MAINE STATE LEGISLATURE The following document is provided by the LAW AND LEGISLATIVE DIGITAL LIBRARY at the Maine State Law and Legislative Reference Library http://legislature.maine.gov/lawlib Reproduced from scanned originals with text recognition applied (searchable text may contain some errors and/or omissions) CORRECTED FRONT PAGE February 4, 2005 (PLEASE REPLACE TInS FRONT PAGE ONLY) 122nd MAINE LEGISLATURE FIRST REGULAR SESSION-2005 Legislative Document No. 509 H.P.384 House of Representatives, February 1,2005 An Act To Adopt the Maine Uniform Securities Act Submitted by the Department of Professional and Financial Regulation pursuant to Joint Rule 204. Reference to the Committee on Insurance and Financial Services suggested and ordered printed. /J'l~ 117· 7T/P£~ MILLICENT M. MacFARLAND Clerk Presented by Representative PERRY of Calais. Cosponsored by Senator MILLS of Somerset and Representatives: GLYNN of South Portland, HARLOW of Portland, McKANE of Newcastle, RICHARDSON of Warren, Senators: PLOWMAN of Penobscot, SULLNAN of York. Printed on recycled paper Be it enacted by the People of the State of Maine as follows: 2 4 PART A 6 Sec. A-t. 32 MRSA c. 105, as amended, is repealed. 8 Sec. A-2. 32 MRSA c.13S is enacted to read: 10 UlfIFORM SECURITIES ACT (2002) 12 Prefatory Rote of the Rational Conference of Commissioners on Uniform State Laws 14 There are two versions of the Uniform Securities Act 16 currently in force. 18 The Uniform Securities Act of 1956 ("1956 Act") has been adopted at one time or another, in whole or in part, by 37 20 jurisdictions. 22 The Revised Uniform Securities Act of 1985 ("RUSA") has been adopted in only a few States. 24 Both Acts have been preempted in part by the National 26 Secur i ties Markets Improvement Act of 1996 and the Securities Litigation Uniform Standards Act of 1998. 28 The need to modernize the Uniform Securities Act is a 30 consequence of a combination of the new federal preemptive legislation, significant recent changes in the technology of 32 securities trading and regulation, and the increasingly interstate and international aspects of securities transactions. 34 The approach of this Act is to use the substance and 36 vocabulary of the more widely adopted 1956 Act, when appropriate. The Act also takes into account RUSA, federal preemptive 38 legislation, and the other developments that are described in this Preface and the Official Comments. 40 The Act has been reorganized to follow in large part the 42 National Conference of Commissioners on Uniform State Laws ("NCCUSL") Procedural and Drafting Manual 15-41 (1997). 44 This is a new Uniform Securities Act. Amendment of the 46 earlier 1956 Act or RUSA would not have been wise given the different versions of the 1956 Act enacted by the States and the 48 determination to seek enactment in all state jurisdictions of the new Uniform'Securities Act after it was adopted by the National 50 Conference. Page l-LR0441(1) 2 Nonetheless several sections of this Act are identical or substantively identical to sections of the 1956 Act or RUSA. It 4 is not intended that adoption of a new Uniform Securities Act will reject earlier case decisions interpreting identical or 6 substantively identical sections of the 1956 Act or RUSA unless specifically so stated in the Official Comments. 8 The Act is solelY,a new Uniform Securities Act. It does not 10 codify or append related regulations or guidelines. The Act also authorizes state administrators in Section 203 to adopt further' 12 exemptions without statutory amendment. The Drafting Committee did not address state tender offer or control share provisions in 14 its preparation of this Act. 16 The Act includes subheadings wi thin sections as an aid to readers. Unlike section captions, subheadings are not a part of 18 the official text. Each jurisdiction in which this Act is introduced may consider whether to adopt the subheadings as a 20 part of the statute and whether to adopt a provision clarifying the effect, if any, to be given to the headings. 22 The Drafting Committee reviewed several drafts in meetings 24 between 1998 and 2002. The drafts were made available on NCCUSL's public website before the meetings. The meetings were publicly 26 noticed and open to all who wished to attend. The Committee had the assistance of advisors, consultants, and observers from 28 several interested groups, including, among others, the American Bankers Association, the American Bar Association, the American 30 Council of Life Insurers, the Certified Financial Planner Board of Standards, the Financial Planning Association, the Investment 32 Company Institute, the Investment Counsel Association of America, the National Association of Securities Dealers, Inc., the New 34 York Stock Exchange, the North American Securities Administrators Association, the Securities and Exchange Commission, and the 36 Secur i ties Industry Association. In addition, the Reporter and the Chair met on several occasions with committees or 38 representatives of these and other groups. 10 In drafting the new Act. the Reporter and the DrRf~ing Committee recognized two fundamental challenges. First, there was 42 a general recognition among all involved of the desirability of drafting an Act that would receive br0~d suppnr~_ The success of 44 RUSA had been limited because of fundamental differences among relevant constituencies on several issues. After the National 46 Securities Markets Improvement Act of 1996 preempted specified aspects of state securities law with respect to federal covered 48 securities,· the opportunity to draft an Act in a less contentious atmosphere was available. Given the number of industry, investor, 50 and regulatory interests affected by the Act and the complexity Page 2-LR0441(1) of the Act itself, building consensus was the Act's most 2 significant drafting challenge. 4 Second, there was the technical challenge of drafting a new Act that could achieve the basic goal of uniformity among states 6 and with applicable federal law against the backdrop of 46 years of experience with the 1956 Act. Over time both Uniform and 8 non-Uniform Act states have, to varying degrees, evolved local solutions to a number of securities law lssues. In an 10 increasingly global securities market, the need for uniformity has become more important. Drafting language to achieve the 12 greatest practicable uniformity, given differences In state practice, was a key aspiration of this Act. In a few instances, 14 such as dollar amounts for fees, the Act defers to local practice. On a few other issues, bracketed language or the 16 Official Comments articulate an alternative some states may choose to adopt rather than the language of the Act itself. 18 The Act is in seven Articles: 20 1. General Provisions 22 2. Exemptions from Registration of Securities 3. Registration of Securities and Notice Filing of Federal 24 Covered Securities 4. Broker-Dealers, Agents, Investment Advisers, Investment 26 Adviser Representatives, and Federal Covered Investment Advisers 28 5. Fraud and Liabilities 6. Administration and Judicial Review 30 7. Transition 32 There are has three overarching themes of the Act. 34 First, Section 608 articulates in greater detail than the 1956 Act's Section 415 the obj ectives of uniformity, cooperation 36 among relevant state and federal governments and self-regulatory organizations, investor protection and, to the extent 38 practicable, cdpiLal formation. Section 608 is thc reciprocal of the instruction on these subjects giveIl by COllgress in 1996 to 40 the Securities and Exchange Commission in Section 19 (c) of the Securities Act of 1933. The theme of uniformity and the 42 aspiration of coordination of federal and state securities law is particularly stressed in the Act and Official Comments. Section 44 602(f), consistent with the Federal Securities Litigation Uniform Standard Act of 1998, is a new provision encouraging reciprocal 46 state enforcement assistance. 48 A second overarching theme of the Act is achieving consistency with the National Securities Markets Improvement Act 50 of 1996 ("NSMIA"). New definitions were added to define in Page 3-LR0441(1) Section 102(6), federal covered investment adviser, and in 2 Section 102(7), federal covered security. NSMIA also had implications for several securities registration exemptions (see 4 Sections 201(3), 201(4), 201(6), 202(4), 202(6), 202(13), 202(14),202(15) and 202(16»; securities registration (Sections 6 301 (1) and 302); and the broker-dealer, agent, investment adviser, and investment adviser representative provisions (see 8 especially Sections 402(b)(1) and (5), 403(b)(l)(A) and (2), 405 and 411). 10 A third theme of the Act involves facilitating electronic· 12 records, signatures, and filing. New definitions were added to address filing (Section 102(8», record (Section 102(25», and 14 sign (Section 102(30». Section 105 expressly permits the filing of electronic signatures and records. Collectively these 16 provisions are intended to permit electronic filing in central information depositories such as the Web-CRD (Central 18 Registration Depository), the Investment Adviser Registration Depository (lARD), the Securities and Exchange Commission's 20 Electronic Data Gathering, Analysis and Retrieval System (EDGAR) or successor institutions. Electronic communication also has led 22 to an amplification of the jurisdiction Section 610. 24 The new Act makes several other significant changes compared to the 1956 Act or RUSA. 26 (1) The definition of "security" in Section 102(28) has been 28 modernized to take into account amendments to the counterpart federal provisions; add new language to expressly include 30 uncertificated securities; exclude contributory or noncontributory ERISA plans; and amplify the definition of 32 investment contract so that it can expressly reach interests in limited partnerships, limited liability companies, or viatical 34 settlement agreements, among other contracts, when they satisfy the definition of investment contract.