SB0540

SENATE BILL 540

52nd legislature - STATE OF NEW MEXICO - first session, 2015

INTRODUCED BY

Sander Rue

AN ACT

RELATING TO SECURITIES; AMENDING THE NEW MEXICO UNIFORM SECURITIES ACT; DEFINING "CORRUPTLY"; PROHIBITING OBSTRUCTION OF INSPECTIONS OR AUDITS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 58-13C-101 NMSA 1978 (being Laws 2009, Chapter 82, Section 101) is amended to read:

"58-13C-101. SHORT TITLE.--[Sections 101 through 701 of this act] Chapter 58, Article 13C NMSA 1978 may be cited as the "New Mexico Uniform Securities Act"."

SECTION 2. Section 58-13C-102 NMSA 1978 (being Laws 2009, Chapter 82, Section 102) is amended to read:

"58-13C-102. DEFINITIONS.--As used in the New Mexico Uniform Securities Act, unless the context otherwise requires:

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

B. "bank" means:

(1) a banking institution organized pursuant to the laws of the United States;

(2) a member bank of the federal reserve system;

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

(4) a receiver, conservator or other liquidating agent of any institution or firm included in Paragraph (1), (2) or (3) of this subsection;

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

(1) an agent;

(2) an issuer;

(3) a bank or savings institution described in Paragraph (2) of Subsection D of this section if its activities as a broker-dealer are limited to those specified in Subsections 3(a)(4)(B)(i) through (vi), (viii) through (x) and (xi), if limited to unsolicited transactions; 3(a)(5)(B); and 3(a)(5)(C) of the federal Securities Exchange Act of 1934 (15 U.S.C. Sections 78c(a)(4) and (5)) or a bank that satisfies the conditions described in Subsection 3(a)(4)(E) of the federal Securities Exchange Act of 1934 (15 U.S.C. Section 78c(a)(4));

(4) an international banking institution; or

(5) a person excluded by rule adopted or order issued pursuant to the New Mexico Uniform Securities Act;

D. "corruptly" means acting with an improper purpose, personally or by influencing another, including making a false or misleading statement, or withholding, concealing, altering or destroying a document or other information;

[D.] E. "depository institution" means:

(1) a bank; or

(2) a savings institution, trust company, credit union or similar institution that is organized or chartered pursuant to the laws of a state or of the United States, authorized to receive deposits and supervised and examined by an official or agency of a state or the United States if its deposits or share accounts are insured to the maximum amount authorized by statute by the federal deposit insurance corporation, the national credit union share insurance fund or a successor authorized by federal law, or a receiver, conservator or other liquidating agent of such institutions or entities. "Depository institution" does not include:

(a) an insurance company or other organization primarily engaged in the business of insurance;

(b) a Morris plan bank; or

(c) an industrial loan company that is not an "insured depository institution" as defined in Section 3(c)(2) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(c)(2), or any successor federal statute;

[E.] F. "director" means the director of the securities division of the regulation and licensing department;

[F.] G. "division" means the securities division of the regulation and licensing department, which for purposes of administering the provisions of the New Mexico Uniform Securities Act and conducting investigations of violations of that act shall be considered a law enforcement agency;

[G.] H. "federal covered investment adviser" means a person registered pursuant to the federal Investment Advisers Act of 1940;

[H.] I. "federal covered security" means a security that is, or upon completion of a transaction will be, a covered security pursuant to Section 18(b) of the federal Securities Act of 1933 (15 U.S.C. Section 77r(b)) or rules or regulations adopted pursuant to that section;

[I.] J. "filing" means the receipt pursuant to the New Mexico Uniform Securities Act of a record by the director, or a designee of the director, in a form and format designated by the director;

[J.] K. "fraud", "deceit" and "defraud" are not limited to common law deceit;

[K.] L. "guaranteed" means guaranteed as to payment of all principal and all interest;

[L.] M. "institutional investor" means any of the following, whether acting for itself or for others in a fiduciary capacity:

(1) a depository institution or international banking institution;

(2) an insurance company;

(3) a separate account of an insurance company;

(4) an investment company as defined in the federal Investment Company Act of 1940;

(5) a broker-dealer registered pursuant to the federal Securities Exchange Act of 1934;

(6) an employee pension, profit-sharing or benefit plan if the plan has total assets in excess of ten million dollars ($10,000,000) or its investment decisions are made by a named fiduciary, as defined in the federal Employee Retirement Income Security Act of 1974, that is a broker-dealer registered pursuant to the federal Securities Exchange Act of 1934, an investment adviser registered or exempt from registration pursuant to the federal Investment Advisers Act of 1940, an investment adviser registered pursuant to the New Mexico Uniform Securities Act, a depository institution or an insurance company;

(7) a plan established and maintained by a state, a political subdivision of a state or an agency or instrumentality of a state or a political subdivision of a state for the benefit of its employees, if the plan has total assets in excess of ten million dollars ($10,000,000) or its investment decisions are made by a duly designated public official or by a named fiduciary, as defined in the federal Employee Retirement Income Security Act of 1974, that is a broker-dealer registered pursuant to the federal Securities Exchange Act of 1934, an investment adviser registered or exempt from registration pursuant to the federal Investment Advisers Act of 1940, an investment adviser registered pursuant to the New Mexico Uniform Securities Act, a depository institution or an insurance company;

(8) a trust, if it has total assets in excess of ten million dollars ($10,000,000), its trustee is a depository institution and its participants are exclusively plans of the types identified in Paragraph (6) or (7) of this subsection, regardless of the size of their assets, except a trust that includes as participants self-directed individual retirement accounts or similar self-directed plans;

(9) an organization described in Section 501(c)(3) of the federal Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)(3)), corporation, Massachusetts trust or similar business trust, limited liability company or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of ten million dollars ($10,000,000);

(10) a small business investment company licensed by the small business administration pursuant to Section 301(c) of the federal Small Business Investment Act of 1958 (15 U.S.C. Section 681(c)) with total assets in excess of ten million dollars ($10,000,000);

(11) a private business development company as defined in Section 202(a)(22) of the federal Investment Advisers Act of 1940 (15 U.S.C. Section 80b-2(a)(22)) with total assets in excess of ten million dollars ($10,000,000);

(12) a federal covered investment adviser acting for its own account;

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

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

(15) any other person, other than an individual, of institutional character with total assets in excess of ten million dollars ($10,000,000) not organized for the specific purpose of evading the New Mexico Uniform Securities Act; or

(16) any other person specified by rule adopted or order issued pursuant to the New Mexico Uniform Securities Act;

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

[N.] O. "insured" means insured as to payment of all principal and all interest;

[O.] P. "international banking institution" means an international financial institution of which the United States is a member and whose securities are exempt from registration pursuant to the federal Securities Act of 1933;

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

(1) an investment adviser representative;

(2) a lawyer, accountant, engineer or teacher whose performance of investment advice is solely incidental to the practice of the person's profession;

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

(4) a publisher, employee or columnist of a bona fide newspaper, news magazine or business or financial publication of general and regular circulation or an owner operator, producer or employee of a cable, radio or television network, station or production facility, if, in either case:

(a) the financial or business news or advice is contained in a publication or broadcast disseminated to the general public; and

(b) the content does not consist of rendering advice on the basis of the specific investment situation of each client;

(5) a federal covered investment adviser;

(6) a bank or a savings institution described in Paragraph (2) of Subsection [D] E of this section; or

(7) any other person excluded by rule adopted or order issued pursuant to the New Mexico Uniform Securities Act;

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

(1) performs only clerical or ministerial acts;

(2) is an agent whose performance of investment advice is solely incidental to the individual acting as an agent and who does not receive special compensation for investment advisory services;

(3) is employed by or associated with a federal covered investment adviser, unless the individual has a place of business in New Mexico, as "place of business" is defined by rule adopted pursuant to Section 203A of the federal Investment Advisers Act of 1940 (15 U.S.C. Section 80b-3a) and is:

(a) an investment adviser representative, as "investment adviser representative" is defined by rule adopted pursuant to Section 203A of the federal Investment Advisers Act of 1940 (15 U.S.C. Section 80b-3a); or

(b) not a supervised person as "supervised person" is defined in Section 202(a)(25) of the federal Investment Advisers Act of 1940 (15 U.S.C. Section 80b-2(a)(25)); or

(4) is excluded by rule adopted or order issued pursuant to the New Mexico Uniform Securities Act;

[R.] S. "issuer" means a person that issues or proposes to issue a security, subject to the following:

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

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

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

[S.] T. "legal rate of interest" means the rate of interest set by Subsection A of Section 56-8-4 NMSA 1978 or its successor statutes;

[T.] U. "nonissuer transaction" or "nonissuer distribution" means a transaction or distribution not directly or indirectly for the benefit of the issuer;

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

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

[W.] X. "place of business" of a broker-dealer, an investment adviser or a federal covered investment adviser means:

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

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

[X.] Y. "predecessor act" means the New Mexico Securities Act of 1986;

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

[Z.] AA. "principal place of business" of a broker- dealer, investment adviser or federal covered investment adviser means the executive office of the broker-dealer, investment adviser or federal covered investment adviser from which the officers, partners or managers of the broker-dealer, investment adviser or federal covered investment adviser direct, control and coordinate the activities of the broker- dealer, investment adviser or federal covered investment adviser;

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

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

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

(2) a gift of assessable stock involving an offer and sale; and

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

[CC.] DD. "securities and exchange commission" means the United States securities and exchange commission;

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

(1) includes both a certificated and an uncertificated security;

(2) does not include an insurance or endowment policy or annuity contract pursuant to which an insurance company promises to pay a fixed or variable sum of money either in a lump sum or periodically for life or other specified period;

(3) does not include an interest in a contributory or noncontributory pension or welfare plan subject to the federal Employee Retirement Income Security Act of 1974;

(4) does not include landowner royalties in the production of oil, gas or other minerals created through the execution of a lease of the lessor's mineral interest;

(5) includes an investment in a common enterprise with the expectation of profits to be derived primarily from the efforts of a person other than the investor. As used in this paragraph, "common enterprise" means an enterprise in which the fortunes of the investor are interwoven with those of either the person offering the investment, a third party or other investors;

(6) includes any interest in a limited partnership or a limited liability company; and

(7) includes as an investment contract an investment in a viatical settlement or similar agreement;

[EE.] FF. "self-regulatory organization" means a national securities exchange registered pursuant to the federal Securities Exchange Act of 1934, a national securities association of broker-dealers registered pursuant to that act, a clearing agency registered pursuant to that act or the municipal securities rulemaking board established pursuant to that act;

[FF.] GG. "sign" means, with present intent to authenticate or adopt a record:

(1) to execute or adopt a tangible symbol; or

(2) to attach or logically associate with the record an electronic symbol, sound or process;

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

[HH.] II. "underwriter" means any person who has purchased from an issuer with the intent to offer or sell a security or to distribute any security; who participates or has a direct or indirect participation in any undertaking; or who participates or has a participation in the direct or indirect underwriting of any undertaking. "Underwriter" does not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. As used in this subsection, "issuer" includes any person directly or indirectly controlling or controlled by the issuer; or any person under direct or indirect common control with the issuer."

SECTION 3. A new section of the New Mexico Uniform Securities Act is enacted to read:

"[NEW MATERIAL] OBSTRUCTION OF INSPECTION OR AUDIT.--It is unlawful for any person to corruptly obstruct any inspection or audit conducted pursuant to Subsection D of Section 58-13C-411 NMSA 1978."

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