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BILL AS INTRODUCED 2007-2008

S

S.91

Introduced by Committee on Finance

Date:

Subject:  Banking and insurance; Vermont securities act  

Statement of purpose:  This bill proposes:  (1) to permit the banking division to request and receive any criminal records of any applicant for a banking division examiner position; (2) to change the due date for money service licensees to file their annual report with the department of banking, insurance, securities, and health care administration; (3) to allow a domestic insurer credit for reinsurance secured by letters of credit issued on or before the due date for the insurer’s annual report; (4) to establish consistent annual filing dates for reinsurers; (5) to revise and update audit standards for certified public accountants consistent with the accreditation standards of the National Association of Insurance Commissioners (NAIC); (6) to eliminate a requirement that the commissioner expressly approve employee pension plans offered by domestic insurers; (7) to repeal the requirement of an annual NAIC report to the legislature; (8) to establish consistent filing and fee payment dates for surplus lines companies; (9) to authorize an industrial insured captive insurance company to insure the controlled unaffiliated business of its participating industrial insured entities; (10) to clarify that an association captive insurance company may insure its sponsoring association along with the association’s members; (11) to correct the reference to the law applicable to captive insurance company supervision, rehabilitation, and liquidation proceedings; (12) to include rules regarding taxation of sponsored captive insurance companies and captive insurance companies formed as limited liability companies that are under common ownership and control with one or more other captive insurance companies; (13) to correct statutory cross‑references made in the enactment of Vermont’s Revised Uniform Securities Act; (14) to restore the securities regulation and supervision fund; (15) to restore the commissioner’s general authority regarding recovery of investigation and examination expenses; (16) to reinstate Vermont’s exemption from the federal Philanthropy Protection Act; (17) to restore the commissioner’s registrant exemption authority with respect to broker‑dealers; (18) to restore the fee imposed for processing registration exemptions; and (19) to restate the commissioner’s ability to impose notice filing and notice filing fees with respect to federal covered securities.

AN ACT RELATING TO THE DEPARTMENT OF BANKING, INSURANCE, SECURITIES, AND HEALTH CARE ADMINISTRATION

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


* * * Banking * * *

Sec. 1.  20 V.S.A. § 2056h is added to read:

§ 2056h.  DISSEMINATION OF CRIMINAL HISTORY RECORDS TO THE
                 DEPARTMENT OF BANKING, INSURANCE, SECURITIES,
                 AND HEALTH CARE ADMINISTRATION

(a)  The department of banking, insurance, securities, and health care administration shall obtain from the Vermont criminal information center a Vermont criminal record, an out‑of‑state criminal record, and a record from the Federal Bureau of Investigation (FBI) or any applicant for a banking division examiner position who has given written authorization, on a release form prescribed under section 2056c of this chapter, pursuant to the provisions of this subchapter and the user’s agreement filed by the commissioner of banking, insurance, securities, and health care administration with the center.  The user’s agreement shall require the department to comply with all federal and state statutes, rules, regulations and policies regulating the release of criminal history records, and the protection of individual privacy.  The user’s agreement shall be signed and kept current by the commissioner.  Release of interstate and F.B.I. criminal history records is subject to the rules and regulations of the F.B.I.’s National Crime Information Center.

(b)  For purposes of this section, “banking division examiner” means employees of the state hired to perform onsite or offsite examinations of banks, credit unions, or any other entity licensed, regulated, or otherwise under the jurisdiction of the banking division of the department of banking, insurance, securities, and health care administration.

(c)  The commissioner of banking, insurance, securities, and health care administration shall obtain from the Vermont criminal information center the record of Vermont convictions and pending criminal charges for any banking division examiner applicant after the applicant has received an offer of employment conditioned on the record check.  Nothing herein shall automatically bar a person who has a criminal record from applying or being selected for a banking division examiner position.

(d)  The commissioner of banking, insurance, securities, and health care administration, through the Vermont criminal information center, shall request the record of convictions and pending criminal charges of the appropriate criminal repositories in all states in which there is reason to believe the applicant has resided or been employed.

(e)  If no disqualifying record is identified at the state level, the commissioner of banking, insurance, securities, and health care administration, through the Vermont criminal information center, shall request from the Federal Bureau of Investigation (FBI) a national criminal history record check of the applicant’s convictions and pending criminal charges.  The request to the FBI shall be accompanied by a set of the applicant’s fingerprints and a fee established by the Vermont criminal information center, which shall be paid by the department of banking, insurance, securities, and health care administration.

(f)  The Vermont criminal information center shall send to the requester any record received pursuant to this section or inform the department of banking, insurance, securities, and health care administration that no record exists.

(g)  The department of banking, insurance, securities and health care administration shall promptly provide a copy of any record of convictions and pending criminal charges to the applicant and shall inform the applicant of the right to appeal the accuracy and completeness of the record pursuant to rules adopted by the Vermont criminal information center.

(h)  Upon completion of the application process under this section, the applicant’s fingerprint card and any copies thereof shall be destroyed.

(i)  No person shall confirm the existence or nonexistence of criminal record information to any person who would not be eligible to receive the information pursuant to this subchapter.

Sec. 2.  8 V.S.A. § 2509(b) is amended to read:

(b)  A licensee under this subchapter shall submit an annual report, on or before May 1 April 1 for the preceding calendar year, in a form and in a medium prescribed by the commissioner.  The annual report shall state or contain:

(1)  a copy of the licensee’s most recent audited annual financial statement or, if the licensee is a wholly‑owned subsidiary of another corporation, the most recent audited consolidated annual financial statement of the parent corporation or the licensee’s most recent audited consolidated annual financial statement;

(2)  the number of payment instruments and stored‑value obligations sold by the licensee in this state that have not been previously included in an annual report, the monetary amount of those instruments, and the monetary amount of those instruments currently outstanding;

(3)  a description of each material change in information submitted by the licensee in its original license application that has not been previously reported to the commissioner on any required report;

(4)  a list of the licensee’s permissible investments and a certification that the licensee continues to maintain permissible investments according to the requirements set forth in sections 2540 and 2541 of this title;

(5)  proof that the licensee continues to maintain adequate security as required by section 2507 of this title;

(6)  a list of the locations in this state where the licensee or an authorized delegate of the licensee engages in money transmission or provides other money services; and

(7)  any other information the commissioner may require.

* * * Insurance * * *

Sec. 3.  8 V.S.A. § 3634a(d) and (h)(2) are amended to read:

(d)  Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is accredited as a reinsurer in this state. An accredited reinsurer is one which:

(1)(A)  files with the commissioner evidence of its submission to this state’s jurisdiction;

(B)  submits to this state’s authority to examine its books and records;

(C)  is licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state;

(D)  files annually with the commissioner on or before March 1 of each year a copy of its annual statement filed with the insurance department of its state of domicile and files on or before June 1 of each year a copy of its most recent audited financial statement;

(E)  files with the commissioner its charter, bylaws, and any other material required by the commissioner; and

(F)  pays an initial fee of $500.00 and thereafter an annual fee of $200.00 on or before March 1 of each year; and

(2)(A)  maintains a surplus for policyholders in an amount which is not less than $20,000,000.00 and whose accreditation has not been denied by the commissioner within 90 days of its submission; or

(B)  maintains a surplus for policyholders in an amount less than $20,000,000.00 and whose accreditation has been approved by the commissioner.

* * *

(h)  Reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer.  A domestic insurer that does not meet the requirements of subsections (a) through (g) of this section shall be allowed a reduction in liability:

* * *

(2)  in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with such assuming insurer as collateral for the payment of obligations thereunder, if such collateral is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a qualified United States financial institution approved by the commissioner.  Such collateral shall be in the form of:


(A)  cash;

(B)  securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as admitted assets; or

(C)  clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States institution, approved by the commissioner, which are effective no later than December 31 in respect of the year for which filing is being made, and in the possession of the ceding company on or before the filing date of its annual statement. Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, notwithstanding the issuing or confirming institution’s subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs; or

(D)  any other form of collateral acceptable to the commissioner.

Sec. 4.  8 V.S.A. § 3579(a) is amended to read:

(a)  A certified public accountant retained to perform audits of an insurer under section 3578 of this title shall:

(1)  shall be a member in good standing of the American Institute of Certified Public Accountants and in all states in which the accountant is licensed, or, for a Canadian or British company, be a chartered accountant;

(2)  shall be independent with respect to the insurer;

(3)  shall conform to the standards of the profession as contained in the code of professional ethics of the American Institute of Certified Public Accountants and of the Vermont board of public accountancy or similar codes governing such accountant’s professional conduct or ethics;

(4)  shall not directly or indirectly enter into an agreement of indemnification or release from liability with respect to the insurer being audited where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing or other misrepresentations made by the insurer or its representatives; and

(5)  may enter into an agreement with an insurer to have disputes relating to an audit resolved by mediation or arbitration; provided, however, in the event of a delinquency proceeding commenced against the insurer under chapter 145 of this title, the mediation or arbitration provisions shall operate at the option of the statutory successor.

Sec. 5.  8 V.S.A. § 3504 is amended to read:

§ 3504.  PENSION SYSTEM

An insurance company now or hereafter organized and doing business under the laws of this state, in addition to all other powers granted to it by law, may provide a pension in pursuance of the terms of a retirement plan, adopted by its board of directors and approved by the commissioner, for any person who is or has been an employee of such company, and who shall retire by reason of age or disability, and may further provide that, if such employee shall contribute to a retirement fund established under such retirement plan, and shall thereafter retire from the service of the company for reasons other than age or disability, he the employee may withdraw from such fund the amount of his the employee’s contribution thereto with interest thereon at such rate, if any, and subject to such rules and regulations, as may be provided by the board of directors.  However, such a company shall not grant a pension after the death of an officer, director, or trustee thereof, to a member of his or her family, or to his or her estate or to any other person for the benefit thereof.  For the purposes of this section, the word “employee” shall include a salaried officer or an employee of such company and, in the case of a life insurance company, a soliciting or general agent of such company and an employee of such general agent, whether or not the person for whom such pension is to be provided is or shall be deemed for any other purpose an employee of such company.

Sec. 6.  REPEAL

8  V.S.A. § 3551 (legislative oversight of the National Association of Insurance Commissioners) is repealed.


Sec. 7.  8 V.S.A. § 5026(a)(1) is amended to read:

(a)  Surplus lines brokers shall not knowingly place or continue surplus lines insurance with nonadmitted insurers who are insolvent or unsound financially, and in no event shall any surplus lines broker place any insurance with a nonadmitted insurer unless such insurer:

(1)  has paid to the commissioner an initial fee of $100.00 and an annual listing fee of $300.00, payable before April 1 March 1 of each year;

* * * Captive Insurance * * *

Sec. 8.  8 V.S.A. § 6001(2), (3), (6), (9), (10), and (13) are amended to read:

§ 6001.  DEFINITIONS

As used in this chapter, unless the context requires otherwise:

* * *

(2)  “Association” means any legal association of individuals, corporations, limited liability companies, partnerships, associations, or other entities, the member organizations of which or which does itself, whether or not in conjunction with some or all of the member organizations:

(A)  own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurance company incorporated as a stock insurer; or

(B)  have complete voting control over an association captive insurance company incorporated as a mutual insurer; or

(C)  constitute all of the subscribers of an association captive insurance company formed as a reciprocal insurer; or

(D)  have complete voting control over an association captive insurance company formed as a limited liability company.

(3)  “Association captive insurance company” means any company that insures risks of the member organizations of the association, and their affiliated companies that also may insure the risks of affiliated companies of the member organizations and the risks of the association itself.

(6)  “Controlled unaffiliated business” means any company person:

(A)  that is not in the corporate system of a parent and its affiliated companies in the case of a pure captive insurance company, or that is not in the corporate system of an industrial insured and its affiliated companies in the case of an industrial insured captive insurance company;

(B)  that has an existing contractual relationship with a parent or one of its affiliated company companies in the case of a pure captive insurance company, or with an industrial insured or one of its affiliated companies in the case of an industrial insured captive insurance company; and

(C)  whose risks are managed by a pure captive insurance company or an industrial insured captive insurance company, as applicable, in accordance with section 6019 of this title.

(9)  “Industrial insured captive insurance company” means any company that insures risks of the industrial insureds that comprise the industrial insured group, and their affiliated companies that may insure the risks of the affiliated companies of the industrial insureds and the risks of the controlled unaffiliated business of an industrial insured or its affiliated companies.

(10)  “Industrial insured group” means any group of industrial insureds that collectively:

(A)  own, control, or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurance company incorporated as a stock insurer;

(B)  have complete voting control over an industrial insured captive insurance company incorporated as a mutual insurer; or

(C)  constitute all of the subscribers of an industrial insured captive insurance company formed as a reciprocal insurer; or

(D)  have complete voting control over an industrial insured captive insurance company formed as a limited liability company.

(13)  “Parent” means a corporation, limited liability company, partnership, other entity, or individual, that directly or indirectly owns, controls, or holds with power to vote more than 50 per centum of the outstanding voting:

(A)  securities of a pure captive insurance company organized as a stock corporation; or

(B)  membership interests of a pure captive insurance company organized as a nonprofit corporation; or

(C)  membership interests of a pure captive insurance company organized as a limited liability company.

Sec. 9.  8 V.S.A. § 6002(a)(2) and (3) are amended to read:

(a)  Any captive insurance company, when permitted by its articles of association, charter, or other organizational document, may apply to the commissioner for a license to do any and all insurance comprised in subdivisions (1), (2), (3)(A)–(C), (E)–(R), and (4)–(9) of subsection 3301(a) of this title and may grant annuity contracts as defined in section 3717 of this title; provided, however, that:

* * *

(2)  no association captive insurance company may insure any risks other than those of its association, those of the member organizations of its association, and their those of a member organization’s affiliated companies;

(3)  no industrial insured captive insurance company may insure any risks other than those of the industrial insureds that comprise the industrial insured group, and those of their affiliated companies, and those of the controlled unaffiliated business of an industrial insured or its affiliated companies;

* * *

Sec. 10.  8 V.S.A. § 6007(b) is amended to read:

(b)  Prior to March 1 of each year, each captive insurance company shall submit to the commissioner a report of its financial condition, verified by oath of two of its executive officers.  Each captive insurance company shall report using generally accepted accounting principles, unless the commissioner requires, approves, or accepts the use of statutory accounting principles, in either case with any appropriate or necessary modifications or adaptations thereof required or approved or accepted by the commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the commissioner.  Except as otherwise provided, each association captive insurance company and each risk retention group shall file its report in the form required by section 3561 of this title, and each risk retention group shall comply with the requirements set forth in section 3569 of this title.  The commissioner shall by rule propose the forms in which pure captive insurance companies and industrial insured captive insurance companies shall report.  Subdivision 6002(c)(3) of this title shall apply to each report filed pursuant to this section, except that such subdivision shall not apply to reports filed by risk retention groups.

Sec. 11.  8 V.S.A. § 6014(f) is amended to read:

(f)  For the purposes of this section:

(1)  common ownership and control shall mean ownership and control of two or more captive insurance companies by the same person or group of persons.

(2)  ownership and control shall mean:

(1)(A)  in the case of a stock corporations corporation, the direct or indirect ownership of 80 percent or more of the outstanding voting stock of two or more corporations by the same shareholder or shareholders; and the corporation.

(2)(B)  in the case of a mutual or nonprofit corporations corporation, the direct or indirect ownership of 80 percent or more of the surplus and the voting power of two or more corporations by the same member or members such corporation.

(C)  in the case of a limited liability company, the direct or indirect ownership of 80 percent or more of the membership interests in the limited liability company.

(D)  in the case of a sponsored captive insurance company, for purposes of this section a protected cell shall be treated as a separate captive insurance company owned and controlled by the protected cell’s participant, but only if:

(i)  the participant is the only participant with respect to such protected cell; and

(ii)  the participant is the sponsor or is affiliated with the sponsor of the sponsored captive insurance company through common ownership and control.

Sec. 12.  8 V.S.A. § 6018 is amended to read:

§ 6018.  DELINQUENCY

Except as otherwise provided in this chapter, the terms and conditions set forth in chapter 145 of this title, pertaining to insurance reorganizations, receiverships and injunctions, shall apply in full to captive insurance companies formed or licensed under this chapter.

Sec. 13.  8 V.S.A. § 6019 is amended to read:

§ 6019.  RULES FOR CONTROLLED UNAFFILIATED BUSINESS

The commissioner may adopt rules establishing standards to ensure that a parent or its affiliated company, or an industrial insured or its affiliated company, is able to exercise control of the risk management function of any controlled unaffiliated business to be insured by the a pure captive insurance company or an industrial insured captive insurance company, respectively; provided, however, that, until such time as rules under this section are adopted, the commissioner may approve the coverage of such risks by a pure captive insurance company or an industrial insured captive insurance company.

* * * Securities * * *

Sec. 14.  8 V.S.A. § 11(a)(1) is amended to read:

(a)  General.  The department of banking, insurance, securities, and health care administration created by section 212 of Title 3, shall have jurisdiction over and shall supervise:

(1)  Financial institutions, credit unions, licensed lenders, mortgage brokers, insurance companies, insurance agents, broker‑dealers, investment advisors, and other similar persons subject to the provisions of this title and chapters 59, 61, and 131 150 of Title 9.

* * *

Sec.  15.  8 V.S.A. § 13(a) is amended to read:

(a)  In addition to any other penalties, and in order to enforce this title, chapter chapters 131 and 150 of Title 9, Title 9A, and Title 18, chapter 221, the commissioner may issue subpoenas, examine persons, administer oaths and require production of papers and records.  Any subpoena or notice to produce may be served by registered or certified mail or in person by an agent of the commissioner.  Service by registered or certified mail shall be effective three business days after mailing.  Any subpoena or notice to produce shall provide at least six business days’ time from service within which to comply, except that the commissioner may shorten the time for compliance for good cause shown.  Any subpoena or notice to produce sent by registered or certified mail, postage prepaid, shall constitute service on the person to whom it is addressed.  Each witness who appears before the commissioner under subpoena shall receive a fee and mileage as provided for witnesses in civil cases in superior courts; provided, however, any person subject to regulation under this title shall not be eligible to receive fees or mileage under this section.

Sec. 16.  8 V.S.A. § 16 is amended to read:

§ 16.  JUDICIAL REVIEW

Any person aggrieved and directly affected by an order of the commissioner may appeal to the supreme court of Vermont, except as otherwise expressly provided in this title or in chapters 131 and 150 of Title 9.  The filing of an appeal for review or injunctive relief shall not stay enforcement of an order, but the court may order a stay on such terms as it deems proper.  The court may affirm the order of the commissioner, may direct him or her to take the action withheld or may reverse or modify the order if it:

(1)  was issued pursuant to unconstitutional statutory provisions;

(2)  was in excess of statutory authority;

(3)  was issued on unlawful procedure; or

(4)  is not supported by substantial evidence in the record.


Sec. 17.  8 V.S.A. § 17 is amended to read:

§ 17.  LIABILITY FOR ACTS

A person serving in any official capacity under this title, chapter 131 or 150 of Title 9, or chapter 221 of Title 18, including the commissioner and any officer, employee, or agent of the department, shall not be liable in any civil action for damages for any act done or omitted in good faith in performing the functions of his or her office.  No person may be subjected to any civil or criminal liability for any act or omission to act done in good faith in reliance on a subsisting order, regulation, or rule of the commissioner, notwithstanding a subsequent decision by a court invalidating the order, regulation or rule.

Sec. 18.  9 V.S.A. § 5408(b) is amended to read:

(b)  If an agent registered under this chapter terminates employment by or association with a broker‑dealer registered under this chapter and begins employment by or association with another broker‑dealer registered under this chapter; or if an investment adviser representative registered under this chapter terminates employment by or association with an investment adviser registered under this chapter or a federal covered investment adviser that has filed a notice under section 5405 of this chapter and begins employment by or association with another investment adviser registered under this chapter or a federal covered investment adviser that has filed a notice under section 5405 of this chapter; then upon the filing by or on behalf of the registrant, within 30 days after the termination, of an application for registration that complies with the requirement of subsection 5406(a) of this chapter and payment of the filing fee required under section 5410 of this chapter, the registration of the agent or investment adviser representative is:

(1)  immediately effective as of the date of the completed filing, if the agent’s Central Registration Depository record or successor record or the investment adviser representative’s Investment Adviser Central Registration Depository record or successor record does not contain a new or amended disciplinary disclosure within the previous 12 months; or

(2)  temporarily effective as of the date of the completed filing, if the agent’s Central Registration Depository record or successor record or the investment adviser representative’s Investment Adviser Central Registration Depository record or successor record contains a new or amended disciplinary disclosure within the preceding 12 months.

Sec. 19.  9 V.S.A. § 5613 is added to read:

§ 5613.  COLLECTION AND DISPOSITION OF FEES

(a)  The fees provided for in this chapter shall be collected by the commissioner and covered into the state treasury except as provided in subsections (b) and (e) of this section.

(b)       There is hereby created a fund to be known as the securities regulation and supervision fund.  The fund shall be used for the purpose of providing the commissioner the means to administer the provisions of this chapter, and for the support of the corporate records division and other corporate regulatory activities of the office of the secretary of state and the activities of the department of economic development.  All agent and investment adviser representative fees received pursuant to subsections 5410(b) and (d) of this title, and all examination fees and investigation expenses received pursuant to section 5614 of this title shall be transmitted to the state treasurer and credited to this fund.  All payments from the securities regulatory and supervision fund for the maintenance of staff and associated expenses, including contractual services as necessary, shall be disbursed from the state treasury only upon warrants issued by the commissioner of finance and management, after receipt of proper documentation regarding services rendered and expenses incurred.  The fund shall be administered pursuant to subchapter 5 of chapter 7 of Title 32.

(c)  At the end of each fiscal year, the balance in the securities regulatory and supervision fund shall be transferred to the general fund.

(d)       The commissioner of finance and management may anticipate receipts to the securities regulatory and supervision fund and issue warrants based thereon.

(e)  In any fiscal year in which revenues deposited in the banking supervision fund established by subsection 19(f) of Title 8 are insufficient to support the annual appropriation to the banking division, the commissioner may transfer no more than a sum necessary to meet the shortfall from the fund established by this section to the banking supervision fund.

Sec. 20.  9 V.S.A. § 5614 is added to read:

§ 5614.  RECOVERY OF EXPENSES

(a)  Whenever it is necessary for the commissioner to incur any expense in connection with any application, notification, registration, license, investigation, or administrative proceeding, the commissioner may require that any person who is the subject of such application, notification, registration, license, investigation, or administrative proceeding pay the reasonable costs incurred by the department.

(b)       The commissioner may impose a reasonable fee for the expense of conducting an examination, audit, or inspection under this chapter, including, but not limited to reimbursement to the commissioner for actual traveling and lodging expenses of the commissioner or employee in connection with such examination, audit, or inspection.

(c)  The provisions of this section are in addition to, and not in limitation of, any other provision of this chapter regarding fees and recovery of expenses. 


Sec. 21.  9 V.S.A. § 5615 is added to read:

§ 5615.  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. 22.  9 V.S.A. § 5401(b) is amended to read:

(b)  The following persons are exempt from the registration requirement of subsection (a) of this section:

(1)  a broker‑dealer without a place of business in this state if its only transactions effected in this state are with:

(A)  the issuer of the securities involved in the transactions;

(B)  a broker‑dealer registered as a broker‑dealer under this chapter or not required to be registered as a broker‑dealer under this chapter;

(C)  an institutional investor;

(D)  a nonaffiliated federal covered investment adviser with investments under management in excess of $100,000,000.00 acting for the account of others pursuant to discretionary authority in a signed record;

(E)  a bona fide preexisting customer whose principal place of residence is not in this state, and the person is registered as a broker‑dealer under 15 U.S.C. § 78a et seq. or not required to be registered under 15 U.S.C.

§ 78a et seq. and is registered under the securities act of the state in which the customer maintains a principal place of residence;

(F)  a bona fide preexisting customer whose principal place of residence is in this state but was not present in this state when the customer relationship was established, if:

(i)  the broker‑dealer is registered under 15 U.S.C. § 78a et seq. or not required to be registered under 15 U.S.C. § 78a et seq. and is registered under the securities laws of the state in which the customer relationship was established and where the customer had maintained a principal place of residence; and

(ii)  within 45 days after the customer’s first transaction in this state, the person files an application for registration as a broker‑dealer in this state and a further transaction is not effected more than 75 days after the date on which the application is filed, or, if earlier, the date on which the commissioner notifies the person that the commissioner has denied the application for registration or has stayed the pendency of the application for good cause;

(G)  not more than three customers in this state during the previous 12 months, in addition to those customers specified in subdivisions (A) through (F) and under subdivision (H) of this subdivision, if the broker‑dealer is registered under 15 U.S.C. § 78a et seq. or not required to be registered under 15 U.S.C. § 78a et seq. and is registered under the securities act of the state in which the broker‑dealer has its principal place of business; and

(H)  any other person exempted by rule adopted or order issued under this chapter; and

(2)  a person that deals solely in United States government securities and is supervised as a dealer in government securities by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the Office of Thrift Supervision; and

(3)  any other person exempted by rule adopted or order issued under this chapter.

Sec. 23.  9 V.S.A. § 5305(k) is added to read:

(k)  At the time of filing a request for exemption from registration, the applicant shall pay a fee of $200.00.

Sec. 24.  9 V.S.A. § 5302 is amended to read:

§ 5302.  NOTICE FILING

(a)  With respect to a federal covered security, as defined in 15 U.S.C. § 77r(b)(2), that is not otherwise exempt under sections 5201 through 5203 of this chapter, a rule adopted or an order issued under this chapter may require the filing of any or all of the following records:

(1)  before the initial offer of a federal covered security in this state, all records that are part of a federal registration statement filed with the Securities and Exchange Commission under 15 U.S.C. § 77a et seq. and a consent to service of process complying with section 5611 of this chapter signed by the issuer and the payment of a registration fee as set forth in subsection (d)(e) of this section;

(2)  after the initial offer of the federal covered security in this state, all records that are part of an amendment to a federal registration statement filed with the Securities and Exchange Commission under 15 U.S.C. § 77a et seq.; and

(3)  to the extent necessary or appropriate to compute fees, a report of the value of the federal covered securities sold or offered to persons present in this state in such form and at such time as the commissioner may prescribe if the state‑specific sales data are not included and available in records filed with the Securities and Exchange Commission.

(b)  A notice filing under subsection (a) of this section is effective for one year from the date the notice filing is accepted as complete by the office of the commissioner.  On or before expiration, the issuer may renew a notice filing by filing a copy of those records filed by the issuer with the Securities and Exchange Commission that are required by rule or order under this chapter to be filed and by paying an annual renewal fee as set forth in subsection (d)(e) of this section.  A previously filed consent to service of process complying with section 5611 of this chapter may be incorporated by reference in a renewal.  A renewed notice filing becomes effective upon the expiration of the filing being renewed.

(c)  With respect to a security that is a federal covered security under 15 U.S.C. § 77r(b)(4)(D), a rule under this chapter may require a notice filing by or on behalf of an issuer to include a copy of Form D, including the Appendix, as promulgated by the Securities and Exchange Commission, and a consent to service of process complying with section 5611 of this chapter signed by the issuer not later than 15 days after the first sale of the federal covered security in this state and the payment of a fee as set forth in subsection (d)(e) of this section.

(d)  Subject to the provisions of 15 U.S.C. § 77r(c)(2) and any rules adopted thereunder, with respect to any security that is a federal covered security under 15 U.S.C. § 77r(b)(3) or (4)(A)–(C) and that is not otherwise exempt under sections 5201 through 5203 of this chapter, a rule adopted or order issued under this chapter may require any or all of the following with respect to such federal covered securities, at such time as the commissioner may deem appropriate:

(1)  the filing of documents as deemed appropriate by the commissioner;

(2)  the filing of a consent to service of process complying with section 5611 of this chapter; and

(3)  the payment of fees as set forth in subsection (e) of this section, including but not limited to fees for renewal of a notice filing, as appropriate.  The notice filing shall be effective for one year from the date the notice filing is accepted as complete by the office of the commissioner.   

(e)  At the time of the filing of the information prescribed in subsections (a), (b), or (c), or (d) of this section, the issuer shall pay to the commissioner a fee of $1.00 for each $1,000.00 of the aggregate amount of the offering of the securities to be sold in this state for which the issuer is seeking to perfect a notice filing under this section, but in no case shall such fee be less than $400.00 nor more than $1,250.00.  If the notice filing is withdrawn or otherwise terminated, the commissioner shall retain the fee paid.  Open‑end investment companies subject to 15 U.S.C. § 80a‑1 et seq. shall pay an initial notice filing fee and annual renewal fee for each portfolio or class of investment company securities for which a notice filing is submitted. 

(e)(f)  Nothing in this section shall be construed to require the notice filing or payment of notice filing fees with respect to variable annuities or variable life insurance products.

(f)(g)  Except with respect to a federal covered security under 15 U.S.C.

§ 77r(b)(1), if the commissioner finds that there is a failure to comply with a notice or fee requirement of this section, the commissioner may issue a stop order suspending the offer and sale of a federal covered security in this state.  If the deficiency is corrected, the stop order is void as of the time of its issuance and no penalty may be imposed by the commissioner.

Sec. 25.  EFFECTIVE DATE

This act shall take effect on July 1, 2007, except that:

(1)  This section shall take effect on passage; and

(2)  Secs. 14, 15, 16, 17, 19, and 21 clarify the intent of the general assembly in the enactment of chapter 150 of Title 9, and shall therefore take effect retroactively and apply on and after July 1, 2006.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us