CHAPTER 274

FORMERLY

HOUSE BILL NO. 444

AN ACT TO AMEND CHAPTER 73, TITLE 6, AND CHAPTER 61, TITLE Z9, OF THE DELAWARE CODE RELATING TO THE REGULATION OF BROKER-DEALERS, INVESTMENT ADVISERS AND AGENTS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (three-fifths of all members elected to each House thereof concurring therein):

Section 1. Amend Chapter 73, Title 6, of the Delaware Code by striking subsection 7302(a)(2) in its entirety and substituting in lieu thereof the following:

"(2) "Agent"

(1) With respect to an agent of a broker-dealer or Issuer, "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 section 7309(a), Cl), (2), (3), (10), or (11), effecting transactions exempted by section 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 an individual who represents an issuer or a member of a bona fide agricultural cooperative whose securities are exempt from registration under section 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.

(ii) With respect to an agent of an investment adviser, "agent" means any individual who acts on behalf of an investment adviser in providing investment advice, obtaining compensation, or otherwise representing the adviser in a transaction or communication with a client or prospective client. An individual who is specifically excluded from the definition of "investment adviser" in section 7302(a)(6) is not an agent."

Section 2. Amend Chapter 73, Title 6, of the Delaware Code by striking the term "MO" in the first sentence of subsection 7305(b) and substituting in lieu thereof the following: '$200 (except registration renewals for open-end investment companies, which shall- be $100)".

Section 3. Amend Section 7314(a)(1), Chapter 73, Title 6, of the Delaware Code by striking the term "thirtieth day" and substituting in lieu thereof the term "ninetieth day" In the last sentence, and again in the next-to-last sentence, In said subsection.

Section 4. Amend Chapter 73, Title 6, of the Delaware Code by striking subsection 7314(b) in its entirety and-substituting in lieu thereof the following:

"(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, transfer or renewal registration as an agent of a broker-dealer, investment adviser or Issuer shall pay a filing fee of $30."

Section 5. Amend Chapter 73, Title 6, of the Delaware Code by striking subsections 7314(f) and 7314(g) in their entirety.

Section 6. Amend Chapter 73, Title 6, of the Delaware Code by striking subsection 7315(e) in its entirety.

Section 7. Amend Chapter 73, Title 6, of the Delaware Code by striking the last sentence in subsection 7316(a) which reads as follows:

"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 30 days."

Section 8. Amend Chapter 73, Title 6, of the Delaware Code by adding a new subsection 7316(a)(12), to read as follows:

"(12) has violated or failed to comply with any lawful order issued by the Commissioner."

Section 9. Amend Chapter 73, Title 6, of the Delaware Code by striking subsection 7316(g) in its entirety and substituting in lieu thereof the following:

"(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 $10,000 for each and every violation of this act, plus the costs of investigation and prosecution."

Section 10. Amend Chapter 73, Title 6, of the Delaware Code by striking the term "$10,000" and substituting in lieu thereof the term "$100,000" in the first sentence of subsection 7322(a).

Section 11. Amend Chapter 73, Title 6, of the Delaware Code by deleting the word "competent" from section 7324 in the following sentence: The findings of the Commissioner as to the facts, if supported by competent, material and substantial evidence, are conclusive."

Section 12. Amend Chapter 73, Title 6, of the Delaware Code by striking subsections 7325(b) and 7325(c) in their entirety and substituting in lieu thereof the following:

"(b) The Commissioner may make, amend and rescind rules, regulations, forms and orders to carry out and define the provisions of this act. Such orders may provide for fines, assessment of costs, restitution to investors, conditional or probationary registration, censure or reprimand, special reporting requirements, or other provisions which the Commissioner determines to be in the public interest.

(c) Whenever it appears that a person has violated this act by failing to register or engaging in fraud or other prohibited conduct, the Commissioner may summarily issue a cease and desist order against that person.

(1) Any person who is the subject of such an order shall be given notice of it as soon as practicable and may request a hearing before the Commissioner, which hearing shall be scheduled within 15 days from the date the request is received.

(2) If any person who is the subject of a cease and desist order, or any agent or employee of such person, subsequent to the issuance of the order engages in the prohibited conduct, the Commissioner may certify the facts and apply for a contempt order to any Judge of the Superior Court, who shall upon such application hear the evidence as to the acts complained of. If the evidence warrants, the Judge shall punish such person in the same manner and to the same extent as for a contempt committed before the Superior Court, or shall commit such person upon the same conditions as if the doing of the forbidden act had occurred with reference to the process of, or in the presence of, the Superior Court.

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

Section 13. Amend Chapter 73, Title 6, of the Delaware Code by adding a new section 7329, to read as follows:

"Section 7329. Investor Protection Fund.

(a) All moneys received by the State as a result of administrative or court actions brought by the Attorney General or the Securities Commissioner pursuant to this chapter shall be credited by the State Treasurer to a fund to be known as the "Investor Protection Fund."

(b) The Investor Protection Fund will be a revolving fund and shall consist of: (1) moneys transferred to the revolving fund pursuant to court order or judgment, including costs and attorney's fees, in a securities action brought by the Attorney General or the Securities Commissioner pursuant to this chapter, and (2) moneys in the nature of fines and costs (to cover the expense of investigation and prosecution) imposed and collected by the Commissioner pursuant to his administrative authority under this chapter, to be deposited in the revolving fund.

(c) If, at the end of any fiscal year, the balance in the Investor Protection Fund exceeds $100,000, the excess shall be withdrawn from the Investor Protection Fund and deposited in the General Fund.

(d) The Attorney General is authorized to expend from the Investor Protection Fund such moneys as are necessary for: (1) the payment of costs, expenses and charges incurred in the preparation, institution and maintenance of administrative and court actions authorized under this chapter, (2) the payment of costs, expenses and charges incurred in the training and education of Securities Division personnel, and (3) the payment of costs, expenses and charges incurred in connection with the dissemination of information to the public, to include the cost of printing copies of this statute and the Commissioner's administrative rules. Moneys from the Investor Protection Fund may not be used for any purpose unrelated to the administration or enforcement of this chapter.

(e) The Attorney General and the Securities Commissioner shall provide such reports as to the expenditure of moneys from the Investor Protection Fund to the Delaware State Clearinghouse Committee, and to such detail, as the Committee requires."

Section 14. Amend Chapter 61, Title 29, of the Delaware Code by striking Section 6102(f) in its entirety and substituting in lieu thereof the following:

"(f) All moneys collected pursuant to Chapter 73 of Title 6, other than those which are to be deposited in or transferred to the Investor Protection Fund pursuant to Section 7329 of Title 6, shall be part of the General Fund. The Attorney General 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 Chapter 73 of Title 6 which are not met by the Investor Protection Fund."

Approved July 2, 1990.