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NO. 102. AN ACT RELATING TO SECURITIES.

(H.115)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. 9 V.S.A. § 4202a is amended to read:

§ 4202a. DEFINITIONS

As used in this chapter:

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

(A) a sales representative;

(B) a depository institution;

(C) an issuer; or

(D) any other person the commissioner, by rule or order, designates. (2) "Depository institution" means:

(A) a person that is organized, chartered, or holding an authorization certificate under the laws of a state or of the United States which authorizes the person to receive deposits, including a savings, share, certificate, or deposit account, and which is supervised and examined for the protection of depositors by an official or agency of a state or the United States; or

(B) a trust company or other institution that is authorized by a federal or state law to exercise fiduciary powers of the type a national bank is permitted to exercise under the authority of the comptroller of the currency and is supervised and examined by an official or agency of a state or the United States.

The term does not include an insurance company or other organization primarily engaged in the insurance business or a Morris Plan Bank, industrial loan company, or a similar bank or company unless its deposits are insured by a federal agency.

(3) "Federal covered investment adviser" means a person who is registered under section 203 of the Investment Advisers Act of 1940.

(4) "Federal covered security" means any security that is a covered security under section 18(b) of the Securities Act of 1933 or rules or regulations promulgatedthereunder.

(A) which is issued as part of an issue, all or a major portion of the proceeds of which are to be used directly or indirectly in any trade or business; and

(B) the payment of the principal or interest on which (under the terms of such obligation or any underlying arrangement) is, in whole or in major part:

(i) secured by any interest in property used or to be used in a nongovernmental industrial or commercial enterprise or in payment in respect of such property; or

(ii) to be derived from payments in respect of property or borrowed money, used or to be used in a nongovernmental industrial or commercial enterprise.

(B) "Investment adviser" does not include:

(i) an investment adviser representative;

(ii) a depository institution;

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

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

(v) a publisher of any bona fide newspaper, news column, newsletter, news magazine, or business or financial publication or service, whether communicated in hard copy form, by electronic means, or otherwise, that does not consist of the rendering of advice on the basis of the specific investment situation of each client; *[or]*

(vi) any person who is a federal covered investment adviser; or

(vii) such other persons not within the intent of this subdivision as the commissioner may by rule or order designate.

(A) is employed by or associated with an investment adviser that is registered or required to be registered under this chapter, and who:

(B) is employed by or associated with a federal covered investment adviser,subject to the limitations of section 203A of the Investment Advisers Act of 1940, as the commissioner may designate by rule or order.

Sec. 2. 9 V.S.A. § 4205 is amended to read:

§ 4205. REGISTRATION AND NOTICE FILING OF SECURITIES

No securities except those exempted under section 4203a of this title, *[or]* those sold in any transaction exempt under section 4204a of this title, or those that are federal covered securities may be offered for sale or sold within this state unless such securities shall have been registered by notification or by qualification as defined in this chapter. Registration of stock shall be deemed to include the registration of rights to subscribe to such stock if the notice under section 4207 of this title or the application under section 4208 of this title for registration of such stock includes a statement that such rights are to be issued.

Sec. 3. [DELETED.]

Sec. 3a. 9 V.S.A. § 4209a(a)(4) and (f) are added to read:

(a) The commissioner may require the filing of any or all of the following documents with respect to a covered security under section 18(b)(2) of the Securities Act of 1933:

* * *

(4) As prescribed by the commissioner, a notice filed in lieu of the documents specified in subdivisions (1) through (3) of this subsection.

* * *

(f) A notice filing may be amended as prescribed by the commissioner.

Sec. 4. 9 V.S.A. § 4213 is amended to read:

§ 4213. REGISTRATION AND EXEMPTION OF BROKER-DEALERS, SALES

REPRESENTATIVES, INVESTMENT ADVISERS, FEDERAL COVERED

INVESTMENT ADVISERS, AND INVESTMENT ADVISER

REPRESENTATIVES

(a) A person may not transact business in Vermont as a broker-dealer or sales representative unless registered or exempt from registration under this chapter.

(b) A broker-dealer required to be registered under this chapter or an issuer may not employ a person as a sales representative in Vermont unless the sales representative is registered under this chapter or exempt from registration under this chapter.

(c) A broker-dealer or an issuer engaged in offering securities in Vermont may not employ, directly or indirectly, a person to engage in any activity in Vermont contrary to a suspension or bar from association with a broker-dealer or investment adviser imposed against that person by the commissioner. A broker-dealer or issuer does not violate this subsection unless the broker-dealer or issuer knows or in the exercise of reasonable care should know of the suspension or bar. Upon request from a broker-dealer or issuer and for good cause shown, the commissioner, by order, may waive the prohibition of this subsection with respect to a person suspended or barred.

(d) The following broker-dealers are exempt from registration under this chapter:

(1) a broker-dealer who has no place of business in Vermont if the transactions effected by the broker-dealer in Vermont are exclusively with the issuer of the securitiesinvolved in the transactions or other broker-dealers registered or exempt under this chapter;

(2) other broker-dealers the commissioner, by rule or order, exempts.

(e) The following sales representatives are exempt from registration requirements under this chapter:

(1) a sales representative acting for a broker-dealer exempt under subsection (d) of this section;

(2) a sales representative whose transactions in Vermont are limited to only those transactions described in section 15(h)(2) of the Securities Exchange Act of 1934; and

(f) A person may not transact business in Vermont as an investment adviser or investment adviser representative unless such person:

(1) is registered under this chapter;

(2) has no place of business in Vermont and:

(A) such person's only clients in Vermont are investment companies as defined in the Investment Company Act of 1940, other investment advisers, federal covered investment advisers, broker-dealers, depository institutions, insurance companies, employee pension, profit sharing, or benefit plans with total assets of not less than five million dollars, and government agencies or instrumentalities, whether acting for themselves or as trustees with investment control, or other financial or institutional investors as are designated by rule or order of the commissioner; or

(B) during the preceding 12-month period has had not more than five clients, other than those specified in subdivision (A) of this subdivision, who are residents of Vermont; or

(3) is exempt from registration requirements under this chapter by rule or order of the commissioner.

(g) An investment adviser required to be registered under this chapter may not employ, supervise, or associate with an investment adviser representative in Vermont unless the investment adviser representative is registered under this chapter or exemptfrom registration under this chapter by rule or order of the commissioner.

(h) An investment adviser engaged in offering or soliciting investment advisory services in Vermont may not employ, directly or indirectly, a person to engage in any activity in Vermont contrary to a suspension or bar from association with an investment adviser, federal covered investment adviser or broker-dealer imposed against that person by the commissioner. A federal covered investment adviser engaged in offering or soliciting investment advisory services in Vermont may not employ, directly or indirectly, a person having a place of business in Vermont to engage in any activity in Vermont contrary to a suspension or bar from association with an investment adviser, federal covered investment adviser or broker-dealer imposed against that person by the commissioner. An investment adviser or a federal covered investment adviser does not violate this subsection unless the investment adviser or federal covered investment adviser knows or in the exercise of reasonable care should know of the suspension or bar. Upon request from an investment adviser or a federal covered investment adviser and for good cause shown, the commissioner, by order, may waive the prohibition of this subsection with respect to a person suspended or barred.

(i) A federal covered investment adviser may not transact advisory business in Vermont unless such person complies with the provisions of subsection 4214(c) of this title, or employ, supervise, or associate with an investment adviser representative, subject to the limitations of section 203A of the Investment Advisers Act of 1940, as the commissioner may designate by rule or order, unless the investment adviser representative is registered under this chapter or is exempt from registration under this chapter by rule or order of the commissioner.

Sec. 5. 9 V.S.A. § 4214 is amended to read:

§ 4214. *[APPLICATION AND FEE]* INITIAL REGISTRATION AND NOTICE FILING

FOR *[BROKER-DEALER]* BROKER-DEALERS, INVESTMENT *[ADVISER]*

ADVISERS, FEDERAL COVERED INVESTMENT ADVISERS, AND

BRANCH *[OFFICE REGISTRATION]* OFFICES

(a) An application in writing for registration as a broker-dealer or investment adviser,accompanied by a filing fee of $250.00, shall be filed in the office of the commissioner in such form as the commissioner may prescribe, duly verified by oath, which shall state the principal office of the applicant, wherever situated, and the location of the principal office and all branch offices in this state, if any, the name or style of doing business, the names, residence and business addresses, qualifications and business history of all persons interested in the business as principals, copartners, limited liability company members, officers, directors, and all persons occupying a similar status, performing similar functions, or directly or indirectly controlling the applicant, specifying as to each his or her capacity and title, the general plan and character of business, the length of time the applicant has been engaged in business, and any information to be furnished or disseminated to any client or prospective client if the applicant is an investment adviser. The commissioner may also require such additional information as to applicant's previous history record, association, and financial standing as the commissioner may deem necessary to establish the good repute in business of the applicant. An application is complete when the applicant has furnished information responsive to each applicable item of the application, has filed with the commissioner a duly executed consent to service of process which complies with the provisions of section 4236 of this title, and has satisfied any bonding or financial requirements which may apply under the provisions of section 4216 of this title. A separate application in writing for branch office registration, accompanied by a filing fee of $100.00 per branch office, shall be filed in the office of the commissioner in such form as the commissioner may prescribe by any broker-dealer or investment adviser who transacts business in this state from any place of business located within this state. If an application is denied, withdrawn, or terminated without registration, or if a registration is terminated, the commissioner shall retain the fees paid. A registered broker-dealer or investment adviser may file an application for registration of a successor, whether or not the successor is then in existence, in such form as the commissioner may prescribe for the unexpired portion of the registrant's term. There shall be no fee for filing a successor registration application.

(b) The commissioner may, as an alternative means of registering broker-dealers,investment advisers, and their associated representatives under this chapter, or in conjunction with the pertinent provisions of this chapter, register applicants by means of or through the facilities of a national organization which facilitates registration on a nationwide basis, and comply with the terms of any agreement or contract entered into with such national organization. In the event of conflict between this provision and other pertinent provisions of this chapter, the commissioner may elect that this provision prevail.

(c) A federal covered investment adviser shall file with the office of the commissioner, prior to acting as a federal covered investment adviser in Vermont, such documents as have been filed with the Securities and Exchange Commission as the commissioner may require which shall be accompanied by an initial notice filing fee of $250.00. To the extent required to be included in documents filed with the Securities and Exchange Commission, such notice filing shall include information on the branch offices of a federal covered investment adviser who transacts business in this state from any place of business located within this state, accompanied by a notice filing fee of $100.00 per branch office in Vermont. A notice filing may be terminated by filing notice of such termination with the commissioner.

Sec. 6. 9 V.S.A. § 4216 is amended to read:

§ 4216. BROKER-DEALER AND INVESTMENT ADVISER *[SURETY]* BONDS AND

FINANCIAL REQUIREMENTS

(a) *[If the commissioner shall find that the applicant is of good repute and has complied with the provisions of this section and sections 4213, 4214, and 4236(b) of this title, including the payment of the filing fee, he or she shall register such applicant upon the applicant filing a bond to the people of the state for the use and benefit of the state and any persons who shall be aggrieved by the breach of any of the conditions of the bond and for such amount as the commissioner may require, and not less than $1,000.00 and not more than $25,000.00, with such sureties as he or she may approve, conditioned for the compliance by it and its agents with the provisions of this chapter and of the laws of this state affecting such applicant]* The commissioner may, by rule or order, require registered broker-dealers, sales representatives, investment advisers, and investment adviserrepresentatives to post bonds in amounts as the commissioner may prescribe, subject to the limitations of section 15 of the Securities Exchange Act of 1934 (for broker-dealers) and section 222 of the Investment Advisers Act of 1940 (for investment advisers) and may determine their conditions. No bond may be required of any broker-dealer whose net capital, or, in the case of an investment adviser, whose minimum financial requirements, which may be defined by rule, exceeds the amounts required by the commissioner. Every bond shall provide for suit thereon by any person who has a cause of action under section 4240 of this title and, if the commissioner by rule or order requires, by any person who has a cause of action not arising under this chapter. The commissioner, in his or her discretion, may permit the applicant to file a letter of credit in a form and in an amount acceptable to the commissioner in lieu of a *[surety]* bond*[, or may waive the requirement of a surety bond or letter of credit]*.

(b) The commissioner may require a minimum capital for registered broker-dealers*[,]* and establish limitations on aggregate indebtedness of registered broker-dealers in relation to net capital, subject to the limitations of section 15 of the Securities Exchange Act of 1934, and establish minimum financial requirements for registered investment advisers, subject to the limitations of section 222 of the Investment Advisers Act of 1940, which may include different requirements for those investment advisers who maintain custody of clients' funds or securities or who have discretionary authority over same and those investment advisers who do not.

Sec. 7. 9 V.S.A. § 4217(b) is amended to read:

(b) Upon the written application of a registered investment adviser or a federal covered investment adviser and the filing of satisfactory evidence of good character, adequate means of identification, and a fee of $45.00 for each investment adviser representative so appointed, the commissioner shall register as an investment adviser representative of such *[investment]* adviser such natural persons as the *[investment]* adviser may request. No person may act at any one time as an investment adviser representative for more than one *[investment]* adviser. If a person registered as an investment adviser representative terminates association with an *[investment]* adviser, the *[investment]* advisershall at once notify the commissioner of such termination. Such registration shall cease upon such termination of association. The transfer fee for each investment adviser representative shall be $45.00.

Sec. 8. 9 V.S.A. § 4218 is amended to read:

§ 4218. EXPIRATION OF REGISTRATION OR NOTICE FILING; RENEWAL FEES

The names and addresses of all persons making a notice filing with the commissioner, and all persons approved for registration as broker-dealers, sales representatives, investment advisers, and investment adviser representatives and all orders with respect thereto shall be recorded in a register maintained for such purpose and kept in the office of the commissioner which shall be open to public inspection. All broker-dealer, branch office, sales representative, investment adviser, and investment adviser representative registrations *[issued]* or notice filings required pursuant to this chapter shall expire on December 31 of each year *[but new registrations for the succeeding year shall be issued upon written application and upon payment of the fee as hereinafter provided, without filing of further statements or furnishing any further information unless specifically required by the commissioner]* unless renewed. *[Applications for]* Registration or notice filing renewals shall be made within the time and manner prescribed by the commissioner; otherwise they shall be treated as *[original applications]* initial filings. The fee for each annual renewal shall be $250.00 in the case of broker-dealers, *[and]* investment advisers, and federal covered investment advisers, $100.00 for branch offices located within this state, and $45.00 in the case of sales representatives and investment adviser representatives.

Sec. 9. 9 V.S.A. § 4221a(a) is amended to read:

(a) The commissioner, subject to notice and opportunity for hearing and in accordance with the procedures set forth in chapter 25 of Title 3 (Administrative Procedure Act), by order may deny, suspend, or revoke any registration, limit the securities or investment advisory activities that an applicant or registered person may perform in this state, bar an applicant or registered person from association with a registered broker-dealer or investment adviser, or a federal covered investment adviser, or bar from employment witha registered broker-dealer or investment adviser a person who is a partner, limited liability company member, officer, director, or a person occupying a similar status or performing a similar function for an applicant or registered person. Those actions may be taken only if the commissioner finds that the applicant or registered person or, in the case of a broker-dealer or investment adviser, a partner, limited liability company member, officer, or director, a person occupying a similar status or performing similar functions, or a person directly or indirectly controlling the broker-dealer or investment adviser:

(1) has filed an application for registration with the commissioner or an amendment thereto which was incomplete in a material respect or contained a statement that was, in light of the circumstances under which it was made, false or misleading with respect to a material fact;

(2) has violated or failed to comply with this chapter, or a rule or order under this chapter;

(3) is the subject of an adjudication or determination within the last ten years by a securities or commodities agency or administrator of another state or a court of competent jurisdiction that the person has violated the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Commodity Exchange Act, or the securities or commodities law of any other state;

(4) within the last ten years, has pled guilty or nolo contendere to, or been convicted in a domestic or foreign court of an offense that the commissioner finds:

(A) involves the purchase or sale of a security, taking a false oath, making a false report, bribery, perjury, burglary, robbery, or attempt or conspiracy to commit any of those offenses;

(B) arises out of the conduct of business as a broker-dealer, investment adviser, federal covered investment adviser, depository institution, insurance company, or fiduciary; or

(C) involves the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation offunds or securities or an attempt or conspiracy to commit any of those offenses;

(5) is permanently or temporarily enjoined by a court of competent jurisdiction from acting as an investment adviser, federal covered investment adviser, investment adviser representative, underwriter, broker-dealer, sales representative, or as an affiliated person or employee of an investment adviser, federal covered investment adviser, broker-dealer, investment company, depository institution, or insurance company, or from engaging in or continuing conduct or practice in connection with any of the foregoing activities or any aspect of the securities business, or in connection with the purchase or sale of a security;

(6) is the subject of an order of the commissioner denying, suspending, or revoking registration as a broker-dealer, sales representative, investment adviser, or investment adviser representative;

(7) is the subject of any of the following orders that are currently effective and were issued within the last five years:

(A) an order by the securities agency or administrator of another state or Canadian province or territory, or by the Securities and Exchange Commission, denying, suspending, or revoking the person's license as a broker-dealer, sales representative, investment adviser, investment adviser representative, or the substantial equivalent of those terms;

(B) a suspension or expulsion from membership in or association with a member of a self-regulatory organization;

(C) a United States Postal Service fraud order;

(D) a cease and desist order by the commissioner, the securities agency or administrator of another state or a Canadian province or territory, the Securities and Exchange Commission, or the Commodity Futures Trading Commission; or

(E) an order by the Commodity Futures Trading Commission denying, suspending, or revoking registration under the Commodity Exchange Act;

(8) has engaged in unethical or dishonest practices in the securities business;

(9) in the case of a broker-dealer or investment adviser, is insolvent, either in the sense that liabilities exceed assets or in the sense that obligations cannot be met as theymature;

(10) is determined by the commissioner not to be qualified because of the lack of training, experience, and knowledge of the securities business, except that the commissioner may not enter an order solely on the basis of lack of experience if the applicant or registrant is qualified by training or knowledge, or both;

(11) has failed to reasonably supervise, with a view to preventing violations of this chapter or a rule or order under this chapter, such sales representatives or employees of a broker-dealer, or such investment adviser representatives or employees of an investment adviser as are subject to the supervision of such person;

(12) has knowingly retained a sales representative in the case of a broker-dealer, or an investment adviser representative in the case of an investment adviser, after notice that the commissioner has found that such sales representative or investment adviser representative has violated or failed to comply with this chapter or a rule or order under this chapter; or

(13) is the subject of an order entered by a court of competent jurisdiction or entered by a federal or state regulatory agency denying, suspending, revoking or restricting the person's activities in the real estate, insurance or banking businesses, or other business involving investments other than securities, provided that the order resulted from allegations of misconduct. This subdivision shall also apply when the denial, suspension, revocation, or restriction is pursuant to a consent agreement, whether or not an order is issued.

Sec. 10. 9 V.S.A. § 4225a(a) and (b) are amended to read:

§ 4225a. ADMINISTRATIVE SANCTIONS

(a)(1) In addition to any other specific power granted under this chapter, the commissioner may issue a cease and desist order without a prior hearing, if the commissioner determines that:

(A) the sale of a security is subject to registration under this chapter and the security is being or has been offered or sold by the issuer or another person in violation of section 4205 of this title; or

(B) a person is acting as a broker-dealer, sales representative, investment adviser, federal covered investment adviser, or investment adviser representative in violation of section 4213 of this title; and

(C) the violation presents an immediate danger to the public welfare requiring the issuance of an order.

(2) The cease and desist order authorized by this subsection shall direct the person engaged in the prohibited activities to desist and refrain from further activity until the security is registered or the person is registered under this chapter and to take other appropriate affirmative action within a reasonable period of time, as prescribed by the commissioner, to correct the conditions resulting from the prohibited activities. The cease and desist order shall state the statute, rule or order of the commissioner which the commissioner has determined has been or is being violated and the facts or circumstances supporting the commissioner's determination. The commissioner, after issuing such order, shall afford the opportunity for a preliminary hearing as promptly as possible under the circumstances, but in no event later than five days after request for such hearing unless the parties agree otherwise. After the preliminary hearing the commissioner shall withdraw the order unless he or she finds a reasonable likelihood of success on the merits for continuation of the order pending a full hearing.

(b) In addition to any specific power granted under this chapter, if the commissioner determines that a person has violated this chapter or a rule or order of the commissioner under this chapter, the commissioner may, after notice and opportunity for hearing, impose one or more of the following administrative sanctions:

(1) Issue a cease and desist order with respect to a specific violation against the person.

(2) Censure the person, if the person is registered as an issuer, broker-dealer, sales representative, investment adviser, or investment adviser representative; or is a federal covered investment adviser required to comply with the provisions of subsection 4214(c) of this chapter.

(3) Bar or suspend the person from association with a registered broker-dealer orinvestment adviser in this state, or a federal covered investment adviser required to comply with the provisions of subsection 4214(c) of this chapter.

(4) Issue an order against an applicant, registered person, or other person who violates this chapter or a rule or order of the commissioner under this chapter, imposing an administrative penalty of not more than $5,000.00 for each violation. Imposition of an administrative penalty under this subdivision precludes the commissioner from seeking any other monetary penalties under any other provision of law for the same violation except as provided for under subdivision (b)(5) of this subsection.

(5) Issue an order against an applicant, registered person, or other person who violates this chapter or a rule or order of the commissioner under this chapter, requiring the person to make restitution or to provide disgorgement of any sums shown to have been obtained in violation of this chapter or a rule or order of the commissioner under this chapter plus interest at the legal rate.

* * *

Sec. 11. 9 V.S.A. § 4229 is amended to read:

§ 4229. BROKER-DEALER AND INVESTMENT ADVISER POST-REGISTRATION

REQUIREMENTS

(a) The commissioner shall have general supervision and control over any and all registered persons under this chapter residing or doing business in this state. Every registered broker-dealer, subject to the limitations of section 15 of the Securities Exchange Act of 1934, and investment adviser, *[when requested by the commissioner, shall file as of the close of business on December 31 of each year, and at such other times as required by the commissioner, a certified statement setting forth the registrant's financial condition, the amount of the registrant's assets and liabilities, and furnishing]* subject to the limitations of section 222 of the Investment Advisers Act of 1940 shall file such financial reports and such other information concerning the registrant's affairs as the commissioner may require. *[Failure to make such statement within fifteen days after request shall be cause for revocation of registration without hearing.]* Failure to file such information within fifteen days after request shall be cause for revocation of registration without hearing.

(b) Every registered broker-dealer and investment adviser shall make and keep such accounts, correspondence, memoranda, papers, books, and other records as the commissioner prescribes, except as provided by section 15 of the Securities Exchange Act of 1934 (in the case of a broker-dealer) and section 222 of the Investment Advisers Act of 1940 (in the case of an investment adviser). All records so required shall be preserved for *[six years unless]* such period as the commissioner prescribes *[otherwise]* for particular types of records.

(c) With respect to investment advisers, the commissioner may require that certain information be furnished or disseminated as necessary or appropriate in the public interest or for the protection of investors and advisory clients. To the extent determined by the commissioner in his or her discretion, information furnished to clients or prospective clients of an investment adviser *[pursuant to]* that would be in compliance with the disclosure requirements of the Investment Advisers Act of 1940 and the rules thereunder may be used in whole or partial satisfaction of this requirement.

(d) If the information contained in any document or application filed with the commissioner becomes inaccurate or incomplete in any material respect, the registrant or federal covered investment adviser shall promptly file a correcting amendment if the document or application is filed with respect to a registrant, or when such amendment is required to be filed with the Securities and Exchange Commission if the document is filed with respect to a federal covered investment adviser, unless notification of the correction has been given under subsection 4217(a) or (b) of this title.

Sec. 12. 9 V.S.A. § 4234 is amended to read:

§ 4234. RESTRICTIONS ON ADVERTISING

(a) No person shall directly or through agents or otherwise, publish, circulate, distribute or cause to be published, circulated or distributed in any manner, any circular, prospectus, advertisement, printed matter, document, pamphlet, leaflet or other matter, hereinafter referred to as advertising matter, containing or constituting an offer to sell any securities which have not been registered as provided in this chapter unless the security is a federal covered security.

(b) Advertising matter containing or constituting an offer to sell any securities which have been registered in compliance with the provisions of section 4208 of this title, or, as the commissioner may by rule or order require, other advertising matter, unless such advertising matter pertains to a federal covered security, addressed or intended for distribution to prospective investors, including clients or prospective clients of a broker-dealer, *[or]* investment adviser, or federal covered investment adviser shall not be published, circulated, distributed, or caused to be published, circulated, or distributed in any manner unless and until such advertising matter shall have been submitted to the commissioner and approved by the commissioner. The commissioner shall have power to disapprove any such advertising matter which the commissioner deems in conflict with the purposes of this chapter.

(c) All such advertising matter containing or constituting an offer to sell any securities which have been registered by notification under the provisions of section 4207 of this title, shall be filed within forty-eight hours after the initial publication, circulation, or distribution thereof. However, the commissioner shall have power by order to prohibit the publication, circulation or distribution of any such advertising matter which the commissioner deems in conflict with the purposes of this chapter; and after the service of such order it shall be unlawful for such advertising matter to be published, circulated or distributed.

(d) All such advertising matter shall carry the name and address of the issuer, broker-dealer, or investment adviser circulating, publishing or distributing the same and shall make no reference to the registration of the securities or the issuance of a license by the commissioner.

(e) The provisions of this section shall not apply to securities exempted under section 4203a of this title, nor to sales of securities made in the manner exempted under section 4204a of this title. However, the commissioner shall have the power by order to prohibit the publication, circulation or distribution of any advertising matter containing or constituting an offer to sell such securities, except federal covered securities, which the commissioner deems in conflict with the purposes of this chapter; and after the service ofsuch order it shall be unlawful for such advertising matter to be published, circulated or distributed.

(f) No person shall make, publish or circulate any representation, statement, or advertisement that any securities are or have been approved by the commissioner.

Sec. 13. 9 V.S.A. § 4236(b) is amended to read:

(b) Every applicant for registration under this chapter, every federal covered investment adviser which submits a notice filing under subsection 4214(c) of this chapter, and every issuer which proposes to offer its securities in this state, unless its securities are exempt under section 4203a of this title or are offered in transactions exempt under section 4204a of this title, shall file with the commissioner, in such form as the commissioner prescribes, an irrevocable consent appointing the commissioner or the commissioner's successor in office to be such person's attorney to receive service of any lawful process in any non-criminal suit, action, or proceeding against such person or the successor executor or administrator of such person which arises under this chapter or any rule 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 or notice filing which is then in effect 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, including the commissioner when acting as such, in a suit, action, or proceeding instituted by such person promptly sends notice of the service and a copy of the process by certified mail, return receipt requested, to the defendant or respondent at such person's last address on file with the commissioner; and

(2) the plaintiff files an affidavit of compliance with this subsection in the case on or before the return day of the process, if any, or within such further time as the court allows.

Sec. 14. 9 V.S.A. § 4240(e)(1) is amended to read:

(e)(1) A person who engages in the business of advising other persons, for compensation, 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 a part of a regular business, issues or promulgates analyses or reports concerning securities in violation of subsections 4213(f), (g), *[or]* (h) or (i) of this title, subsections 4224a(e), (f), (g), or (i) of this title, or section 4234 of this title is liable to such other persons, who may sue to recover the consideration paid for such advice and any loss due to such advice, together with interest at the legal rate from the date of payment of the consideration plus costs and reasonable attorney's fees, less the amount of any income received from such advice.

Sec. 15. 9 V.S.A. § 4204b is added to read:

§ 4204b. PHILANTHROPY PROTECTION ACT OF 1995

The state of Vermont is hereby declared to be exempt from the provisions of the Philanthropy Protection Act of 1995 (P.L. 104-62, section 6(c)).

Sec. 15a. 11A V.S.A. § 8.30(a) is amended to read:

(a) A director shall discharge his or her duties as a director, including the director's duties as a member of a committee:

(1) in good faith;

(2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

(3) in a manner the director reasonably believes to be in the best interests of the corporation. In determining what the director reasonably believes to be in the best interests of the corporation, a director of a corporation which has a class of voting stock registered under section 12 of the Securities Exchange Act of 1934, as the same may be amended from time to time, may, in addition, consider the interests of the corporation's employees, suppliers, creditors and customers, the economy of the state, region and nation, community and societal considerations, including those of any community in which any offices or facilities of the corporation are located, and any other factors the director in his or her discretion reasonably considers appropriate in determining what he or she reasonably believes to be in the best interests of the corporation, and the long-term and short-term interests of the corporation and its stockholders, and including the possibility that these interests may be best served by the continued independence of the corporation;provided that nothing in this subdivision shall affect in any way the interests that may be considered by the director of a corporation which does not have a class of voting stock registered under section 12 of the Securities Exchange Act of 1934, as the same may be amended from time to time, in determining what such director reasonably believes to be in the best interests of the corporation.

Sec. 16. EFFECTIVE DATE

This act shall take effect on passage.

Approved: April 16, 1998