes effective at noon on the 45th day after a completed application is filed unless the registration is denied. A rule adopted or order issued under this act may set an earlier effective date or may defer the effective date until noon on the 45th day after the filing of any amendment completing the application.

D. A registration is effective until midnight on December 31 of the year for which the application for registration is filed. Unless an order is in effect under Section 28 of this act [Section 1-411 of this title], a registration may be automatically renewed each year by filing such records as are required by rule adopted or order issued under this act, by paying the fee specified in Section 50 of this act [Section 1-612 of this title], and by paying costs charged by the designee of the Administrator for processing the filings.

E. A rule adopted or order issued under this act may impose such other conditions not inconsistent with the National Securities Markets Improvement Act of 1996. An order issued under this act may waive, in whole or in part, specific requirements in connection with registration as are in the public interest and for the protection of investors.

§ 1-407. Succession and change in registration of broker-dealer or investment adviser

A. A broker-dealer or investment adviser may succeed to the current registration of another broker-dealer or investment adviser or a notice filing of a federal covered investment adviser, and a federal covered investment adviser may succeed to the current registration of an investment adviser or notice filing of another federal covered investment adviser, by filing as a successor an application for registration pursuant to Section 18 or 20 of this act [Section 1-401 or 1-403 of this title], or a notice pursuant to Section 22 of this act [Section 1-405 of this title], for the unexpired portion of the current registration or notice filing.

B. A broker-dealer or investment adviser that changes its form of organization or state of incorporation or organization may continue its registration by filing an amendment to its registration if the change does not involve a material change in its financial condition or management. The amendment becomes effective when filed or upon a date designated by the registrant in its filing. The new organization is a successor to the original registrant for the purposes of this act. If there is a material change in financial condition or management, the broker-dealer or investment adviser shall file a new application for registration. Any predecessor registered under this act shall stop conducting its securities business other than winding down transactions and shall file for withdrawal of broker-dealer or investment adviser registration within forty-five (45) days after filing its amendment to effect succession.

C. A broker-dealer or investment adviser that changes its name may continue its registration by filing an amendment to its registration. The amendment becomes effective when filed or upon a date designated by the registrant.

D. A change of control of a broker-dealer or investment adviser may be made in accordance with a rule adopted or order issued under this act.

§ 1-408. Termination of employment or association of agent and investment adviser representative -- Transfer of employment or association

A. If an agent registered under this act terminates employment by or association with a broker-dealer or issuer, or if an investment adviser representative registered under this act terminates employment by or association with an investment adviser or federal covered investment adviser, or if either registrant terminates activities that require registration as an agent or investment adviser representative, the broker-dealer, issuer, investment adviser, or federal covered investment adviser shall promptly file a notice of termination. If the registrant learns that the broker-dealer, issuer, investment adviser, or federal covered investment adviser has not filed the notice, the registrant may do so.

B. If an agent registered under this act terminates employment by or association with a broker-dealer registered under this act and begins employment by or association with another broker-dealer registered under this act; or if an investment adviser representative registered under this act terminates employment by or association with an investment adviser registered under this act; or a federal covered investment adviser that has filed a notice under Section 22 of this act [Section 1-405 of this title], and begins employment by or association with another investment adviser registered under this act or a federal covered investment adviser that has filed a notice under Section 22 of this act [Section 1-405 of this title]; then upon the filing by or on behalf of the registrant, within thirty (30) days after the termination, of an applicat