CHAPTER 208

FORMERLY

HOUSE SUBSTITUTE NO. 1

TO HOUSE BILL NO. 416

AS AMENDED BY HOUSE AMENDMENTS NO. 1, 2, 3, 4 AND 5

AN ACT TO AMEND TITLE 6 OF THE DELAWARE CODE BY ADDING A CHAPTER 73 THERETO RELATING TO SECURITIES; PROHIBITING FRAUDULENT PRACTICES IN RELATION THERETO; REQUIRING REGISTRATION IN CONNECTION WITH THE OFFER, SALE AND TRADING OF CERTAIN SECURITIES OFFERED IN DELAWARE; REQUIRING REGISTRATION OF BROKER-DEALERS, INVESTMENT ADVISERS AND AGENTS; AND APPROPRIATING FUNDS TO THE ATTORNEY GENERAL; AND TO AMEND CHAPTER 61, TITLE 29, DELAWARE CODE.

Be it enacted by the General Assembly of the State of Delaware:

Section 1. Title 6, Delaware Code, is hereby amended by adding a new Chapter thereto to be designated as Chapter 73 to read as follows:

CHAPTER 73. SECURITIES ACT

§ 7301. Short title

This Chapter shall be known and may be cited as the "Delaware Securities Act."

§ 7302. Definitions

(1) When used in this Chapter, unless the context otherwise requires:

(a) "Attorney General" means the Attorney General of the State of Delaware or his duly appointed deputy.

(b) "Agent" means any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of Securities. "Agent" does not include an individual who represents an issuer in effecting transactions in a security exempted by §7309 (a), (1), (2), (3), (10), or (11), effecting transactions exempted by §7309(b), or effecting transactions with existing employees, partners, or directors of the issuer if no commission or remuneration is paid or given directly or indirectly for soliciting any person in this State, or individual who represents an issuer or a member of a bona fide agricultural cooperative whose securities are exempt from registration under §7309(a) (12). A partner, officer, or director of a broker-dealer or issuer, or a person occupying similar status or performing similar functions, is an agent only if he otherwise comes within this definition.

(c) "Broker-dealer" means any person engaged in the business of effecting transactions in securities for the account of others or for his own account. "Broker-dealer" does not include (1) an agent, (2) an issuer, (3) a bank, savings institution, or trust company, or (4) a person who has no place of business in this State if he effects transactions in this State exclusively with or through (i) the issuers of the securities involved in the transactions, (ii) other broker-dealers, or (iii) banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees, (5) an issuer or an individual who represents an issuer or a member of such issuer provided said issuer is exempt from registration under §7309 (a) (12).

(d) "Commissioner" means the Securities Commissioner, the principal executive officer of the Division of Securities designated in §7325 of this Chapter.

(e) "Fraud", "deceit", and "defraud" are not limited to common-law deceit.

(f) "Investment adviser" means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in purchasing or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analysis or reports concerning securities. "Investment adviser" does not include:

(1) a bank, savings institution, or trust company;

(2) a lawyer, accountant, engineer, or teacher whose performance of these services is solely incidental to the practice of his profession;

(3) a broker-dealer whose performance of these services is solely incidental to the conduct of his business as a broker-dealer and who receives no special compensation for them;

(4) A publisher or any bona fide newspaper, news magazine, or business or financial publication of general, regular and paid circulation;

(5) a person whose advise, analyses, or reports relate only to securities exempted by §7309 (a) (1) ;

(6) a person who has no place of business in this State if his only clients in this State are other investment advisers, broker-dealers, banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees; or

(7) such other persons not within the intent of this paragraph as the Commissioner may by rule or order designate.

(g) "Issuer" means any person who issues or proposes to issue any security.

(h) "Non-issuer" means not directly or indirectly for the benefit of the issuer.

(i) "Person" means an individual, a corporation, a partnership, an association, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government.

(j) "Promoter" includes:

(1) Any person who, acting alone or in conjunction with one or more other persona, directly or indirectly takes the initiative in founding and organizing the business or enterprise of an issuer.

(2) Any person who, in connection with the founding or organizing of the business or enterprise of an issuer, directly or indirectly receives in consideration of services or property, or both services and property, 10 percent or more of any class of securities of the issuer or 10 percent or more of the proceeds from the sale of any class of securities. However, a person who receives such securities or proceeds either solely as underwriting commissions or solely in consideration of property shall not be deemed a promoter within the meaning of this paragraph if such person does not otherwise take part in founding and organizing the enterprise.

(k) (1) "Sale" or "sell" includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value.

(2) "Offer" or "offer to sell" includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.

(3) A purported gift of assessable stock is considered to involve an offer and sale.

(4) Every sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert into another security of the same or another issuer, is considered to include an offer of the other security.

(5) The terms defined in this subsection do not include any bona fide pledge or loan ; any stock dividend whether the corporation distributing the dividend is the issuer of the stock or not, if nothing of value is given by stockholders for the dividend other than the surrender of a right to a cash or property dividend when each stockholder may elect to take the dividend in cash or property or in stock; any act incident to a vote by stockholders or approval pursuant to §228 of Title 8 without a meeting, pursuant to the certificate of incorporation or the provisions of this title, on a merger, consolidation, reclassification of securities, dissolution, or sale of corporate assets in consideration of the issuance of securities, dissolution, or sale of corporate assets in consideration of the issuances of securities of another corporation; or any 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.

(l) "Securities Act of 1933", "Securities Exchange Act of 1934", "Public Utility Holding Company Act of 1935", and "Investment Company Act of 1940" mean the Federal Statutes of those names as amended before or after the effective date of this Act.

(m) "Security" means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust certificate; pre-organization certificate or subscription; transferable share; investment contract, including pyramid promotion which includes any plan or operation for the sale or distribution of property, services, or any other thing of value wherein a person for a consideration is offered an opportunity to obtain a benefit which is based in whole or in part on the inducement, by himself or by others, of additional persons to purchase the same or a similar opportunity; voting-trust certificate; certificate of deposit for a security; certificate of interest of participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease; or in payments out of production under such a title or lease; options on commodities; or, in general, any interest or instrument commonly known as a "security," or any 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 afore-going. "Security" does not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum or periodically for life or for some other specified period.

() "State" means any state, territory, or possession of the United States, the District of Columbia, and Puerto Rico.

(2) Principles of definition

(a) In this chapter when the word "means" is employed in defining a word or term, the definition is limited to the meaning given.

(b) In this chapter when the word "includes" is employed in defining a word or term, the definition is not limited to the meaning given, but in appropriate cases the word or term may be defined in any way not inconsistent with the definition given.

(c) If a word used in this chapter is not defined herein, it has its commonly accepted meaning, and may be defined as appropriate under §7325 (b).

§ 7303. Sales and purchases

It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly:

(1) to employ any device, scheme, or artifice to defraud,

(2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or

(3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

§ 7304. Registration of securities required

It is unlawful for any person to offer or sell any security in this State unless 1) it is registered under this Act, or 2) the security or transaction is exempted under §7309.

§ 7305. Registration of securities by coordination

(a) Any 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.

(b) A registration statement under this section shall contain the following information and be accompanied by the following documents in addition to the information specified in §7307(c) and the consent to service of process required by §7327, and a filing fee of $100.

(1) three copies of the latest form of prospectus filed under the Securities Act of 1933;

(2) if the Commissioner by rule or otherwise requires, a copy of the articles of incorporation and bylaws (or their substantial equivalents) currently in effect, a copy of any agreements with or among underwriters, a copy of any indenture or other instrument governing the issuance of the security to be registered, and a specimen or copy of the security;

(3) if the Commissioner requests, any other information, or copies of other documents, filed under the Securities Act of 1933; and

(4) an undertaking to forward all future amendments to the federal prospectus, other than an amendment which merely delays the effective date of the registration statement, promptly and in any event not later than the first business day after the day they are forwarded to or filed with the Securities and Exchange Commission, which ever first occurs.

(c) A registration statement under this section automatically becomes effective at the moment the federal registration statement becomes effective if all the following conditions are satisfied:

(1) no stop order is in effect and no proceeding is pending under §7308;

(2) the registration statement has been on file with the commissioner for at least ten days; and

(3) a statement of the maximum and minimum proposed offering prices and the maximum underwriting discounts and commissions.is then on file and the offering is made within those limitations. The registrant shall promptly notify the Commissioner by telephone or telegram of the date and time when the federal registration statement became effective and the content of the price amendment, if any, and shall promptly file post-effective amendment containing the information and documents in the price amendment. "Price amendment" means the final federal amendment which 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. Upon failure to receive the required notification post-effective amendment with the respect to the price amendment, the Commissioner may enter a stop order, without notice or hearing, retroactively denying effectiveness to the registration statement or suspending its effectiveness until compliance with this subsection, if he promptly notifies the registrant by telephone or telegram (and promptly confirms by letter or telegram when he notifies by telephone) of the issuance of the order. If the registrant proves compliance with the requirements of this subsection as to notice and post-effective amendment, the stop order is void as of the time of its entry.

The Commissioner may by rule or otherwise waive either or both of the conditions specified in subsections (c) (2) and (c) (3) of this section. If the federal registration statement becomes effective before all the conditions in this subsection are satisfied and they are not waived, the registration statement automatically becomes effective as soon as all the conditions are satisfied.

(d) Any security for which the documents required by any regulation adopted by the Securities and Exchange Commission under sections 3 (b) or 3(c) of the Securities Act of 1933 have been filed with said commission in connection with the same offering may be registered by coordination upon compliance with subsections (b) and (c) of this section in such manner as the Commissioner by rule or order may prescribe. For purposes of this subsection, the terms "federal registration statement" and "federal prospectus" shall include the documents (including the offering circular, if any) which may be filed with the Securities and Exchange Commission pursuant to any such regulation.

§ 7306. Registration of securities by qualification

(a) Any security may be registered by qualification.

(b) A registration statement under this section shall contain the following information and be accompanied by the following documents in addition to the information specified in §7307(b) and the consent to service of process required by §7327;

(1) the name of the issuer, its address, and form of organization; the State 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 every director and officer of the issuer, or person occupying a similar status or performing similar functions: his name, address, and principal occupation for the past five years; the amount of securities of the issuer held by him as of a specified date within thirty days of the filing; the amount of the securities covered by the filing to which he has indicated his intention to subscribe; and a description of any material interest in any material transaction with the issuer or any significant subsidiary effected within the past three years or proposed to be effected ;

(3) with respect to persons covered by subsection (b) (2): the remuneration paid during the past twelve months and estimated to be paid during the next twelve months, directly or indirectly, by the issuer (together with all predecessors, parents, subsidiaries and affiliates) to all those persons in the aggregate;

(4) with respect to any person owning of record, or beneficially ten percent or more of the outstanding shares of any class or equity security of the issuer: the information specified in subsection (b) (2) other than his occupation;

(5) with respect to every promoter if the issuer was organized within the past three years: the information specified in subsection (b) (2), any amount paid to him within that period or intended to be paid to him, and the consideration for any such payment;

(6) with respect to any person on whose behalf any part of the offering is to be made in a non-issuer distribution or in a distribution in which only part of the securities are being distributed by the issuer: his name and address; the amount of securities of the issuer held by him as of the date of the filing; a description of any material interest in any material transaction with the issuer or any significant subsidiary effected within the past three years or proposed to be effected; and a statement of his reasons for making the offering;

(0) the capitalization and long-term debt (on both a current and a 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) for which the issuer or any subsidiary has issued any of its securities within the past two years or is obligated to issue any of 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 therefrom at which any proportion of the offering is to be made to any person or class or persons other than the underwriters with a specification of any such person or class; the basis upon 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 every underwriter and every recipient of a finder's fee; a copy of any underwriting or selling-group agreement pursuant to 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 which are to be offered otherwise than through an underwriter;

(9) the estimated cash proceeds to be received by the issuer from the offering; the purposes for which the proceeds are to be used by the issuer; the 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 stating the sources of any such funds; and, if any part of the proceeds is to be used to acquire any 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 who have received commissions in connection with the acquisition, and the amounts of any such commissions and any other expense 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, together with the amount of any such options held or to be held by every person required to be named in subsection (b) (2), (4), (5), (6), or (8) and by any person who holds or will hold ten percent or more in the aggregate of any such options;

(11) the dates of, parties to, and general effect concisely stated of, every management or other material contract made or to be made otherwise than in the ordinary course of business if it is to be performed in whole or in part at or after the filing of the registration statement or was made within the past two years, together with a copy of every such contract; and a description of any pending litigation or proceeding to which the issuer is a party and which materially affects its business or assets (including any such litigation or proceeding known to be contemplated by governmental authorities);

(12) three copies of the prospectus required by subsection (d) of this section, together with a copy of any other prospectus, pamphlet, circular, form letter, advertisement, or other sales literature intended as of the effective date to be used in connection with offering;

(13) a specimen or copy of the security being registered; a copy of the issuer's articles of incorporation and bylaws, or their substantial equivalents, as currently in effect; and a copy of any indenture or other instrument covering the security to he registered;

(14) a signed or conformed copy of an opinion of counsel as to the legality of the security being registered (with an English translation if it is in a foreign language), which shall state whether the security when sold will be legally issued, fully paid, and non-assessable, and if a debt security, a binding obligation of the issuer;

(15) the written consent of any accountant, engineer, appraiser, or other person whose profession gives authority to a statement made by him, if any such person is named as having prepared or certified the report or evaluation (other than a public and official document or statement) which is used in connection with the registration statement;

(16) a balance sheet of the issuer as of a date within the last quarter prior to the filing of the registration statement; a profit and loss statement and analysis of surplus for each of the three fiscal years preceding the date of the balance sheet and for any period between the close of the last fiscal year and the date of the balance sheet, or for the period of the issuer's and predecessor's existence of less than three years; and, if any part of the proceeds of the offering is to be applied to the purchase of any business, the same financial statements which would be required of that business for the registrant;

(17) such additional information as the Commissioner requires by rule, regulation, or order.

(c) A registration statement under this section becomes effective when the Commissioner so orders.

(d) As a condition of registration under this section, a prospectus containing any designated part of the information specified in subsection (b) shall be sent or given to each person to whom an offer is made before or concurrently with:

(1) the first written offer made to him (otherwise than by means of a public advertisement) by or for the account of the issuer or any other person on whose behalf the offering is being made, or by any other writer or broker-dealer who is offering part of an unsold allotment or subscription taken by him as a participant in the distribution,

(2) the confirmation of any sale made by or for the account of any such person,

(3) payment pursuant to any such sale, or

(4) delivery of the security pursuant to any such sale, whichever first occurs; provided, however, that subsection (d) (1) may be satisfied by the use of a preliminary prospectus, so designated and bearing such legend as the Commissioner may prescribe, if a final prospectus is sent or given to each recipient of the preliminary prospectus before or concurrently with which ever event in subsection (d) (2), (3) and (4) first occurs.

(e) Every person filing a registration statement under this section shall pay a filing fee as provided by rule or regulation by the Commissioner but in no case shall the fee be less than $100 or more than $1,000. In addition, the Commissioner may by rule, regulation or order require such other reasonable fees as he deems necessary.

§ 7307. Provisions applicable to registration of securities generally

(a) A registration statement may be filed by the issuer, and the other person on whose behalf the offering is to be made, or a registered broker-dealer.

(b) Every registration statement shall specify the amount of securities to be offered in this State; the states in which a registration statement or similar document in connection with the offering has been or is to be filed; and any adverse order, judgment, or decree entered in connection with the offering by the regulatory authorities in each state or by any court or the Securities and Exchange Commission.

(c) The Commissioner may by rule or otherwise permit the omission of any item of information or document from any registration statement.

(d) Every registration statement is effective for any period 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 any underwriter or broker-dealer who is still offering part of an unsold allotment or subscription taken by him as a participant in the distribution, except during the time a stop order is in effect under §7308. The registration statement may be withdrawn only in the discretion of the Commissioner.

() So long as a registration statement is effective, the Commissioner may by rule or order require the person who filed the registration statement to file reports, not more often than quarterly, to keep reasonably current the information contained in the registration statement and to disclose the progress of the offering.

(f) A registration statement relating to a security issued by a face-amount certificate company or a redeemable security issued by an open-end management company or unit investment trust, as those terms are defined in the Investment Company Act of 1940, may be amended after its effective date so as to increase the securities specified as proposed to be offered. Such an amendment becomes effective when the Commissioner so orders. Every person filing such an amendment shall pay a filing fee, in accordance with §7306 (e), with respect to the additional securities proposed to be offered.

(g) The Commissioner may require by rule, regulation or order any issuer of securities registered under this chapter or those offered pursuant to §7309 to file periodic reports with the Commissioner, and to provide them to holders of those securities.

§ 7308. Stop orders

(a) The Commissioner may issue a stop order prohibiting the offering and sale of a security, or the Commissioner may issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of, any registration statement, if he finds that the order is in the public interest and that:

(1) the registration statement as of its effective date or as of any earlier date in the case of an order denying effectiveness, or any amendment under §7307(f) as of its effective date, or any report under §7307(e) is incomplete in any material respect or contains any statement which was, in the light of the circumstances under which it was made, false or misleading with respect to any material fact;

(2) any provision of this Act or any rule, order, or condition lawfully imposed under this Act has been violated, in connection with the offering, by (i) the person filing the registration statement, (ii) the issuer, any partner, officer, or director of the issuer, any person occupying a similar status or performing similar functions, or any 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 (iii) any underwriter;

(3) the security registered or sought to be registered is the subject of an administrative stop order or similar order or permit or temporary injunction of any court of competent jurisdiction entered under any federal or state act applicable to the offering; but the Commissioner may not institute the proceeding against an effective registration statement under this subsection more than one year from the date of the order or injunction relied on, and he may not enter an order under this subsection on the basis of an order or injunction entered under any other state act unless that order or injunction is based on facts which would currently constitute a ground for stop order under this section;

(4) the issuer's enterprise or method of business includes or would include activities which are illegal where performed;

(5) the offering has worked or tended to work a fraud upon purchasers or would so operate;

(6) the offering has been or would be made with unreasonable amounts of underwriters' and sellers, discounts, commissions, or other compensation, or promoters' profits or participation, or unreasonable amounts or kinds of options ;

(7) the applicant or registrant has failed to pay the proper filing fee; but the Commissioner shall vacate any such order when the deficiency Was been corrected;

(8) when a security is sought to be registered by coordination, there has been a failure to comply with the undertaking required by §7305 (b) (4);

(b) The Commissioner may not institute a stop-order proceeding against an effective registration statement on the basis of a fact or transaction known to him when the registration statement became effective unless the proceeding is instituted within the next thirty (30) days.

(c) The Commissioner may by order summarily postpone or suspend the effectiveness of the registration statement pending final determination of any proceeding under this section. Upon the entry of the order, the Commissioner shall promptly notify each person specified in subsection (d) that it has been entered and of the reasons therefor and that within fifteen (15) days after the receipt of a written request the matter will be set down for hearing. If no hearing is requested and none is ordered by the Commissioner, the order will remain in effect until it is modified or vacated by the Commissioner, If a hearing is requested or ordered, the Commissioner, after notice of and opportunity for hearing to each person specified in subsection (d), may modify or vacate the order or extend it until final determination.

(d) No stop order may be entered under any part of this section, except the first sentence of subsection (c), without appropriate prior notice to the applicant making the filing, the issuer, and the person on whose behalf the securities are to be or have been offered, opportunity for hearing, and written findings of fact and conclusions of law.

(e) The Commissioner may vacate or modify a stop-order if he finds that the conditions which prompted entry have changed or that it is otherwise in the public interest to do so.

§ 7309. Exemptions

(a) The following securities are exempted from §7304 and §7312:

(1) any security (including a revenue obligation) issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency or corporation or other instrumentality of one or more of the foregoing, or any certificate of deposit for any of the foregoing;

(2) any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any such province, any agency or corporate or other instrumentality of one or more of the foregoing, or any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor;

(3) any security issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company organized and supervised under the laws of any state;

(4) any security issued by and representing an interest in or a debt of, or guaranteed by, any federal savings and loan association, or any building and loan association organized and supervised under the laws of any state and authorized to do business in this state;

(5) any security issued by and representing an interest in or a debt of, or guaranteed by, any insurance company organized under the laws of any state and authorized to do business in this state;

(6) any security issued or guaranteed by any federal credit union or any credit union, industrial loan association, or similar association organized and supervised under the laws of this state;

(7) any security issued or guaranteed by any railroad, other common carrier, public utility, or holding company which is subject to the jurisdiction of the Interstate Commerce Commission ; a registered holding company under the Public Utility Holding Company Act of 1935 or a subsidiary of such a company within the meaning of that act; regulated in respect of its rates and charges by a governmental authority of the United States or any state; or regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, any state, Canada, or any Canadian province;

(8) any security listed or approved for listing upon notice of issuance on the New York Stock Exchange, the American Stock Exchange, the Pacific Coast Stock Exchange, the Midwest Stock Exchange, or the Philadelphia-Baltimore-Washington Stock Exchange or any other Exchange which the Commissioner deems to have substantially the same standards for listing as required by the above mentioned Exchanges; any other security of the same issuer which is of senior or substantially equally rank; any security called for by subscription rights or, warrants so listed or approved; or any warrant or right to purchase or subscribe to any of the foregoing;

(9) any security issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes, or as a chamber of commerce, local industrial development corporation, or trade or professional association;

(0) any commercial paper which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of such paper which is likewise limited, or any guarantee of such paper or of any such renewal;

(11) any investment contract issued after the effective date of this act in connection with an employee's stock purchase, savings, pension, profit-sharing, or similar benefit plan if the Commissioner is notified in writing thirty (30) days before the inception of the plan, or, with respect to plans which are in effect on the effective date of this Act, within sixty days, thereafter (or within thirty days before they are reopened if they are closed on the effective date of this Act).

(12) any security issued by a bona fide agricultural cooperative operating in this state that is organized under Chapter 85 of Title 3 of this Code or as a foreign cooperative association organized under the law of another state that has been duly qualified to transact business in this State.

(b) The following transactions are exempted from §7304 and §7312;

(1) any isolated non-issuer transaction, whether effected through a broker-dealer or not;

(2) any non-issuer distribution of an outstanding security if a recognized securities manual contains the names of the issuers, officers and directors, a balance sheet of the issuer as of the date within eighteen months, and a profit and loss statement for either the fiscal year preceding that date or the most recent year of operations, or the security has fixed maturity or a fixed interest or dividend provision and there has been no default (luring the current fiscal year or within three preceding fiscal years, or during the existence of the issuer and any predecessors if less than three years, in the payment of principal, interest, or dividends on the security, and if the Commissioner has not by rule, regulation, or order removed such security from the operation of this exemption;

(3) any non-issuer transaction effected by or through a registered broker-dealer pursuant to an unsolicited order or offer to buy; but the Commissioner may by rule require that the customer acknowledge upon a specified form that the sale was unsolicited, and that a signed copy of each such form be preserved by the broker-dealer for a specified period;

(4) any transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters;

(5) any transaction in a bond or other evidence of indebtedness secured by a real or chattel mortgage or deed of trust, or by an agreement for the sale of real estate or chattels, if the entire mortgage, deed of trust or agreement, together with all the bonds or other evidences of indebtedness secured thereby, is offered and sold as a unit;

(6) any transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator;

(7) any transaction executed by a bona fide pledgee without any purpose of evading this act;

(8) any offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in the Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional buyer, or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity;

(0) any transaction pursuant to an offer directed by the offerer to not more than twenty-five persons [other than those designated in paragraph (8)] in this State during any period of twelve consecutive months, whether or not the offerer or any of the offerees is then present in this State, if the seller reasonably believes that all the buyers in this State, other than those designated in paragraph (8), are purchasing for investment; but the Commissioner may by rule or order, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption, or increase or decrease the number of offerings permitted, or waive the condition relating to their investment intent;

(1) any offer or sale of a preorganization certificate or subscription if no commission or other remuneration is paid or given directly or indirectly for soliciting any prospective subscriber, the number of subscribers does not exceed ten, and no payment is made by any subscriber;

(11) any transaction pursuant to an offer to existing security holders of the issuer, including persons who at the time of the transaction are holders of the convertible securities, non-transferable warrants, or transferable warrants exercisable within not more than ninety days of their issuance, if no commission or other remuneration (other than a standby commission) is paid or given directly or indirectly for soliciting any security holder in this state, or the issuer first files a notice specifying the terms of the offer and the Commissioner does not by order disallow the exemption within the next five full business days;

(12) any offer (but not a sale) of a security for which a registration statement has been filed under this act if no stop-order or refusal order is in effect and no public proceeding or examination looking toward such an order is pending, and if the offerer complies with §7306(d);

(13) any offer or sale of a security by or through a registered broker-dealer if such offer or sale is not directly or indirectly for the benefit of the issuer or a person who is known or should reasonably be known to such broker-dealer to be the record or beneficial owner of ten percent or more of the outstanding voting securities of the issuer; the security is not part of an unsold allotment or subscription taken by a participant in a distribution directly or indirectly for the benefit of the issuer or a person who is known or should reasonably be known by such broker-dealer to be the record or beneficial owner of ten percent or more of the outstanding voting securities of the issuer ; and no administrative stop-order or similar order or permanent or temporary injunction of any court of competent jurisdiction is in effect under this subtitle or under any federal or state act against the offering or sale of the security or any security of the same class.

(c) The Commissioner may by order deny or revoke any exemption specified in subsection (a) (9) or (11) or in subsection (b) with respect to a specific security or transaction. No such order may be entered without appropriate prior notice to all interested parties, opportunity for hearing, and written findings of fact and conclusions of law, except that the Commissioner may by order summarily deny or revoke any of the specified exemptions pending final determination of any proceeding under this subsection. Upon the entry of a summary order the Commissioner shall promptly notify all interested parties that it has been entered and of the reasons therefor and that within fifteen days of the receipt of a written request the matter will be set down for a hearing. If no hearing is requested and none is ordered by the Commissioner, the order will remain in effect until it is modified or vacated by the Commissioner. If a hearing is requested or ordered, the Commissioner, after notice of and opportunity for hearing to all interested persons, may modify or vacate the order or extend it until final determination. No order under this subsection may operate retroactively. No person may be considered to have violated §7304 or §7312 by reason of any offer or sale effected after the entry of an order under this subsection if he sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the order.

(d) In any proceeding under this act, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

§ 7310. Misleading filings

It is unlawful for any person to make or cause to be made, in any document filed with the Commissioner or in any proceeding under this act, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect.

§ 7311. Unlawful representations concerning registration or exemption

(a) Neither the fact that an application for registration under this chapter, or a registration statement under this act, has been filed nor the fact that a person or security is effectively registered constitutes a finding by the Commissioner that any document filed under this act is true, complete, and not misleading. Neither any such fact nor the fact that an exemption or exception is available for a security or a transaction means that the Commissioner has passed in any way upon the merits or qualifications of, or recommended or given approval to, any person, security, or transaction.

(b) It is unlawful to make, or cause to be made, to any prospective purchaser, customer, or client any representation inconsistent with subsection (a).

§ 7312. Filing of sales and advertising literature

The Commissioner may by rule or order require the filing of any prospectus, pamphlet, circular, form letter, advertisement, or other sales literature or advertising communication addressed or intended for distribution to prospective investors, including clients or prospective clients of an investment adviser, unless the security or transaction is exempted by §7309.

For purposes of this chapter "sales literature" and "advertising communication" include any pamphlet, circular, form letter, advertisement, or printed advertising communication films, film strips, television and radio presentations, tape and cassette recordings and any other public lecture addressed or intended for distribution to and/or delivered to prospective investors including clients or prospective clients of an agent or broker-dealer ; provided, however, that "sales literature" and "advertising communication" shall not include :

(1) any prospectus used in conjunction with an offer and/or sale of securities;

(2) any individual letters sent to a prospective investor where the issuer has filed a registration statement with the Commissioner relating to the offer and/or sale of securities to which the letter relates; provided, however, that the letter must be accompanied by a copy of the prospectus;

(3) "tombstone advertisements" ;

(4) dividend notices, proxy statements and reports to shareholders, the content of which does not pertain to a current offering and/or sale of securities of the issuer ;

(5) literature disseminated in connection with the distribution of securities of an investment company registered under Section 8 of the Investment Company Act of 1940;

(6) literature relating to any securities, offer and/or sale of securities, to which is applicable one or more of the exemptions from registration contained within §7309 of this chapter;

(7) written or printed material relating to an offer and/or sale of securities pursuant to: (i) a qualified employee stock, or stock option plans; or (ii) a merger, consolidation, exchange offer, reclassification of securities or sale of corporate assets in consideration of the issuance of securities of another issuer.

(8) written or printed material which is otherwise required to be filed under the registration provision of this chapter.

§ 7313. Registration of broker-dealers, investment advisers and agents required

(a) It is unlawful for any person to transact business in this State as a broker-dealer, investment adviser, or agent unless he is registered under this act.

(b) It is unlawful for any broker-dealer, investment adviser or issuer to employ an agent unless the agent is registered. When an agent terminates a connection with a broker-dealer, investment adviser or issuer, or terminates those activities which make him an agent, the agent as well as the broker-dealer, investment adviser or issuer shall promptly notify the Commissioner.

(c) Unless sooner terminated under other provisions of this chapter, all registrations of broker-dealers, investment advisers and agents shall expire on September 30 of each year; however, prior to September 30. 1973, no broker-dealer, investment adviser or agent will be required to register unless the Commissioner requires such registration by rule, regulation or order.

(d) Every registration of an agent expires when the agent terminates his connection with a broker-dealer or investment adviser registered under this chapter or with an issuer. When such a person who is currently registered as an agent under this chapter begins a connection with another broker-dealer, investment adviser or issuer, he shall file an application for initial registration as provided in §7314(a) and shall pay the filing fee prescribed by §7314 (b). Unless the Commissioner takes action under §7316 hereof to deny or suspend such registration, the said agent registration shall become effective thirty days after receipt of the application by the Commissioner and shall continue in effect until it expires under the provisions of subsection (c) hereof, or under the provisions of this subsection, which ever would earlier occur. The Commissioner shall be empowered to waive the thirty day period or any portion thereof at his discretion.

§ 7314. Registration procedure for broker-dealers, investment advisers and agents

(a) (1) A broker-dealer, investment adviser or agent may obtain an initial registration by filing with the Commissioner an application together with a consent to service of process pursuant to §7327. The application shall contain whatever information the Commissioner by rule or regulation requires concerning such matters as (i) the applicant's form and place of organization; (ii) the applicant's proposed method of doing business ; (iii) the qualifications and business history of the applicant and, in the case of a broker-dealer or investment adviser, any partner, officer, director or any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer or investment adviser; (iv) any injunction or administrative order or conviction of a misdemeanor involving a security or any aspect of the securities business and any conviction of a felony and (v) the applicant's financial condition and history. The Commissioner at his discretion may publish an announcement of the applicants for registration in such newspapers as he determines. If no denial order is in effect and no proceeding is pending under §7316, registration becomes effective at noon of the thirtieth day after an application is filed. The Commissioner may by rule or order specify an earlier effective date and he may by order defer the effective date until noon of the thirtieth day after the filing of any amendment.

(2) A broker-dealer or investment adviser may obtain a renewal registration by filing with the Commissioner an application containing whatever information the Commissioner by rule requires to keep current the information contained in the application for initial registration. A broker-dealer, investment adviser or issuer may obtain a renewal registration for the agents associated with it by filing with the Commissioner an application containing the names of the agents associated with it and a certification that, to the best knowledge, information and belief of such broker-dealer, investment adviser or issuer, there has been no change in the information contained in such agents' applications for registration then currently in effect, or if there has been any such change, specifying the same. Every application for renewal registration shall become effective on the date it is received by the Commissioner or upon the expiration of the previous registration which ever date is later.

(b) Every applicant for initial or renewal registration as a broker-dealer or investment adviser shall pay a filing fee of $150. Every applicant for initial or renewal registration as an agent shall pay a filing fee of $25 except that a partner, officer or director of a broker-dealer or investment adviser applying for initial or renewal registration as an agent or such broker-dealer or investment advisor shall pay a filing fee of $20. The maximum initial or renewal registration filing fee payable with the application of any broker-dealer or investment advisor and its agents shall be $750, regardless of the number of agents affiliated with such broker-dealer or investment adviser. In addition, each agent application received at a time other than the initial or renewal registration filed by a broker-dealer or investment adviser will require a filing fee of $25.

(c) A registered broker-dealer or investment adviser may file an application or registration of a successor, whether or not the successor is then in existence, for the unexpired portion of the year. There shall be no filing fee.

(d) Any broker-dealer registered in this state shall have and maintain a net capital of not less than $25,000, and no such broker-dealer (other than one who deals exclusively in securities exempt under §7309(a) (1) or §7309(a) (2) of this Chapter) shall permit his aggregate indebtedness to all persons to exceed two thousand percentum of his net capital. The terms "aggregate indebtedness" and "net capital" shall be defined by rule of the Commissioner.

(e) The Commissioner may by rule require registered broker-dealers, investment advisers and agents to post surety bonds in amounts up to $25,000, conditioned that the registrant will comply with the provisions of this chapter and the rules, regulations, and orders issued pursuant thereto. Such bond may be so drawn to cover the original registration and any renewals thereof. Any appropriate deposit of cash or security shall be accepted in lieu of any such bond in the discretion of the Commissioner. Every bond shall provide that no suit may be maintained to enforce any liability thereon unless brought within two years after the contract of sale or other act upon which such suit is based and shall also provide that the liability of the surety on each such bond to all persons aggrieved shall in no event exceed in the aggregate the penal sum thereof. Every such bond shall also contain a provision authorizing the surety thereon to cancel it upon thirty (30) days written notice to the registrant and to the Commissioner.

(f) The requirements of subsection (a) and (b) shall be satisfied:

(1) if the broker-dealer or investment adviser is a member or member firm of the New York Stock Exchange, by filing with the Commissioner copies of the required applications for membership, partners, officers, directors, agents and representatives, where applicable, required to be filed with the New York Stock Exchange;

(2) if the broker-dealer or investment adviser is a member of member firm of the American Stock Exchange, but not a member or member firm of the New York Stock Exchange, by filing with the Commissioner copies of the required applications for membership, partners, officers, directors, agents and representatives, where applicable, required to be filed with the American Stock Exchange;

(3) if the broker-dealer or investment adviser is a member or member firm of the National Association of Securities Dealers, but not a member firm of either the New York or American Stock Exchanges, by filing with the Commissioner copies of the required applications for membership, partners, officers, directors, agents and representatives, where applicable, required to be filed with the National Association of Securities Dealers;

(g) Broker-dealers or investment advisers filing as required under §7314 (f) shall be registered, together with their agents, upon such filing being received by the Commissioner and upon the payment of a fee of $2 per page of such filing, the total fee not to exceed $10.

§ 7315. Post-registration provisions for broker-dealers, investment advisers, and agents

(a) Every registered broker-dealer or investment adviser shall make and keep such accounts, correspondence, memoranda, papers, books, and other records as the Commissioner by rule prescribes. All records so required shall be preserved for three years unless the Commissioner by rule prescribes otherwise for particular types of records.

(b) Every registered broker-dealer or investment adviser shall file such financial reports as the Commissioner by rule prescribes.

(c) If the information contained in any document filed with the Commissioner is or becomes inaccurate or incomplete in any material respect, the registrant shall promptly file a correcting amendment unless notification of the correction has been given under §7313 (b).

(d) All the records referred to in subsection (a) are subject at any time or from time to time to such reasonable periodic, special, or other examinations by the Commissioner or his representatives, within or without this state, as the Commissioner deems necessary or appropriate in the public interest or for the protection of investors. For the purpose of avoiding unnecessary duplication of examinations, the Commissioner, in so far as he deems it practicable in administering this section, may cooperate with the securities administrators of other states, the Security and Exchange Commission, and any national securities exchange or national securities association registered under the Securities Exchange Act of 1934.

() Broker-dealers or investment advisers filing under §7314

() shall be deemed to have compiled with subsections (a), (b) and (c) of this section if they have compiled with similar requirements of the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers where applicable.

§ 7316. Denial, revocation, suspension, cancellation and withdrawal of registration of broker-dealers, investment advisers and agents

(a) The Commissioner may by order deny, suspend, or revoke any registration if he finds that the order is in the public interest and that the applicant or registrant or, in the case of a broker-dealer or investment adviser, any partner, officer, director, or any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer or investment adviser:

(1) has filed an application for registration which as of its effective date, or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained any statement which was, in light of the circumstances under which it was made, false or misleading with respect to any material fact;

(2) has willfully violated or willfully failed to comply with any provision of this chapter;

(3) has been convicted of a felony, infamous crime, or other crime involving moral turpitude;

(4) is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities business;

(5) is the subject of an order of the Commissioner denying, suspending, revoking registration as a broker-dealer, investment adviser or agent;

(6) is the subject of an order entered within the past five years by the securities administrator of any other state or by the Securities and Exchange Commission denying or revoking registration as a broker-dealer, investment adviser or agent, or the substantial equivalent of those terms as defined in this chapter or is suspended or expelled from a national securities exchange or national securities association registered under the Securities Exchange Act of 1934 either by action of a national securities exchange or national securities association, the effect of which action has not been stayed by appeal or otherwise, or by order of Securities and Exchange Commission, or is the subject of a United States Post Office fraud order; but (i) the Commissioner may not institute a revocation or suspension proceeding under subsection (a) (6) more than one year from the date of the order or action relied on, and (ii) he may not enter an order under subsection (a) (6) on the basis of an order under another state act unless that order was based on facts which would currently constitute a ground for an order under this section;

(7) has engaged in dishonest or unethical practices;

(8) is insolvent, either in the sense that his liabilities exceed his assets or in the sense that he cannot meet his obligations as they mature; but the Commissioner may not enter an order against a broker-dealer or investment adviser under this clause without a finding or insolvency as to the broker-dealer or investment adviser; or

(9) is not qualified on the basis of such factors as training, experience, and knowledge of the securities business, except as otherwise provided in subsection (b);

(10) has failed reasonably to supervise his agents if he is a broker-dealer; or

(11) has failed to pay the proper filing fee; but the Commissioner may enter only a denial order under this clause, and he shall vacate any such order when the deficiency has been corrected.

The Commissioner may not institute a suspension or revocation proceeding on the basis of fact or transaction known to him when registration became effective unless the proceeding is instituted within the next thirty days.

(b) The following provisions govern the application of §7316 (a) (9):

(1) The Commissioner may not enter an order against a broker-dealer or an investment adviser on the basis of the lack of qualification of any person other than the broker-dealer or investment adviser himself if he is an individual or an agent of the broker-dealer or investment adviser.

(2) The Commissioner may not enter an order solely on the basis of lack of experience if the applicant or registrant is qualified by training in or knowledge of securities, or both.

(3) The Commissioner shall consider that an agent who will work under the supervision of a registered broker-dealer or investment adviser need not have the same qualifications as a broker-dealer or investment adviser.

(4) The Commissioner may by rule provide for an examination, which may be written or oral or both, to be taken by any class of or all applicants.

(c) The Commissioner may by order summarily postpone or suspend registration pending final determination of any proceeding under this section. Upon the entry of an order, the Commissioner shall promptly notify the applicant or registrant, as well as the employer or prospective employer if the applicant or registrant is an agent, that is has been entered and of the reasons therefor and that within fifteen days after the receipt of a written request the matter will be set down for a hearing. If no hearing is requested and none is ordered by the Commissioner, the order will remain in effect until it is modified or vacated by the Commissioner. If a hearing is requested or ordered, the Commissioner, after notice of and opportunity for hearing, may modify or vacate the order or extend it until final determination.

(d) If the Commissioner finds that any registrant or applicant for registration is no longer in existence or has ceased to do business as a broker-dealer, investment adviser or agent, or is subject to an adjudication of mental incompetence or to the control of the committee, conservator, or guardian, or cannot be located after reasonable search, the Commissioner may by order cancel the registration or application.

() Withdrawal from registration as a broker-dealer, investment adviser or agent becomes effective thirty days after receipt of an application to withdraw or within such shorter period of time as the Commissioner may determine, unless a revocation or suspension proceeding is pending when the application is filed or a proceeding to revoke or suspend or impose conditions upon the withdrawal is instituted within thirty days after the application is filed. If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the Commissioner by order determines. If no proceeding is pending or instituted a withdrawal automatically becomes effective, but the Commissioner may nevertheless institute a revocation or suspension proceeding under §7316(a) (2) within one year after withdrawal became effective and enter a revocation or suspension as of the last date on which registration was effective.

() No order may be entered under any part of this section except the first sentence of subsection (c), without appropriate prior notice to the applicant or registrant (as well as the employer or prospective employer if the applicant or registrant is an agent), opportunity for a hearing, and written findings of fact and conclusions of law.

(g) The Commissioner shall, upon notice and hearing as further defined by subsection (c) of this section, have the right to fine any broker-dealer, investment adviser or agent in an amount not to exceed $1,000 for each and every violation of this act.

§ 7317. Advisory activities

(a) It is unlawful for an investment adviser as defined in this Chapter to employ any device, scheme or artifice to defraud another person, or to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon another person.

(b) It is unlawful for any investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing:

(1) that the investment adviser shall not be compensated on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client;

(2) that no assignment of a contract may be made by the investment adviser without the consent of the other party to the contract; and

(3) that the investment adviser, if a partnership, shall notify the other party to the contract of any change in the membership or the partnership within a reasonable time after the change.

Subsection (b) (1) does not prohibit an investment advisory contract which provides for compensation based upon the total value of a fund averaged over a definite period, or as of definite dates or taken as of a definite date. "Assignment", as used in subsection (b) (2), includes any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of a controlling block of the assignor's outstanding voting securities by a security holder of the assignor; but if the investment advisor is a partnership, no assignment of an investment advisory contract is considered to result from the death or withdrawal of a minority of the members of the investment adviser having only a minority interest in the business of the investment adviser, or from the admission to the investment adviser of one or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business.

(c) It is unlawful for any investment adviser to take or have custody of any securities or funds of a client if:

(1) the Commissioner by rule prohibits custody; or

(2) in the absence of rule, the investment adviser fails to notify the Commissioner that he has or may have custody.

§ 7318. Trading markets

(a) It is unlawful for any broker-dealer, investment adviser or agent to effect transactions in, trade, or quote any securities unless such security is covered by regulations under the Securities and Exchange Act of 1934 or unless the filing provisions of this Chapter have been complied with in regard to such security.

(b) The Commissioner is empowered to suspend trading in any security for a period of ten days in the public interest.

§ 7319. Investigations and subpoenas

(a) The Commissioner in his discretion may make such public or private investigations within or outside of this State as he deems necessary to determine whether any person has violated or is about to violate any provision of this chapter or any rule or order hereunder, or to aid in the enforcement of this chapter or in the prescribing of rules and forms hereunder, may require or permit any person to file a statement in writing, under oath or otherwise as the Commissioner determines, as to all the facts and circumstances concerning the matter to be investigated, and may publish information concerning any violation of this chapter or any rule or order hereunder.

(b) For the purpose of any investigation or proceeding under this chapter, the Commissioner or any officer designated by him may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the Commissioner deems relevant or material to the inquiry.

(c) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the Court of Chancery, upon application by the Commissioner, may issue to the person an order requiring him to appear before the Court of Chancery or the officer designated by him, there to produce documentary evidence if so ordered or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt of court.

(d) No person is excused from attending and testifying or from producing any document or record before the Commissioner, or in obedience to the subpoena of the Commissioner or any officer designated by him or in any proceeding instituted by the Commissioner, on the ground that the testimony or evidence (documentary or otherwise) required of him may tend to incriminate him or subject him to penalty or forfeiture; but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he is compelled, after claiming his privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.

§ 7320. Injunctions

Whenever it appears to the Commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this chapter or any rule or order hereunder, he may in his discretion bring an action in the Court of Chancery to temporarily restrain or to enjoin the acts or practices and to enforce compliance with this chapter or any rule or order hereunder. The Commissioner may also seek, and the Court of Chancery shall upon proper showing grant, such other ancillary relief as is in the public interest including the appointment of a receiver, temporary receiver, conservator, obtaining of an accounting, orders of recission, orders of restitution, or other relief as may be appropriate in the public interest. The Court shall not require the Commissioner to post a bond.

§ 7321. Escrow of funds

Whenever the Commissioner shall deem it necessary in the public interest he may require that the proceeds of sale of the securities of an issuer be held intact until such proceeds aggregate a fixed amount and that such proceeds be held intact under an appropriate agreement of escrow with a bank or trust company approved by the Commissioner.

§ 7322. Criminal penalties

(a) Any person who willfully violates any provision of this chapter shall upon conviction be fined not more than $10,000 or imprisoned not more than three years, or both; but no person may be imprisoned for the violation of any rule or order if he proves that he had no knowledge of the rule or order. No indictment or information may be returned under this chapter more than five years after the alleged violation. The Superior Court shall have exclusive jurisdiction of any violations of this chapter.

(b) Nothing in this chapter limits the power of the state to punish any person for any conduct which otherwise constitutes a crime by statute.

§ 7323. Civil liabilities

(a) Any person who:

(1) offers or sells a security in violation of §7313 or §7304 or any order under §7308, or

(2) offers, sells or purchases a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they are made, not misleading (the buyer or seller not knowing of the untruth or omission), and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known of the untruth or omission, is liable to the person buying or selling the security from or to him, who may sue either at law or in equity to recover the consideration paid for the security, together with the interest at the legal rate from the date of payment costs, and reasonable attorneys' fees, less the amount of any income received on the security, upon the tender of the security, or for damages if he no longer owns the security.

(b) Every person who directly or indirectly controls a seller or buyer liable under subsection (a), every partner, officer, or director of such a seller or buyer, every person occupying a similar status or performing similar functions, every employee of such seller or buyer who materially aids in the sale, and every broker-dealer or agent who materially aides in the sale or purchase are also liable jointly and severally with and to the same extent as the seller or buyer, unless the non-seller or non-buyer who is so liable sustains the burden of proof that he did not know, and in exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. There is contribution as in cases of contract among the several persons so liable.

() Any tender specified in this section may be made at any time before entry of judgment.

(a) Every cause of action under this statute survives the death of any person who might have been a plaintiff or defendant.

(b) No person may sue under this section more than two years after the contract of sale. No person may sue under this section if the buyer received a written offer, before suit and at a time when he owned the security, or if a seller received a written offer before suit, to refund the consideration paid together with interest at the legal rate from the date of payment, less the amount of any income received on the security, and he failed to accept the offer within thirty days of its receipt, or if the buyer received such an offer before suit and at a time when he did not own the security unless he rejected the offer in writing within thirty days of its receipt.

() No person who has made or engaged in the performance of any contract in violation of any provision of this chapter or any rule or order hereunder, or who has acquired any purported right under any such contract with knowledge of the facts by reason of which its making or performance was in violation may base any suit on the contract.

(a) Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this chapter or any rule or order hereunder is void.

(h) The rights and remedies provided by this chapter are in addition to any other rights or remedies that may exist at law or in equity.

§ 7324. Judicial review

(a) Any person aggrieved by a stop order, or an order under §7316 of this chapter of the Commissioner may obtain a review of the order in the Court of Chancery by filing in court, within sixty days after the entry of the order, a written complaint praying that the order be modified or set aside in whole or in part. A copy of the complaint shall be forthwith served upon the Commissioner and thereupon the Commissioner shall certify and file within twenty days in court a copy of the filing and evidence upon which the order was entered. When these have been filed, the court has exclusive jurisdiction to affirm, modify, enforce, or set aside the order, in whole or in part. The findings of the Commissioner as to the facts, if supported by competent, material and substantial evidence, are conclusive. If within twenty days of the filing by the Commissioner, as provided above, either party applies to the court for leave to adduce additional material evidence, and shows to the satisfaction of the court that there were reasonable grounds for failure to adduce the evidence in the hearing before the Commissioner, the court may order the additional evidence to be taken before the Commissioner and to be adduced upon the hearing in such manner and upon such conditions as the court considers proper.

(b) The commencement of proceedings under subsection (a) does not, unless specifically ordered by the court, operate as a stay of the Commissioner's order.

§7325. Administration of act and rules and regulations

(a) This act shall be administered by the Attorney General who may designate a Deputy Attorney General to act as Securities Commissioner to be the principal executive officer of a Division of Securities of the Department of Justice to act for him administering this act. The Securities Commissioner shall have the qualifications of and his salary shall be fixed as that of a Deputy Attorney General.

(b) The Commissioner may from time to time make, amend and rescind rules, regulations, forms and orders to carry out and define the provisions of this act.

(c) The Commissioner shall publish such rules, regulations, forms and orders as such rules specify.

§ 7326. Administrative files

(a) A document is filed when it is received by the Commissioner.

(b) The information contained in or filed with any registration statement, application, or report may be made available to the public under such rules as the Commissioner prescribes.

(c) It is unlawful for the Commissioner or any of his employees to use for personal benefit any information which is filed with or obtained by the Commissioner and which is not made public. No provision of this act authorizes the Commissioner or any of his employees to disclose any such information except among themselves or when necessary or appropriate in a proceeding or investigation under this act except as provided in (b) above.

(d) No provision of this act either creates or derogates from any privilege which exists at common law or otherwise when documentary or other evidence is sought under a subpoena directed to the Commissioner or any of his employees.

§ 7327. Service of process

Every applicant for registration under this act and every issuer which proposes to offer a security in this state through any person acting on an agency basis in the common-law sense shall file with the Commissioner, in such form as he by rule prescribes, an irrevocable consent appointing the Commissioner or his successor in office to be his attorney to receive service of any lawful process in any non-criminal suit, action, or proceeding against him or his successor, executor or administrator which arises under this act or any rules or order hereunder after the consent has been filed, with the same force and validity as if served personally on the person filing the consent. A person who has filed such a consent in connection with a previous registration need not file another. Service may be made by leaving a copy of the process in the office of the Commissioner, but it is not effective unless 1) the plaintiff, who may be the Commissioner, in a suit, action or proceeding instituted by him, forthwith sends notice of the service and a copy of the process by. registered mail to the defendant or respondent at his last address on file with the Commissioner, and 2) the plaintiff's affidavit of compliance with this section is filed in the case on or before the return day of the process, if any, or within such further time as the court allows.

When any person, including any non-resident of this state, engages in conduct prohibited or made actionable by this act or any rule or order hereunder, and he has not filed a consent to service of process under this section and personal jurisdiction over him cannot otherwise be obtained in this state, that conduct shall be considered equivalent to his appointment of the Commissioner or his successor in office to be his attorney to receive process of any lawful process in any non-criminal suit, action or proceeding against him or his successor, executor or administrator which grows out of that conduct in which is brought under this act or any rule or order hereunder, with the same force and validity as if served on him personally. Service may be made in the same manner as stated above.

§ 7328. Liability of Attorney General

In no case shall the Attorney General or the Commissioner, or any person designated by them, in the administration of this chapter incur any official or personal liability by instituting an injunction or any judicial proceeding, or administrative order or proceeding.

§ 7329. Severability of provisions

If any provision of this Chapter or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of the chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.

Section 2. The sum of $45,000 is hereby appropriated to the Office of the Attorney General for the fiscal year ending June 30, 1974, for the administration of this act.

Section 3. Amend §6102 of Title 29 of the Delaware Code, by adding a new subsection (f) to read as follows:

(f) All monies collected pursuant to Chapter 73 of Title 6 of the Delaware Code shall be part of the general fund. The Attorney General after June 30, 1974, shall specifically include in his annual operational budget the salaries, including, but not limited to, the salary of the Deputy Attorney General, appointed Securities Commissioner, and other expenses of administering the provisions of Chapter 73 of Title 6 of the Delaware Code.

Section 4. This act shall take effect on July 1, 1973.

Approved July 13, 1973.